Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following management's discussion and analysis of financial condition and results of operations ("MD&A") should be read together with our audited consolidated financial statements and footnotes, which are included in this Annual Report on Form 10-K. We utilize a 52-53 week fiscal year ending on the Saturday closest to March 31. As such, Fiscal 2015 ended on March 28, 2015 and was a 52-week period; Fiscal 2014 ended on March 29, 2014 and was a 52-week period; and Fiscal 2013 ended on March 30, 2013 and was also a 52-week period. Fiscal 2016 will end on April 2, 2016 and will be a 53-week period.

INTRODUCTION

MD&A is provided as a supplement to the accompanying audited consolidated financial statements and footnotes 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, current trends and outlook, and a summary of our financial performance for Fiscal 2015. 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 Fiscal 2015 as compared to Fiscal 2014 and Fiscal 2014 as compared to Fiscal 2013.
•Financial condition and liquidity. This section provides a discussion of our financial condition and liquidity as of March 28, 2015, which includes (i) an analysis of our financial condition compared to the prior fiscal year-end; (ii) an analysis of changes in our cash flows for Fiscal 2015 and Fiscal 2014 as compared to the respective prior fiscal year; (iii) an analysis of our liquidity, including common stock repurchases, payments of dividends, our outstanding debt and covenant compliance, and the availability under our credit facilities and our commercial paper borrowing program; and (iv) a summary of our contractual and other obligations as of March 28, 2015.
•Market risk management. This section discusses how we manage our risk exposures related to foreign currency exchange rates, interest rates, and our investments as of March 28, 2015.
•Critical accounting policies. This section discusses accounting policies considered to be important to our results of operations and financial condition, which 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 to the accompanying audited consolidated financial statements.
•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 or proposed.

OVERVIEW

Our Business

Our Company is a global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, accessories, home furnishings, and other licensed product categories. Our long-standing reputation and distinctive image have been consistently developed across an expanding number of products, brands, sales channels, and international markets. Our brand names include Ralph Lauren, Ralph Lauren Collection, Purple Label, Black Label, Polo, Polo Ralph Lauren, Double RL, RLX Ralph Lauren, Lauren Ralph Lauren, Ralph Lauren Childrenswear, Denim & Supply Ralph Lauren, Chaps, Club Monaco, and American Living, among others.

We classify our businesses into three segments: Wholesale, Retail, and Licensing. Our Wholesale business, which represented approximately 46% of our Fiscal 2015 net revenues, consists of sales made principally to major department stores and specialty stores around the world. Our Retail business, which represented approximately 52% of our Fiscal 2015 net revenues, consists of sales made directly to consumers through our integrated retail channel, which includes our retail stores, concession-based shop-within-shops, and our e-commerce operations around the world. Our Licensing business, which represented approximately 2% of our Fiscal 2015 net revenues, consists of royalty-based arrangements under which we license to unrelated third parties for specified periods the right to operate retail stores and/or to use our various trademarks in connection with the

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manufacture and sale of designated products, such as certain apparel, eyewear, and fragrances. Approximately 37% of our Fiscal 2015 net revenues were earned outside of the U.S. See Note 22 to the accompanying audited consolidated financial statements for a summary of net revenues, operating income, and total assets by reportable segment, as well as net revenues and long-lived assets by geographic location.

Our business is typically affected by seasonal trends, with higher levels of wholesale sales in our second and fourth fiscal quarters and higher retail sales in our second and third fiscal quarters. These trends result primarily from the timing of seasonal wholesale shipments and key vacation travel, back-to-school, and holiday shopping periods impacting our Retail segment.

Current Trends and Outlook

The global economy remains in a state of uncertainty, with certain regions of the world currently outperforming others. While the U.S. economy has shown signs of improvement driven by falling unemployment, lower oil prices, and continued low interest rates, economies in certain parts of Europe and Asia have slowed considerably, evidenced by softening business sentiment, lower rates of growth, foreign exchange volatility, and the threat of deflation. Additionally, certain worldwide events, including political unrest in various parts of the world, have added uncertainty and have had an impact on consumer travel and spending. The retail industry was particularly challenged in 2014, with trends likely to continue through 2015. While certain geographic regions are withstanding these pressures better than others, the level of consumer spending on discretionary items remains constrained due to this continued economic uncertainty. Consumer retail traffic remains relatively weak and inconsistent, which has led to increased competition and a desire to offset traffic declines with increased levels of conversion. Certain of our operations have experienced and have been impacted by these dynamics, with variations across the geographic regions and businesses in which we operate.

If the economic uncertainty and challenging industry trends continue or worsen, the constrained level of worldwide consumer spending and modified consumption behavior may continue to have a negative effect on our sales, inventory levels, and operating margin in Fiscal 2016. Furthermore, our results have been, and are expected to continue to be, negatively impacted by unfavorable foreign exchange rate fluctuations. Despite these challenges, we remain optimistic about our future growth prospects and continue to invest in our longer-term growth initiatives, including our planned transition to a global brand-based operating structure as described within "Summary of Financial Performance — Recent Developments," while continually monitoring macroeconomic risks and remaining focused on disciplined expense management. Although we continue to expect that the dilutive effects of investments that we are making in our business will create operating margin pressure in the near-term, we expect that these initiatives will create longer-term shareholder value. We will continue to monitor these risks and evaluate and adjust our operating strategies and cost management opportunities to mitigate the related impact on our results of operations, while remaining focused on the long-term growth of our business and protecting 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" included in this Annual Report on Form 10-K.

Summary of Financial Performance

Operating Results

In Fiscal 2015, we reported net revenues of $7.620 billion, net income of $702 million, and net income per diluted share of $7.88, as compared to net revenues of $7.450 billion, net income of $776 million, and net income per diluted share of $8.43 in Fiscal 2014.

Our operating performance for Fiscal 2015 reflected revenue growth of 2.3% on a reported basis and 4.0% on a constant currency basis, as defined within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition" below. On a reported basis, the net revenue increase for Fiscal 2015 reflected higher revenues from our retail business across all major geographies and from our Americas wholesale business, partially offset by lower net revenues from our international wholesale businesses, primarily due to net unfavorable foreign currency effects. Our gross margin percentage declined 40 basis points to 57.5% during Fiscal 2015, primarily attributable to a more promotional retail environment and less favorable product mix, partially offset by a more favorable channel mix. Selling, general, and administrative ("SG&A") expenses increased during Fiscal 2015 due to increased investments in our stores, facilities, and infrastructure consistent with our longer-term initiatives. During Fiscal 2014, we recorded a $16 million gain relating to our acquisition of the Chaps Menswear Business, as defined within "Recent Developments" below.

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Net income declined by $74 million in Fiscal 2015 as compared to Fiscal 2014, primarily due to a $95 million decrease in operating income and higher foreign currency losses of $18 million, partially offset by a $35 million decline in our provision for income taxes. The lower income tax provision for Fiscal 2015 was primarily driven by lower pretax income and a decline in our reported effective tax rate of 30 basis points. Net income per diluted share declined by $0.55 to $7.88 per share in Fiscal 2015 as compared to Fiscal 2014, primarily due to lower net income, partially offset by lower weighted-average diluted shares outstanding during Fiscal 2015. Net income per diluted share also included unfavorable foreign currency impacts of approximately $0.31 per diluted share in Fiscal 2015.

Financial Condition and Liquidity

We ended Fiscal 2015 in a net cash and investments position (cash and cash equivalents plus short-term and non-current investments, less total debt) of $620 million, compared to $989 million as of the end of Fiscal 2014. The decline in our net cash and investments position was primarily due to our use of cash to support Class A common stock repurchases of $532 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, capital expenditures of $391 million, dividend payments of $158 million, and negative foreign currency impacts of $81 million, partially offset by our operating cash flows of $894 million during Fiscal 2015.

We generated $894 million of cash from operations during Fiscal 2015, compared to $907 million during Fiscal 2014. The decline in our operating cash flows primarily relates to the decline in net income before non-cash charges, partially offset by a net favorable change related to our operating assets and liabilities during Fiscal 2015 as compared to the prior fiscal year.

Our equity declined to $3.891 billion as of March 28, 2015, compared to $4.034 billion as of March 29, 2014, primarily due to our Class A common stock repurchases and dividends declared, largely offset by our comprehensive income and the net impact of stock-based compensation arrangements during Fiscal 2015.

Recent Developments

Global Reorganization Plan

On May 12, 2015, our Board of Directors approved a reorganization and restructuring plan comprised of the following major actions: (i) the reorganization of the Company from its current channel and regional structure to an integrated global brand-based operating structure, which will streamline our business processes to better align our cost structure with our long-term growth strategy; (ii) a strategic store and shop-within-shop performance review conducted by region and brand; (iii) a targeted corporate functional area review; and (iv) the consolidation of certain of our luxury lines (collectively, the "Global Reorganization Plan"). The Global Reorganization Plan will result in a reduction in workforce and, once a performance review is complete, the closure of certain stores and shop-within-shops. When substantially implemented by the end of Fiscal 2016, the Global Reorganization Plan is expected to result in improved operational efficiencies by reducing annual operating expenses by approximately $100 million.

In connection with the Global Reorganization Plan, we expect to incur total estimated charges of $70 million to $100 million, comprised of restructuring charges totaling $55 million to $80 million, to be settled in cash, and non-cash charges totaling $15 million to $20 million. Restructuring charges will consist primarily of severance and benefit charges and lease termination and store closure costs, and non-cash charges will consist primarily of asset impairment and inventory-related charges. We anticipate that these restructuring and non-cash charges will be incurred over the course of Fiscal 2016, primarily during the first half of the year.

Australia and New Zealand Licensed Operations Acquisition

In July 2013, in connection with the transition of the Ralph Lauren-branded apparel and accessories business in Australia and New Zealand (the "Australia and New Zealand Business") from a licensed to a wholly-owned operation, we acquired certain net assets from Oroton Group/PRL Australia ("Oroton") in exchange for an aggregate payment of approximately $15 million (the "Australia and New Zealand Licensed Operations Acquisition"). Oroton was our licensee for the Australia and New Zealand Business. The operating results of the acquired business have been consolidated in our operating results beginning on July 1, 2013.

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Chaps Menswear License Acquisition

In April 2013, in connection with the transition of the North American Chaps-branded men's sportswear business (the "Chaps Menswear Business") from a licensed to a wholly-owned operation, we entered into an agreement with The Warnaco Group, Inc. ("Warnaco"), a subsidiary of PVH Corp. ("PVH"), to acquire certain net assets in exchange for an aggregate payment of approximately $18 million (the "Chaps Menswear License Acquisition"). Warnaco was our licensee for the Chaps Menswear Business. The operating results of the Chaps Menswear Business have been consolidated in our operating results beginning on April 10, 2013.

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

The comparability of our operating results for the three fiscal years presented herein has been affected by certain events, including:

•pretax asset impairment and restructuring and other charges recorded during the periods presented. A summary of the effect of these items on pretax income for each fiscal year is summarized below (references to "Notes" are to the notes to the accompanying audited consolidated financial statements):
Fiscal Years Ended
March 28, 2015March 29, 2014March 30, 2013
(millions)
Impairments of assets (see Note 11)$(7)$(1)$(19)
Restructuring and other charges (see Note 12)(10)(18)(12)
•our acquisitions of previously licensed businesses, including the Australia and New Zealand Licensed Operations Acquisition in July 2013; the Chaps Menswear License Acquisition in April 2013, which resulted in a $16 million gain recorded during the first quarter of Fiscal 2014; and our acquisition of the Ralph Lauren-branded business in Latin America in June 2012;
•discrete income tax benefits of $10 million and $15 million recognized within our provision for income taxes during Fiscal 2014 and Fiscal 2013, respectively, in connection with the settlements of two separate tax examinations. During Fiscal 2013, the tax benefit from the tax examination settlement was more than offset by a discrete income tax reserve of $16 million for an interest assessment on a prior year withholding tax; and
•the wind-down of our Rugby brand operations during the second half of Fiscal 2013 (the "Rugby Closure Plan").

Since 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. These rate fluctuations can have a significant effect on our reported results. As such, in addition to financial measures prepared in accordance with generally accepted accounting principles ("GAAP"), our discussions often contain references to constant currency measures, which are calculated by translating the 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-GAAP financial measure, as a supplement to our reported operating results. We use constant currency information to provide a framework to assess how our businesses performed excluding the effects of foreign currency exchange rate fluctuations. We believe this information is useful to investors to facilitate comparisons of operating results and better identify 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.

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.

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RESULTS OF OPERATIONS

Fiscal 2015 Compared to Fiscal 2014

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.

Fiscal Years Ended
March 28, 2015March 29, 2014$ Change% / bps Change
(millions, except per share data)
Net revenues$7,620$7,450$1702.3%
Cost of goods sold(a)(3,242)(3,140)(102)3.3%
Gross profit4,3784,310681.6%
Gross profit as % of net revenues57.5%57.9%(40 bps)
Selling, general, and administrative expenses(a)(3,301)(3,142)(159)5.0%
SG&A expenses as % of net revenues43.3%42.2%110 bps
Amortization of intangible assets(25)(35)10(27.9%)
Gain on acquisition of Chaps—16(16)NM
Impairment of assets(7)(1)(6)NM
Restructuring and other charges(10)(18)8(43.5%)
Operating income1,0351,130(95)(8.4%)
Operating income as % of net revenues13.6%15.2%(160 bps)
Foreign currency losses(26)(8)(18)NM
Interest expense(17)(20)3(17.3%)
Interest and other income, net63373.3%
Equity in losses of equity-method investees(11)(9)(2)22.8%
Income before provision for income taxes9871,096(109)(9.9%)
Provision for income taxes(285)(320)35(11.0%)
Effective tax rate(b)28.9%29.2%(30 bps)
Net income$702$776$(74)(9.5%)
Net income per common share:
Basic$7.96$8.55$(0.59)(6.9%)
Diluted$7.88$8.43$(0.55)(6.5%)
(a)Includes total depreciation expense of $269 million and $223 million for Fiscal 2015 and Fiscal 2014, respectively.
(b)Effective tax rate is calculated by dividing the provision for income taxes by income before provision for income taxes.

NM Not meaningful.

Net Revenues. Net revenues increased by $170 million, or 2.3%, to $7.620 billion in Fiscal 2015 from $7.450 billion in Fiscal 2014. On a constant currency basis, net revenues increased by $301 million, or 4.0%.

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

Fiscal Years Ended% Change
March 28, 2015March 29, 2014$ ChangeAs ReportedConstant Currency
(millions)
Net Revenues:
Wholesale$3,495$3,486$90.3%2.1%
Retail3,9563,7981584.2%5.9%
Licensing16916631.8%3.3%
Total net revenues$7,620$7,450$1702.3%4.0%

Wholesale net revenues — Net revenues increased $9 million, or 0.3%, during Fiscal 2015 as compared to Fiscal 2014, including net unfavorable foreign currency effects of $63 million, primarily related to the weakening of the Euro, the Canadian Dollar, and the Japanese Yen against the U.S. Dollar. On a constant currency basis, net revenues increased by $72 million, or 2.1%.

The $9 million net increase in Wholesale net revenues was driven by:

•a $28 million net increase related to our business in the Americas, reflecting increased revenues from our womenswear and accessories businesses, partially offset by decreased revenues from our menswear business, due in part to higher prior period sales associated with the initial transition of the Chaps Menswear Business to a wholly-owned operation. The net increase related to our business in the Americas also reflected net unfavorable foreign currency effects of $9 million due to the weakening of the Canadian Dollar against the U.S. Dollar.

This net increase was partially offset by:

•a $9 million net decrease related to our Asia businesses, primarily reflecting net unfavorable foreign currency effects of $4 million largely related to the weakening of the Japanese Yen against the U.S. Dollar, as well as the continued impact of our business model shift to the retail concession-based channel, partially offset by increased sales to our licensees; and
•a $10 million net decrease related to our European business, primarily reflecting net unfavorable foreign currency effects of $50 million, partially offset by increased sales across all of our major apparel and accessories businesses.

Retail net revenues — Net revenues increased $158 million, or 4.2%, during Fiscal 2015 compared to Fiscal 2014, including net unfavorable foreign currency effects of $65 million, primarily related to the weakening of the Japanese Yen and the Euro against the U.S. Dollar. On a constant currency basis, net revenues increased by $223 million, or 5.9%.

The $158 million net increase in Retail net revenues was driven by:

•a $178 million, or a 23%, net increase in non-comparable store sales, including net unfavorable foreign currency effects of $17 million. On a constant currency basis, non-comparable store sales increased by $195 million, or 25%, primarily driven by new global store openings in Asia and Europe within the past twelve months, the expansion of our e-commerce operations, and new stores and concession shops assumed in connection with the Australia and New Zealand Licensed Operations Acquisition, which more than offset the impact of store closings.

This net increase was partially offset by:

•a $20 million, or 1%, net decline in consolidated comparable store sales, including net unfavorable foreign currency effects of $48 million. Our total comparable store sales increased approximately $28 million, or 1%, on a constant currency basis, primarily driven by an increase from our Ralph Lauren e-commerce operations, partially offset by lower sales from certain retail stores and concession shops. Comparable store sales related to our e-commerce operations increased by approximately 16% on a reported basis and 17% on a constant currency basis over the related prior fiscal year period, and had a favorable impact on our total comparable store sales of approximately 3% to 4% on a reported basis and 2% to 3% on a constant currency basis. Our consolidated comparable store sales excluding e-commerce declined between 3% and 4% on a reported basis and declined between 2% and 3% on a constant currency basis.
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Comparable store sales refer to the growth of sales in stores that are open for at least one full fiscal year. Sales for stores that are closed during a fiscal 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 in their new location or in their newly renovated state for at least one full fiscal year. Sales from our e-commerce sites are included within comparable store sales for those geographies that have been serviced by the related site for at least one full fiscal year. Consolidated comparable store sales information includes our Ralph Lauren stores (including concession-based shop-within-shops), factory stores, Club Monaco stores and e-commerce sites, and certain Ralph Lauren e-commerce sites. We use an integrated omni-channel strategy to operate our retail business, in which our e-commerce operations are interdependent with our physical stores.

Our global average store count increased by 36 stores and concession shops during Fiscal 2015 compared with the prior fiscal year, due to new global store openings, primarily in Asia, partially offset by store closures. The following table details our retail store and e-commerce presence as of the periods presented:

March 28, 2015March 29, 2014
Stores:
Freestanding stores466433
Concession shops536503
Total stores1,002936
E-commerce Sites:
North American sites(a)33
European sites(b)33
Asian sites(c)42
Total e-commerce sites108
(a)Includes www.RalphLauren.com and www.ClubMonaco.com (servicing the U.S.) and www.ClubMonaco.ca (servicing Canada).
(b)Includes www.RalphLauren.co.uk (servicing the United Kingdom), www.RalphLauren.fr (servicing Belgium, France, Italy, Luxembourg, the Netherlands, Portugal, and Spain), and www.RalphLauren.de (recently expanded to service Denmark, Estonia, Finland, Latvia, Slovakia, and Sweden, in addition to servicing Austria and Germany).
(c)Includes www.RalphLauren.co.jp (servicing Japan) and www.RalphLauren.co.kr (servicing South Korea), and, as of March 28, 2015, www.RalphLauren.asia (servicing Hong Kong, Macau, Malaysia, and Singapore) and www.RalphLauren.com.au (servicing Australia and New Zealand).

Licensing revenues — Net revenues increased $3 million, or 1.8%, during Fiscal 2015 as compared to Fiscal 2014, including net unfavorable foreign currency effects of $3 million, primarily related to the weakening of the Euro and the Japanese Yen against the U.S. Dollar. On a constant currency basis, net revenues increased by $6 million, or 3.3%.

The $3 million increase in net revenues is primarily attributable to increased apparel and accessories-related revenues and home licensing revenues, partially offset by the impact of the transition of the previously licensed Australia and New Zealand Business to a wholly-owned operation.

Gross Profit. Gross profit increased by $68 million, or 1.6%, to $4.378 billion in Fiscal 2015 from $4.310 billion in Fiscal 2014. Gross profit as a percentage of net revenues decreased by 40 basis points to 57.5% in Fiscal 2015 from 57.9% in Fiscal 2014. This decline is primarily attributable to a more promotional retail environment and less favorable product mix, partially offset by a more favorable channel mix.

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, 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 year to year.

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Selling, General, and Administrative Expenses. SG&A expenses primarily include compensation and benefits, advertising and marketing, distribution, bad debt, information technology, facilities, legal, and other costs associated with finance and administration. SG&A expenses increased by $159 million, or 5.0%, to $3.301 billion in Fiscal 2015 from $3.142 billion in Fiscal 2014. This increase included a net favorable foreign currency effect of $54 million, primarily related to the weakening of the Euro and the Japanese Yen against the U.S. Dollar. SG&A expenses as a percentage of net revenues increased to 43.3% in Fiscal 2015 from 42.2% in Fiscal 2014. The 110 basis point increase was primarily due to the increase in operating expenses in support of the growth of our retail businesses (which typically carry higher operating expense margins); increased investments in our facilities and infrastructure; increased advertising and marketing costs; incremental operating expenses attributable to our acquisition of the Australia and New Zealand Business; and investments in new business initiatives. These increases were partially offset by our operating leverage on higher net revenues and operational discipline.

The $159 million net increase in SG&A expenses by functional category is as follows:

Fiscal 2015 Compared to Fiscal 2014
(millions)
SG&A expense category:
Compensation-related expenses(a)$62
Depreciation expense46
Rent and occupancy expenses26
Marketing and advertising expenses19
Incremental operating expenses related to the Australia and New Zealand Business10
Shipping and handling costs7
Acquisition-related costs(b)(7)
Other(4)
Total change in SG&A expenses$159
(a)Primarily due to increased salaries and related expenses to support our retail business growth.
(b)Comprised of acquisition-related costs for the Chaps Menswear License Acquisition in April 2013 and for the Australia and New Zealand Licensed Operations Acquisition in July 2013 (see Note 5 to the accompanying audited consolidated financial statements).

During Fiscal 2016, we continue to expect a certain amount of operating expense deleverage due to continued investment in our long-term strategic growth initiatives, including expansion of the Polo-branded store concept around the world, retail store expansion, department store renovations, and continued investment in our infrastructure, partially offset by anticipated cost savings related to our planned transition to a global brand-based operating structure (see "Summary of Financial Performance — Recent Developments").

Amortization of Intangible Assets. Amortization of intangible assets decreased by $10 million, or 27.9%, to $25 million in Fiscal 2015 from $35 million in Fiscal 2014. This decrease was primarily related to the licensed trademark intangible asset acquired in April 2013 in connection with the Chaps Menswear License Acquisition, which was fully amortized in Fiscal 2014 (see Note 5 to the accompanying audited consolidated financial statements).

Gain on Acquisition of Chaps. During Fiscal 2014, we recorded a $16 million gain on the Chaps Menswear License Acquisition, representing the difference between the acquisition date fair value of net assets acquired and the contractually-defined purchase price under our license agreement with Warnaco, which granted us the right to early-terminate the license upon PVH's acquisition of Warnaco in February 2013 (see Note 5 to the accompanying audited consolidated financial statements).

Impairments of Assets. During Fiscal 2015, we recorded non-cash impairment charges of $7 million, primarily to write off certain fixed assets related to our domestic and international retail stores. During Fiscal 2014, we recognized non-cash impairment charges of $1 million to write off certain long-lived assets related to our European operations (see Note 11 to the accompanying audited consolidated financial statements).

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Restructuring and Other Charges. Restructuring and other charges declined by $8 million to $10 million in Fiscal 2015 from $18 million in Fiscal 2014. During Fiscal 2015, we recorded restructuring charges of $10 million, primarily related to severance and benefit costs associated with certain of our retail, wholesale, and corporate operations. During Fiscal 2014, we recorded restructuring charges of $8 million, primarily related to severance and benefit costs associated with our corporate operations. In addition, during Fiscal 2014, we recorded $10 million of accelerated stock-based compensation expense associated with certain new executive employment agreement provisions (see Note 12 to the accompanying audited consolidated financial statements).

Operating Income. Operating income decreased by $95 million, or 8.4%, to $1.035 billion in Fiscal 2015 from $1.130 billion in Fiscal 2014. Operating income as a percentage of net revenues decreased 160 basis points, to 13.6% in Fiscal 2015 from 15.2% in Fiscal 2014. The overall decline in operating income as a percentage of net revenues was primarily driven by the increase in SG&A as a percentage of net revenues and the absence of the prior year gain on the Chaps Menswear License Acquisition, as well as a lower gross profit margin, as previously discussed.

Operating income and margin for each of our three reportable segments are provided below:

Fiscal Years Ended
March 28, 2015March 29, 2014
Operating IncomeOperating MarginOperating IncomeOperating Margin$ ChangeMargin Change
(millions)(millions)(millions)
Segment:
Wholesale$94327.0%$96327.6%$(20)(60 bps)
Retail52713.3%57215.1%(45)(180 bps)
Licensing15290.4%15090.2%220 bps
1,6221,685(63)
Unallocated corporate expenses(577)(553)(24)
Gain on acquisition of Chaps—16(16)
Unallocated restructuring and other charges(10)(18)8
Total operating income$1,03513.6%$1,13015.2%$(95)(160 bps)

Wholesale operating margin declined by 60 basis points, primarily attributable to net unfavorable foreign currency effects. Operating expenses as a percentage of net revenues was flat in Fiscal 2015 compared to the prior fiscal year.

Retail operating margin declined by 180 basis points, primarily attributable to a 60 basis point increase in compensation-related expenses and a 50 basis point increase in depreciation expense, both primarily associated with our global store development efforts and new store openings, a 20 basis point increase in advertising and marketing expenses, and a 10 basis point increase in other operating expenses. The decline in the Retail operating margin also reflected a 40 basis point decrease due to other factors, including lower profitability from our existing retail operations, reflecting the impact of a more promotional retail environment, as previously discussed.

Licensing operating margin increased by 20 basis points, primarily due to our operating leverage on higher revenues.

Unallocated corporate expenses increased by $24 million, primarily due to higher compensation-related costs of $18 million, higher depreciation expense of $17 million largely due to the increased investment in our infrastructure, higher rent and occupancy expenses of $5 million, and higher corporate advertising and marketing costs of $3 million. These increases were partially offset by lower amortization expense of $9 million, the non-recurrence of prior year acquisition-related costs of $7 million, and a decline in other operating expenses of $3 million.

Gain on acquisition of Chaps was $16 million for Fiscal 2014, as previously described above and in Note 5 to the accompanying audited consolidated financial statements.

Unallocated restructuring and other charges declined by $8 million to $10 million in Fiscal 2015, from $18 million in Fiscal 2014, as previously described above and in Note 12 to the accompanying audited consolidated financial statements.

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Non-operating Expense, Net. Non-operating expense, net is comprised of net foreign currency gains (losses), interest expense, interest and other income, net, and equity in losses from our joint venture, the Ralph Lauren Watch and Jewelry Company Sárl (the "RL Watch Company"), which is accounted for under the equity method of accounting. Non-operating expense, net increased by $14 million to $48 million in Fiscal 2015, from $34 million in Fiscal 2014. The higher non-operating expense, net was primarily attributed to (i) higher foreign currency losses, primarily related to the revaluation and settlement of foreign currency-denominated third-party and intercompany receivables and payables attributable to the weakening of the Japanese Yen, the Euro, and the Canadian Dollar against the U.S. Dollar, partially offset by gains recognized on forward foreign currency exchange contracts (foreign currency gains and losses do not result from the translation of the operating results of our foreign subsidiaries to U.S. Dollars), and (ii) additional equity in losses from our equity-method investment in RL Watch Company. These increases were partially offset by (i) higher interest and other income, net, primarily due to the increased balance of our investment portfolio, and (ii) lower interest expense associated with our current borrowings, including the 2.125% unsecured senior notes issued in September 2013 (the "Senior Notes") and commercial paper notes, as compared to the 4.5% interest rate on the Euro-denominated notes, which were repaid in October 2013 (see Note 14 to the accompanying audited consolidated financial statements).

Provision for Income Taxes. The provision for income taxes represents federal, foreign, state and local income taxes. The provision for income taxes decreased by $35 million, or 11.0%, to $285 million in Fiscal 2015 from $320 million in Fiscal 2014. The decrease in the provision for income taxes was primarily due to the decline in pretax income, coupled with a decrease in our reported effective tax rate of 30 basis points to 28.9% in Fiscal 2015 from 29.2% in Fiscal 2014. The lower effective tax rate for Fiscal 2015 was primarily due to a greater proportion of earnings generated in lower-taxed jurisdictions, as well as an income tax benefit resulting from the legal entity restructuring of certain of our foreign operations in Fiscal 2015, partially offset by additional tax reserves associated with the conclusion of tax examinations during Fiscal 2015 and the absence of prior-year tax reserve reductions associated with the conclusion of a tax examination. The effective tax rate differs from the statutory tax rate due to the effect of state and local taxes, tax rates in foreign jurisdictions, and certain nondeductible expenses. 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.

Net Income. Net income declined by $74 million, or 9.5%, to $702 million in Fiscal 2015, from $776 million in Fiscal 2014. The decline in net income was primarily due to the $95 million decline in operating income and higher foreign currency losses of $18 million, partially offset by the $35 million reduction in our provision for income taxes, all as previously discussed.

Net Income per Diluted Share. Net income per diluted share declined by $0.55, or 6.5%, to $7.88 per share in Fiscal 2015 from $8.43 per share in Fiscal 2014. The decline was due to lower net income, as previously discussed, partially offset by lower weighted-average diluted shares outstanding during Fiscal 2015, driven by our share repurchases over the last twelve months.

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Fiscal 2014 Compared to Fiscal 2013

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.

Fiscal Years Ended
March 29, 2014March 30, 2013$ Change% / bps Change
(millions, except per share data)
Net revenues$7,450$6,945$5057.3%
Cost of goods sold(a)(3,140)(2,789)(351)12.6%
Gross profit4,3104,1561543.7%
Gross profit as % of net revenues57.9%59.8%(190 bps)
Selling, general, and administrative expenses(a)(3,142)(2,971)(171)5.7%
SG&A expenses as % of net revenues42.2%42.8%(60 bps)
Amortization of intangible assets(35)(27)(8)30.7%
Gain on acquisition of Chaps16—16NM
Impairments of assets(1)(19)18(93.1%)
Restructuring and other charges(18)(12)(6)52.9%
Operating income1,1301,12730.3%
Operating income as % of net revenues15.2%16.2%(100 bps)
Foreign currency losses(8)(12)4(30.1%)
Interest expense(20)(22)2(8.7%)
Interest and other income, net36(3)(38.2%)
Equity in losses of equity-method investees(9)(10)1(1.0%)
Income before provision for income taxes1,0961,08970.6%
Provision for income taxes(320)(339)19(5.6%)
Effective tax rate (b)29.2%31.1%(190 bps)
Net income$776$750$263.4%
Net income per common share:
Basic$8.55$8.21$0.344.1%
Diluted$8.43$8.00$0.435.4%
(a)Includes total depreciation expense of $223 million and $206 million for Fiscal 2014 and Fiscal 2013, respectively.
(b)Effective tax rate is calculated by dividing the provision for income taxes by income before provision for income taxes.
NMNot meaningful.

Net Revenues. Net revenues increased by $505 million, or 7.3%, to $7.450 billion in Fiscal 2014 from $6.945 billion in Fiscal 2013. On a constant currency basis, net revenues increased by $552 million, or 7.9%.

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

Fiscal Years Ended$ Change% Change
March 29, 2014March 30, 2013As ReportedConstant Currency
(millions)
Net Revenues:
Wholesale$3,486$3,138$34811.1%10.9%
Retail3,7983,6251734.8%6.3%
Licensing166182(16)(9.0%)(9.0%)
Total net revenues$7,450$6,945$5057.3%7.9%

Wholesale net revenues — Net revenues increased $348 million, or 11.1%, in Fiscal 2014 as compared to Fiscal 2013, including a $7 million increase in revenues due to net favorable foreign currency effects, primarily related to the strengthening of the Euro, partially offset by the weakening of the Japanese Yen and the Canadian Dollar against the U.S. Dollar during Fiscal 2014 compared to the prior fiscal year. On a constant currency basis, net revenues increased by $341 million, or 10.9%.

The $348 million net increase in Wholesale net revenues was primarily driven by:

•a $378 million net increase related to our business in the Americas, largely due to $210 million of incremental revenues contributed by previously licensed businesses, including the Chaps Menswear Business acquired in April 2013 and certain businesses in Latin America acquired in June 2012. The increase in net revenues also reflected higher domestic revenues from our menswear, womenswear, and childrenswear product lines, as well as increased revenues from our accessories business. These increases were partially offset by lower Home product revenues primarily due to the rebranding of certain of our home products; and
•an $11 million net increase related to our European business, due to the favorable impact of foreign currency related to the strengthening of the Euro against the U.S. Dollar during Fiscal 2014, partially offset by a planned reduction in shipments across our menswear, womenswear, and childrenswear product lines due to the challenging European retail environment and softness in the specialty store business.

These net increases were partially offset by:

•a $37 million net decrease related to our Japanese business, driven by lower sell-throughs and the impact of a business model shift to the retail concessions-based channel, as well as the unfavorable impact of foreign currency related to the weakening of the Japanese Yen against the U.S. Dollar during Fiscal 2014.

Retail net revenues — Net revenues increased $173 million, or 4.8%, in Fiscal 2014 as compared to Fiscal 2013, including a $53 million decrease in revenues due to net unfavorable foreign currency effects, primarily related to the weakening of the Japanese Yen, partially offset by the strengthening of the Euro against the U.S. Dollar during Fiscal 2014 compared to the prior fiscal year. On a constant currency basis, net revenues increased by $226 million, or 6.3%.

The $173 million net increase in Retail net revenues was driven by:

•a $187 million, or a 38%, net increase in non-comparable store sales, including unfavorable foreign currency effects of $10 million, primarily related to the weakening of the Japanese Yen against the U.S. Dollar during Fiscal 2014 compared to the prior fiscal year. On a constant currency basis, non-comparable store sales increased by $197 million, or 40%, primarily driven by new store openings during Fiscal 2014, including store openings in Asia, new stores and concession shops assumed in connection with the Australia and New Zealand Licensed Operations Acquisition, other new global store openings, and the expansion of our e-commerce operations, which more than offset the impact of store closings, including those closed in connection with the Rugby Closure Plan (see Note 12 to the accompanying audited consolidated financial statements).

This increase was partially offset by:

•a $14 million net decline in comparable store sales during Fiscal 2014, remaining essentially flat on a percentage basis versus the prior year. The decline in the reported comparable store sales was largely due to unfavorable foreign currency effects of $43 million, primarily related to the weakening of the Japanese Yen, partially offset by the
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strengthening of the Euro against the U.S. Dollar during Fiscal 2014 compared to the prior fiscal year. Our total comparable store sales increased approximately $29 million, or 1%, on a constant currency basis, primarily driven by an increase from our Ralph Lauren e-commerce operations, partially offset by decreases in comparable store sales from our concession shops and our domestic factory stores. Comparable store sales related to our e-commerce operations increased by approximately 14% on a reported basis and 13% on a constant currency basis over the related prior fiscal year, and had a favorable impact on our total comparable store sales of approximately 2% to 3% on a reported basis and approximately 1% to 2% on a constant currency basis. Our consolidated comparable store sales excluding e-commerce decreased approximately 2% to 3% on a reported basis and were flat to down by 1% on a constant currency basis.

Our global average store count increased by 47 stores and concession shops during Fiscal 2014 compared with the prior fiscal year, primarily due to new store and concession shop openings in Asia and Europe, and stores and concession shops assumed in connection with the Australia and New Zealand Licensed Operations Acquisition, partially offset by store closures, including those associated with the Rugby Closure Plan. The following table details our retail store and e-commerce presence as of the periods presented:

March 29, 2014March 30, 2013
Stores:
Freestanding stores433388
Concession shops503494
Total stores936882
E-commerce Sites:
North American sites(a)33
European sites(b)33
Asian sites(c)21
Total e-commerce sites87
(a)Includes www.RalphLauren.com and www.ClubMonaco.com (servicing the U.S.) and www.ClubMonaco.ca (servicing Canada).
(b)Includes www.RalphLauren.co.uk (servicing the United Kingdom), www.RalphLauren.fr (servicing Belgium, France, Italy, Luxembourg, the Netherlands, Portugal, and Spain), and www.RalphLauren.de (servicing Austria and Germany).
(c)Includes www.RalphLauren.co.jp (servicing Japan), and, as of March 29, 2014, www.RalphLauren.co.kr (servicing South Korea).

Licensing revenues — The $16 million decrease in net revenues primarily reflected the transition of certain licensing arrangements, including the Chaps Menswear Business and the Australia and New Zealand Business, to wholly-owned operations and the discontinuance of certain Home licensing arrangements, partially offset by higher apparel and fragrance-related royalties.

Gross Profit. Gross profit increased by $154 million, or 3.7%, to $4.310 billion in Fiscal 2014 from $4.156 billion in Fiscal 2013. Gross profit as a percentage of net revenues decreased by 190 basis points to 57.9% in Fiscal 2014 from 59.8% in Fiscal 2013. This decline was primarily attributable to the inclusion of the Chaps Menswear Business and the unfavorable effects of foreign currency.

Selling, General, and Administrative Expenses. SG&A expenses increased by $171 million, or 5.7%, to $3.142 billion in Fiscal 2014 from $2.971 billion in Fiscal 2013. This increase included a net favorable foreign currency effect of approximately $29 million, primarily related to the weakening of the Japanese Yen, partially offset by the strengthening of the Euro against the U.S. Dollar during Fiscal 2014 as compared to the prior fiscal year. SG&A expenses as a percentage of net revenues declined to 42.2% in Fiscal 2014 from 42.8% in Fiscal 2013. The 60 basis point improvement was primarily due to operating leverage on higher net revenues and our operational discipline, which more than offset the increase in operating expenses attributable to our recent acquisitions and new business initiatives, as well as increased investments in our facilities, infrastructure, and information technology.

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The $171 million net increase in SG&A expenses by functional category is as follows:

Fiscal 2014 Compared to Fiscal 2013
(millions)
SG&A expense category:
Compensation-related expenses(a)$44
Marketing and advertising expenses39
Shipping and handling costs28
Rent and occupancy expenses27
Depreciation expense17
Acquisition-related costs(b)7
Other9
Total change in SG&A expenses(c)$171
(a)Primarily due to increased salaries and related expenses to support business growth.
(b)Comprised of acquisition-related costs for the Chaps Menswear License Acquisition in April 2013 and for the Australia and New Zealand Licensed Operations Acquisition in July 2013 (see Note 5 to the accompanying audited consolidated financial statements).
(c)Includes $62 million of incremental expenses associated with the aforementioned newly acquired businesses and $13 million of incremental expenses incurred in connection with the implementation of our global operating and financial reporting system.

Amortization of Intangible Assets. Amortization of intangible assets increased by $8 million, or 30.7%, to $35 million in Fiscal 2014 from $27 million in Fiscal 2013. This increase was primarily due to the full amortization of the licensed trademark intangible asset acquired in connection with the Chaps Menswear License Acquisition during Fiscal 2014 (see Note 5 to the accompanying audited consolidated financial statements).

Gain on Acquisition of Chaps. During Fiscal 2014, we recorded a $16 million gain on the Chaps Menswear License Acquisition, representing the difference between the acquisition date fair value of net assets acquired and the contractually-defined purchase price under our license agreement with Warnaco, which granted us the right to early-terminate the license upon PVH's acquisition of Warnaco in February 2013 (see Note 5 to the accompanying audited consolidated financial statements).

Impairments of Assets. During Fiscal 2014, we recorded non-cash impairment charges of $1 million, to write off certain long-lived assets related to our European operations. During Fiscal 2013, we recognized non-cash impairment charges of $19 million, which included charges of $11 million to write off certain Rugby brand-related long-lived assets in connection with the Rugby Closure Plan and charges of $8 million to reduce the carrying values of long-lived assets of certain underperforming European stores to their fair values, as well as to write off the fixed assets of certain wholesale locations in Europe that were expected to close (see Note 11 to the accompanying audited consolidated financial statements).

Restructuring and Other Charges. Restructuring and other charges increased by $6 million to $18 million in Fiscal 2014 from $12 million in Fiscal 2013. During Fiscal 2014, we recorded restructuring charges of $8 million, primarily related to severance and benefit costs associated with our corporate operations. In addition, during Fiscal 2014, we recorded $10 million of accelerated stock-based compensation expense associated with certain new executive employment agreement provisions. Restructuring and other charges of $12 million recorded during Fiscal 2013 included $7 million of severance and lease termination costs associated with the Rugby Closure Plan and $5 million of other net restructuring charges, which primarily related to the suspension of the Company's operations in Argentina, severance and lease termination costs associated with our European operations, and other severance-related costs primarily within our corporate operations, partially offset by reversals of reserves deemed no longer necessary in connection with our fiscal year ended March 31, 2012 restructuring plan in the Asia-Pacific region (see Note 12 to the accompanying audited consolidated financial statements).

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Operating Income. Operating income slightly increased by $3 million, or 0.3%, to $1.130 billion in Fiscal 2014 from $1.127 billion in Fiscal 2013. Operating income as a percentage of net revenues declined 100 basis points, to 15.2% in Fiscal 2014 from 16.2% in Fiscal 2013. The decrease in operating income as a percentage of net revenues primarily reflected the decline in our gross profit margin, partially offset by an improvement in SG&A and other operating expenses as a percentage of net revenues, as previously discussed.

Operating income and margin for each of our three reportable segments are provided below:

Fiscal Years Ended$ ChangeMargin Change
March 29, 2014March 30, 2013
Operating IncomeOperating MarginOperating IncomeOperating Margin
(millions)(millions)(millions)
Segment:
Wholesale$96327.6%$90328.7%$60(110 bps)
Retail57215.1%61517.0%(43)(190 bps)
Licensing15090.2%15283.6%(2)660 bps
1,6851,67015
Unallocated corporate expenses(553)(531)(22)
Gain on acquisition of Chaps16—16
Unallocated restructuring and other charges(18)(12)(6)
Total operating income$1,13015.2%$1,12716.2%$3(100 bps)

Wholesale operating margin declined by 110 basis points, which included net unfavorable effects related to foreign currency of 110 basis points and a 50 basis point decline due to the inclusion of the Chaps Menswear Business. The decline in Wholesale operating margin was partially offset by a 40 basis point increase due to improved operating leverage of SG&A expenses on higher wholesale revenues.

Retail operating margin declined by 190 basis points, primarily due to net unfavorable effects related to foreign currency of 50 basis points, an increase in SG&A expenses as a percentage of net revenues of 50 basis points (primarily driven by expenses associated with our global store and e-commerce development efforts), and a 40 basis point decline due to the inclusion of the Australia and New Zealand Business. The remaining 50 basis point decline was due in part to elevated promotional activity within certain of our retail businesses during the fourth quarter of Fiscal 2014.

Licensing operating margin improvement of 660 basis points was due to reduced operating expenses reflecting the transition of certain licensing arrangements to wholly-owned operations, partially offset by lower net revenues.

Unallocated corporate expenses increased by $22 million, reflecting higher increased global information technology-related costs of $13 million, higher corporate advertising and marketing expenses of $12 million, and acquisition-related costs of $7 million. These increases were partially offset by declines in other individually immaterial costs.

Gain on acquisition of Chaps was $16 million for Fiscal 2014, as previously described above and in Note 5 to the accompanying audited consolidated financial statements.

Unallocated restructuring and other charges increased by $6 million to $18 million in Fiscal 2014, from $12 million in Fiscal 2013, as previously described above and in Note 12 to the accompanying audited consolidated financial statements.

Non-operating Expense, Net. Non-operating expense, net declined by $4 million to $34 million in Fiscal 2014, from $38 million in Fiscal 2013. The decline in non-operating expense, net was primarily attributed to (i) lower foreign currency losses related to the revaluation and settlement of foreign currency-denominated third-party and intercompany receivables and payables, as well as net gains related to foreign currency hedge contracts, and (ii) lower interest expense on the 2.125% Senior Notes issued in September 2013, as compared to the 4.5% interest rate on the previously outstanding Euro-denominated notes. These declines were partially offset by additional interest expense on our increased capital lease obligations, and lower interest and other income, net, primarily due to changes in our investment portfolio mix.

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Provision for Income Taxes. The provision for income taxes decreased by $19 million, or 5.6%, to $320 million in Fiscal 2014 from $339 million in Fiscal 2013. The decrease in the provision for income taxes was primarily due to a decrease in our reported effective tax rate of 190 basis points to 29.2% in Fiscal 2014 from 31.1% in Fiscal 2013, slightly offset by the increase in the overall level of our pretax income. The lower effective tax rate for Fiscal 2014 was primarily due to tax reserve reductions associated with the conclusion of a tax examination during the third quarter of Fiscal 2014, and an income tax benefit resulting from legal entity restructuring of certain of our foreign operations during Fiscal 2014. The effective tax rate for Fiscal 2013 reflected tax reserve reductions associated with the conclusion of a separate tax examination during the third quarter of Fiscal 2013, which were offset by the inclusion of a reserve for an interest assessment on a prior year withholding tax.

Net Income. Net income increased by $26 million, or 3.4%, to $776 million in Fiscal 2014, from $750 million in Fiscal 2013, due to the $19 million reduction in our provision for income taxes, lower non-operating charges of $4 million, and a $3 million increase in operating income, all as previously discussed.

Net Income per Diluted Share. Net income per diluted share increased by $0.43, or 5.4%, to $8.43 per share in Fiscal 2014 from $8.00 per share in Fiscal 2013. The increase was primarily attributable to higher net income, as previously discussed, and lower weighted-average diluted shares outstanding during Fiscal 2014, driven by our share repurchases during Fiscal 2014.

FINANCIAL CONDITION AND LIQUIDITY

Financial Condition

The following table presents our financial condition as of March 28, 2015 and March 29, 2014.

March 28, 2015March 29, 2014$ Change
(millions)
Cash and cash equivalents$500$797$(297)
Short-term investments644488156
Non-current investments(a)826
Short-term debt(234)—(234)
Long-term debt(b)(298)(298)—
Net cash and investments(c)$620$989$(369)
Equity$3,891$4,034$(143)
(a)Recorded within other non-current assets in our consolidated balance sheets.
(b)Net of $2 million of unamortized debt issuance costs as of both March 28, 2015 and March 29, 2014.
(c)"Net cash and investments" is defined as cash and cash equivalents, plus short-term and non-current investments, less total debt.

The decline in our net cash and investments position at March 28, 2015 as compared to March 29, 2014 was primarily due to our use of cash to support our Class A common stock repurchases of $532 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to invest in our business through $391 million in capital expenditures, and to make cash dividend payments of $158 million during Fiscal 2015, partially offset by our operating cash flows of $894 million. The decline in our net cash and investment position also reflected unfavorable foreign currency impacts of $81 million, primarily related to the weakening of the Euro and the Japanese Yen against the U.S. Dollar during Fiscal 2015 as compared to the prior fiscal year.

The decline in equity was attributable to our share repurchase activity and dividends declared, largely offset by our comprehensive income and the net impact of stock-based compensation arrangements during Fiscal 2015.

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Cash Flows

Fiscal 2015 Compared to Fiscal 2014

Fiscal Years Ended
March 28, 2015March 29, 2014$ Change
(millions)
Net cash provided by operating activities$894$907$(13)
Net cash used in investing activities(689)(488)(201)
Net cash used in financing activities(421)(599)178
Effect of exchange rate changes on cash and cash equivalents(81)3(84)
Net decrease in cash and cash equivalents$(297)$(177)$(120)

Net Cash Provided by Operating Activities. Net cash provided by operating activities decreased to $894 million during Fiscal 2015, from $907 million during Fiscal 2014. The net decrease in cash provided by operating activities was primarily due to the decline in net income before non-cash charges, partially offset by a net favorable change related to our operating assets and liabilities. The net favorable change related to our operating assets and liabilities was driven by foreign currency impacts, primarily related to the weakening of the Euro and the Japanese Yen against the U.S. Dollar during Fiscal 2015, partially offset by a decline in our working capital driven by:

•unfavorable changes in income tax receivables and payables, as well as prepaid expenses and other current assets, both due to the timing of payments; and
•a year-over-year increase in our inventory levels to support our new brands and new and expanded stores.

Net Cash Used in Investing Activities. Net cash used in investing activities was $689 million during Fiscal 2015, as compared to $488 million during Fiscal 2014. The $201 million net increase in cash used in investing activities was primarily driven by a $229 million increase in cash used to purchase investments, less proceeds from sales and maturities of investments. During Fiscal 2015, we made net purchases of investments of $285 million, as compared to net purchases of investments of $56 million during Fiscal 2014.

The above increase in cash used in investing activities was partially offset by a $28 million decline in cash used to fund acquisitions and ventures. During Fiscal 2015, we used $12 million of cash to support the funding of our joint venture, the RL Watch Company, and other investments. During Fiscal 2014, we used $40 million of cash, including $18 million to fund the Chaps Menswear License Acquisition, $15 million to fund the Australia and New Zealand Licensed Operations Acquisition, as well as amounts to support the continued funding of the RL Watch Company.

In Fiscal 2016, we expect to spend between $400 million and $500 million in capital expenditures, primarily to support our global retail store expansion and further development of our infrastructure, including investment in a new global e-commerce platform and the build-out of a newly leased distribution center. Our capital expenditures will also be focused on department store renovations and the continued implementation of SAP and other systems.

Net Cash Used in Financing Activities. Net cash used in financing activities was $421 million during Fiscal 2015, as compared to $599 million during Fiscal 2014. The $178 million decline in cash used in financing activities was primarily driven by:

•a $203 million increase in proceeds from debt issuances, less cash used to repay debt. During Fiscal 2015, we received net proceeds of $234 million from commercial paper note issuances and repayments. During Fiscal 2014, we received $300 million in proceeds from our issuance of Senior Notes in September 2013, a portion of which was used to repay the $269 million principal amount outstanding of the 4.5% Euro-denominated notes upon their maturity on October 4, 2013; and
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•a $26 million decline in cash used to repurchase shares of our Class A common stock. During Fiscal 2015, we used $500 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $32 million in shares of Class A common stock were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under our amended and restated 2010 Long-Term Stock Incentive Plan (the "2010 Incentive Plan"). On a comparative basis, during Fiscal 2014, we used $498 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $60 million in shares of Class A common stock were surrendered or withheld for taxes under our 1997 Long-Term Stock Incentive Plan (the "1997 Incentive Plan") and our 2010 Incentive Plan.

The above decreases in cash used in financing activities were partially offset by:

•a $26 million decline in excess tax benefits from stock-based compensation arrangements;
•a $15 million increase in payments related to our capital lease obligations; and
•a $9 million increase in cash used to pay dividends.

Fiscal 2014 Compared to Fiscal 2013

Fiscal Years Ended
March 29, 2014March 30, 2013$ Change
(millions)
Net cash provided by operating activities$907$1,019$(112)
Net cash used in investing activities(488)(113)(375)
Net cash used in financing activities(599)(595)(4)
Effect of exchange rate changes on cash and cash equivalents3(9)12
Net increase (decrease) in cash and cash equivalents$(177)$302$(479)

Net Cash Provided by Operating Activities. Net cash provided by operating activities decreased to $907 million during Fiscal 2014, from $1.019 billion during Fiscal 2013. The net decrease in cash provided by operating activities was primarily due to the net unfavorable change related to our working capital, including:

•an increase associated with the changes in our accounts receivable balance, resulting from higher revenues at the end of Fiscal 2014 and the timing of cash collections; and
•an increase in prepaid expenses and other current assets, primarily attributable to an increase in non-income tax receivables related to our foreign operations and the timing of related payments.

These declines in cash from operating activities were partially offset by:

•increases related to accounts payable and accrued liabilities and income taxes, primarily due to the timing of the related payments.

Net Cash Used in Investing Activities. Net cash used in investing activities was $488 million during Fiscal 2014, as compared to $113 million during Fiscal 2013. The $375 million net increase in cash used in investing activities was primarily driven by:

•a $238 million increase in cash used to purchase investments, less proceeds from sales and maturities of investments. During Fiscal 2014, we made net investment purchases of $56 million, as compared to net investment sales of $182 million during Fiscal 2013;
•a $114 million increase in cash used for capital expenditures. During Fiscal 2014, we spent $390 million on capital expenditures, as compared to $276 million during Fiscal 2013. Our capital expenditures were primarily associated with global retail store expansion, department store renovations, the purchase and expansion of a distribution facility in High Point, North Carolina, and enhancements to our global information technology systems, including the continued implementation of our global operating and financial reporting information technology system, SAP; and
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•an $18 million increase in cash used to fund our acquisitions and ventures. During Fiscal 2014, we used $40 million of cash to fund our acquisitions and ventures, including $18 million to fund the Chaps Menswear License Acquisition, $15 million to fund the Australia and New Zealand Licensed Operations Acquisition, as well as amounts to support the continued funding of our joint venture, the RL Watch Company. During Fiscal 2013, we used $22 million of cash, primarily in connection with our acquisition of the previously licensed business in Latin America, and to fund the operations of the RL Watch Company.

Net Cash Used in Financing Activities. Net cash used in financing activities was $599 million during Fiscal 2014, as compared to $595 million during Fiscal 2013. The net increase in cash used in financing activities was primarily driven by:

•a $21 million increase in cash used to pay dividends. During Fiscal 2014, we used $149 million to pay dividends, as compared to $128 million during Fiscal 2013, primarily due to the increase in the quarterly cash dividend from $0.40 per share to $0.45 per share, effective in November 2013; and
•an $11 million increase in cash used to repurchase shares of our Class A common stock. During Fiscal 2014, we used $498 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $60 million in shares of Class A common stock were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under our 1997 Incentive Plan and our 2010 Incentive Plan. On a comparative basis, during Fiscal 2013, we used $450 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $47 million in shares of Class A common stock were surrendered or withheld for taxes. In addition, during Fiscal 2013, we made a $50 million payment in connection with our prepaid share repurchase program.

These increases in cash used in financing activities were partially offset by:

•$31 million in proceeds from the issuance of long-term debt, net of repayments. During Fiscal 2014, we received $300 million in proceeds from our issuance of 2.125% unsecured Senior Notes in September 2013. A portion of these proceeds was used to repay the $269 million principal amount outstanding of the 4.5% Euro-denominated notes upon their maturity on October 4, 2013.

Liquidity

Our primary sources of liquidity are the cash flows generated from our operations, availability under our Global Credit Facility, Domestic Credit Facility, and Pan-Asia Credit Facilities (all as defined below), our Commercial Paper Program (as defined below), our available cash and cash equivalents and short-term investments, and other available financing options. As of March 28, 2015, we had $1.144 billion in cash, cash equivalents, and short-term investments, of which $1.109 billion were held by our subsidiaries domiciled outside the U.S. We are not dependent on foreign cash to fund our domestic operations and do not expect to repatriate these balances to meet our domestic cash needs. However, if our plans change and we choose to repatriate any funds to the U.S. in the future, we would be subject to applicable U.S. and foreign taxes.

Our sources of liquidity are used to fund our ongoing cash requirements, including working capital requirements, global retail store and e-commerce development and expansion, construction and renovation of shop-within-shops, investment in infrastructure, including technology, acquisitions, joint ventures, payment of dividends, debt repayments, common stock repurchases, settlement of contingent liabilities (including uncertain tax positions), and other corporate activities. 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.

As discussed in the "Debt and Covenant Compliance" section below, we had $234 million in commercial paper notes outstanding as of March 28, 2015. We had no borrowings outstanding under our Global Credit Facility, Domestic Credit Facility, or Pan-Asia Credit Facilities as of March 28, 2015.

We believe that our Global Credit Facility is adequately diversified with no undue concentration in any one financial institution. In particular, as of March 28, 2015, there were nine financial institutions participating in the Global Credit Facility, with no one participant maintaining a maximum commitment percentage in excess of 20%. 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, the Domestic Credit Facility, and the Pan-Asia Credit Facilities in the event of our election to draw funds in the foreseeable future.

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Common Stock Repurchase Program

A summary of our repurchases of Class A common stock under our common stock repurchase program is presented below:

Fiscal Years Ended
March 28, 2015March 29, 2014March 30, 2013
(in millions)
Cost of shares repurchased$500$548(a)$450
Number of shares repurchased3.23.2(a)3.0
(a)Includes a $50 million prepayment made in March 2013 under our share repurchase program with a third-party financial institution, in exchange for the right to receive shares of our Class A common stock at the conclusion of the 93-day repurchase term. The $50 million prepayment was recorded as a reduction to additional paid-in capital in our consolidated balance sheet as of March 30, 2013. The related 0.3 million shares were delivered to us during Fiscal 2014, based on the volume-weighted average market price of our Class A common stock over the 93-day repurchase term, less a discount.

As of March 28, 2015, the remaining availability under our Class A common stock repurchase program was approximately $80 million. On May 12, 2015, our Board of Directors approved an expansion of the program that allows us to repurchase up to an additional $500 million of Class A common stock. Repurchases of shares of Class A common stock are subject to overall business and market conditions.

In addition, during Fiscal 2015, Fiscal 2014, and Fiscal 2013, 0.2 million, 0.4 million, and 0.4 million shares of Class A common stock, respectively, at a cost of $32 million, $60 million, and $47 million, respectively, were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under the 1997 Incentive Plan and the 2010 Incentive Plan.

Repurchased and surrendered shares are accounted for as treasury stock at cost and held in treasury for future use.

Dividends

Since 2003, we have maintained a regular quarterly cash dividend program on our common stock. On November 5, 2013, our Board of Directors approved an increase to the quarterly cash dividend on our common stock from $0.40 per share to $0.45 per share. On February 3, 2015, our Board of Directors approved a further increase to the quarterly cash dividend on our common stock from $0.45 to $0.50 per share. Dividends paid amounted to $158 million, $149 million, and $128 million in Fiscal 2015, Fiscal 2014, and Fiscal 2013, respectively.

We intend to continue to pay regular quarterly dividends on our outstanding common stock. However, any decision to declare and pay dividends in the future will 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.

Debt and Covenant Compliance

Senior Notes

In September 2013, we completed a registered public debt offering and issued $300 million aggregate principal amount of Senior Notes due September 26, 2018 at a price equal to 99.896% of their principal amount. The Senior Notes bear interest at a fixed rate of 2.125%, payable semi-annually. The proceeds from this offering were used for general corporate purposes, including repayment of the previously outstanding €209 million principal amount of 4.5% Euro-denominated notes (the "Euro Debt"), which matured on October 4, 2013.

The Indenture governing the Senior Notes (the "Indenture") contains 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.

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Commercial Paper

In May 2014, we initiated a commercial paper borrowing program (the "Commercial Paper Program") that allowed us to issue up to $300 million of unsecured commercial paper notes through private placement using third-party broker-dealers. In May 2015, we expanded the Commercial Paper Program to allow for a total issuance of up to $500 million of unsecured commercial paper notes.

Borrowings under the Commercial Paper Program are supported by the Global Credit Facility, as defined below, and may be used to support our general working capital and corporate needs. Maturities of commercial paper notes vary, but cannot exceed 397 days from the date of issuance. Commercial paper notes issued under the Commercial Paper Program rank equally with our other forms of unsecured indebtedness. As of March 28, 2015, we had $234 million in borrowings outstanding under our Commercial Paper Program, with a weighted-average annual interest rate of 0.27% and a weighted-average remaining term of 11 days.

Revolving Credit Facilities

Global Credit Facility

In February 2015, we entered into an amended and restated credit facility that provides for a $500 million senior unsecured revolving line of credit through February 11, 2020 (the "Global Credit Facility") under terms and conditions substantially similar to those previously in effect. The Global Credit Facility is also used to support the issuance of letters of credit and the maintenance of the Commercial Paper Program. 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 our borrowing availability under the Global Credit Facility to $750 million, 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. As of March 28, 2015, there were no borrowings outstanding under the Global Credit Facility and we were contingently liable for $8 million of outstanding letters of credit.

The Global Credit Facility contains a number of covenants that, among other things, restrict our ability, subject to specified exceptions, to incur additional debt; incur liens; sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve; engage in businesses that are not in a related line of business; make loans, advances, or guarantees; engage in transactions with affiliates; and make certain investments. The Global Credit Facility also requires us to maintain a maximum ratio of Adjusted Debt to Consolidated EBITDAR (the "leverage ratio") of no greater than 3.75 as of the date of measurement for the four most recent consecutive fiscal quarters. Adjusted Debt is defined generally as consolidated debt outstanding plus eight times consolidated rent expense for the last four consecutive fiscal quarters. Consolidated EBITDAR is defined generally as consolidated net income plus (i) income tax expense, (ii) net interest expense, (iii) depreciation and amortization expense, and (iv) consolidated rent expense. As of March 28, 2015, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under our Global Credit Facility.

Upon the occurrence of an Event of Default under the Global Credit Facility, the lenders may cease making loans, terminate the Global Credit Facility, and declare all amounts outstanding to be immediately due and payable. The Global Credit Facility specifies a number of events of default (many of which are subject to applicable grace periods), including, among others, the failure to make timely principal, interest, and fee payments or to satisfy the covenants, including the financial covenant described above. Additionally, the Global Credit Facility provides that an Event of Default will occur if Mr. Ralph Lauren, our Chairman of the Board and Chief Executive Officer, and entities controlled by the Lauren family, fail to maintain a specified minimum percentage of the voting power of our common stock.

Domestic Credit Facility

In August 2014, we entered into an uncommitted credit facility (the "Domestic Credit Facility") with Santander Bank, N.A. ("Santander"), which provides for a revolving line of credit up to $100 million through August 19, 2015. Borrowings under the Domestic Credit Facility are granted at the sole discretion of Santander, subject to availability of its funds, and bear interest at a rate equal to the London Interbank Offered Rate plus a spread determined by Santander at the time of borrowing. The Domestic Credit Facility does not contain any financial covenants. As of March 28, 2015, there were no borrowings outstanding under the Domestic Credit Facility.

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Pan-Asia Credit Facilities

Certain of our subsidiaries in Asia have uncommitted credit facilities with regional branches of JPMorgan Chase (the "Banks") in China, Malaysia, South Korea, and Taiwan (the "Pan-Asia Credit Facilities"). These credit facilities are subject to annual renewal and may be used to fund general working capital and corporate needs of our operations in the respective countries. Our subsidiaries' borrowings under the Pan-Asia Credit Facilities are guaranteed by the parent company. The Pan-Asia Credit Facilities do not contain any financial covenants. As of March 28, 2015, the Pan-Asia Credit Facilities provided for revolving lines of credit of up to $32 million, granted at the sole discretion of the Banks, subject to availability of the Banks' funds and satisfaction of certain regulatory requirements. As of March 28, 2015, there were no borrowings outstanding under any of the Pan-Asia Credit Facilities.

See Note 14 to the accompanying audited consolidated financial statements for additional information relating to our credit facilities.

Contractual and Other Obligations

Firm Commitments

The following table summarizes certain of our aggregate contractual obligations as of March 28, 2015, and the estimated timing and effect that such obligations are expected to have on our liquidity and cash flows in future periods. We expect to fund these firm commitments with operating cash flows generated in the normal course of business and, if necessary, through availability under our credit facilities or other accessible sources of financing.

Fiscal 2016Fiscal 2017-2018Fiscal 2019-2020Fiscal 2021 and ThereafterTotal
(millions)
Senior Notes$—$—$300$—$300
Interest payments on Senior Notes6133—22
Capital leases26494669190
Operating leases3225794867332,120
Inventory purchase commitments840———840
Other commitments58423627163
Total$1,252$683$871$829$3,635

The following is a description of our material, firmly committed obligations as of March 28, 2015:

•Senior Notes represents the principal amount of our outstanding unsecured senior notes due September 26, 2018. Amount does not include any fair value adjustments, call premiums, or interest payments (see below);
•Interest payments on Senior Notes represent the semi-annual contractual interest payments due on our Senior Notes, which bear interest at a fixed annual rate of 2.125%;
•Lease obligations represent the minimum lease rental payments due under noncancelable leases for our real estate and operating equipment in various locations around the world. In addition to such amounts, we are normally required to pay taxes, insurance, and certain occupancy costs relating to our leased real estate properties, which are not included in the table above. Approximately 72% of these lease obligations relate to our retail operations. Information has been presented separately for operating and capital leases;
•Inventory purchase commitments represent our legally-binding agreements to purchase fixed or minimum quantities of goods at determinable prices; and
•Other commitments primarily represent our legally-binding obligations under sponsorship, licensing, and other marketing and advertising agreements; distribution-related agreements; information technology-related service agreements; and pension-related obligations.

Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $116 million as of March 28, 2015, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever. The

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above table also excludes the following: (i) amounts recorded in current liabilities in our consolidated balance sheet as of March 28, 2015, including our outstanding commercial paper notes of $234 million, which will be paid within one year; and (ii) non-current liabilities that have no cash outflows associated with them (e.g., deferred revenue), or the cash outflows associated with them are uncertain or do not represent a "purchase obligation" as the term is used herein (e.g., deferred taxes and other miscellaneous items).

We also have certain contractual arrangements that would require us to make payments if certain events or circumstances occur. See Note 17 to the accompanying audited consolidated financial statements for a description of our contingent commitments not included in the above table.

Off-Balance Sheet Arrangements

In addition to the commitments included in the above table, our other off-balance sheet firm commitments relating to our outstanding letters of credit amounted to approximately $9 million as of March 28, 2015. We do not maintain any other off-balance sheet arrangements, transactions, obligations, or other relationships with unconsolidated entities that would be expected to have a material current or future effect on our consolidated financial statements.

MARKET RISK MANAGEMENT

As discussed in Note 16 to the accompanying audited consolidated financial statements, we are exposed to a variety of risks, including changes in foreign currency exchange rates relating to certain anticipated cash flows from our international operations and possible declines in the value of reported net assets of certain of our foreign operations, as well as changes in the fair value of our fixed-rate debt relating to changes in interest rates. Consequently, at times, in the normal course of business, we employ established policies and procedures, including the use of derivative financial instruments, to manage such risks. We do not enter into derivative transactions for speculative or trading purposes.

As a result of the use of derivative instruments, we are exposed to the risk that counterparties to our contracts will fail to meet their contractual obligations. To mitigate this counterparty credit risk, we have a policy of only entering 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 from derivative transactions include ongoing review and assessment of the creditworthiness of our counterparties. We also enter into master netting arrangements with counterparties, when possible, to mitigate credit risk associated with our derivative instruments. As a result of the above considerations, we do not believe that we are exposed to any undue concentration of counterparty risk with respect to our derivative contracts as of March 28, 2015. However, we do have in aggregate approximately $73 million of derivative instruments in net asset positions with six creditworthy financial institutions.

Foreign Currency Risk Management

We manage our exposure to changes in foreign currency exchange rates through the use of forward foreign currency exchange contracts. Refer to Note 16 to the accompanying audited consolidated financial statements for a summary of the notional amounts and fair values of our forward foreign currency exchange contracts outstanding as of March 28, 2015.

Forward Foreign Currency Exchange Contracts

We enter into forward foreign currency exchange contracts as hedges to reduce our risk related to exchange rate fluctuations on inventory transactions made in an entity's non-functional currency, intercompany royalty payments made by certain of our international operations, intercompany contributions made to fund certain marketing efforts of our international operations, and other foreign currency-denominated operational cash flows. As part of our overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, primarily to changes in the value of the Euro, the Japanese Yen, the South Korean Won, the Australian Dollar, the Canadian Dollar, the British Pound Sterling, and the Hong Kong Dollar, we hedge a portion of our foreign currency exposures anticipated over a two-year period. In doing so, we use forward foreign currency exchange contracts that generally have maturities of two months to two years to provide continuing coverage throughout the hedging period.

Our foreign exchange risk management activities are governed by our Company's 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 a periodic review of market values and sensitivity analyses.

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We record our forward foreign currency exchange contracts at fair value in our consolidated balance sheets. To the extent forward foreign currency exchange contracts designated as cash flow hedges are highly effective in offsetting changes in the value of the hedged item, the related gains or losses are initially deferred in equity as a component of accumulated other comprehensive income ("AOCI") and are subsequently recognized in our consolidated statements of income as follows:

•Forecasted Inventory Transactions — recognized as part of the cost of the inventory being hedged within cost of goods sold when the related inventory is sold to a third party.
•Intercompany Royalty Payments and Marketing Contributions — recognized within foreign currency gains (losses) generally in the period in which the related payments or contributions being hedged are received or paid.

We recognized net gains on forward foreign currency exchange contracts in earnings of approximately $35 million, $30 million, and $32 million during Fiscal 2015, Fiscal 2014, and Fiscal 2013, respectively.

Sensitivity

We perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our forward foreign currency exchange contracts. To perform the sensitivity analysis, we assess the risk of loss in fair values from the effect of hypothetical changes in foreign currency exchange rates. This analysis assumes a like movement by the foreign currencies in our hedge portfolio against the U.S. Dollar. As of March 28, 2015, a 10% appreciation or depreciation of the U.S. Dollar against the exchange rates for foreign currencies under contract would result in a net increase or decrease, respectively, in the fair value of our derivative portfolio of approximately $72 million. As our outstanding forward foreign currency exchange contracts are primarily designated as cash flow hedges of forecasted transactions, this hypothetical net change in fair value would be largely offset by the net change in the fair values of the underlying hedged items.

Interest Rate Risk Management

Sensitivity

As of March 28, 2015, we had no variable-rate debt outstanding. As such, our exposure to changes in interest rates primarily relates to a change in the fair value of our fixed-rate Senior Notes and commercial paper notes. As of March 28, 2015, the carrying value and fair value of our Senior Notes were $298 million (net of unamortized debt issuance costs of $2 million) and $304 million, respectively, and both the carrying value and fair value of our commercial paper notes were $234 million. A 25 basis point increase or decrease in the level of interest rates would decrease or increase, respectively, the aggregate fair value of our Senior Notes and commercial paper notes by approximately $3 million. Such potential increases or decreases in the fair value of our debt would only be relevant if we were to retire all or a portion of the debt prior to its maturity, and are based on certain simplifying assumptions, including an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period.

Investment Risk Management

As of March 28, 2015, we had cash and cash equivalents on-hand of $500 million, consisting of deposits in interest bearing accounts and invested in money market funds and time deposits with original maturities of 90 days or less. Our other significant investments included $644 million of short-term investments, consisting of time deposits with original maturities greater than 90 days, and $38 million of restricted cash placed in escrow with certain banks as collateral, primarily to secure guarantees in connection with certain international tax matters.

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 further below. 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 16 to the accompanying audited consolidated financial statements for further detail of the composition of our investment portfolio as of March 28, 2015.

We evaluate investments held in unrealized loss positions for other-than-temporary impairment on a quarterly basis. This evaluation involves a variety of considerations, including assessments of risks and uncertainties associated with general economic conditions and distinct conditions affecting specific issuers. We consider the following factors: (i) the length of time and the extent to which the fair value has been below cost, (ii) the financial condition, credit worthiness, and near-term prospects of the issuer, (iii) the length of time to maturity, (iv) anticipated future economic conditions and market forecasts, (v) our intent and ability to

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retain our investment for a period of time sufficient to allow for recovery of market value, and (vi) an assessment of whether it is more likely than not that we will be required to sell our investment before recovery of market value. No material realized or unrealized gains or losses on available-for-sale investments or other-than-temporary impairment charges were recorded in any of the fiscal years presented.

CRITICAL ACCOUNTING POLICIES

An accounting policy is considered to be critical if it is important to our results of operations, financial condition, and cash flows, and requires significant judgment and estimates on the part of management in its application. 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. We believe that the following list represents our critical accounting policies. For a discussion of all of our significant accounting policies, see Note 3 to the accompanying audited consolidated financial statements.

Sales Reserves and Uncollectible Accounts

A significant area of judgment affecting reported revenue and net income involves estimating sales reserves, which represent the portion of gross revenues not expected to be realized. In particular, wholesale revenue is reduced by estimates of returns, discounts, end-of-season markdowns, and operational chargebacks. Retail revenue, including e-commerce sales, is also reduced by an estimate of returns.

In determining estimates of returns, discounts, end-of-season markdowns, and operational chargebacks, we analyze historical trends, seasonal results, current economic and market conditions, and retailer performance. We review and refine these estimates on a quarterly basis. Our historical estimates of these costs have not differed materially from actual results. A hypothetical 1% increase in our reserves for returns, discounts, end-of-season markdowns, and operational chargebacks as of March 28, 2015 would have decreased our Fiscal 2015 net revenues by approximately $3 million.

Similarly, we evaluate our accounts receivable balances to determine if they will ultimately be collected. Significant judgments and estimates are involved in this evaluation, including an analysis of specific risks on a customer-by-customer basis for larger accounts and customers, and a receivables aging analysis that determines the percentage of receivables that has historically been uncollected by aged category. Based on this information, we provide a reserve for the estimated amounts believed to be uncollectible. Although we believe that we have adequately provided for those risks as part of our bad debt reserve, a severe and prolonged adverse impact on our major customers' business operations could have a corresponding material adverse effect on our net sales, cash flows, and/or financial condition.

See "Accounts Receivable" in Note 3 to the accompanying audited consolidated financial statements for an analysis of the activity in our sales reserves and allowance for doubtful accounts for each of the three fiscal years presented.

Inventories

We hold inventory that is sold through wholesale distribution channels to major department stores and specialty retail stores, including our own retail stores. We also hold retail inventory that is sold in our own stores and e-commerce sites directly to consumers. Wholesale and retail inventories are stated at the lower of cost or estimated net realizable value, with cost primarily determined on a weighted-average basis.

The estimated net realizable value of inventory is determined based on an analysis of historical sales trends of our individual product lines, the impact of market trends and economic conditions, and a forecast of future demand, giving consideration to the value of current orders in-house for future sales of inventory, as well as plans to sell inventory through our factory stores, among other liquidation channels. Estimates may differ from actual results due to the quantity, quality, and mix of products in inventory, consumer and retailer preferences, and market conditions. Reserves for inventory shrinkage, representing the risk of physical loss of inventory, are estimated based on historical experience and are adjusted based upon physical inventory counts. Our historical estimates of these costs and the related provisions have not differed materially from actual results.

A hypothetical 1% increase in the level of our inventory reserves as of March 28, 2015 would have decreased our Fiscal 2015 gross profit by approximately $1 million.

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Business Combinations

In connection with our business combinations, we are required to record all of the assets and liabilities of the acquired business at their acquisition date fair value; recognize contingent consideration at fair value on the acquisition date; and, for certain arrangements, recognize changes in fair value in earnings until settlement. These fair value determinations require our judgment and may involve the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives, and market multiples, among other items. We may utilize independent valuation firms to assist in making these fair value determinations. In addition, in connection with our business combinations, we evaluate the terms of any pre-existing relationships to determine whether a gain or loss on settlement of the pre-existing relationship exists.

See Note 5 to the accompanying audited consolidated financial statements for detailed disclosures related to our acquisitions.

Fair Value Measurements

We use judgment when evaluating the inputs used to measure the fair value of a particular asset or liability, notably the extent to which the inputs are market-based (observable) or internally-derived (unobservable). See Note 15 to the accompanying audited consolidated financial statements for further discussion of our fair value measurements.

The fair values of our derivative assets and liabilities are determined using a pricing model, which is primarily based on market observable external inputs, including spot and forward currency exchange rates, and considers the impact of our own credit risk, if any. Changes in counterparty credit risk are also considered in the valuation of derivative financial instruments. Refer to "Market Risk Management" for a discussion of the sensitivity of our derivative financial instruments' fair values to changes in foreign currency exchange rates.

Our Senior Notes and commercial paper notes are recorded at carrying value in our consolidated balance sheets, adjusted for any unamortized debt issuance costs and premium or discount, and may differ from their respective fair values. The fair values of our Senior Notes and commercial paper notes are estimated based on external pricing data, including available quoted market prices of comparable debt instruments with similar interest rates, credit ratings, and trading frequency, among other factors. Refer to "Market Risk Management" for a discussion of the sensitivity of the fair value of these debt instruments to changes in interest rates.

Impairment of Goodwill and Other Intangible Assets

Goodwill and certain other intangible assets deemed to have indefinite useful lives are not amortized. Rather, goodwill and indefinite-lived intangible assets are assessed for impairment at least annually. Finite-lived intangible assets are amortized over their respective estimated useful lives and, along with other long-lived assets, are evaluated for impairment periodically whenever events or changes in circumstances indicate that their carrying values may not be fully recoverable.

We generally 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. However, in order to reassess the fair values of our reporting units, we periodically perform a quantitative impairment analysis in lieu of using the qualitative approach.

Performance of the qualitative assessment requires judgment in identifying and considering the significance of relevant key factors, events, and circumstances that affect the fair values of our reporting units. This requires consideration and assessment of external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as our actual and planned financial performance. We also give consideration to the difference between each reporting unit's fair value and carrying value as of the most recent date that a fair value measurement was performed. If the results of the qualitative assessment conclude that it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, additional quantitative impairment testing is performed.

The quantitative goodwill impairment test is a two-step process. The first step is to identify the existence of potential impairment by comparing the fair value of a reporting unit with its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, the reporting unit's goodwill is considered not to be impaired and performance of the second step of the quantitative goodwill impairment test is unnecessary. However, if the carrying value of a reporting unit exceeds its fair value, the second step of the quantitative goodwill impairment test is performed to measure the amount of impairment loss to be recorded, if any. The second step of the quantitative goodwill impairment test compares the implied fair value of the reporting unit's goodwill with the carrying value of that goodwill. If the carrying value of the reporting unit's goodwill exceeds its implied fair value, an impairment loss is recognized in an amount equal to that excess.

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Determining the fair value of a reporting unit under the first step of the quantitative goodwill impairment test and determining the fair values of individual assets and liabilities of a reporting unit (including any unrecognized intangible assets) under the second step of the quantitative goodwill impairment test requires judgment and often involves the use of significant estimates and assumptions. Similarly, estimates and assumptions are used when determining the fair values of other indefinite-lived intangible assets. 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. To assist management in the process of determining any potential goodwill impairment, we may review and consider appraisals from accredited independent valuation firms. Estimates of fair value are primarily determined using discounted cash flows, market comparisons, and recent transactions. These approaches use significant estimates and assumptions, including projected future cash flows (including timing), discount rates reflecting the risks inherent in future cash flows, perpetual growth rates, and determination of appropriate market comparables.

We performed our annual goodwill impairment assessment as of the beginning of the second quarter of Fiscal 2015 using the quantitative approach in lieu of using the qualitative assessment. Based on the results of this assessment, we concluded that the fair values of our reporting units significantly exceeded their respective carrying values, and there are no reporting units at risk of impairment. Additionally, no goodwill impairment charges have been recorded during any of the three fiscal years presented.

In evaluating finite-lived intangible assets for recoverability, we use our best estimate of future cash flows expected to result from the use of the asset and its eventual disposition where probable. To the extent that estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is recognized equal to the difference between the carrying value of such asset and its fair value, considering external market participant assumptions.

In Fiscal 2013, we recorded aggregate impairment charges of $2 million related to the write-off of certain finite-lived and indefinite-lived intangible assets in connection with the Rugby Closure Plan. There were no other intangible asset impairment charges recorded during any of the three fiscal years presented.

Impairment of Other Long-Lived Assets

Property and equipment, along with other long-lived assets, are evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. In evaluating long-lived assets for recoverability, we use our best estimate of future cash flows expected to result from the use of the asset and its eventual disposition, where applicable. To the extent that estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is recognized equal to the difference between the carrying value of such asset and its fair value, considering external market participant assumptions. Assets to be disposed of and for which there is a committed plan of disposal are reported at the lower of carrying value or fair value, less costs to sell.

In determining future cash flows, we take various factors into account, including changes in merchandising strategy, the emphasis on retail store cost controls, the effects of macroeconomic trends such as consumer spending, and the impacts of more experienced retail store managers and increased local advertising. Since the determination of future cash flows is an estimate of future performance, future impairments may arise in the event that future cash flows do not meet expectations.

During Fiscal 2015, Fiscal 2014, and Fiscal 2013, we recorded non-cash impairment charges of $7 million, $1 million, and $19 million (including the $2 million of previously discussed charges related to the write-off of certain intangible assets in connection with the Rugby Closure Plan), respectively, to reduce the net carrying value of certain long-lived assets, primarily in our Retail segment, to their estimated fair values. See Note 11 to the accompanying audited consolidated financial statements for further discussion.

Income Taxes

In determining our income tax provision for financial reporting purposes, we establish a reserve for uncertain tax positions. If we consider that a tax position is more likely than not of being sustained upon audit, based solely on the technical merits of the position, we recognize the tax benefit. We measure the tax benefit by determining the largest amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. These assessments can be complex and require significant judgment, and we often obtain assistance from external advisors. To the extent that our estimates change or the final tax outcome of these matters is different from the amounts recorded, such differences will impact the income tax provision in the period in which such determinations are made. If the initial assessment of a position fails to result in the recognition of a tax benefit, we will recognize the tax benefit if (i) there are changes in tax law or analogous case law that sufficiently raise the likelihood of prevailing on the technical merits of the position to more likely than not; (ii) the statute of limitations expires; or (iii) there is a completion of an audit resulting in a settlement of that tax year with the appropriate agency.

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Deferred income taxes reflect the tax effect of certain net operating losses, capital losses, general business credit carryforwards, and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates. Valuation allowances are established when management determines that it is more likely than not that some portion or all of a deferred tax asset will not be realized. Tax valuation allowances are analyzed periodically by assessing the adequacy of future expected taxable income, which typically involves the use of significant estimates. Such allowances are adjusted as events occur, or circumstances change, that warrant adjustments to those balances.

See Note 13 to the accompanying audited consolidated financial statements for further discussion of income taxes.

Contingencies

We are periodically exposed to various contingencies in the ordinary course of conducting our business, including certain litigation, alleged information system security breaches, contractual disputes, employee relation matters, various tax or other governmental audits, and trademark and intellectual property matters and disputes. We record a liability for such contingencies to the extent that we conclude their occurrence is probable and the related losses are estimable. In addition, if it is reasonably possible that an unfavorable settlement of a contingency could exceed the established liability, we disclose the estimated impact on our liquidity, financial condition, and results of operations, if practicable. Management considers many factors in making these assessments. As the ultimate resolution of contingencies is inherently unpredictable, these assessments can involve a series of complex judgments about future events including, but not limited to, court rulings, negotiations between affected parties, and governmental actions. As a result, the accounting for loss contingencies relies heavily on management's judgment in developing the related estimates and assumptions.

Stock-Based Compensation

We expense all stock-based compensation awarded to employees and non-employee directors based on the grant date fair value of the awards over the requisite service period, adjusted for estimated forfeitures.

Stock Options

Stock options are granted to employees and non-employee directors with exercise prices equal to the fair market value of our Class A common stock on the date of grant. We use the Black-Scholes option-pricing model to estimate the grant date fair value of stock options, which requires the use of both subjective and objective assumptions. Certain key assumptions involve estimating future uncertain events. The key factors influencing the estimation process include the expected term of the option, expected volatility of our stock price, our expected dividend yield, and the risk-free interest rate, among others. Generally, once stock option values are determined, accounting practices do not permit them to be changed, even if the estimates used are different from actual results.

Restricted Stock and Restricted Stock Units ("RSUs")

We grant service-based RSUs to certain of our senior executives, as well as certain of our other employees, and restricted shares of our Class A common stock to our non-employee directors. In addition, we grant performance-based RSUs to such senior executives and other key executives, as well as certain of our other employees. The fair values of restricted stock shares and RSUs are based on the fair value of our unrestricted Class A common stock, adjusted to reflect the absence of dividends for those restricted securities that are not entitled to dividend equivalents prior to vesting. Compensation expense for performance-based RSUs is recognized over the employees' requisite service period when attainment of the performance goals is deemed probable, which involves judgment as to achievement of certain performance metrics.

Our performance-based RSU awards with a market condition in the form of a total shareholder return ("TSR") modifier are valued based on the expected attainment of performance at the end of a three-year performance period and TSR achieved relative to the S&P 500 index over the performance period. The fair value of these awards is estimated using a Monte Carlo simulation valuation model prepared by an independent third party. This pricing model utilizes multiple input variables that determine the probability of satisfying each market condition stipulated in the terms of the award to estimate its grant date fair value. Compensation expense, net of forfeitures, is updated for the Company's expected net income performance level against the related goal at the end of each reporting period.

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Sensitivity

The assumptions used in calculating the grant date fair values of stock-based compensation awards represent our best estimates. In addition, judgment is required in estimating the number of stock-based awards that are expected to be forfeited. If actual results differ significantly from our estimates and assumptions, if we change the assumptions used to estimate the grant date fair value for future stock-based award grants, or if there are changes in market conditions, stock-based compensation expense and, therefore, our results of operations could be materially impacted. A hypothetical 10% change in our stock-based compensation expense would have affected our Fiscal 2015 net income by approximately $5 million.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 4 to the accompanying audited consolidated financial statements for a description of certain recently issued and proposed accounting standards which may impact our consolidated financial statements in future reporting periods.

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