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RALPH LAUREN CORPORATION

(RL)
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Delayed Nyse  -  04:04 2022-09-30 pm EDT
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RALPH LAUREN CORP Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

08/09/2022 | 10:22am EDT

Special Note Regarding Forward-Looking Statements


Various statements in this Form 10-Q, or incorporated by reference into this
Form 10-Q, in future filings by us with the Securities and Exchange Commission
(the "SEC"), in our press releases, and in oral statements made from time to
time by us or on our behalf constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements include, without limitation, statements regarding our future
operating results and sources of liquidity (especially in light of the COVID-19
pandemic), the implementation and impact of our strategic plans, initiatives and
capital expenses, our plans regarding our quarterly cash dividend and Class A
common stock repurchase programs, and our ability to meet environmental, social,
and governance goals. Forward-looking statements are based on current
expectations and are indicated by words or phrases such as "anticipate,"
"outlook," "estimate," "expect," "project," "believe," "envision," "goal,"
"target," "can," "will," and similar words or phrases and involve known and
unknown risks, uncertainties, and other factors which may cause actual results,
performance, or achievements to be materially different from the future results,
performance, or achievements expressed in or implied by such forward-looking
statements. These risks, uncertainties, and other factors include, among others:

•the loss of key personnel, including Mr. Ralph Lauren, or other changes in our
executive and senior management team or to our operating structure, including
those resulting from the recent reduction to our global workforce in connection
with our long-term growth strategy, and our ability to effectively transfer
knowledge and maintain adequate controls and procedures during periods of
transition;

•the impact to our business resulting from the COVID-19 pandemic, including
periods of reduced operating hours and capacity limits and/or temporary closure
of our stores, distribution centers, and corporate facilities, as well as those
of our customers, suppliers, and vendors, and potential changes to consumer
behavior, spending levels, and/or shopping preferences, such as willingness to
congregate in shopping centers or other populated locations;

•the potential impact to our business resulting from inflationary pressures, including increases in the costs of raw materials, transportation, wages, healthcare, and other benefit-related costs;


•the impact of economic, political, and other conditions on us, our customers,
suppliers, vendors, and lenders, including potential business disruptions
related to the war between Russia and Ukraine, civil and political unrest, and
diplomatic tensions between the U.S. and other countries;

•the potential impact to our business resulting from supply chain disruptions,
including those caused by capacity constraints, closed factories and/or labor
shortages (stemming from pandemic diseases, labor disputes, strikes, or
otherwise), scarcity of raw materials, and port congestion, which could result
in inventory shortages and lost sales;

•our ability to effectively manage inventory levels and the increasing pressure on our margins in a highly promotional retail environment;

•our exposure to currency exchange rate fluctuations from both a transactional and translational perspective;

•our ability to recruit and retain employees to operate our retail stores, distribution centers, and various corporate functions;


•the impact to our business resulting from changes in consumers' ability,
willingness, or preferences to purchase discretionary items and luxury retail
products, which tends to decline during recessionary periods, and our ability to
accurately forecast consumer demand, the failure of which could result in either
a build-up or shortage of inventory;

•our ability to successfully implement our long-term growth strategy;


•our ability to continue to expand and grow our business internationally and the
impact of related changes in our customer, channel, and geographic sales mix as
a result, as well as our ability to accelerate growth in certain product
categories;

•our ability to open new retail stores and concession shops, as well as enhance
and expand our digital footprint and capabilities, all in an effort to expand
our direct-to-consumer presence;

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•our ability to respond to constantly changing fashion and retail trends and
consumer demands in a timely manner, develop products that resonate with our
existing customers and attract new customers, and execute marketing and
advertising programs that appeal to consumers;

•our ability to competitively price our products and create an acceptable value proposition for consumers;

•our ability to continue to maintain our brand image and reputation and protect our trademarks;

•our ability to achieve our goals regarding environmental, social, and governance practices, including those related to climate change and our human capital;


•our ability and the ability of our third-party service providers to secure our
respective facilities and systems from, among other things, cybersecurity
breaches, acts of vandalism, computer viruses, ransomware, or similar Internet
or email events;

•our efforts to successfully enhance, upgrade, and/or transition our global information technology systems and digital commerce platforms;

•the potential impact to our business if any of our distribution centers were to become inoperable or inaccessible;


•the potential impact on our operations and on our suppliers and customers
resulting from man-made or natural disasters, including pandemic diseases such
as COVID-19, severe weather, geological events, and other catastrophic events;

•our ability to achieve anticipated operating enhancements and cost reductions
from our restructuring plans, as well as the impact to our business resulting
from restructuring-related charges, which may be dilutive to our earnings in the
short term;

•the impact to our business resulting from potential costs and obligations
related to the early or temporary closure of our stores or termination of our
long-term, non-cancellable leases;

•our ability to maintain adequate levels of liquidity to provide for our cash
needs, including our debt obligations, tax obligations, capital expenditures,
and potential payment of dividends and repurchases of our Class A common stock,
as well as the ability of our customers, suppliers, vendors, and lenders to
access sources of liquidity to provide for their own cash needs;

•the potential impact to our business resulting from the financial difficulties
of certain of our large wholesale customers, which may result in consolidations,
liquidations, restructurings, and other ownership changes in the retail
industry, as well as other changes in the competitive marketplace, including the
introduction of new products or pricing changes by our competitors;

•our ability to access capital markets and maintain compliance with covenants associated with our existing debt instruments;


•a variety of legal, regulatory, tax, political, and economic risks, including
risks related to the importation and exportation of products which our
operations are currently subject to, or may become subject to as a result of
potential changes in legislation, and other risks associated with our
international operations, such as compliance with the Foreign Corrupt Practices
Act or violations of other anti-bribery and corruption laws prohibiting improper
payments, and the burdens of complying with a variety of foreign laws and
regulations, including tax laws, trade and labor restrictions, and related laws
that may reduce the flexibility of our business;

•the potential impact to our business resulting from the imposition of additional duties, tariffs, taxes, and other charges or barriers to trade, including those resulting from trade developments between the U.S. and China, and any related impact to global stock markets, as well as our ability to implement mitigating sourcing strategies;


•changes in our tax obligations and effective tax rate due to a variety of
factors, including potential changes in U.S. or foreign tax laws and
regulations, accounting rules, or the mix and level of earnings by jurisdiction
in future periods that are not currently known or anticipated;

•the impact to our business of events of unrest and instability that are currently taking place in certain parts of the world, as well as from any terrorist action, retaliation, and the threat of further action or retaliation;


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•the potential impact to the trading prices of our securities if our operating
results, Class A common stock share repurchase activity, and/or cash dividend
payments differ from investors' expectations;

•our ability to maintain our credit profile and ratings within the financial community;

•our intention to introduce new products or brands, or enter into or renew alliances;

•changes in the business of, and our relationships with, major wholesale customers and licensing partners; and

•our ability to make strategic acquisitions and successfully integrate the acquired businesses into our existing operations.


These forward-looking statements are based largely on our expectations and
judgments and are subject to a number of risks and uncertainties, many of which
are unforeseeable and beyond our control. A detailed discussion of significant
risk factors that have the potential to cause our actual results to differ
materially from our expectations is included in our Annual Report on Form 10-K
for the fiscal year ended April 2, 2022 (the "Fiscal 2022 10-K"). There are no
material changes to such risk factors, nor have we identified any previously
undisclosed risks that could materially adversely affect our business, operating
results, and/or financial condition, as set forth in Part II, Item 1A - "Risk
Factors" of this Form 10-Q. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events, or otherwise.

In this Form 10-Q, references to "Ralph Lauren," "ourselves," "we," "our," "us,"
and the "Company" refer to Ralph Lauren Corporation and its subsidiaries, unless
the context indicates otherwise. We utilize a 52-53 week fiscal year ending on
the Saturday immediately before or after March 31. As such, fiscal year 2023
will end on April 1, 2023 and will be a 52-week period ("Fiscal 2023"). Fiscal
year 2022 ended on April 2, 2022 and was a 53-week period ("Fiscal 2022"). The
first quarter of Fiscal 2023 ended on July 2, 2022 and was a 13-week period. The
first quarter of Fiscal 2022 ended on June 26, 2021 and was also a 13-week
period.

INTRODUCTION


Management's discussion and analysis of financial condition and results of
operations ("MD&A") is provided as a supplement to the accompanying consolidated
financial statements and notes thereto to help provide an understanding of our
results of operations, financial condition, and liquidity. MD&A is organized as
follows:

•Overview.  This section provides a general description of our business, global
economic conditions and industry trends, and a summary of our financial
performance for the three-month period ended July 2, 2022. In addition, this
section includes a discussion of recent developments and transactions affecting
comparability that we believe are important in understanding our results of
operations and financial condition, and in anticipating future trends.

•Results of operations. This section provides an analysis of our results of operations for the three-month period ended July 2, 2022 as compared to the three-month period ended June 26, 2021.


•Financial condition and liquidity.  This section provides a discussion of our
financial condition and liquidity as of July 2, 2022, which includes (i) an
analysis of our financial condition as compared to the prior fiscal year-end;
(ii) an analysis of changes in our cash flows for the three months ended July 2,
2022 as compared to the three months ended June 26, 2021; (iii) an analysis of
our liquidity, including the availability under our commercial paper borrowing
program and credit facilities, our outstanding debt and covenant compliance,
common stock repurchases, and payments of dividends; and (iv) a description of
any material changes in our material cash requirements since April 2, 2022.

•Market risk management.  This section discusses any significant changes in our
risk exposures related to foreign currency exchange rates, interest rates, and
our investments since April 2, 2022.

•Critical accounting policies.   This section discusses any significant changes
in our critical accounting policies since April 2, 2022. Critical accounting
policies typically require significant judgment and estimation on the part of
management in their application. In addition, all of our significant accounting
policies, including our critical accounting policies, are summarized in Note 3
of the Fiscal 2022 10-K.

•Recently issued accounting standards.  This section discusses the potential
impact on our reported results of operations and financial condition of certain
accounting standards that have been recently issued.

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OVERVIEW

Our Business


Our Company is a global leader in the design, marketing, and distribution of
premium lifestyle products, including apparel, footwear, accessories, home
furnishings, fragrances, and hospitality. Our long-standing reputation and
distinctive image have been developed across a wide range of products, brands,
distribution channels, and international markets. Our brand names include Ralph
Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren,
Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, and Chaps, among
others.

We diversify our business by geography (North America, Europe, and Asia, among
other regions) and channel of distribution (retail, wholesale, and licensing).
This allows us to maintain a dynamic balance as our operating results do not
depend solely on the performance of any single geographic area or channel of
distribution. We sell directly to consumers through our integrated retail
channel, which includes our retail stores, concession-based shop-within-shops,
and digital commerce operations around the world. Our wholesale sales are made
principally to major department stores, specialty stores, and third-party
digital partners around the world, as well as to certain third-party-owned
stores to which we have licensed the right to operate in defined geographic
territories using our trademarks. In addition, we license to third parties for
specified periods the right to access our various trademarks in connection with
the licensees' manufacture and sale of designated products, such as certain
apparel, eyewear, fragrances, and home furnishings.

We organize our business into the following three reportable segments:


•North America - Our North America segment, representing approximately 48% of
our Fiscal 2022 net revenues, primarily consists of sales of our Ralph Lauren
branded products made through our retail and wholesale businesses in the U.S.
and Canada. In North America, our retail business is primarily comprised of our
Ralph Lauren stores, our factory stores, and our digital commerce site,
www.RalphLauren.com. Our wholesale business in North America is comprised
primarily of sales to department stores and, to a lesser extent, specialty
stores.

•Europe - Our Europe segment, representing approximately 28% of our Fiscal
2022 net revenues, primarily consists of sales of our Ralph Lauren branded
products made through our retail and wholesale businesses in Europe and emerging
markets. In Europe, our retail business is primarily comprised of our Ralph
Lauren stores, our factory stores, our concession-based shop-within-shops, and
our various digital commerce sites. Our wholesale business in Europe is
comprised primarily of a varying mix of sales to both department stores and
specialty stores, depending on the country, as well as to various third-party
digital partners.

•Asia - Our Asia segment, representing approximately 21% of our Fiscal 2022 net
revenues, primarily consists of sales of our Ralph Lauren branded products made
through our retail and wholesale businesses in Asia, Australia, and New Zealand.
Our retail business in Asia is primarily comprised of our Ralph Lauren stores,
our factory stores, our concession-based shop-within-shops, and our various
digital commerce sites. In addition, we sell our products online through various
third-party digital partner commerce sites. Our wholesale business in Asia is
comprised primarily of sales to department stores, with related products
distributed through shop-within-shops.

No operating segments were aggregated to form our reportable segments. In
addition to these reportable segments, we also have other non-reportable
segments, representing approximately 3% of our Fiscal 2022 net revenues, which
primarily consist of Ralph Lauren and Chaps branded royalty revenues earned
through our global licensing alliances. In addition, prior to its disposition at
the end of our first quarter of Fiscal 2022, our other non-reportable segments
also included sales of Club Monaco branded products made through our retail and
wholesale businesses in the U.S., Canada, and Europe, and our licensing
alliances in Asia. Refer to "Recent Developments" for additional discussion
regarding the disposition of our former Club Monaco business, as well as the
transition of our Chaps business to a fully licensed business model.

Approximately 51% of our Fiscal 2022 net revenues were earned outside of the U.S. See Note 17 to the accompanying consolidated financial statements for further discussion of our segment reporting structure.


Our business is typically affected by seasonal trends, with higher levels of
retail sales in our second and third fiscal quarters and higher wholesale sales
in our second and fourth fiscal quarters. These trends result primarily from the
timing of key vacation travel, back-to-school, and holiday shopping periods
impacting our retail business and timing of seasonal wholesale shipments. As a
result of changes in our business, consumer spending patterns, and the
macroeconomic environment, including those resulting from pandemic diseases and
other catastrophic events, historical quarterly operating trends and working
capital requirements may not be indicative of our future performance. In
addition, fluctuations in sales, operating

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income (loss), and cash flows in any fiscal quarter may be affected by other
events affecting retail sales, such as changes in weather patterns. Accordingly,
our operating results and cash flows for the three-month period ended July 2,
2022 are not necessarily indicative of the operating results and cash flows that
may be expected for the full Fiscal 2023.

Recent Developments

COVID-19 Pandemic


Beginning in the fourth quarter of our fiscal year ended March 28, 2020, a novel
strain of coronavirus commonly referred to as COVID-19 emerged and spread
rapidly across the globe, including throughout all major geographies in which we
operate, resulting in adverse economic conditions and widespread business
disruptions. Since then, governments worldwide have periodically imposed varying
degrees of preventative and protective actions, such as temporary travel bans,
forced business closures, and stay-at-home orders, all in an effort to reduce
the spread of the virus.

As a result of the COVID-19 pandemic, we have experienced varying degrees of
business disruptions since its beginning, including periods of closure of our
stores and corporate-related facilities, as have our wholesale customers,
licensing partners, and suppliers. Such disruptions continued throughout Fiscal
2022 in certain regions, although to a lesser extent than the widespread
significant disruptions experienced during our fiscal year ended March 27, 2021,
and have since extended into the first quarter of Fiscal 2023, most notably in
Asia where approximately 50% of our stores in China experienced closures for a
significant portion of the quarter. Further, throughout the course of the
pandemic, the majority of our stores that were able to remain open have
periodically been subject to limited operating hours and/or customer capacity
levels in accordance with local health guidelines, with traffic remaining
challenged. However, our digital commerce operations have grown significantly
from pre-pandemic levels, due in part to our investments and enhanced
capabilities, as well as changes in consumer shopping preferences.

The COVID-19 pandemic also continues to adversely impact our distribution,
logistic, and sourcing partners, including temporary factory closures, labor
shortages, vessel, container and other transportation shortages, and port
congestion. Such disruptions have reduced the availability of inventory, delayed
timing of inventory receipts, and resulted in increased costs for both the
purchase and transportation of such inventory.

Despite the introduction of COVID-19 vaccines, the pandemic remains volatile and
continues to evolve, with resurgences and outbreaks occurring in various parts
of the world, including those resulting from variants of the virus. Accordingly,
we cannot predict for how long and to what extent the pandemic will continue to
impact our business operations or the overall global economy. We will continue
to assess our operations location-by-location, considering the guidance of local
governments and global health organizations. See Item 1A - "Risk Factors - Risks
Related to Macroeconomic Conditions - Infectious disease outbreaks, such as the
COVID-19 pandemic, could have a material adverse effect on our business" in the
Fiscal 2022 10-K for additional discussion regarding risks to our business
associated with the COVID-19 pandemic.

Fiscal 2021 Strategic Realignment Plan


We have undertaken efforts to realign our resources to support future growth and
profitability, and to create a sustainable, enhanced cost structure. The key
initiatives underlying these efforts involve evaluation of our: (i) team
organizational structures and ways of working; (ii) real estate footprint and
related costs across our corporate offices, distribution centers, and
direct-to-consumer retail and wholesale doors; and (iii) brand portfolio.

In connection with the first initiative, on September 17, 2020, our Board of
Directors approved a restructuring plan (the "Fiscal 2021 Strategic Realignment
Plan") to reduce our global workforce. Additionally, during a preliminary review
of our store portfolio during the second quarter of Fiscal 2021, we made the
decision to close our Polo store on Regent Street in London.

Shortly thereafter, on October 29, 2020, we announced the planned transition of
our Chaps brand to a fully licensed business model, consistent with our
long-term brand elevation strategy and in connection with our third initiative.
Specifically, we have entered into a multi-year licensing partnership, which
took effect on August 1, 2021 following a transition period, with an affiliate
of 5 Star Apparel LLC, a division of the OVED Group, to manufacture, market, and
distribute Chaps menswear and womenswear. The products are being sold at
existing channels of distribution with opportunities for expansion into
additional channels and markets globally. This agreement created incremental
value for the Company by enabling an even greater focus on elevating our core
brands in the marketplace, reducing our direct exposure to the North America
department store channel, and setting up Chaps to deliver on its potential with
an experienced partner that is focused on nurturing the brand.

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Later, on February 3, 2021, our Board of Directors approved additional actions
related to our real estate initiative. Specifically, we are in the process of
further rightsizing and consolidating our global corporate offices to better
align with our organizational profile and new ways of working. We also have
closed, and may continue to close, certain of our stores to improve overall
profitability. Additionally, we further consolidated our North America
distribution centers in order to drive greater efficiencies, improve
sustainability, and deliver a better consumer experience.

Finally, on June 26, 2021, in connection with our brand portfolio initiative, we
sold our former Club Monaco business to Regent, L.P. ("Regent"), a global
private equity firm, with no resulting gain or loss on sale realized during the
first quarter of Fiscal 2022. Regent acquired Club Monaco's assets and
liabilities in exchange for potential future cash consideration payable to us,
including earn-out payments based on Club Monaco meeting certain defined revenue
thresholds over a five-year period. Accordingly, we may realize amounts in the
future related to the receipt of such contingent consideration. Additionally, in
connection with this divestiture, we are providing Regent with certain
operational support for a transitional period of approximately one year, varying
by functional area.

In connection with the Fiscal 2021 Strategic Realignment Plan, we have recorded
cumulative pre-tax charges of $262.8 million, of which $0.7 million and $18.5
million were recorded during the three-month periods ended July 2, 2022 and
June 26, 2021, respectively. Actions associated with the Fiscal 2021 Strategic
Realignment Plan were substantially completed by the end of Fiscal 2022, with
certain remaining actions expected to be completed during Fiscal 2023. We expect
total charges of up to $300 million to be incurred in connection with this plan,
consisting of cash-related charges of approximately $180 million and non-cash
charges of approximately $120 million. Actions associated with this plan are
expected to result in gross annualized pre-tax expense savings of approximately
$200 million, a portion of which is being reinvested back into the business.

See Note 8 to our accompanying consolidated financial statements for additional discussion regarding charges recorded in connection with the Fiscal 2021 Strategic Restructuring Plan.

Global Economic Conditions and Industry Trends


The global economy and retail industry are impacted by many different factors.
As discussed in "Recent Developments," governments worldwide have periodically
imposed varying degrees of preventative and protective actions throughout the
course of the COVID-19 pandemic, such as temporary travel bans, forced business
closures, and stay-at-home orders, all in an effort to reduce the spread of the
virus. Such actions, together with changes in consumers' willingness to
congregate in populated areas and lower levels of disposal income due to higher
unemployment rates, have resulted in significant business disruptions across a
wide array of industries since the outbreak of the pandemic. The COVID-19
pandemic has also significantly disrupted distribution, logistic, and supply
chain operations globally, including temporary factory closures, labor
shortages, vessel, container and other transportation shortages, and port
congestion. Such disruptions have reduced the availability of inventory, delayed
timing of inventory receipts, and resulted in increased costs for both the
purchase and transportation of such inventory. Despite the introduction of
COVID-19 vaccines, resurgences and outbreaks continue to occur in certain
geographic locations, including those resulting from variants of the virus.
Accordingly, it is not clear at this time how much longer and to what extent the
pandemic will last.

The global economy has also been negatively impacted by the war between Russia
and Ukraine. Several countries, including the U.S., have imposed significant
economic sanctions against Russia, including export controls and other trade
restrictions with Russian entities. Various companies, including Ralph Lauren,
have also voluntarily elected to suspend operations in Russia in protest of the
conflict. The Russia-Ukraine war has adversely impacted consumer sentiment and
confidence, particularly in Eastern Europe. It is not clear at this time how
long the conflict will endure, or if it will escalate further with additional
countries declaring war against each other, which could further compound the
adverse impact to the global economy. Certain other worldwide events and
factors, such as international trade relations, new legislation and regulations,
taxation or monetary policy changes, political and civil unrest, and significant
inflationary pressures, including increases in the cost of raw materials,
transportation, wages, healthcare and other benefit-related costs, among other
factors, have also adversely impacted the global economy.

The retail landscape in which we operate continues to be disrupted by the
COVID-19 pandemic, including periods of temporary closures of stores and
distribution centers and declines in retail traffic, tourism, and consumer
spending on discretionary items. The retail industry, particularly in the U.S.,
has also experienced numerous bankruptcies, restructurings, and ownership
changes in recent years. Supply chain-related risks also continue to exist as
manufacturers and transportation providers alike are finding it difficult to
meet increased consumer demand. The continuation of these industry trends could
have a material adverse effect on our business or operating results.
Additionally, changes in economic conditions, including recent inflationary
pressures and the growing concerns of a potential recession, may further impact
consumer discretionary income levels, spending, and sentiment.

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We have implemented various strategies globally to help address many of these
current challenges and continue to build a foundation for long-term profitable
growth centered around strengthening our consumer-facing areas of product,
stores, and marketing across channels and driving a more efficient operating
model. Throughout the course of the COVID-19 pandemic, our priority has been to
ensure the safety and well-being of our employees, customers, and the
communities in which we operate around the world. We continue to consider the
guidance of local governments and global health organizations and have
implemented health and safety protocols in our stores, distribution centers, and
corporate facilities. Investing in our digital ecosystem remains a primary focus
and is a key component of our integrated global omni-channel strategy and
driving consumer engagement, particularly in light of the current COVID-19
pandemic, which has and could continue to reshape consumer shopping preferences.
During the first quarter of Fiscal 2023, we launched additional digital sites in
key markets globally, including India and Israel. We also continue to drive
consumer engagement and global brand awareness through our sports sponsorships,
with recent events including the Wimbledon and PGA Championship, as well as
through our special product releases and limited collections and celebrity
dressings at highly publicized events, such as the recent Met Gala.
Additionally, we have accelerated our marketing investments, with a focus on
supporting new customer acquisition, digitally-amplified brand campaigns, and
resumption of in-store programs as markets continue to reopen worldwide. We also
continue to take deliberate actions to ensure promotional consistency across
channels and to enhance the overall brand and shopping experience, including
better aligning shipments and inventory levels with underlying demand. We also
remain committed to optimizing our wholesale distribution channel and enhancing
our department store consumer experience.

We will continue to monitor these conditions and trends and will evaluate and
adjust our operating strategies and foreign currency and cost management
opportunities to help mitigate the related impacts on our results of operations,
while remaining focused on the long-term growth of our business and protecting
and elevating the value of our brand.

For a detailed discussion of significant risk factors that have the potential to
cause our actual results to differ materially from our expectations, see Part I,
Item 1A - "Risk Factors" in our Fiscal 2022 10-K.

Summary of Financial Performance

Operating Results


During the three months ended July 2, 2022, we reported net revenues of $1.491
billion, net income of $123.4 million, and net income per diluted share of
$1.73, as compared to net revenues of $1.376 billion, net income of $164.7
million, and net income per diluted share of $2.18 during the three months ended
June 26, 2021. The comparability of our operating results has been affected by
net restructuring-related charges, impairment of assets, and certain other
benefits (charges), as well as the impacts of the disposition of our former Club
Monaco business at the end of the first quarter of Fiscal 2022 and the
transition of our Chaps business to a fully licensed business model during the
second quarter of Fiscal 2022, as discussed further below. We also continue to
experience varying degrees of business disruptions resulting from the COVID-19
pandemic, including periods of temporary closures of our stores, as well as
sourcing and distribution-related delays.

Our operating performance for the three months ended July 2, 2022 reflected
revenue increases of 8.3% on a reported basis and 13.4% on a constant currency
basis, as defined within "Transactions and Trends Affecting Comparability of
Results of Operations and Financial Condition" below. The increase in net
revenues reflected growth across all of our reportable segments and sales
channels, despite revenue declines associated with the disposition of our former
Club Monaco business at the end of the first quarter of Fiscal 2022 and the
transition of our Chaps business to a fully licensed business model during the
second quarter of Fiscal 2022, as discussed further below.

Our gross profit as a percentage of net revenues declined by 310 basis points to
67.2% during the three months ended July 2, 2022, primarily driven by higher
non-routine inventory charges recorded during the three months ended July 2,
2022 as compared to the prior fiscal year period, higher product and freight
costs, and net unfavorable foreign currency effects, partially offset by
improved pricing and lower levels of promotional activity.

Selling, general, and administrative ("SG&A") expenses as a percentage of net
revenues during the three months ended July 2, 2022 increased by 210 basis
points to 55.0%, primarily driven by the return to a more normalized level of
marketing investments, as well as higher compensation and selling-related
expenses to drive strategic growth.

Net income decreased by $41.3 million to $123.4 million during the three months
ended July 2, 2022 as compared to the three months ended June 26, 2021,
primarily due to a $45.4 million decline in our operating income, partially
offset by a $6.5 million decrease in our income tax provision. Net income per
diluted share decreased by $0.45 to $1.73 per share during the three months
ended July 2, 2022 driven by the lower level of net income, partially offset by
lower weighted-average diluted shares outstanding.

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During the three-month periods ended July 2, 2022 and June 26, 2021, our operating results were negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges (benefits) totaling $14.8 million and $10.4 million, respectively, which had an after-tax effect of reducing net income by $11.2 million, or $0.15 per diluted share, and $7.7 million, or $0.11 per diluted share, respectively.

Financial Condition and Liquidity


We ended the first quarter of Fiscal 2023 in a net cash and short-term
investments position (calculated as cash and cash equivalents, plus short-term
investments, less total debt) of $639.9 million, as compared to $962.1 million
as of the end of Fiscal 2022. The decrease in our net cash and short-term
investments position was primarily due to our use of cash to support Class A
common stock repurchases of $234.7 million, including withholdings in
satisfaction of tax obligations for stock-based compensation awards, to make
dividend payments of $48.1 million, and to invest in our business through $39.4
million in capital expenditures, as well as the unfavorable effect of exchange
rate changes on our cash, cash equivalents, and restricted cash of $30.0
million, partially offset by operating cash flows of $45.3 million.

Net cash provided by operating activities was $45.3 million during the three
months ended July 2, 2022, as compared to $247.6 million during the three months
ended June 26, 2021. The net decrease in cash provided by operating activities
was due to a net unfavorable change related to our operating assets and
liabilities, including our working capital, as compared to the prior fiscal year
period, as well as a decrease in net income before non-cash charges.

Our equity decreased to $2.364 billion as of July 2, 2022 compared to $2.536
billion as of April 2, 2022, due to our share repurchase activity and dividends
declared during the three months ended July 2, 2022, partially offset by our
comprehensive income and the net impact of stock-based compensation
arrangements.

Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition

The comparability of our operating results for the three-month periods ended July 2, 2022 and June 26, 2021 has been affected by certain events, including:


•pretax charges incurred in connection with our restructuring activities, as
well as certain other benefits (charges), as summarized below (references to
"Notes" are to the notes to the accompanying consolidated financial statements):

                                                                 Three Months Ended
                                                                               July 2,      June 26,
                                                                                2022          2021
                                                                                    (millions)
Impairment of assets (see Note 7)                                             $     -      $  (18.6)
Restructuring and other charges, net (see Note 8)                                (5.6)         (0.7)
Non-routine inventory benefits (charges)(a)                                     (11.6)          8.0
Non-routine bad debt expense reversals(b)                                         2.4           0.9
Total charges                                                                 $ (14.8)     $  (10.4)






(a)Non-routine inventory benefits (charges) are recorded within cost of goods
sold in the consolidated statements of operations. The charges recorded during
the three months ended July 2, 2022 primarily related to the Russia-Ukraine war.
The benefits recorded during the three months ended June 26, 2021 related to
reversals of amounts previously recognized in connection with the COVID-19
pandemic.

(b)Non-routine bad debt expense reversals are recorded within SG&A expenses in
the consolidated statements of operations. The reversals recorded during the
three-month periods ended July 2, 2022 and June 26, 2021 related to charges
previously recognized in connection with the Russia-Ukraine war and COVID-19
pandemic, respectively.

•the disposition of our former Club Monaco business at the end of the first
quarter of Fiscal 2022. We did not recognize any net revenues during the three
months ended July 2, 2022 in connection with our former Club Monaco business,
whereas in comparison we recognized net revenues of approximately $34 million
during the prior fiscal year period;

•the transition of our Chaps business to a fully licensed business model during
the second quarter of Fiscal 2022, which resulted in an overall decline in net
revenues of approximately $16 million during the three months ended July 2, 2022
as compared to the prior fiscal year period; and

                                           41


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•other adverse impacts related to COVID-19 business disruptions during the three-month periods ended July 2, 2022 and June 26, 2021.


Because we are a global company, the comparability of our operating results
reported in U.S. Dollars is also affected by foreign currency exchange rate
fluctuations because the underlying currencies in which we transact change in
value over time compared to the U.S. Dollar. Such fluctuations can have a
significant effect on our reported results. As such, in addition to financial
measures prepared in accordance with accounting principles generally accepted in
the U.S. ("U.S. GAAP"), our discussions often contain references to constant
currency measures, which are calculated by translating current-year and
prior-year reported amounts into comparable amounts using a single foreign
exchange rate for each currency. We present constant currency financial
information, which is a non-U.S. GAAP financial measure, as a supplement to our
reported operating results. We use constant currency information to provide a
framework for assessing how our businesses performed excluding the effects of
foreign currency exchange rate fluctuations. We believe this information is
useful to investors for facilitating comparisons of operating results and better
identifying trends in our businesses. The constant currency performance measures
should be viewed in addition to, and not in lieu of or superior to, our
operating performance measures calculated in accordance with U.S. GAAP.
Reconciliations between this non-U.S. GAAP financial measure and the most
directly comparable U.S. GAAP measure are included in the "Results of
Operations" section where applicable.

Our discussion also includes reference to comparable store sales. Comparable
store sales refer to the change in sales of our stores that have been open for
at least 13 full fiscal months. Sales from our digital commerce sites are also
included within comparable sales for those geographies that have been serviced
by the related site for at least 13 full fiscal months. Sales for stores or
digital commerce sites that are closed or shut down during the year are excluded
from the calculation of comparable store sales. Sales for stores that are either
relocated, enlarged (as defined by gross square footage expansion of 25% or
greater), or generally closed for 30 or more consecutive days for renovation are
also excluded from the calculation of comparable store sales until such stores
have been operating in their new location or in their newly renovated state for
at least 13 full fiscal months. All comparable store sales metrics are
calculated on a constant currency basis.

Our "Results of Operations" discussion that follows includes the significant
changes in operating results arising from these items affecting comparability.
However, unusual items or transactions may occur in any period. Accordingly,
investors and other financial statement users should consider the types of
events and transactions that have affected operating trends.

                                           42


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RESULTS OF OPERATIONS

Three Months Ended July 2, 2022 Compared to Three Months Ended June 26, 2021


The following table summarizes our results of operations and expresses the
percentage relationship to net revenues of certain financial statement captions.
All percentages shown in the below table and the discussion that follows have
been calculated using unrounded numbers.

                                                                    Three Months Ended
                                                             July 2,                   June 26,              $                 % / bps
                                                               2022                      2021             Change                Change
                                                                     (millions, except per share data)
Net revenues                                             $    1,490.6                $ 1,376.3          $  114.3                     8.3  %
Cost of goods sold                                             (489.2)                  (408.2)            (81.0)                   19.9  %
Gross profit                                                  1,001.4                    968.1              33.3                     3.4  %
Gross profit as % of net revenues                                67.2  %                  70.3  %                                  (310 bps)
Selling, general, and administrative expenses                  (820.6)                  (728.2)            (92.4)                   12.7  %
SG&A expenses as % of net revenues                               55.0  %                  52.9  %                                    210 bps
Impairment of assets                                                -                    (18.6)             18.6                  (100.0  %)
Restructuring and other charges, net                             (5.6)                    (0.7)             (4.9)                  758.2  %
Operating income                                                175.2                    220.6             (45.4)                  (20.6  %)
Operating income as % of net revenues                            11.8  %                  16.0  %                                  (420 bps)
Interest expense                                                (11.8)                   (13.3)              1.5                   (11.7  %)
Interest income                                                   3.6                      1.8               1.8                   102.7  %
Other income (expense), net                                      (4.8)                     0.9              (5.7)                         NM
Income before income taxes                                      162.2                    210.0             (47.8)                  (22.8  %)
Income tax provision                                            (38.8)                   (45.3)              6.5                   (14.3  %)
Effective tax rate(a)                                            23.9  %                  21.6  %                                    230 bps
Net income                                               $      123.4                $   164.7          $  (41.3)                  (25.1  %)
Net income per common share:
Basic                                                    $       1.76                $    2.23          $  (0.47)                  (21.1  %)
Diluted                                                  $       1.73                $    2.18          $  (0.45)                  (20.6  %)



(a)Effective tax rate is calculated by dividing the income tax provision by income before income taxes.

NM Not meaningful.


Net Revenues.  Net revenues increased by $114.3 million, or 8.3%, to $1.491
billion during the three months ended July 2, 2022 as compared to the three
months ended June 26, 2021, including net unfavorable foreign currency effects
of $69.5 million. On a constant currency basis, net revenues increased by $183.8
million, or 13.4%. The increase in net revenues reflected growth across all of
our reportable segments and sales channels, despite revenue declines associated
with the disposition of our former Club Monaco business at the end of the first
quarter of Fiscal 2022 and the transition of our Chaps business to a fully
licensed business model during the second quarter of Fiscal 2022.

The following table summarizes the percentage change in our consolidated comparable store sales for the three months ended July 2, 2022 as compared to the prior fiscal year period:


                                   % Change
Digital commerce                        7  %
Brick and mortar                       16  %
Total comparable store sales           15  %


                                           43


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Our global average store count increased by 86 stores and concession shops
during the three months ended July 2, 2022 compared with the three months ended
June 26, 2021, largely driven by new openings primarily in Asia. The following
table details our retail store presence by segment as of the periods presented:

                                 July 2,       June 26,
                                  2022           2021
Freestanding Stores:
North America                     238            233
Europe                             97             94
Asia                              191            155
Total freestanding stores         526            482

Concession Shops:
North America                       1              1
Europe                             29             29
Asia                              678            617
Total concession shops            708            647
Total stores                    1,234          1,129


In addition to our stores, we sell products online in North America, Europe, and
Asia through our various digital commerce sites, as well as through our Polo
mobile apps in North America and the United Kingdom. We also sell products
online through various third-party digital partner commerce sites, primarily in
Asia.

Net revenues for our segments, as well as a discussion of the changes in each
reportable segment's net revenues from the comparable prior fiscal year period,
are provided below:


                                                 Three Months Ended               $ Change            Foreign           $ Change                      % Change
                                             July 2,            June 26,             As              Exchange           Constant               As                Constant
                                               2022               2021            Reported            Impact            Currency            Reported             Currency
                                                                                 (millions)
Net Revenues:
North America                              $   700.7          $   662.1          $   38.6          $     (0.3)         $   38.9                 5.8  %               5.9  %
Europe                                         415.6              354.9              60.7               (40.2)            100.9                17.1  %              28.4  %
Asia                                           334.1              288.2              45.9               (28.9)             74.8                15.9  %              26.0  %
Other non-reportable segments(a)                40.2               71.1             (30.9)               (0.1)            (30.8)              (43.4  %)            (43.2  %)
Total net revenues                         $ 1,490.6          $ 1,376.3          $  114.3          $    (69.5)         $  183.8                 8.3  %              13.4  %



(a)Reflects the disposition of our former Club Monaco business at the end of the first quarter of Fiscal 2022.


North America net revenues - Net revenues increased by $38.6 million, or 5.8%,
during the three months ended July 2, 2022 as compared to the three months ended
June 26, 2021. On a constant currency basis, net revenues increased by $38.9
million, or 5.9%.

The $38.6 million net increase in North America net revenues was driven by:


•a $25.6 million net increase related to our North America retail business,
reflecting growth in both our brick and mortar and digital commerce operations.
On a constant currency basis, net revenues increased by $25.8 million,
reflecting increases of $20.7 million in comparable store sales and $5.1 million
in non-comparable store sales. The following table summarizes the percentage
change in comparable store sales related to our North America retail business:

                                           44

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                                   % Change
Digital commerce                        2  %
Brick and mortar                        5  %
Total comparable store sales            5  %


•a $13.0 million net increase related to our North America wholesale business
largely driven by overall stronger consumer demand. This increase was realized
despite the transition of our Chaps business to a fully licensed business model
during the second quarter of Fiscal 2022.

Europe net revenues - Net revenues increased by $60.7 million, or 17.1%, during
the three months ended July 2, 2022 as compared to the three months ended
June 26, 2021. On a constant currency basis, net revenues increased by $100.9
million, or 28.4%.

The $60.7 million net increase in Europe net revenues was driven by:


•a $45.1 million net increase related to our Europe retail business, reflecting
growth in both our brick and mortar and digital commerce operations, partially
offset by net unfavorable foreign currency effects of $19.4 million. On a
constant currency basis, net revenues increased by $64.5 million, reflecting
increases of $48.3 million in comparable store sales and $16.2 million in
non-comparable store sales. The following table summarizes the percentage change
in comparable store sales related to our Europe retail business:

                                   % Change
Digital commerce                        7  %
Brick and mortar                       45  %
Total comparable store sales           34  %


•a $15.6 million net increase related to our Europe wholesale business largely
driven by overall stronger consumer demand, partially offset by net unfavorable
foreign currency effects of $20.8 million.

Asia net revenues - Net revenues increased by $45.9 million, or 15.9%, during
the three months ended July 2, 2022 as compared to the three months ended
June 26, 2021, despite approximately 50% of our stores in China experiencing
COVID-19-related closures for a significant portion of the current fiscal year
period. On a constant currency basis, net revenues increased by $74.8 million,
or 26.0%.

The $45.9 million net increase in Asia net revenues was driven by:


•a $41.1 million net increase related to our Asia retail business, reflecting
growth in both our brick and mortar and digital commerce operations, partially
offset by net unfavorable foreign currency effects of $27.6 million. On a
constant currency basis, net revenues increased by $68.7 million, reflecting
increases of $42.6 million in comparable store sales and $26.1 million in
non-comparable store sales. The following table summarizes the percentage change
in comparable store sales related to our Asia retail business:

                                   % Change
Digital commerce                       37  %
Brick and mortar                       17  %
Total comparable store sales           19  %

•a $4.8 million net increase related to our Asia wholesale business, reflecting increases most notably in South Korea and Australia.


Gross Profit.  Gross profit increased by $33.3 million, or 3.4%, to $1.001
billion for the three months ended July 2, 2022, including net unfavorable
foreign currency effects of $62.9 million. Gross profit as a percentage of net
revenues declined to 67.2% for the three months ended July 2, 2022 from 70.3%
for the three months ended June 26, 2021. The 310 basis point decline was
primarily driven by higher non-routine inventory charges recorded during the
three months ended July 2, 2022 as compared to the prior fiscal year period,
higher product and freight costs, and net unfavorable foreign currency effects,
partially offset by improved pricing and lower levels of promotional activity.

                                           45

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Gross profit as a percentage of net revenues is dependent upon a variety of
factors, including changes in the relative sales mix among distribution
channels, changes in the mix of products sold, pricing, the timing and level of
promotional activities, foreign currency exchange rates, and fluctuations in
material costs. These factors, among others, may cause gross profit as a
percentage of net revenues to fluctuate from period to period.

Selling, General, and Administrative Expenses.  SG&A expenses include costs
relating to compensation and benefits, advertising and marketing, rent and
occupancy, distribution, information technology, legal, depreciation and
amortization, bad debt, and other selling and administrative costs. SG&A
expenses increased by $92.4 million, or 12.7%, to $820.6 million for the three
months ended July 2, 2022, including net favorable foreign currency effects of
$33.1 million. SG&A expenses as a percentage of net revenues increased to 55.0%
for the three months ended July 2, 2022 from 52.9% for the three months ended
June 26, 2021. The 210 basis point increase was primarily driven by the return
to a more normalized level of marketing investments, as well as higher
compensation and selling-related expenses to drive strategic growth.

The $92.4 million increase in SG&A expenses was driven by:

                                            Three Months Ended July 2, 2022
                                                      Compared to
                                           Three Months Ended June 26, 2021
                                                      (millions)
SG&A expense category:
Marketing and advertising expenses        $                            31.8
Compensation-related expenses                                          21.3
Selling-related expenses                                               11.6
Staff-related expenses                                                 10.1
Rent and occupancy costs                                                5.3
Shipping and handling costs                                             5.1
Other                                                                   7.2
Total increase in SG&A expenses           $                            92.4


Impairment of Assets. No non-cash impairment charges were recorded during the
three months ended July 2, 2022. During the three months ended June 26, 2021, we
recorded non-cash impairment charges of $18.6 million to write-down certain
long-lived assets. See Note 7 to the accompanying consolidated financial
statements.

Restructuring and Other Charges, Net. During the three-month periods ended
July 2, 2022 and June 26, 2021, we recorded net restructuring charges and
benefits of $0.7 million and $0.1 million, respectively, primarily consisting of
severance and benefits costs (reversals) and other cash charges, as well as
other charges of $4.9 million and $0.8 million, respectively, primarily related
to rent and occupancy costs associated with certain previously exited real
estate locations for which the related lease agreements have not yet expired.
See Note 8 to the accompanying consolidated financial statements.

Operating Income.  Operating income decreased by $45.4 million, or 20.6%, to
$175.2 million for the three months ended July 2, 2022. Our operating results
during the three-month periods ended July 2, 2022 and June 26, 2021 were
negatively impacted by net restructuring-related charges, impairment of assets,
and certain other charges (benefits) totaling $14.8 million and $10.4 million,
respectively. The decline in operating income also reflects net unfavorable
foreign currency effects of $29.8 million. Operating income as a percentage of
net revenues was 11.8% for the three months ended July 2, 2022, reflecting a 420
basis point decline from the prior fiscal year period. The decline in operating
income as a percentage of net revenues was primarily driven by the decrease in
our gross margin and the increase in SG&A expenses as a percentage of net
revenues, as previously discussed.

                                           46


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Operating income and margin for our segments, as well as a discussion of the
changes in each reportable segment's operating margin from the comparable prior
fiscal year period, are provided below:

                                                                                  Three Months Ended
                                                               July 2, 2022                              June 26, 2021
                                                       Operating            Operating             Operating            Operating               $                   Margin
                                                         Income               Margin               Income                Margin              Change                Change
                                                       (millions)                                (millions)                                (millions)
Segment:
North America                                       $    132.8                19.0%           $        186.3             28.1%           $     (53.5)             (910 bps)
Europe                                                    73.2                17.6%                     94.5             26.6%                 (21.3)             (900 bps)
Asia                                                      78.7                23.5%                     60.4             20.9%                  18.3               260 bps
Other non-reportable segments(a)                          37.2                92.4%                     35.4             49.8%                   1.8    

4,260 bps

                                                         321.9                                         376.6                                   (54.7)
Unallocated corporate expenses                          (141.1)                                       (155.3)                                   14.2
Unallocated restructuring and other charges,
net                                                       (5.6)                                         (0.7)                                   (4.9)
Total operating income                              $    175.2                11.8%           $        220.6             16.0%           $     (45.4)             (420 bps)



(a)Reflects the disposition of our Club Monaco business at the end of the first quarter of Fiscal 2022.


North America operating margin declined by 910 basis points, primarily due to
the unfavorable impacts of approximately 550 basis points and 120 basis points
related to our retail and wholesale businesses, respectively, both largely
driven by an increase in SG&A expenses as a percentage of net revenues due in
part to higher marketing investments and a decline in our gross margin due in
part to higher freight costs. The remaining 240 basis point decline was
attributable to higher non-routine inventory charges recorded during the three
months ended July 2, 2022 as compared to the prior fiscal year period.

Europe operating margin declined by 900 basis points, primarily due to the
unfavorable impacts of approximately 350 basis points and 120 basis points
related to our wholesale and retail businesses, respectively, both largely
driven by a decline in our gross margin due in part to higher freight costs. The
basis point decline of our wholesale business also reflected an increase in SG&A
expenses as a percentage of net revenues due in part to higher marketing
investments. The overall decline in operating margin also reflected unfavorable
foreign currency effects of approximately 330 basis points, as well as
approximately 70 basis points attributable to unfavorable channel mix. The
remaining 30 basis point decline was attributable to higher net non-routine
inventory charges and bad debt expense recorded during the three months ended
July 2, 2022 as compared to the prior fiscal year period.

Asia operating margin improved by 260 basis points, primarily due to the
favorable impact of approximately 230 basis points related to our retail
business, largely driven by an increase in our gross margin and a decline in
SG&A expenses as a percentage of net revenues. The overall improvement in
operating margin also reflected 40 basis points attributable to lower impairment
of assets recorded during the three months ended July 2, 2022 as compared to the
prior fiscal year period, as well as approximately 30 basis points related to
our wholesale business, largely driven by a decline in SG&A expenses as a
percentage of net revenues. These improvements in operating margin were
partially offset by unfavorable foreign currency effects of approximately 40
basis points.

Unallocated corporate expenses decreased by $14.2 million to $141.1 million
during the three months ended July 2, 2022. The decline in unallocated corporate
expenses was due to lower impairment charges of $17.5 million and higher
intercompany sourcing commission income of $9.3 million (which is offset at the
segment level and eliminates in consolidation), partially offset by higher
marketing and advertising expenses of $6.7 million and higher other expenses of
$5.9 million.

Unallocated restructuring and other charges, net increased by $4.9 million to
$5.6 million during the three months ended July 2, 2022, as previously discussed
above and in Note 8 to the accompanying consolidated financial statements.

                                           47


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Non-operating Income (Expense), Net. Non-operating income (expense), net is
comprised of interest expense, interest income, and other income (expense), net,
which includes foreign currency gains (losses), equity in income (losses) from
our equity-method investees, and other non-operating expenses. During
the three-month periods ended July 2, 2022 and June 26, 2021, we reported
non-operating expense, net of $13.0 million and $10.6 million, respectively. The
$2.4 million increase in non-operating expense, net was primarily driven by a
$5.7 million increase in other expense, net, largely due to higher net foreign
currency losses during the three months ended July 2, 2022 as compared to the
prior fiscal year period. This unfavorable variance was partially offset by:

•a $1.8 million increase in interest income, primarily driven by higher interest rates in financial markets; and


•a $1.5 million decrease in interest expense, primarily driven by the lower
average level of outstanding debt during the three months ended July 2, 2022 as
compared to the prior fiscal year period resulting from our repayment of the
1.700% Senior Notes that matured on June 15, 2022 (see "Financial Condition and
Liquidity - Cash Flows"), as well as lower interest expense related to our
finance leases.

Income Tax Provision.  The income tax provision represents federal, foreign,
state and local income taxes. Our effective tax rate will change from period to
period based on various factors including, but not limited to, the geographic
mix of earnings, the timing and amount of foreign dividends, enacted tax
legislation, state and local taxes, tax audit findings and settlements, and the
interaction of various global tax strategies.

The income tax provision and effective tax rate for the three months ended
July 2, 2022 were $38.8 million and 23.9%, respectively, compared to $45.3
million and 21.6%, respectively, for the three months ended June 26, 2021. The
$6.5 million decrease in our income tax provision was driven by the decline in
our pretax income, partially offset by a 230 basis point increase in our
effective tax rate. The increase in our effective tax rate was primarily due to
the absence of prior year deferred tax adjustments of certain deferred tax
liabilities, partially offset by a favorable change for audit related
adjustments. See Note 9 to the accompanying consolidated financial statements.

Net Income.  Net income decreased to $123.4 million for the three months ended
July 2, 2022, from $164.7 million for the three months ended June 26, 2021. The
$41.3 million decrease in net income was primarily due to the decline in our
operating income, partially offset by the decrease in our income tax provision,
both as previously discussed. Our operating results during the three-month
periods ended July 2, 2022 and June 26, 2021 were negatively impacted by net
restructuring-related charges, and certain other charges (benefits) totaling
$14.8 million and $10.4 million, respectively, which had an after-tax effect of
reducing net income by $11.2 million and $7.7 million, respectively.

Net Income per Diluted Share.  Net income per diluted share decreased to $1.73
for the three months ended July 2, 2022, from $2.18 for the three months ended
June 26, 2021. The $0.45 per share decrease was driven by the lower level of net
income, as previously discussed, partially offset by lower weighted-average
diluted shares outstanding during the three months ended July 2, 2022 driven by
our share repurchases during the last twelve months. Net income per diluted
share for the three-month periods ended July 2, 2022 and June 26, 2021 were also
negatively impacted by $0.15 per share and $0.11 per share, respectively,
related to net restructuring-related charges, impairment of assets, and certain
other charges (benefits), as previously discussed.

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FINANCIAL CONDITION AND LIQUIDITY

Financial Condition


The following table presents our financial condition as of July 2, 2022 and
April 2, 2022:

                                            July 2,       April 2,          $
                                             2022           2022          Change
                                                         (millions)
Cash and cash equivalents                 $ 1,456.8      $ 1,863.8      $ (407.0)
Short-term investments                        320.1          734.6        (414.5)

Current portion of long-term debt(a)              -         (499.8)        

499.8

Long-term debt(a)                          (1,137.0)      (1,136.5)         

(0.5)

Net cash and short-term investments       $   639.9      $   962.1      $ (322.2)
Equity                                    $ 2,364.1      $ 2,536.0      $ (171.9)



(a)See Note 10 to the accompanying consolidated financial statements for discussion of the carrying values of our debt.


The decrease in our net cash and short-term investments position at July 2, 2022
as compared to April 2, 2022 was primarily due to our use of cash to support
Class A common stock repurchases of $234.7 million, including withholdings in
satisfaction of tax obligations for stock-based compensation awards, to make
dividend payments of $48.1 million, and to invest in our business through $39.4
million in capital expenditures, as well as the unfavorable effect of exchange
rate changes on our cash, cash equivalents, and restricted cash of $30.0
million, partially offset by operating cash flows of $45.3 million.

The decrease in our equity was attributable to our share repurchase activity and
dividends declared during the three months ended July 2, 2022, partially offset
by our comprehensive income and the net impact of stock-based compensation
arrangements.

Cash Flows

The following table details our cash flows for the three-month periods ended July 2, 2022 and June 26, 2021:

                                                                         Three Months Ended
                                                                     July 2,             June 26,              $
                                                                       2022                2021             Change
                                                                                      (millions)
Net cash provided by operating activities                         $      45.3          $   247.6          $ (202.3)
Net cash provided by (used in) investing activities                     365.6             (199.4)            565.0
Net cash used in financing activities                                  (788.6)             (34.3)           (754.3)

Effect of exchange rate changes on cash, cash equivalents, and restricted cash

                                                     (30.0)               3.3             (33.3)

Net increase (decrease) in cash, cash equivalents, and restricted cash

                                                   $    

(407.7) $ 17.2 $ (424.9)



Net Cash Provided by Operating Activities.  Net cash provided by operating
activities was $45.3 million during the three months ended July 2, 2022, as
compared to $247.6 million during the three months ended June 26, 2021. The
$202.3 million net decrease in cash provided by operating activities was due to
a net unfavorable change related to our operating assets and liabilities,
including our working capital, as compared to the prior fiscal year period as
well as a decrease in net income before non-cash charges.

The net unfavorable change related to our operating assets and liabilities, including our working capital, was primarily driven by:


•a year-over-year increase in our inventory levels largely to support revenue
growth, as well as higher goods-in-transit to mitigate ongoing global supply
chain delays;

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•an unfavorable change related to our prepaid expenses and other current assets largely driven by the timing of cash payments; and

•an unfavorable change related to our accounts receivable, largely driven by stronger performance in our wholesale businesses, as well as timing of cash receipts.

These decreases related to our operating assets and liabilities were partially offset by:


•a net favorable change in our accounts payable and accrued liabilities largely
driven by an increase in our expenses during the first quarter of Fiscal 2023
compared to the prior year period, partially offset by an unfavorable change in
our dividends payable related to the temporary suspension and subsequent
resumption of our quarterly cash dividend program in Fiscal 2022.

Net Cash Provided by (Used in) Investing Activities.  Net cash provided by
investing activities was $365.6 million during the three months ended July 2,
2022, as compared to cash used in investing activities of $199.4 million during
the three months ended June 26, 2021. The $565.0 million net increase in cash
provided by investing activities was primarily driven by:

•a $581.6 million increase in proceeds from sales and maturities of investments,
less purchases of investments. During the three months ended July 2, 2022, we
received net proceeds from sales and maturities of investments of $411.0
million, as compared to making net purchases of investments of $170.6 million
during the three months ended June 26, 2021.

This increase in cash provided by investing activities was partially offset by:


•an $11.2 million increase in capital expenditures. During the three months
ended July 2, 2022, we spent $39.4 million on capital expenditures, as compared
to $28.2 million during the three months ended June 26, 2021. Our capital
expenditures during the three months ended July 2, 2022 primarily related to
store openings and renovations, as well as enhancements to our information
technology systems.

Over the course of Fiscal 2023, we continue to expect to spend approximately
$290 million to $310 million on capital expenditures primarily related to store
opening and renovations, as well as enhancements to our information technology
systems.

Net Cash Used in Financing Activities.  Net cash used in financing activities
was $788.6 million during the three months ended July 2, 2022, as compared to
net cash used in financing activities of $34.3 million during the three months
ended June 26, 2021. The $754.3 million net increase in cash used in financing
activities was primarily driven by:

•a $500.0 million increase in cash used to repay debt. During the three months
ended July 2, 2022, we repaid our previously outstanding $500.0 million
principal amount of unsecured 1.700% senior notes that matured June 15, 2022. On
a comparative basis, during the three months ended June 26, 2021, we did not
issue or repay any debt;

•a $205.9 million increase in cash used to repurchase shares of our Class A
common stock. During the three months ended July 2, 2022, we used $213.3 million
to repurchase shares of our Class A common stock pursuant to our common stock
repurchase program (which had been temporarily paused in connection with the
COVID-19 pandemic but subsequently resumed during the third quarter of Fiscal
2022), and an additional $21.4 million in shares of our Class A common stock
were surrendered or withheld in satisfaction of withholding taxes in connection
with the vesting of awards under our long-term stock incentive plans. On a
comparative basis, during the three months ended June 26, 2021, $28.8 million in
shares of our Class A common stock were surrendered or withheld for taxes; and

•a $48.1 million increase in payments of dividends, due to the reinstatement of
our quarterly cash dividend program during Fiscal 2022 after being temporarily
suspended at the beginning of the COVID-19 pandemic as a preemptive action to
preserve cash and strengthen our liquidity position, as discussed in "Dividends"
below.

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Sources of Liquidity

Our primary sources of liquidity are the cash flows generated from our operations, our available cash and cash equivalents and short-term investments, availability under our credit and overdraft facilities and commercial paper program, and other available financing options.


During the three months ended July 2, 2022, we generated $45.3 million of net
cash flows from our operations. As of July 2, 2022, we had $1.777 billion in
cash, cash equivalents, and short-term investments, of which $636.6 million were
held by our subsidiaries domiciled outside the U.S. We are not dependent on
foreign cash to fund our domestic operations. Undistributed foreign earnings
generated on or before December 31, 2017 that were subject to the one-time
mandatory transition tax in connection with U.S. tax legislation commonly
referred to as the Tax Cuts and Jobs Act (the "TCJA") are not considered to be
permanently reinvested and may be repatriated to the U.S. in the future with
minimal or no additional U.S. taxation. We intend to permanently reinvest
undistributed foreign earnings generated after December 31, 2017 that were not
subject to the one-time mandatory transition tax. However, if our plans change
and we choose to repatriate post-2017 earnings to the U.S. in the future, we
would be subject to applicable U.S. and foreign taxes.

The following table presents the total availability, borrowings outstanding, and
remaining availability under our credit and overdraft facilities and Commercial
Paper Program as of July 2, 2022:

                                                                                       July 2, 2022
                                                                    Total               Borrowings             Remaining
Description(a)                                                   Availability           Outstanding           Availability
                                                                                        (millions)
Global Credit Facility and Commercial Paper Program(b)         $         500          $          9    (c)   $         491
Pan-Asia Credit Facilities                                                38                     -                     38
Japan Overdraft Facility                                                  37                     -                     37



(a)As defined in Note 10 to the accompanying consolidated financial statements.


(b)Borrowings under the Commercial Paper Program are supported by the Global
Credit Facility. Accordingly, we do not expect combined borrowings outstanding
under the Commercial Paper Program and the Global Credit Facility to exceed $500
million.

(c)Represents outstanding letters of credit for which we were contingently liable under the Global Credit Facility as of July 2, 2022.


We believe that the Global Credit Facility is adequately diversified with no
undue concentration in any one financial institution. In particular, as of
July 2, 2022, there were eight financial institutions participating in the
Global Credit Facility, with no one participant maintaining a maximum commitment
percentage in excess of 20%. In accordance with the terms of the agreement, we
have the ability to expand our borrowing availability under the Global Credit
Facility to $1 billion through the full term of the facility, subject to the
agreement of one or more new or existing lenders under the facility to increase
their commitments.

Borrowings under the Pan-Asia Credit Facilities and Japan Overdraft Facility
(collectively, the "Pan-Asia Borrowing Facilities") are guaranteed by the parent
company and are granted at the sole discretion of the participating banks (as
described within Note 10 to the accompanying consolidated financial statements),
subject to availability of the respective banks' funds and satisfaction of
certain regulatory requirements. We have no reason to believe that the
participating institutions will be unable to fulfill their obligations to
provide financing in accordance with the terms of the Global Credit Facility and
the Pan-Asia Borrowing Facilities in the event of our election to draw
additional funds in the foreseeable future.

Our sources of liquidity are used to fund our ongoing cash requirements,
including working capital requirements, global retail store and digital commerce
expansion, construction and renovation of shop-within-shops, investment in
infrastructure, including technology, acquisitions, joint ventures, payment of
dividends, debt repayments, Class A common stock repurchases, settlement of
contingent liabilities (including uncertain tax positions), and other corporate
activities, including our restructuring actions. We believe that our existing
sources of cash, the availability under our credit facilities, and our ability
to access capital markets will be sufficient to support our operating, capital,
and debt service requirements for the foreseeable future, the ongoing
development of our businesses, and our plans for further business expansion.
However, prolonged periods of adverse economic conditions or business
disruptions in any of our key regions, or a combination thereof, such as those
resulting from pandemic

                                           51

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diseases and other catastrophic events, could impede our ability to pay our obligations as they become due or return value to our shareholders, as well as delay previously planned expenditures related to our operations.

See Note 10 to the accompanying consolidated financial statements and Note 11 of the Fiscal 2022 10-K for additional information relating to our credit facilities.

Debt and Covenant Compliance


In August 2018, we completed a registered public debt offering and issued $400
million aggregate principal amount of unsecured senior notes due September 15,
2025, which bear interest at a fixed rate of 3.750%, payable semi-annually (the
"3.750% Senior Notes"). In June 2020, we completed another registered public
debt offering and issued an additional $500 million aggregate principal amount
of unsecured senior notes that were due and repaid on June 15, 2022 with cash on
hand, which bore interest at a fixed rate of 1.700%, payable semi-annually (the
"1.700% Senior Notes"), and $750 million aggregate principal amount of unsecured
senior notes due June 15, 2030, which bear interest at a fixed rate of 2.950%,
payable semi-annually (the "2.950% Senior Notes").

The indenture and supplemental indentures governing the 3.750% Senior Notes and
2.950% Senior Notes (as supplemented, the "Indenture") contain certain covenants
that restrict our ability, subject to specified exceptions, to incur certain
liens; enter into sale and leaseback transactions; consolidate or merge with
another party; or sell, lease, or convey all or substantially all of our
property or assets to another party. However, the Indenture does not contain any
financial covenants.

We have a credit facility that provides for a $500 million senior unsecured
revolving line of credit through August 12, 2024, which is also used to support
the issuance of letters of credit and the maintenance of the Commercial Paper
Program (the "Global Credit Facility"). Borrowings under the Global Credit
Facility may be denominated in U.S. Dollars and other currencies, including
Euros, Hong Kong Dollars, and Japanese Yen. We have the ability to expand the
borrowing availability under the Global Credit Facility to $1 billion, subject
to the agreement of one or more new or existing lenders under the facility to
increase their commitments. There are no mandatory reductions in borrowing
ability throughout the term of the Global Credit Facility.

The Global Credit Facility contains a number of covenants, as described in Note
10 to the accompanying consolidated financial statements. As of July 2, 2022, no
Event of Default (as such term is defined pursuant to the Global Credit
Facility) has occurred under our Global Credit Facility. The Pan-Asia Borrowing
Facilities do not contain any financial covenants.

See Note 10 to the accompanying consolidated financial statements and Note 11 of the Fiscal 2022 10-K for additional information relating to our debt and covenant compliance.

Common Stock Repurchase Program


Repurchases of shares of our Class A common stock are subject to overall
business and market conditions, as well as other potential factors such as the
temporary restrictions previously in place under our Global Credit Facility.
Accordingly, in response to business disruptions related to the COVID-19
pandemic, effective beginning in the first quarter of Fiscal 2021, we
temporarily suspended our common stock repurchase program as a preemptive action
to preserve cash and strengthen our liquidity position. However, we resumed
activities under our Class A common stock repurchase program during the third
quarter of Fiscal 2022 as restrictions under our Global Credit Facility were
lifted (see Note 11 of the Fiscal 2022 10-K) and overall business and market
conditions have improved since the COVID-19 pandemic first emerged.

On February 2, 2022, our Board of Directors approved an expansion of our
existing common stock repurchase program that allowed us to repurchase up to an
additional $1.500 billion of our Class A common stock. As of July 2, 2022, the
remaining availability under our Class A common stock repurchase program was
approximately $1.416 billion.

See Note 14 to the accompanying consolidated financial statements for additional information relating to our Class A common stock repurchase program.


                                           52


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Dividends

Except as discussed below, we have maintained a regular quarterly cash dividend program on our common stock since 2003.

In response to business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 2021 we temporarily suspended our quarterly cash dividend program as a preemptive action to preserve cash and strengthen our liquidity position. On May 19, 2021, our Board of Directors approved the reinstatement of our quarterly cash dividend program at the pre-pandemic amount of $0.6875 per share.


On May 18, 2022, our Board of Directors approved an increase to our quarterly
cash dividend on its common stock from $0.6875 to $0.75 per share. The first
quarterly dividend declared to reflect this increase was payable to shareholders
of record at the close of business on July 1, 2022 and was paid on July 15,
2022.

We intend to continue to pay regular dividends on outstanding shares of our
common stock. However, any decision to declare and pay dividends in the future
will ultimately be made at the discretion of our Board of Directors and will
depend on our results of operations, cash requirements, financial condition, and
other factors that the Board of Directors may deem relevant, including economic
and market conditions.

See Note 14 to the accompanying consolidated financial statements for additional information relating to our quarterly cash dividend program.

Material Cash Requirements


There have been no substantial changes to our material cash requirements as
disclosed in our Fiscal 2022 10-K, other than those which occur in the ordinary
course of business. Refer to the "Financial Condition and Liquidity -
Contractual and Other Obligations" section of the MD&A in our Fiscal 2022 10-K
for detailed disclosure of our material cash requirements as of April 2, 2022.

MARKET RISK MANAGEMENT


As discussed in Note 13 of the Fiscal 2022 10-K and Note 12 to the accompanying
consolidated financial statements, we are exposed to a variety of levels and
types of risks, including the impact of changes in currency exchange rates on
foreign currency-denominated balances, certain anticipated cash flows of our
international operations, and the value of reported net assets of our foreign
operations, as well as changes in the fair value of our fixed-rate debt
obligations relating to fluctuations in benchmark interest rates. Accordingly,
in the normal course of business we assess such risks and, in accordance with
our established policies and procedures, may use derivative financial
instruments to manage and mitigate them. We do not use derivatives for
speculative or trading purposes.

Given our use of derivative instruments, we are exposed to the risk that the
counterparties to such contracts will fail to meet their contractual
obligations. To mitigate such counterparty credit risk, it is our policy to only
enter into contracts with carefully selected financial institutions based upon
an evaluation of their credit ratings and certain other factors, adhering to
established limits for credit exposure. Our established policies and procedures
for mitigating credit risk include ongoing review and assessment of the
creditworthiness of our counterparties. We also enter into master netting
arrangements with counterparties, when possible, to further mitigate credit
risk. As a result of the above considerations, we do not believe that we are
exposed to undue concentration of counterparty risk with respect to our
derivative contracts as of July 2, 2022. However, we do have in aggregate $81.4
million of derivative instruments in net asset positions held across eight
creditworthy financial institutions.

Foreign Currency Risk Management


We manage our exposure to changes in foreign currency exchange rates using
forward foreign currency exchange and cross-currency swap contracts. Refer to
Note 12 to the accompanying consolidated financial statements for a summary of
the notional amounts and fair values of our outstanding forward foreign currency
exchange and cross-currency swap contracts, as well as the impact on earnings
and other comprehensive income of such instruments as of July 2, 2022.

                                           53


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Forward Foreign Currency Exchange Contracts


We enter into forward foreign currency exchange contracts to mitigate risk
related to exchange rate fluctuations on inventory transactions made in an
entity's non-functional currency, the settlement of foreign currency-denominated
balances, and the translation of certain foreign operations' net assets into
U.S. Dollars. As part of our overall strategy for managing the level of exposure
to such exchange rate risk, relating primarily to the Euro, the Japanese Yen,
the South Korean Won, the Australian Dollar, the Canadian Dollar, the British
Pound Sterling, the Swiss Franc, and the Chinese Renminbi, we generally hedge a
portion of our related exposures anticipated over the next twelve months using
forward foreign currency exchange contracts with maturities of two months to one
year to provide continuing coverage over the period of the respective exposure.

Our foreign exchange risk management activities are governed by established
policies and procedures. These policies and procedures provide a framework that
allows for the management of currency exposures while ensuring the activities
are conducted within our established guidelines. Our policies include guidelines
for the organizational structure of our risk management function and for
internal controls over foreign exchange risk management activities, including,
but not limited to, authorization levels, transaction limits, and credit quality
controls, as well as various measurements for monitoring compliance. We monitor
foreign exchange risk using different techniques, including periodic review of
market values and performance of sensitivity analyses.

Cross-Currency Swap Contracts

We periodically designate pay-fixed rate, receive-fixed rate cross-currency swap contracts as hedges of our net investment in certain European subsidiaries.


Our pay-fixed rate, receive-fixed rate cross-currency swap contracts swap U.S.
Dollar-denominated fixed interest rate payments based on the contract's notional
amount and the fixed rate of interest payable on certain of our senior notes for
Euro-denominated fixed interest rate payments, thereby economically converting a
portion of our fixed-rate U.S. Dollar-denominated senior note obligations to
fixed rate Euro-denominated obligations.

See Note 3 to the accompanying consolidated financial statements for further discussion of our foreign currency exposures and the types of derivative instruments used to hedge those exposures.

Investment Risk Management


As of July 2, 2022, we had cash and cash equivalents on-hand of $1.457 billion,
consisting of deposits in interest bearing accounts, investments in money market
deposit accounts, and investments in time deposits with original maturities of
90 days or less. Our other significant investments included $320.1 million of
short-term investments, consisting of investments in time deposits with original
maturities greater than 90 days.

We actively monitor our exposure to changes in the fair value of our global
investment portfolio in accordance with our established policies and procedures,
which include monitoring both general and issuer-specific economic conditions,
as discussed in Note 3 to the accompanying consolidated financial statements.
Our investment objectives include capital preservation, maintaining adequate
liquidity, diversification to minimize liquidity and credit risk, and
achievement of maximum returns within the guidelines set forth in our investment
policy. See Note 12 to the accompanying consolidated financial statements for
further detail of the composition of our investment portfolio as of July 2,
2022.

CRITICAL ACCOUNTING POLICIES


Our significant accounting policies are described in Note 3 of the Fiscal 2022
10-K. Our estimates are often based on complex judgments, assessments of
probability, and assumptions that management believes to be reasonable, but that
are inherently uncertain and unpredictable. It is also possible that other
professionals, applying reasonable judgment to the same set of facts and
circumstances, could develop and support a range of alternative estimated
amounts. For a complete discussion of our critical accounting policies, refer to
the "Critical Accounting Policies" section of the MD&A in our Fiscal 2022 10-K.

There have been no significant changes in the application of our critical accounting policies since April 2, 2022.


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RECENTLY ISSUED ACCOUNTING STANDARDS


See Note 4 to the accompanying consolidated financial statements for a
description of certain recently issued accounting standards which have impacted
our consolidated financial statements, or may impact our consolidated financial
statements in future reporting periods.

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