RLRalph Lauren Corporation

The global economy and retail industry are impacted affected by many uncontrollable factors, numerous factors beyond our control, including, among others, changes in diplomatic and trade relationships, including potential relationships (including the imposition of new tariffs or other changes to international trade policies or agreements, such as the imposition of new tariffs; general agreements); domestic and international political conditions; consumer perceptions of current and future economic conditions, including any recessionary fears; inflation; conditions (including an economic slowdown or potential downturn, inflation, interest rates; rates, foreign currency exchange rates; the rates, commodity availability and price of commodities, including (including fuel and energy costs; costs)); employment levels and wage rates; stock market performance; the housing market; market conditions; consumer debt levels; the availability of levels and access to consumer credit; the health and stability of the banking sector; global food supplies; taxation; the threat, outbreak, or escalation of terrorism, military conflicts, or other hostilities; consumer perceptions of personal well-being and safety; man-made or natural disasters, including disasters (including pandemic diseases; diseases); and weather conditions.

Most recently, In April 2025, the U.S. announced significant changes to its trade policies, policies under the authority of the International Emergency Economic Powers Act ("IEEPA"), including widespread tariff increases on imported goods (including on those countries from which we import a substantial amount of our finished products, most notably Vietnam, Cambodia, and China) with the potential for additional tariffs and further increases to existing tariffs, and revisions or terminations to of existing trade agreements.

Widespread public health emergencies or and infectious disease outbreaks, such as outbreaks (including pandemics, epidemics, resurgences of endemic diseases, and the novel strain emergence of coronavirus commonly referred to as COVID-19, new or more transmissible variants or pathogens), whether occurring domestically or internationally, have had, and could again in the future have, future, have a material adverse effect on our business, results of operations, and financial condition.

This has led to significant These developments have increased uncertainty regarding the future relationship between the U.S. and other countries, as well as growing concerns about countries and could contribute to a global trade war, higher inflation, and a potential global recession, economic slowdown, any of which has already caused significant caused, and could continue to cause, volatility of in global stock markets and foreign currency exchange rates.

In return, many countries As previously discussed, recent changes in U.S. trade policies, including tariff-related developments surrounding the IEEPA and other authorities, have announced retaliatory tariffs on U.S. exports, resulting in increased uncertainty of regarding the future relationship between the U.S. and other countries, as well as the potential of for an ensuing global trade war and recession. economic slowdown.

Lauren, or other members of our management team, or our Company as a whole, especially through social media which accelerates can accelerate and increases increase the potential scope reach of such negative publicity, which could adversely impact the image of our brands with our customers and result in diminished loyalty to our brands and potentially lead to adverse consumer actions, including boycotts, even if the subject of such publicity is unverified or inaccurate and we seek to correct it.

As described in Item 1 — "Business — Recent Developments," we are in the early stages of executing a large-scale multi-year transformational our Next Generation Transformation project, which began during Fiscal 2024, entails upgrading and enhancing our technology infrastructure infrastructure, including AI and machine learning capabilities, to better enable us to implement process changes to improve productivity and operational efficiencies on a global scale (the "Next Generation Transformation project" or "NGT project"). scale.

(iii) the imposition of additional regulations, quotas, trade sanctions, or safeguards relating to imports or exports, and costs of complying with such regulations and other laws relating to the identification sourcing and reporting of the sources of raw materials used in our products, which requirements that could increase compliance costs or lead to the detention, exclusion, or seizure of goods and imposition of monetary penalties and fines;

In addition, the entire apparel industry, including our Company, has faced, and could continue to face, supply chain challenges as a result of inflationary pressures, political instability, severe weather, military conflicts and other hostilities, pandemic diseases, and other factors, challenges, including reduced freight availability, port congestion, labor shortages, and rising wages wages, oil prices and other energy costs, among others, as a result of unfavorable macroeconomic conditions and other factors.

(xi) (x) heightened terrorism-related cargo and supply chain security concerns, which could subject imported or exported goods to additional, more frequent, or more thorough inspections, concerns leading to increased inspections and delays in the delivery of cargo; and (xii) decreased scrutiny (xi) insufficient enforcement by customs officials for against counterfeit goods, leading to lost sales, increased costs for our anti-counterfeiting measures, and damage to the reputation of our brands.

Consumer sentiment can perception may also be influenced by geopolitical developments, including periods of heightened anti-American sentiment in certain international markets, as well as our partnership with athletes and other public figures, our relationships with wholesale customers, licensees, and suppliers, our views on political and social issues, or our long-term environmental and social initiatives and goals regarding our impact on the environment and society as a whole, among other factors.

Although our voluntary decision to suspend operations in Russia has not resulted in a material impact to our consolidated financial statements and our ongoing operations in Israel the Middle East are also not material, our business has been, and may continue to be, affected by the broader macroeconomic implications resulting from these and other military conflicts, including inflationary pressures, unfavorable foreign currency exchange rates, increases in energy prices, food shortages, and financial market volatility, among other factors, which have adversely impacted consumer sentiment and confidence.

The improvement in operating income as a percentage of net revenues was primarily driven by the increase in our gross margin, as well as lower net restructuring-related charges margin and certain other charges (benefits) recorded during Fiscal 2025 as compared to the prior fiscal year, partially offset by the increase reduction in SG&A expenses as a percentage of net revenues, partially offset by higher net restructuring-related charges and certain other charges recorded during Fiscal 2026 as compared to the prior fiscal year, all as previously discussed.

The increase in corporate expenses was due to higher compensation-related expenses of $50.7 million, higher non-income taxes of $23.9 $68.8 million, higher marketing and advertising expenses of $13.5 $16.8 million, lower and higher other expenses of $4.1 million, partially offset by higher intercompany sourcing commission of $9.3 $12.6 million (which is offset at the segment level and eliminates in consolidation), lower non-routine inventory benefits of $4.5 million, and higher other expenses of $22.8 million, partially offset by lower rent and occupancy expenses of $16.3 million. consolidation).

In Fiscal 2025, 2026, we reported net revenues of $8.115 billion, net income of $941.1 million, and net income per diluted share of $15.11, as compared to net revenues of $7.079 billion, net income of $742.9 million, and net income per diluted share of $11.61, as compared to net revenues of $6.631 billion, net income of $646.3 million, and net income per diluted share of $9.71 $11.61 in Fiscal 2024. 2025.

During In addition, during Fiscal 2025 2026 and Fiscal 2024, 2025, we recorded net restructuring other charges of $20.4 $83.9 million and $55.8 $25.2 million, respectively, primarily consisting of severance and benefits costs, in connection with our Next Generation Transformation project (refer to "Recent Developments" for additional discussion), as well as other charges of $11.4 $8.3 million and $14.0 $12.2 million, respectively, primarily related to rent and occupancy costs associated with certain previously exited real estate locations in connection with our restructuring activities for which the related lease agreements have not yet expired.

Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues increased decreased by 30 70 basis points to 54.6% 53.9% during Fiscal 2025, 2026, largely attributable to geographic and channel mix, as well as increases across various expense categories, including operating leverage on higher net revenues despite higher compensation-related expenses expenses, marketing investments, and higher marketing investments due to planned key campaign events. variable selling expenses.

The increase decrease in our net cash and short-term investments position during Fiscal 2025 at March 28, 2026 as compared to Fiscal 2024 March 29, 2025 was primarily due to our operating cash flows of $1.235 billion, partially offset by our use of cash to support Class A common stock repurchases of $480.9 $623.8 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to invest in our business through $216.2 $408.1 million in capital expenditures, and to make dividend payments of $201.1 million. $216.5 million, partially offset by our operating cash flows of $1.154 billion.

This has led to significant These developments have also increased uncertainty regarding the future relationship between the U.S. and other countries, as well as growing concerns about countries and could contribute to a global trade war, higher inflation, and a potential global recession, economic slowdown, any of which has already caused caused, and could continue to cause, significant volatility of in global stock markets and foreign currency exchange rates.

The increase decrease in our net cash and short-term investments position at March 29, 2025 28, 2026 as compared to March 30, 2024 29, 2025 was primarily due to our operating cash flows of $1.235 billion, partially offset by our use of cash to support Class A common stock repurchases of $480.9 $623.8 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to invest in our business through $216.2 $408.1 million in capital expenditures, and to make dividend payments of $201.1 million. $216.5 million, partially offset by our operating cash flows of $1.154 billion.

Asia operating margin improved by 280 320 basis points, primarily due to an increase of 210 basis points due to in gross margin and a decline reduction of 190 120 basis points in SG&A expenses as a percentage of net revenues and an increase of 80 basis points in gross margin. revenues.

Most recently, In April 2025, the U.S. announced significant changes to its trade policies, policies under the authority of the International Emergency Economic Powers Act ("IEEPA"), including widespread tariff increases on imported goods, with potential for new tariffs and further increases and on existing tariffs in the future, as well as revisions or terminations to existing trade agreements.

Although our business has not been significantly impacted by such disruptions, we have experienced some shipping delays impacting affecting the timing of inventory receipts, and if such disruptions were to continue over a prolonged period, it could result in further inventory receipt delays and/or higher freight costs in the near-term and beyond. receipts.

Our gross profit as a percentage of net revenues increased by 180 130 basis points to 68.6% 69.9% during Fiscal 2025, 2026, primarily driven by the favorable geographic, channel, and product mix, average unit retail ("AUR") growth, product elevation, and lower cotton costs, favorable foreign currency effects, more than offsetting incremental pressure from tariffs and non-cotton product costs and unfavorable foreign currency effects. costs.

However, significant unforeseen adverse future economic and market conditions, such as those resulting from widespread pandemic diseases and/or other catastrophic events, could result in our actual results differing materially from our estimates.

We generally typically perform our annual goodwill impairment assessment using a qualitative approach to determine whether it is more likely than not that the fair value of a reporting unit is less than its respective carrying value. amount.

These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and the magnitude of any such charge.

For example, unforeseen adverse future economic and market conditions could negatively impact consumer behavior, spending levels, and/or shopping preferences and could result in actual results differing from our estimates.

We grant service-based RSUs to certain of our senior executives and certain other employees, as well as to our non-employee directors.