The news
Ralph Lauren donated $33.2 million to charity from its IEEPA tariff refunds in its fiscal second quarter, which ended Sept 26. The company booked $82.3 million in refunds during the quarter, recording them as a reduction in cost of goods sold.
The donation equals about 40% of the refunds.
“We are strategically reinvesting the refunds to support business growth and to initiatives that strengthen and advance our values and purpose,” Ralph Lauren said in its quarterly filing.
The details
The refunds accounted for about half of Ralph Lauren's gross margin improvement. Gross margin rose 6.2 percentage points to 74.2% in the quarter, with the company attributing about half of the increase to the refunds.
The rest came from higher average prices, a better geographic mix and lower product costs.
Ralph Lauren excluded both the refunds and the charitable donation from its adjusted results. Adjusted gross margin was 70.5%.
Ralph Lauren gave away a larger share of its refund to charity than peers set aside for vendors. VF, Williams-Sonoma and Gap each set aside roughly a fifth to a quarter of their refunds for vendors and partners.
VF committed $37.6 million of its $149.7 million refund to vendors and partners.
Williams-Sonoma set aside $47.5 million of its $197.8 million refund claim.
Gap committed about $95 million of its roughly $512 million.
Ralph Lauren still pays tariffs under other trade laws. Following a February ruling, the US introduced new tariffs under separate authorities, and Ralph Lauren is managing costs through supplier negotiations, country-of-origin flexibility and pricing.
It says it has spread its supply chain across more countries.
Its inventory is lower than a year ago, when tariff impacts in North America had raised it.
What peers are doing
Most companies are retaining at least part of their tariff refunds. In an Atlanta Fed survey of more than 1,100 executives in August, about 75% said they were keeping at least some refunds as cash. Just over half were putting some of the money into research and development or capital projects.
Walmart and BJ's Wholesale Club are using refunds to lower prices, while Williams-Sonoma is sharing some with employees.
(Photo via Wikimedia Commons)
