Jane Nielsen
Chief Operating Officer and Chief Financial Officer at Ralph Lauren
Thank you, Patrice, and good morning everyone. We are encouraged by this year's progress on our next great chapter Accelerate plan, which remains on-track, even with numerous macro challenges that our teams have faced this year. We leveraged our strong brand, multiple strategic growth drivers and superior operational capabilities to deliver strong financial results in a dynamic environment.
For the full-year, we delivered 10% revenue growth in constant currency, exceeding our guidance with growth in every region. We expanded operating margin and grew profits ahead of top-line growth in constant dollars consistent with our three-year plan. Adjusted operating margin expanded to 13.7% in constant currency, with operating profit dollars up 15%. Our continued brand elevation and culture of cost discipline were key to our strong results and provided flexibility to more than offset softer gross margins as we focused on keeping inventories clean and well-positioned in the marketplace. Operating with discipline will continue to be an important element of our long-term strategic plan with productivity helping to manage changing market dynamics and fuel our investments in sustainable long-term growth. And we continue to make important investments in our business while delivering strong shareholder returns, including more than $650 million this year in the form of dividends and share repurchases.
Exiting the year, we remain confident in both our strategic direction and our fortress foundation enablers, which are allowing us to drive our strategic initiatives even through times of uncertainty. Our full year and fourth quarter financial performance underscored this position of strength through dynamic times. Let me take you through some highlights from the quarter.
Total company revenues in the fourth quarter increased 9% in constant currency, above our outlook, led by double-digit growth in Asia. Results included about 180 basis points of negative headwind from the shift of the post-Christmas sales week into the fiscal third quarter from our fourth quarter last year as previously noted. Our digital ecosystem sales declined mid single-digits in constant-currency. Q4 performance included lower European pure-play results as planned, following exceptionally strong performance last year coming out-of-the pandemic.
Sales in our owned Ralph Lauren digital sites grew mid single digits on top of 20% growth last year. As we continue to elevate this channel, our digital AUR grew mid-teens and our full price sales penetration increased meaningfully to last year. We plan to enhance the user experience with rich digital content and even greater customer personalization in fiscal '24. In addition to the AI machine learning capabilities we've been utilizing for areas such as inventory optimization, forecasting and consumer engagement, we've started to leverage our early learnings to test generative AI across multiple areas of our business, from copy editing and graphics to computer programing.
Total company adjusted comparable gross margin was about flat in constant currency, in-line with our guidance. Tailwinds from product mix elevation, AUR growth of 12% and lower airfreight were offset by peak levels of raw material costs, notably cotton, targeted promotions to drive conversion with our more value-oriented consumers and keep inventories healthy and higher duties in Europe. Finally, freight turned to a 100 basis point benefit in the fourth quarter, compared to an 80 basis point headwind for the full year. Despite cost turbulence, our adjusted gross margins are tracking ahead of Fiscal '19 pre-pandemic levels and we're 170 basis points higher in the fourth quarter and 320 basis points higher for the full-year.
Adjusted comparable operating margin was 6.1% in constant currency or 390 basis points increased to last year. Adjusted operating expenses declined 380 basis points to last year in constant-currency. Marketing was 6% of sales on a more normalized cadence of planned spending compared to 10% in the prior year period. Full year marketing was 7% of sales, in line with our annual guidance as we continue to invest in key brand moments and innovative new platforms. Adjusted operating profit grew approximately 2% in the quarter.
Moving to segment performance. The shift of post-Christmas sales from Q4 last year into Q3 this year had a disproportionate impact on both North America and Europe's fourth quarter results, particularly our retail channels. This shift represented about a 270 basis points of headwind to revenue growth in North America and 120 basis points impact on Europe.
Starting with North America, fourth quarter revenues increased 2%, stronger wholesale growth was partially offset by retail headwinds. In North America Retail, fourth quarter comps declined 4% on top of a strong 21% compared to last year. Similar to recent trends, strong growth in our full price stores was offset by softer performance in outlet in digital. North America retail AUR increased another mid single digits on-top of a robust 20% growth last year, reflecting our continued brand elevation efforts around product, distribution and marketing. This helped to mitigate targeted promotions focused on our more value-oriented consumers. Looking ahead, we expect the sub-segment of consumers to remain more sensitive to near-term inflationary pressures. And this is reflected in our continued caution through fiscal '24. Beyond these headwinds, we are confident in the regions long-term trajectory, which was reinforced by improving North America brand health metrics, this past year, with our strongest growth in brand awareness, perception of value-for-money and luxury perception.
In North America wholesale, revenues grew low double digits to last year as we return to a more normalized cadence of spring deliveries, following last year's supply chain disruptions. This benefited our Q4 by about 12 points and will have a roughly 13 point negative impact on our first quarter wholesale growth. Adjusting for the normalized shipment cadence, this implies underlying wholesale revenue flat to last year, similar to Q3 trends. Our wholesale AUR increased high single digits to last year as we continue to elevate product and take market share at key partners. The promotion cadence at wholesale was flat to last year, in line with our expectations.
Moving on to Europe. Fourth quarter revenue increased 7% in constant currency. Retail comps increased 8% on top of a 77% post COVID reopening comp last year. Brick-and-mortar comps were up 9%, driven by positive growth in both full-price stores and outlets, while digital comps grew mid single digits. Europe AUR increased double digits in the quarter, with strong growth across channels. Europe wholesale grew 3% in constant currency. This was ahead of our expectations. However, we remain cautious on the channel into fiscal '24 on softening reorder rates and digital pure-play performance consistent with our previous comments.
Turning to Asia. Revenue increased 29% in constant-currency, ahead of our expectations, with broad-based growth across each of our key markets, led by China. China rebounded strongly to more than 40% growth in constant dollars, following the loosening of the 0 COVID policies in the previous quarter with consumers traveling domestically for the first time since the start of the pandemic. Our brand continues to show momentum following a strong Lunar New Year holiday. Korea and Japan also grew double digits on compelling assortments and brand engagement, and as Japan lapped last year's COVID states of emergency. Despite meaningful COVID disruptions and foreign currency headwinds through this year, we delivered our highest ever operating profit in Asia in fiscal '23. This is a testament to the growing desirability and momentum of our brand, along with the agility of our teams as they continue to drive our key city ecosystem strategy across the region.
Within our other segment, licensing grew low-single digits this quarter, slightly above our plan with encouraging results from our Chaps license and Polo women's intimate launch. Looking ahead, we will fully transition out of our Lauren men's suiting license in fiscal '24. While this will negatively impact our licensing revenues and overall company margins by about 20 basis points in fiscal '24, the move is consistent with our brand elevation strategy.
Moving onto the balance sheet. Our balance sheet continues to be an important element of our fortress foundation, enabling us to balance strategic investments in our brand and business with returning cash to shareholders. We ended this year with $1.6 billion in cash and short-term investments and $1.1 billion in total debt. We returned $653 million in the form of dividends and share repurchases this year consistent with our long-term targets. Net inventory increased 10% with growth moderating significantly on a sequential basis as we reduced goods in transit and return to a more normalized lead times, following last year's supply chain disruptions. Inventory growth still reflects higher product costs and our ongoing strategy of product mix elevation. Inventory units declined approximately 5% to last year and are healthy as we enter fiscal '24. That said, we continue to manage our inventory positions carefully with the majority of our products still weighted to core and seasonless product that can be flexed with demand. Looking to fiscal '24, we expect inventory levels to continue to moderate through the year and ending below prior year levels.
Looking ahead, our outlook contemplates a more pressured consumer spending environment, dynamic macroeconomic conditions and foreign currency volatility, among others. We continue to plan across a range of scenarios and our guidance represents our best assessment of market conditions and resulting consumer impacts. We are taking a pragmatic approach to our plan for this year, which assumes continued momentum in the full price channels and Asia, balanced with a more challenged value consumer backdrop in North America and Europe. With an intense focus on what we control from our core iconic products and continued investments in new consumer acquisition to judicious inventory planning and operating expense discipline, we remain committed to driving progress on our long-term growth and profitability trajectory despite the dynamic global environment. Importantly, we expect to deliver both revenue growth and margin expansion this year.
For fiscal '24, we are guiding constant currency revenues to increase low-single digits and foreign currency to benefit reported revenues by about 20 basis points. We currently expect growth to be led by Asia, up double digits, followed by low-single digit growth in Europe and a low-single digit decline in North America based on softer spring trends and Q1 wholesale timing shifts. We expect operating margin to expand approximately 30 to 50 basis points in constant currency to 12.3 to 12.5%, driven by gross margin expansion of about 50 to 100 basis points. Foreign currency is expected to benefit operating margin by about 10 basis points this year.
Relative to our Investor Day base period, this guidance implies about 80 to a 100 basis points of operating margin expansion when compared to fiscal '22, holding currency constant, on track with our long-term targets. We expect gross margin to benefit from lower freight costs, continued AUR growth and favorable product, geographic and channel mix this year. Reduced freight costs are expected to benefit gross margin by at least 100 basis points this year. We expect these tailwinds to be partially offset by about 20 basis points of negative foreign currency impact, along with continued pressure from product cost, notably cotton, through the majority of the year.
For the first quarter, we expect revenues to be flat to-up slightly in constant currency on a reported basis, including a 150 basis points of currency headwind, we expect revenues to be down slightly. First quarter also includes approximately 220 basis points of negative impact from the normalized timing of spring wholesale shipments following last year's supply-chain disruption noted earlier. The timing shift is expected to negatively impact our North America growth by about 5 points and North America wholesale growth by about 13 points, before returning to more normalized trends in Q2.
We expect first quarter operating margin expansion of about 30 to 50 basis points in constant currency, driven by gross margin expansion. We expect gross margins to be driven by lower freight, positive AUR growth and lower wholesale mix, partially offset by higher product costs. Foreign currency is expected to negatively impact both operating and gross margins by about 50 basis points in the quarter. From a cadence perspective, we currently expect operating margin to decline in Q2 due to the timing of planned marketing and ecosystem investments and expand again in Q3 and Q4 to last year. We expect our tax rate to be in the range of 24% to 25% for the full year and roughly 23% to 24% for the first quarter. And lastly, we expect capital expenditures to be in the range of $275 million to $300 million, in line with our long-term guidance of 4% to 5% of sales.
In closing, led by Ralph's enduring vision, our brand continues to inspire consumers across every geography. Our dedicated, passionate teams around the world are operating with commitment and agility to execute on our next great chapter Accelerate plan. We believe our elevated brand, clear strategy and targeted investments, combined with our culture of operating discipline and fortress foundation enablers put us in a position of strength to continue to drive long-term value creation.
And with that, let's open up the call for your questions.
