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 2017 ended on April 1, 2017 and was a 52-week period; Fiscal 2016 ended on April 2, 2016 and was a 53-week period; Fiscal 2015 ended on March 28, 2015 and was a 52-week period; and Fiscal 2018 will end on March 31, 2018 and will be a 52-week period.

INTRODUCTION

MD&A is provided as a supplement to the accompanying 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, global economic developments, and a summary of our financial performance for Fiscal 2017. 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 2017 and Fiscal 2016 as compared to the respective prior fiscal year.

•

Financial condition and liquidity. This section provides a discussion of our financial condition and liquidity as of April 1, 2017, 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 2017 and Fiscal 2016 as compared to the respective prior fiscal year; (iii) an analysis of our liquidity, including the availability under our commercial paper borrowing program and credit facilities, common stock repurchases, payments of dividends, and our outstanding debt and covenant compliance; and (iv) a summary of our contractual and other obligations as of April 1, 2017.

•	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 April 1, 2017.

•

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 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 developed across an expanding number of products, brands, sales channels, and international markets. Our brand names include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, Chaps, and Club Monaco, among others.

We have diversified our business by geography (North America, Europe, and Asia, among other regions) and channels of distribution (wholesale, retail, and licensing). This allows us to maintain a dynamic balance as our operating results do not depend solely on the performance of any single geographic area or channel of distribution. Our wholesale sales are made principally to major department stores and specialty stores around the world. We also sell directly to consumers through our integrated retail channel, which includes our retail stores, concession-based shop-within-shops, and e-commerce operations around the world. In addition, 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 manufacture and sale of designated products, such as certain apparel, eyewear, fragrances, and home furnishings.

	38

Effective beginning in the fourth quarter of Fiscal 2017, we organize our business into the following three reportable segments:

•	North America — Our North America segment, representing approximately 57% of our Fiscal 2017 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our wholesale and retail businesses in the U.S. and Canada.

•	Europe — Our Europe segment, representing approximately 23% of our Fiscal 2017 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our wholesale and retail businesses in Europe and the Middle East.

•	Asia — Our Asia segment, representing approximately 13% of our Fiscal 2017 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our wholesale and retail businesses in Asia, Australia, and New Zealand.

In addition to these reportable segments, we also have other non-reportable segments, representing approximately 7% of our Fiscal 2017 net revenues, which primarily consist of (i) sales of our Club Monaco branded products made through our retail businesses in the U.S., Canada, and Europe, (ii) sales of our Ralph Lauren branded products made through our wholesale business in Latin America, and (iii) royalty revenues earned through our global licensing alliances.

Approximately 40% of our Fiscal 2017 net revenues were earned outside of the U.S. See Note 20 to the accompanying consolidated financial statements for further discussion of our segment reporting structure.

Our business is typically affected by seasonal trends, with higher levels of 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 business.

Global Economic Developments

Although the global economy has shown signs of modest improvement in certain geographic areas, global consumer retail traffic remains relatively weak and inconsistent. Certain worldwide events, including political unrest, acts of terrorism, monetary policy changes, and currency and commodity price changes, increase volatility in the global economy. In addition, the current domestic and international political environment, including potential changes to U.S. policies related to global trade, taxation, immigration, and healthcare, as well as the United Kingdom's decision to exit the European Union, have also resulted in greater uncertainty surrounding the future state of the global economy. As the majority of our products are produced outside of the U.S., major changes in tax policies or trade relations could have a material adverse effect on our business or operating results.

While certain geographic regions are withstanding these pressures better than others, the level of consumer travel and spending on discretionary items remains constrained in certain markets, with trends likely to continue throughout calendar 2017 and potentially beyond. As a result of these collective factors, among others, many retailers, including certain of our large wholesale customers, have been highly promotional and have aggressively marked down their merchandise in an attempt to offset traffic declines with increased levels of conversion. The retail industry has also experienced numerous consolidations, restructurings, reorganizations, and other ownership changes in recent years, and we expect such changes will continue as a result of current economic conditions. 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 challenging economic conditions and industry trends continue or worsen, consumer spending and consumption behavior could be negatively impacted, which could have a material adverse effect on our business or operating results. Furthermore, our results have been, and are expected to continue to be, impacted by foreign exchange rate fluctuations. We have implemented various operating strategies to mitigate these challenges, and continue to build a foundation for long-term profitable growth. Accordingly, we are strengthening our consumer facing areas of product, stores, and marketing and driving a more efficient operating model, including our restructuring activities, as described within "Recent Developments" below, while continually monitoring macroeconomic risks. Although we continue to expect that the dilutive effects of investments that we are making in our business and our quality of sales initiatives will create operating profit 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 foreign currency 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.

	39

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 2017, we reported net revenues of $6.653 billion, a net loss of $99.3 million, and net loss per diluted share of $1.20, as compared to net revenues of $7.405 billion, net income of $396.4 million, and net income per diluted share of $4.62 in Fiscal 2016. The comparability of our operating results has been affected by restructuring-related charges, impairment of assets, and certain other charges, as well as the 53rd week in Fiscal 2016 and unfavorable foreign currency effects, all as discussed further below.

During Fiscal 2017, net revenues declined 10.2% on a reported basis and 9.9% on a constant currency basis, as defined within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition" below. The decline in reported net revenues during Fiscal 2017 reflected lower net revenues from our North America, Europe, and Asia segments, and also reflected the absence of the 53rd week, which resulted in incremental net revenues of $72.2 million during Fiscal 2016.

Our gross profit as a percentage of net revenues declined by 160 basis points to 54.9% during Fiscal 2017, primarily driven by higher non-cash inventory-related charges recorded in connection with our restructuring plans and net unfavorable foreign currency effects, partially offset by increased profitability driven by favorable geographic and channel mix and our quality of sales initiatives, including lower levels of promotional activity within our international businesses.

Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues increased by 150 basis points to 47.3% during Fiscal 2017, primarily due to operating deleverage on lower net revenues and continued investments in our stores and concession shops, facilities, and infrastructure consistent with our longer-term initiatives, partially offset by our operational discipline and cost savings associated with our restructuring activities.

Net income declined by $495.7 million to a loss of $99.3 million in Fiscal 2017 as compared to Fiscal 2016, primarily due to a $676.7 million decrease in operating income, partially offset by a $161.0 million decline in our income tax provision. Net income per diluted share declined by $5.82 to a loss of $1.20 per share in Fiscal 2017 as compared to Fiscal 2016, due to lower net income and lower weighted-average diluted shares outstanding during Fiscal 2017.

Our operating results during Fiscal 2017 and Fiscal 2016 were negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $770.3 million and $211.8 million, respectively, which had an after-tax effect of reducing net income by $592.1 million and $150.1 million, respectively, or $7.10 per diluted share and $1.74 per diluted share, respectively. In addition, our net loss during Fiscal 2017 reflected unfavorable foreign currency impacts of $63.6 million, or $0.77 per diluted share, partially offset by the favorable impact of $15.9 million, or $0.19 per diluted share, related to the reversal of an income tax reserve resulting from a change in tax law that impacted an interest assessment on a prior year withholding tax. Net income during Fiscal 2016 reflected the favorable impact of the inclusion of the 53rd week, which increased net income by $8.3 million, or $0.10 per diluted share.

Financial Condition and Liquidity

We ended Fiscal 2017 in a net cash and investments position (cash and cash equivalents plus short-term and non-current investments, less total debt) of $786.2 million, compared to $559.2 million as of the end of Fiscal 2016. The increase in our net cash and investments position was primarily due to our operating cash flows of $952.3 million, partially offset by our use of cash to invest in our business through $284.0 million in capital expenditures, to support Class A common stock repurchases of $215.2 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, and to make cash dividend payments of $164.8 million.

We generated $952.3 million of cash from operations during Fiscal 2017, compared to $1.007 billion during Fiscal 2016. The decrease in our operating cash flows was primarily due to a decline in net income before non-cash charges, partially offset by a net favorable change related to our operating assets and liabilities, including our working capital.

Our equity declined to $3.300 billion as of April 1, 2017, compared to $3.744 billion as of April 2, 2016, primarily due to our Class A common stock repurchases, dividends declared, and comprehensive loss, partially offset by the net impact of stock-based compensation arrangements during Fiscal 2017.

	40

Recent Developments

Change in Chief Executive Officer

Consistent with our announcement on February 2, 2017, Mr. Stefan Larsson departed as the Company's President and CEO and as a member of our Board of Directors, effective as of May 1, 2017. Subsequently, on May 17, 2017, we announced that Mr. Patrice Louvet will be appointed as the Company's new President and CEO and as a member of our Board of Directors, effective as of July 10, 2017 or such date as may be mutually agreed upon by the parties. See Note 22 to our accompanying consolidated financial statements for further discussion regarding the appointment of Mr. Louvet.

In connection with Mr. Larsson's departure, we recorded other charges of $11.4 million during Fiscal 2017 and expect to incur additional charges of approximately $6 million during Fiscal 2018. See Note 10 to our accompanying consolidated financial statements for further discussion regarding Mr. Larsson's departure.

Way Forward Plan

On June 2, 2016, our Board of Directors approved a restructuring plan with the objective of delivering sustainable, profitable sales growth and long-term value creation for shareholders (the "Way Forward Plan"). We plan to refocus on our core brands and evolve our product, marketing, and shopping experience to increase desirability and relevance. We also intend to evolve our operating model to enable sustainable, profitable sales growth by significantly improving quality of sales, reducing supply chain lead times, improving our sourcing, and executing a disciplined multi-channel distribution and expansion strategy. As part of the Way Forward Plan, we plan to rightsize our cost structure and implement a return on investment-driven financial model to free up resources to invest in the brand and drive high-quality sales. The Way Forward Plan includes strengthening our leadership team and creating a more nimble organization by moving from an average of nine to six layers of management. The Way Forward Plan also includes the discontinuance of our Denim & Supply brand and the integration of our denim product offerings into our Polo Ralph Lauren brand. Collectively, these actions resulted in a reduction in workforce and the closure of certain stores and shop-within-shops during Fiscal 2017, and are expected to result in gross annualized expense savings of approximately $180 million to $220 million.

On March 30, 2017, our Board of Directors approved the following additional restructuring-related activities associated with our Way Forward Plan: (i) the restructuring of our in-house global e-commerce platform which was in development and shift to a more cost-effective, flexible e-commerce platform through a new agreement with Salesforce's Commerce Cloud, formerly known as Demandware; (ii) the closure of our Polo store at 711 Fifth Avenue in New York City; and (iii) the further streamlining of the organization and the execution of other key corporate actions in line with our Way Forward Plan. These actions, which are expected to be completed by the end of Fiscal 2018, are an important part of our efforts to achieve our stated objective to return to sustainable, profitable growth and invest in the future. These additional restructuring-related activities will result in a further reduction in workforce and the closure of certain corporate office and store locations, and are expected to result in additional gross annualized expense savings of approximately $140 million.

In connection with the Way Forward Plan, we currently expect to incur total estimated charges of approximately $770 million, comprised of cash-related restructuring charges of approximately $450 million and non-cash charges of approximately $320 million. Cumulative cash and non-cash charges incurred during Fiscal 2017 were $289.1 million and $277.3 million, respectively. In addition to these charges, we also incurred an additional non-cash charge of $155.2 million during Fiscal 2017 associated with the destruction of inventory out of current liquidation channels in line with our Way Forward Plan. See Notes 9 and 10 to our accompanying consolidated financial statements for detailed discussions of the charges recorded in connection with the Way Forward Plan.

	41

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's operating structure in order to 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 has resulted in a reduction in workforce and the closure of certain stores and shop-within-shops. Actions associated with the Global Reorganization Plan were substantially completed during Fiscal 2016 and are expected to result in improved operational efficiencies by reducing annual operating expenses by approximately $125 million.

Since its inception, we have recorded total cumulative charges of $147.4 million in connection with the Global Reorganization Plan, of which $4.9 million was recorded during Fiscal 2017. Actions associated with the Global Reorganization Plan are now complete and no additional charges are expected to be incurred in relation to this plan. See Notes 9 and 10 to our accompanying consolidated financial statements for detailed discussions of the charges recorded in connection with the Global Reorganization Plan.

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:

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

		Fiscal Years Ended
		April 1, 2017				April 2, 2016				March 28, 2015
		(millions)
Impairments of assets (see Note 9)(a)		$	(253.8	)		$	(48.8	)		$	(6.9	)
Restructuring and other charges (see Note 10)		(318.6		)		(142.6		)		(10.1		)
Restructuring-related inventory charges (see Note 10)(b)		(197.9		)		(20.4		)		—
Total charges		$	(770.3	)		$	(211.8	)		$	(17.0	)

(a)	Fiscal 2017 and Fiscal 2016 included non-cash impairment charges of $234.6 million and $27.2 million, respectively, recorded in connection with our restructuring plans.

(b)	Non-cash restructuring-related inventory charges are recorded within cost of goods sold in the consolidated statements of operations.

•	the reversal of an income tax reserve resulting from a change in tax law that impacted an interest assessment on a prior year withholding tax, which favorably impacted our income tax benefit by $15.9 million, or $0.19 per diluted share, during Fiscal 2017.

•	the inclusion of the 53rd week in Fiscal 2016, which resulted in incremental net revenues of $72.2 million and net income of $8.3 million, or $0.10 per diluted share.

	42

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 accounting principles generally accepted in the U.S. ("U.S. GAAP"), our discussions often contain references to constant currency measures, which are calculated by translating 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-U.S. 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. Reconciliations between this non-U.S. GAAP financial measure and the most directly comparable U.S. GAAP measure are included in the "Results of Operations" section where applicable.

Our discussion also includes reference to comparable store sales. Comparable store sales refer to the 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. Sales for e-commerce sites that are shut down during a fiscal year are excluded from the calculation of comparable store sales. We use an integrated omni-channel strategy to operate our retail business, in which our e-commerce operations are interdependent with our physical stores. All comparable store sales metrics were calculated on a 52-week basis.

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

	43

RESULTS OF OPERATIONS

Fiscal 2017 Compared to Fiscal 2016

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
		April 1, 2017				April 2, 2016				$ Change				% / bps Change
		(millions, except per share data)
Net revenues		$	6,652.8			$	7,405.2			$	(752.4	)		(10.2	%)
Cost of goods sold(a)		(3,001.7		)		(3,218.5		)		216.8				(6.7	%)
Gross profit		3,651.1				4,186.7				(535.6		)		(12.8	%)
Gross profit as % of net revenues		54.9		%		56.5		%						(160 bps)
Selling, general, and administrative expenses(a)		(3,149.4		)		(3,389.7		)		240.3				(7.1	%)
SG&A expenses as % of net revenues		47.3		%		45.8		%						150 bps
Amortization of intangible assets		(24.1		)		(23.7		)		(0.4		)		2.0	%
Impairment of assets		(253.8		)		(48.8		)		(205.0		)		NM
Restructuring and other charges		(318.6		)		(142.6		)		(176.0		)		123.4	%
Operating income (loss)		(94.8		)		581.9				(676.7		)		(116.3	%)
Operating income (loss) as % of net revenues		(1.4		%)		7.9		%						(930 bps)
Foreign currency gains (losses)		1.1				(3.8		)		4.9				(128.8	%)
Interest expense		(12.4		)		(21.0		)		8.6				(41.0	%)
Interest and other income, net		6.4				5.6				0.8				14.3	%
Equity in losses of equity-method investees		(5.2		)		(10.9		)		5.7				(52.5	%)
Income (loss) before income taxes		(104.9		)		551.8				(656.7		)		(119.0	%)
Income tax benefit (provision)		5.6				(155.4		)		161.0				(103.6	%)
Effective tax rate(b)		5.3		%		28.2		%						(2,290 bps)
Net income (loss)		$	(99.3	)		$	396.4			$	(495.7	)		(125.1	%)
Net income (loss) per common share:
Basic		$	(1.20	)		$	4.65			$	(5.85	)		(125.8	%)
Diluted		$	(1.20	)		$	4.62			$	(5.82	)		(126.0	%)

(a)	Includes total depreciation expense of $283.4 million and $285.7 million for Fiscal 2017 and Fiscal 2016, respectively.

(b)	Effective tax rate is calculated by dividing the income tax benefit (provision) by income (loss) before income taxes.

NM Not meaningful.

Net Revenues. Net revenues decreased by $752.4 million, or 10.2%, to $6.653 billion in Fiscal 2017. This decrease reflected net unfavorable foreign currency effects of $21.2 million, as well as the absence of the 53rd week, which resulted in incremental net revenues of $72.2 million during the prior fiscal year. On a constant currency basis, net revenues decreased by $731.2 million, or 9.9%.

The following table summarizes the percentage change in our Fiscal 2017 consolidated comparable store sales as compared to the prior fiscal year on both a reported and constant currency basis:

		As Reported			Constant Currency
E-commerce comparable store sales		(10	%)		(10	%)
Comparable store sales excluding e-commerce		(7	%)		(7	%)
Total comparable store sales		(7	%)		(7	%)

	44

Our global average store count increased by 44 stores and concession shops during Fiscal 2017 compared with the prior fiscal year, due to new global store openings, primarily in Asia, partially offset by store closures, primarily associated with our Way Forward Plan. The following table details our retail store presence by segment as of the periods presented:

		April 1, 2017			April 2, 2016
Freestanding Stores:
North America		216			224
Europe		82			87
Asia		89			105
Other non-reportable segments		79			77
Total freestanding stores		466			493
Concession Shops:
North America		—			2
Europe		31			34
Asia		586			545
Other non-reportable segments		2			2
Total concession shops		619			583
Total stores		1,085			1,076

In addition to our stores, we sell products online in North America and Europe through our various e-commerce sites, which include www.RalphLauren.com and www.ClubMonaco.com, among others. In Asia, we sell products online through e-commerce sites of various third-party digital partners.

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

		Fiscal Years Ended								$ Change				Foreign Exchange Impact				$ Change				% Change
		April 1, 2017				April 2, 2016				As Reported					Constant Currency				As Reported			Constant Currency
		(millions)
Net Revenues:
North America		$	3,795.0			$	4,493.9			$	(698.9	)		$	(0.4	)		$	(698.5	)		(15.6	%)		(15.5	%)
Europe		1,543.4				1,561.8				(18.4		)		(64.3		)		45.9				(1.2	%)		2.9	%
Asia		882.9				893.5				(10.6		)		43.6				(54.2		)		(1.2	%)		(6.1	%)
Other non-reportable segments		431.5				456.0				(24.5		)		(0.1		)		(24.4		)		(5.4	%)		(5.3	%)
Total net revenues		$	6,652.8			$	7,405.2			$	(752.4	)		$	(21.2	)		$	(731.2	)		(10.2	%)		(9.9	%)

North America net revenues — Net revenues decreased by $698.9 million, or 15.6%, during Fiscal 2017 as compared to Fiscal 2016. This decrease reflected net unfavorable foreign currency effects of $0.4 million, as well as the absence of the 53rd week, which resulted in incremental net revenues of $38.2 million during the prior fiscal year. On a constant currency basis, net revenues decreased by $698.5 million, or 15.5%.

The $698.9 million net decline in North America net revenues was driven by:

•

a $511.4 million net decrease related to our North America wholesale business, reflecting lower sales across all of our major apparel and accessories businesses, due in part to a strategic reduction of shipments in connection with our Way Forward Plan and a decline in department store traffic, which contributed to a more competitive retail environment. This decrease also reflected the absence of the 53rd week, which resulted in incremental net revenues of $10.0 million during the prior fiscal year;

	45

•	a $165.5 million net decrease in comparable store sales, primarily driven by lower sales from certain of our retail stores and Ralph Lauren e-commerce operations due in part to a decline in traffic. The following table summarizes our comparable store sales percentages on both a reported and constant currency basis related to our North America retail business:

		As Reported			Constant Currency
E-commerce comparable store sales		(15	%)		(15	%)
Comparable store sales excluding e-commerce		(8	%)		(8	%)
Total comparable store sales		(10	%)		(10	%)

•	a $22.0 million net decrease in non-comparable store sales, primarily driven by the absence of the 53rd week, which resulted in incremental net revenues of $28.2 million during the prior fiscal year, partially offset by new store openings during Fiscal 2017.

Europe net revenues — Net revenues decreased by $18.4 million, or 1.2%, during Fiscal 2017 as compared to Fiscal 2016. This decrease reflected net unfavorable foreign currency effects of $64.3 million, as well as the absence of the 53rd week, which resulted in incremental net revenues of $14.3 million during the prior fiscal year. On a constant currency basis, net revenues increased by $45.9 million, or 2.9%.

The $18.4 million net decline in Europe net revenues was driven by:

•

a $57.1 million net decrease in comparable store sales, including net unfavorable foreign currency effects of $26.9 million. Our comparable store sales decreased by $30.2 million on a constant currency basis, primarily driven by lower sales from certain retail stores due in part to a decline in traffic, as well as lower levels of promotional activity in connection with our Way Forward Plan, partially offset by higher sales from our Ralph Lauren e-commerce operations. The following table summarizes our comparable store sales percentages on both a reported and constant currency basis related to our Europe retail business:

		As Reported			Constant Currency
E-commerce comparable store sales		7	%		11	%
Comparable store sales excluding e-commerce		(10	%)		(6	%)
Total comparable store sales		(8	%)		(4	%)

This decline was partially offset by:

•	a $25.4 million net increase related to our Europe wholesale business, reflecting increased sales across all of our major apparel and accessories businesses. This increase is net of unfavorable foreign currency effects of $23.0 million; and

•	a $13.3 million net increase in non-comparable store sales, primarily driven by new store openings during Fiscal 2017, partially offset by net unfavorable foreign currency effects of $14.4 million and the absence of the 53rd week, which resulted in incremental net revenues of $14.3 million during the prior fiscal year.

Asia net revenues — Net revenues decreased by $10.6 million, or 1.2%, during Fiscal 2017 as compared to Fiscal 2016, reflecting the absence of the 53rd week, which resulted in incremental net revenues of $15.4 million during the prior fiscal year. This decrease is inclusive of net favorable foreign currency effects of $43.6 million. On a constant currency basis, net revenues decreased by $54.2 million, or 6.1%.

The $10.6 million net decline in Asia net revenues was driven by:

•

a $17.4 million net decrease in non-comparable store sales, primarily driven by the absence of the 53rd week, which resulted in incremental net revenues of $15.4 million during the prior fiscal year, as well as lower sales from certain of our stores and concession shops due in part to a decline in traffic, lower levels of promotional activity in connection with our Way Forward Plan, and the strategic closure of certain of our locations, partially offset by net favorable foreign currency effects of $11.1 million and new store openings during Fiscal 2017; and

	46

•	a $5.5 million net decrease related to our Asia wholesale business, primarily driven by lower sales in Greater China and Southeast Asia, partially offset by net favorable foreign currency effects of $3.4 million.

These declines were partially offset by:

•

a $12.3 million net increase in comparable store sales, including net favorable foreign currency effects of $29.1 million. Our comparable store sales decreased by $16.8 million on a constant currency basis, primarily driven by lower sales from certain of our stores and concession shops due in part to a decline in traffic, and lower levels of promotional activity in connection with our Way Forward Plan. The following table summarizes our comparable store sales percentage on both a reported and constant currency basis related to our Asia retail business:

		As Reported			Constant Currency
Total comparable store sales(a)		2	%		(3	%)

(a)	Comparable store sales for our Asia segment was comprised solely of sales made through our stores and concession shops.

Gross Profit. Gross profit decreased by $535.6 million, or 12.8%, to $3.651 billion in Fiscal 2017. Gross profit during Fiscal 2017 and Fiscal 2016 reflected non-cash inventory-related charges of $197.9 million and $20.4 million, respectively, recorded in connection with our restructuring plans. Gross profit as a percentage of net revenues declined by 160 basis points to 54.9% in Fiscal 2017 from 56.5% in Fiscal 2016. This decline was primarily driven by the higher non-cash inventory-related charges recorded in connection with our restructuring plans during Fiscal 2017 as compared to the comparable prior year period and net unfavorable foreign currency effects, partially offset by increased profitability driven by favorable geographic and channel mix and our quality of sales initiatives, including lower levels of promotional activity within our international businesses.

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.

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 decreased by $240.3 million, or 7.1%, to $3.149 billion in Fiscal 2017. This decrease included a net unfavorable foreign currency effect of $5.3 million. SG&A expenses as a percentage of net revenues increased by 150 basis points to 47.3% in Fiscal 2017 from 45.8% in Fiscal 2016. This increase was primarily due to operating deleverage on lower net revenues, as previously discussed, and the continued investment in, and expansion of, our retail businesses (which typically carry higher operating expense margins) through new store and concession shop openings (as previously discussed); investments in our facilities and infrastructure; and investments in new business initiatives. These increases were partially offset by our operational discipline and cost savings associated with our restructuring activities.

The $240.3 million decline in SG&A expenses was driven by:

		Fiscal 2017 Compared to Fiscal 2016
		(millions)
SG&A expense category:
Compensation-related expenses		$	(107.2	)
Marketing and advertising expenses		(60.1		)
Consulting fees		(23.0		)
Rent and occupancy expenses		(19.3		)
Shipping and handling costs		(12.9		)
Other		(17.8		)
Total decline in SG&A expenses		$	(240.3	)

	47

During Fiscal 2018, we continue to expect a certain amount of operating expense deleverage driven by an anticipated decline in sales associated with our quality of sale initiatives and unfavorable foreign currency effects, which are affecting operating expenses at a lower rate than sales. In addition, we will continue to invest in our long-term strategic initiatives, including expansion and renovations of our retail stores and concession shops, which will partially offset anticipated cost savings related to our restructuring activities (see "Recent Developments").

Amortization of Intangible Assets. Amortization of intangible assets increased slightly by $0.4 million, or 2.0%, to $24.1 million in Fiscal 2017, due to net unfavorable foreign currency effects.

Impairment of Assets. During Fiscal 2017, we recorded non-cash impairment charges of $248.6 million to write off certain fixed assets related to our domestic and international stores, shop-within-shops, and corporate offices, as well as our in-house global e-commerce platform previously under construction, of which $234.6 million was recorded in connection with the Way Forward Plan and $14.0 million was recorded in connection with underperforming stores subject to potential future closure. Additionally, as a result of the realignment of our segment reporting structure, we recorded a non-cash goodwill impairment charge of $5.2 million during Fiscal 2017. During Fiscal 2016, we recognized non-cash impairment charges of $48.8 million, primarily to write off certain fixed assets related to our domestic and international retail stores and shop-within-shops, of which $27.2 million was recorded in connection with the Global Reorganization Plan and $21.6 million was recorded in connection with underperforming stores that were subject to potential future closure. See Note 9 to the accompanying consolidated financial statements.

Restructuring and Other Charges. During Fiscal 2017 and Fiscal 2016, we recorded restructuring charges of $294.0 million and $94.9 million, respectively, in connection with our restructuring plans, consisting of severance and benefits costs, lease termination and store closure costs, and other cash charges, as well as non-cash accelerated stock-based compensation expense. In addition, during Fiscal 2017, we recorded other charges of $24.6 million related to the anticipated settlement of certain non-income tax issues and the departure of Mr. Stefan Larsson. During Fiscal 2016, we recorded other charges of $47.7 million primarily related to a pending customs audit and the settlement of certain litigation claims. See Note 10 to the accompanying consolidated financial statements.

Operating Income (Loss). During Fiscal 2017, we reported an operating loss of $94.8 million, as compared to operating income of $581.9 million during Fiscal 2016. Our operating results during Fiscal 2017 and Fiscal 2016 were negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $770.3 million and $211.8 million, respectively, as previously discussed. The $676.7 million decline in operating income also included a net unfavorable foreign currency effect of $67.4 million. Operating loss as a percentage of net revenues was 1.4% during Fiscal 2017, reflecting a 930 basis point decline from the prior fiscal year. The overall decline in operating income as a percentage of net revenues was primarily driven by the decline in our gross profit margin and the increase in restructuring-related charges, impairment of assets, and certain other charges, as well as the increase in SG&A expenses as a percentage of net revenues, all as previously discussed.

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

		Fiscal Years Ended
	April 1, 2017						April 2, 2016
	Operating Income (Loss)				Operating Margin		Operating Income (Loss)				Operating Margin		$ Change				Margin Change
	(millions)						(millions)						(millions)
Segment:
North America		$	674.7			17.8%		$	951.6			21.2%		$	(276.9	)		(340 bps)
Europe		302.6				19.6%		280.1				17.9%		22.5				170 bps
Asia		(85.8		)		(9.7%)		(0.1		)		—%		(85.7		)		(970 bps)
Other non-reportable segments		68.7				15.9%		103.9				22.8%		(35.2		)		(690 bps)
		960.2						1,335.5						(375.3		)
Unallocated corporate expenses		(736.4		)				(611.0		)				(125.4		)
Unallocated restructuring and other charges		(318.6		)				(142.6		)				(176.0		)
Total operating income (loss)		$	(94.8	)		(1.4%)		$	581.9			7.9%		$	(676.7	)		(930 bps)

	48

North America operating margin declined by 340 basis points, primarily due to the unfavorable impact of 190 basis points related to higher non-cash charges recorded in connection with our restructuring plans during Fiscal 2017 as compared to the prior fiscal year and a 170 basis point decline related to decreased profitability in our core wholesale business, largely driven by the impact of a more competitive retail environment. These declines in operating margin were partially offset by a 20 basis point increase related to improved profitability in our core retail business.

Europe operating margin increased by 170 basis points, primarily due to the favorable impact of 390 basis points and 200 basis points related to improved profitability of our core wholesale and retail businesses, respectively, largely driven by a decline in SG&A expenses as a percentage of net revenues and lower levels of promotional activity in connection with our Way Forward Plan. These increases in operating margin were partially offset by unfavorable foreign currency effects of 340 basis points, as well as an 80 basis point decline attributable to higher non-cash charges recorded in connection with our restructuring plans during Fiscal 2017 as compared to the prior fiscal year.

Asia operating margin declined by 970 basis points, primarily due to the unfavorable impact of 1,710 basis points related to higher non-cash charges recorded in connection with our restructuring plans during Fiscal 2017 as compared to the prior fiscal year. This decline in operating margin was partially offset by the favorable impact of 740 basis points primarily related to improved profitability of our core retail business, largely driven by a decline in SG&A expenses as a percentage of net revenues, lower levels of promotional activity in connection with our Way Forward Plan, and the strategic closure of certain of our locations.

Unallocated corporate expenses increased by $125.4 million, primarily due to higher non-cash impairment charges of $117.0 million, higher depreciation and amortization expense of $13.5 million, higher non-income tax related charges of $9.3 million, and higher other operating expenses of $37.4 million. These increases were partially offset by a decline in compensation-related expenses of $33.4 million and a decline in consulting fees of $18.4 million.

Unallocated restructuring and other charges increased by $176.0 million to $318.6 million in Fiscal 2017, as previously discussed above and in Note 10 to the accompanying consolidated financial statements.

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 equity-method investees. Non-operating expense, net decreased by $20.0 million to $10.1 million in Fiscal 2017 from $30.1 million in Fiscal 2016. The decline in non-operating expense was driven by:

•

an $8.6 million decrease in interest expense driven by the net favorable impact of our swap contracts entered into during Fiscal 2016, partially offset by the inclusion of twelve months of interest expense during the current fiscal year related to the 2.625% unsecured senior notes issued in August 2015, as compared to approximately seven months of interest expense during the prior year period. See Note 14 to the accompanying consolidated financial statements for further discussion of our swap contracts;

•	a $5.7 million decrease in equity in losses of equity-method investees, primarily related to our share in losses from our joint venture, the Ralph Lauren Watch and Jewelry Company Sárl, which is accounted for under the equity method of accounting; and

•

a $4.9 million decrease in foreign currency losses, largely related to the net favorable revaluation and settlement of foreign currency-denominated intercompany receivables and payables, inclusive of the impact of forward foreign currency exchange contracts, as compared to the prior fiscal year period (foreign currency gains (losses) do not result from the translation of the operating results of our foreign subsidiaries to U.S. Dollars).

	49

Income Tax Benefit (Provision). The income tax benefit (provision) represents federal, foreign, state and local income taxes. During Fiscal 2017, we reported an income tax benefit of $5.6 million, as compared to an income tax provision of $155.4 million during Fiscal 2016. The $161.0 million decrease in the income tax provision was largely driven by lower pretax income resulting in a pretax loss in Fiscal 2017. The 5.3% effective tax rate for Fiscal 2017 is lower than the statutory tax rate primarily due to the tax impact of earnings in foreign jurisdictions, valuation allowances and adjustments recorded on deferred tax assets, and income tax reserves largely associated with an income tax settlement and certain income tax audits, partially offset by the reversal of an income tax reserve resulting from a change in tax law that impacted an interest assessment on a prior year withholding tax. The 28.2% effective tax rate for Fiscal 2016 was lower than the statutory tax rate primarily due to the tax impact of earnings in foreign jurisdictions and a change to the assessment period associated with certain tax liabilities, partially offset by the reversal of certain deferred tax assets that were determined to not be realizable. 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 (Loss). During Fiscal 2017, we reported a net loss of $99.3 million, as compared to net income of $396.4 million during Fiscal 2016. The $495.7 million decrease in net income was primarily due to the decline in operating income, partially offset by the reduction in our income tax provision, as previously discussed. Our operating results during Fiscal 2017 and Fiscal 2016 were negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $770.3 million and $211.8 million, respectively, which had an after-tax effect of reducing net income by $592.1 million and $150.1 million, respectively. In addition, our net loss during Fiscal 2017 reflected unfavorable foreign currency impacts of $63.6 million, partially offset by the favorable impact of $15.9 million related to the reversal of an income tax reserve resulting from a change in tax law that impacted an interest assessment on a prior year withholding tax, as previously discussed. Our net income during Fiscal 2016 reflected the favorable impact of the inclusion of the 53rd week, which increased net income by $8.3 million.

Net Income (Loss) per Diluted Share. During Fiscal 2017, we reported a net loss per diluted share of $1.20, as compared to net income per diluted share of $4.62 during Fiscal 2016. The $5.82 per share decline was due to lower net income, as previously discussed, and lower weighted-average diluted shares outstanding during Fiscal 2017, driven by our share repurchases over the last twelve months. Net income (loss) per diluted share during Fiscal 2017 and Fiscal 2016 was negatively impacted by $7.10 per share and $1.74 per share, respectively, as a result of restructuring-related charges, impairment of assets, and certain other charges, as previously discussed. In addition, our net loss per diluted share during Fiscal 2017 reflected unfavorable foreign currency impacts of $0.77 per share, partially offset by the favorable impact of $0.19 per share related to the reversal of an income tax reserve resulting from a change in tax law that impacted an interest assessment on a prior year withholding tax, as previously discussed. Net income per diluted share during Fiscal 2016 reflected the favorable impact of the inclusion of the 53rd week, which increased net income per diluted share by $0.10 per share.

	50

Fiscal 2016 Compared to Fiscal 2015

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
		April 2, 2016				March 28, 2015				$ Change				% / bps Change
		(millions, except per share data)
Net revenues		$	7,405.2			$	7,620.3			$	(215.1	)		(2.8	%)
Cost of goods sold(a)		(3,218.5		)		(3,242.4		)		23.9				(0.7	%)
Gross profit		4,186.7				4,377.9				(191.2		)		(4.4	%)
Gross profit as % of net revenues		56.5		%		57.5		%						(100 bps)
Selling, general, and administrative expenses(a)		(3,389.7		)		(3,300.3		)		(89.4		)		2.7	%
SG&A expenses as % of net revenues		45.8		%		43.3		%						250 bps
Amortization of intangible assets		(23.7		)		(25.2		)		1.5				(6.2	%)
Impairment of assets		(48.8		)		(6.9		)		(41.9		)		NM
Restructuring and other charges		(142.6		)		(10.1		)		(132.5		)		NM
Operating income		581.9				1,035.4				(453.5		)		(43.8	%)
Operating income as % of net revenues		7.9		%		13.6		%						(570 bps)
Foreign currency losses		(3.8		)		(25.9		)		22.1				(85.2	%)
Interest expense		(21.0		)		(16.7		)		(4.3		)		25.7	%
Interest and other income, net		5.6				6.1				(0.5		)		(7.9	%)
Equity in losses of equity-method investees		(10.9		)		(11.5		)		0.6				(5.3	%)
Income before income taxes		551.8				987.4				(435.6		)		(44.1	%)
Income tax provision		(155.4		)		(285.2		)		129.8				(45.5	%)
Effective tax rate(b)		28.2		%		28.9		%						(70 bps)
Net income		$	396.4			$	702.2			$	(305.8	)		(43.6	%)
Net income per common share:
Basic		$	4.65			$	7.96			$	(3.31	)		(41.6	%)
Diluted		$	4.62			$	7.88			$	(3.26	)		(41.4	%)

(a)	Includes total depreciation expense of $285.7 million and $269.2 million for Fiscal 2016 and Fiscal 2015, respectively.

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

NM	Not meaningful.

Net Revenues. Net revenues decreased by $215.1 million, or 2.8%, to $7.405 billion during Fiscal 2016. This decrease included the favorable impact of the 53rd week in Fiscal 2016, which resulted in incremental net revenues of $72.2 million. On a constant currency basis, net revenues increased by $59.8 million, or 0.8%.

The following table summarizes the percentage change in our Fiscal 2016 consolidated comparable store sales as compared to the prior fiscal year on both a reported and constant currency basis:

		As Reported			Constant Currency
E-commerce comparable store sales		2	%		3	%
Comparable store sales excluding e-commerce		(8	%)		(4	%)
Total comparable store sales		(7	%)		(3	%)

	51

Our global average store count increased by 91 stores and concession shops during Fiscal 2016 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 presence by reportable segment as of the periods presented:

		April 2, 2016			March 28, 2015
Freestanding Stores:
North America		224			223
Europe		87			81
Asia		105			98
Other non-reportable segments		77			64
Total freestanding stores		493			466
Concession Shops:
North America		2			2
Europe		34			24
Asia		545			508
Other non-reportable segments		2			2
Total concession shops		583			536
Total stores		1,076			1,002

In addition to our stores, we sold products online in North America, Europe, and Asia through our various e-commerce sites, which include www.RalphLauren.com and www.ClubMonaco.com, among others.

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

		Fiscal Years Ended								$ Change				Foreign Exchange Impact				$ Change				% Change
		April 2, 2016				March 28, 2015				As Reported					Constant Currency				As Reported			Constant Currency
		(millions)
Net Revenues:
North America		$	4,493.9			$	4,645.7			$	(151.8	)		$	(17.8	)		$	(134.0	)		(3.3	%)		(2.9	%)
Europe		1,561.8				1,620.0				(58.2		)		(177.4		)		119.2				(3.6	%)		7.4	%
Asia		893.5				915.5				(22.0		)		(66.4		)		44.4				(2.4	%)		4.9	%
Other non-reportable segments		456.0				439.1				16.9				(13.3		)		30.2				3.8	%		6.9	%
Total net revenues		$	7,405.2			$	7,620.3			$	(215.1	)		$	(274.9	)		$	59.8			(2.8	%)		0.8	%

North America net revenues — Net revenues decreased by $151.8 million, or 3.3%, during Fiscal 2016 as compared to Fiscal 2015, inclusive of the favorable impact of the 53rd week in Fiscal 2016, which resulted in incremental net revenues of $38.2 million. The decrease also included net unfavorable foreign currency effects of $17.8 million. On a constant currency basis, net revenues decreased by $134.0 million, or 2.9%.

The $151.8 million net decline in North America net revenues was driven by:

•

a $152.1 million net decrease related to our North America wholesale business, reflecting lower sales across all of our major apparel and accessories businesses, due in part to a decline in foreign tourist traffic in major metropolitan locations, which contributed to a more competitive retail environment. This decrease also reflected net unfavorable foreign currency effects of $14.3 million, and was net of the favorable impact of the 53rd week in Fiscal 2016, which resulted in incremental net revenues of $10.0 million; and

	52

•	an $80.8 million net decrease in comparable store sales, primarily driven by lower sales from certain of our retail stores. The following table summarizes our comparable store sales percentages on both a reported and constant currency basis related to our North America retail business:

		As Reported			Constant Currency
E-commerce comparable store sales		—	%		—	%
Comparable store sales excluding e-commerce		(6	%)		(6	%)
Total comparable store sales		(5	%)		(5	%)

These declines in North America net revenues were partially offset by an $81.1 million net increase in non-comparable store sales, primarily driven by the favorable impact of the 53rd week in Fiscal 2016, which resulted in incremental net revenues of $28.2 million, and new store openings during Fiscal 2016.

Europe net revenues — Net revenues decreased by $58.2 million, or 3.6%, during Fiscal 2016 as compared to Fiscal 2015, inclusive of the favorable impact of the 53rd week in Fiscal 2016, which resulted in incremental net revenues of $14.3 million. The decrease also included net unfavorable foreign currency effects of $177.4 million. On a constant currency basis, net revenues increased by $119.2 million, or 7.4%.

The $58.2 million net decline in Europe net revenues was driven by:

•

a $59.9 million net decrease in comparable store sales, including net unfavorable foreign currency effects of $76.2 million. Our comparable store sales increased by $16.3 million on a constant currency basis, primarily driven by an increase from our Ralph Lauren e-commerce operations. The following table summarizes our comparable store sales percentages on both a reported and constant currency basis related to our Europe retail business:

		As Reported			Constant Currency
E-commerce comparable store sales		13	%		30	%
Comparable store sales excluding e-commerce		(10	%)		—	%
Total comparable store sales		(8	%)		3	%

•	a $33.2 million net decrease related to our Europe wholesale business, reflecting net unfavorable foreign currency effects of $85.8 million, partially offset by increased sales across all of our major apparel and accessories businesses.

These declines in Europe net revenues were partially offset by a $34.9 million net increase in non-comparable store sales, primarily driven by the favorable impact of the 53rd week in Fiscal 2016, which resulted in incremental net revenues of $14.3 million, and new store openings during Fiscal 2016. The increase was net of unfavorable foreign currency effects of $15.4 million.

Asia net revenues — Net revenues decreased by $22.0 million, or 2.4%, during Fiscal 2016 as compared to Fiscal 2015, inclusive of the favorable impact of the 53rd week in Fiscal 2016, which resulted in incremental net revenues of $15.4 million. The decrease included net unfavorable foreign currency effects of $66.4 million. On a constant currency basis, net revenues increased by $44.4 million, or 4.9%.

The $22.0 million net decline in Asia net revenues was driven by:

•

a $72.9 million net decrease in comparable store sales, including net unfavorable foreign currency effects of $45.1 million. Our comparable store sales decreased by $27.8 million on a constant currency basis, primarily driven by lower sales from certain retail stores and concession shops. The following table summarizes our comparable store sales percentages on both a reported and constant currency basis related to our Asia retail business:

		As Reported			Constant Currency
E-commerce comparable store sales		(24	%)		(17	%)
Comparable store sales excluding e-commerce		(11	%)		(4	%)
Total comparable store sales		(12	%)		(5	%)

	53

•	an $8.0 million net decrease related to our Asia wholesale business, primarily driven by net unfavorable foreign currency effects of $4.7 million and lower sales in Japan.

These declines in Asia net revenues were partially offset by a $58.9 million net increase in non-comparable store sales, primarily driven by the favorable impact of the 53rd week in Fiscal 2016, which resulted in incremental net revenues of $15.4 million, and new store openings during Fiscal 2016. The increase also included net unfavorable foreign currency effects of $16.6 million.

Gross Profit. Gross profit decreased by $191.2 million, or 4.4%, to $4.187 billion in Fiscal 2016. Gross profit as a percentage of net revenues declined by 100 basis points to 56.5% in Fiscal 2016 from 57.5% in Fiscal 2015. This decline was primarily driven by unfavorable foreign currency effects and certain non-cash charges recorded in connection with the Global Reorganization Plan, partially offset by increased profitability largely attributable to favorable channel mix.

Selling, General, and Administrative Expenses. SG&A expenses increased by $89.4 million, or 2.7%, to $3.390 billion in Fiscal 2016. This increase included a net favorable foreign currency effect of $109.5 million. SG&A expenses as a percentage of net revenues increased to 45.8% in Fiscal 2016 from 43.3% in Fiscal 2015. The 250 basis point increase was primarily due to operating deleverage on lower net revenues due in part to unfavorable foreign currency effects, as previously discussed, and an increase in operating expenses in support of the continued investment in, and expansion of, our retail businesses (which typically carry higher operating expense margins) through new store and concession shop openings (as previously discussed); increased investments in our facilities and infrastructure; increased advertising and marketing costs; and investments in new business initiatives. These increases were partially offset by our operational discipline and savings associated with our restructuring activities.

The $89.4 million increase in SG&A expenses was driven by:

		Fiscal 2016 Compared to Fiscal 2015
		(millions)
SG&A expense category:
Consulting fees		$	26.0
Depreciation expense		17.3
Rent and occupancy expenses		16.0
Compensation-related expenses		7.3
Marketing and advertising expenses		5.4
Other		17.4
Total increase in SG&A expenses		$	89.4

Amortization of Intangible Assets. Amortization of intangible assets decreased by $1.5 million, or 6.2%, to $23.7 million in Fiscal 2016. This decrease reflected the absence of expense in Fiscal 2016 for certain customer relationship intangible assets that were fully amortized as of the end of Fiscal 2015.

Impairment of Assets. During Fiscal 2016, we recorded non-cash impairment charges of $48.8 million, primarily to write off certain fixed assets related to our domestic and international retail stores and shop-within-shops, of which $27.2 million was recorded in connection with the Global Reorganization Plan and $21.6 million was recorded in connection with underperforming stores that were subject to potential future closure. During Fiscal 2015, we recognized non-cash impairment charges of $6.9 million, primarily to write off certain fixed assets related to our domestic and international retail stores. See Note 9 to the accompanying consolidated financial statements.

Restructuring and Other Charges. During Fiscal 2016, we recorded restructuring charges of $94.9 million in connection with the Global Reorganization Plan, consisting of severance and benefits costs, lease termination and store closure costs, other cash charges, and non-cash accelerated stock-based compensation expense. In addition, during Fiscal 2016, we recorded other charges of $47.7 million primarily related to a pending customs audit and the settlement of certain litigation claims. During Fiscal 2015, we recorded restructuring charges of $10.1 million, primarily related to severance and benefits costs associated with certain of our retail and wholesale businesses and corporate operations. See Note 10 to the accompanying consolidated financial statements).

	54

Operating Income. Operating income decreased by $453.5 million, or 43.8%, to $581.9 million in Fiscal 2016. This decrease included $142.5 million of charges recorded in connection with the Global Reorganization Plan, $47.7 million of other charges primarily related to a pending customs audit and the settlement of certain litigation claims, and $21.6 million of other non-cash impairment charges related to underperforming stores that were subject to potential future closure, all as previously discussed. This decrease also included a net unfavorable foreign currency effect of $112.5 million. Operating income as a percentage of net revenues decreased 570 basis points, to 7.9% in Fiscal 2016 from 13.6% in Fiscal 2015. The overall decline in operating income as a percentage of net revenues was primarily driven by the decrease in our gross profit margin and the increase in SG&A expenses as a percentage of net revenues, both of which are inclusive of unfavorable foreign currency effects, as well as the increase in restructuring and other charges and impairment of assets, all as previously discussed.

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

		Fiscal Years Ended
	April 2, 2016						March 28, 2015
	Operating Income (Loss)				Operating Margin		Operating Income (Loss)				Operating Margin		$ Change				Margin Change
	(millions)						(millions)						(millions)
Segment:
North America		$	951.6			21.2%		$	1,183.3			25.5%		$	(231.7	)		(430 bps)
Europe		280.1				17.9%		306.7				18.9%		(26.6		)		(100 bps)
Asia		(0.1		)		—%		8.5				0.9%		(8.6		)		(90 bps)
Other non-reportable segments		103.9				22.8%		124.6				28.4%		(20.7		)		(560 bps)
		1,335.5						1,623.1						(287.6		)
Unallocated corporate expenses		(611.0		)				(577.6		)				(33.4		)
Unallocated restructuring and other charges		(142.6		)				(10.1		)				(132.5		)
Total operating income		$	581.9			7.9%		$	1,035.4			13.6%		$	(453.5	)		(570 bps)

North America operating margin declined by 430 basis points, primarily due to the unfavorable impact of 240 basis points and 130 basis points related to decreased profitability in our core wholesale and retail businesses, respectively, largely driven by the impact of a more competitive retail environment and an increase in SG&A expenses as a percentage of net revenues. The remaining 60 basis point decline in operating margin was attributable to non-cash charges recorded in connection with the Global Reorganization Plan.

Europe operating margin declined by 100 basis points, primarily due to unfavorable foreign currency effects of 250 basis points, a 70 basis point decline attributable to non-cash charges recorded in connection with the Global Reorganization Plan, and a 40 basis point decline related to decreased profitability in our core retail business. These declines in operating margin were partially offset by a 260 basis point increase related to improved profitability in our core wholesale business, largely driven by a decline in SG&A expenses as a percentage of net revenues and lower levels of promotional activity.

Asia operating margin declined by 90 basis points, primarily due to a 320 basis point decline attributable to non-cash charges recorded in connection with the Global Reorganization Plan and unfavorable foreign currency effects of 190 basis points. These declines in operating margin were partially offset by the favorable impact of 340 basis points and 80 basis points related to improved profitability in our core retail and wholesale businesses, respectively, largely driven by our pricing actions and lower levels of promotional activity, as well as a decline in SG&A expenses as a percentage of net revenues.

Unallocated corporate expenses increased by $33.4 million, primarily due to higher compensation-related costs of $33.1 million, due in part to the introduction of new vesting provisions for certain stock-based compensation awards granted to retirement-eligible employees beginning in Fiscal 2016 (see Note 18 to the accompanying consolidated financial statements), and higher consulting fees of $26.6 million. These increases were partially offset by a decline in other operating expenses of $26.3 million due in part to operational discipline.

	55

Unallocated restructuring and other charges increased by $132.5 million to $142.6 million in Fiscal 2016, as previously discussed above and in Note 10 to the accompanying consolidated financial statements.

Non-operating Expense, Net. Non-operating expense, net decreased by $17.9 million to $30.1 million in Fiscal 2016. The decline in non-operating expense, net was primarily attributable to lower foreign currency losses of $22.1 million, largely related to the net favorable revaluation and settlement of foreign currency-denominated intercompany receivables and payables, inclusive of the impact of forward foreign currency exchange contracts, as compared to the prior fiscal year (foreign currency gains (losses) do not result from the translation of the operating results of our foreign subsidiaries to U.S. Dollars). This decrease was partially offset by higher interest expense of $4.3 million, primarily attributable to the 2.625% unsecured senior notes issued in August 2015.

Income Tax Provision. The income tax provision decreased by $129.8 million, or 45.5%, to $155.4 million in Fiscal 2016. The decrease in the income tax provision was primarily due to the decline in pretax income, coupled with a decrease in our reported effective tax rate of 70 basis points to 28.2% in Fiscal 2016 from 28.9% in Fiscal 2015. The lower effective tax rate for Fiscal 2016 was primarily due to income tax benefits resulting from the expiration of statutes of limitations, a change to the assessment period associated with certain tax liabilities, and provision to tax return adjustments, partially offset by the reversal of certain deferred tax assets that were determined to not be realizable and the absence of tax benefits derived from the legal entity restructuring of certain of our foreign operations during Fiscal 2015.

Net Income. Net income declined by $305.8 million, or 43.6%, to $396.4 million in Fiscal 2016. The decline in net income was primarily due to the $453.5 million decline in operating income, partially offset by the $129.8 million reduction in our income tax provision, as previously discussed. Our operating results during Fiscal 2016 were negatively impacted by $142.5 million of pretax charges recorded in connection with the Global Reorganization Plan, $47.7 million of other charges primarily related to a pending customs audit and the settlement of certain litigation claims, and $21.6 million of other non-cash impairment charges related to underperforming stores that were subject to potential future closure, which together had an after-tax effect of reducing net income by $150.1 million. Partially offsetting these charges was the favorable impact of the 53rd week in Fiscal 2016, which increased net income by $8.3 million. Net income also included unfavorable foreign currency impacts of $93.6 million during Fiscal 2016.

Net Income per Diluted Share. Net income per diluted share declined by $3.26, or 41.4%, to $4.62 per share in Fiscal 2016. The decline was due to lower net income, as previously discussed, partially offset by lower weighted-average diluted shares outstanding during Fiscal 2016, driven by our share repurchases during Fiscal 2016. Net income per diluted share for Fiscal 2016 was negatively impacted by $1.74 per share as a result of charges recorded in connection with the Global Reorganization Plan, other charges primarily related to a pending customs audit and the settlement of certain litigation claims, and other non-cash impairment charges related to underperforming stores that were subject to potential future closure, and favorably impacted by $0.10 per share as a result of the 53rd week in Fiscal 2016, all as previously discussed. Net income per diluted share also included unfavorable foreign currency impacts of $1.10 per share during Fiscal 2016.

	56

FINANCIAL CONDITION AND LIQUIDITY

Financial Condition

The following table presents our financial condition as of April 1, 2017 and April 2, 2016.

		April 1, 2017				April 2, 2016				$ Change
		(millions)
Cash and cash equivalents		$	668.3			$	456.3			$	212.0
Short-term investments		684.7				629.4				55.3
Non-current investments(a)		21.4				186.6				(165.2		)
Short-term debt		—				(116.1		)		116.1
Long-term debt(b)		(588.2		)		(597.0		)		8.8
Net cash and investments(c)		$	786.2			$	559.2			$	227.0
Equity		$	3,299.6			$	3,743.5			$	(443.9	)

(a)	Recorded within other non-current assets in our consolidated balance sheets.

(b)	See Note 12 to the accompanying consolidated financial statements for discussion of the carrying values of our long-term debt.

(c)	"Net cash and investments" is defined as cash and cash equivalents, plus short-term and non-current investments, less total debt.

The increase in our net cash and investments position at April 1, 2017 as compared to April 2, 2016 was primarily due to our operating cash flows of $952.3 million, partially offset by our use of cash to invest in our business through $284.0 million in capital expenditures, to support Class A common stock repurchases of $215.2 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, and to make cash dividend payments of $164.8 million.

The decline in equity was attributable to our share repurchase activity, dividends declared, and comprehensive loss, partially offset by the net impact of stock-based compensation arrangements during Fiscal 2017.

Cash Flows

Fiscal 2017 Compared to Fiscal 2016

		Fiscal Years Ended
		April 1, 2017				April 2, 2016				$ Change
		(millions)
Net cash provided by operating activities		$	952.3			$	1,006.5			$	(54.2	)
Net cash used in investing activities		(207.8		)		(582.3		)		374.5
Net cash used in financing activities		(518.1		)		(472.8		)		(45.3		)
Effect of exchange rate changes on cash and cash equivalents		(14.4		)		5.2				(19.6		)
Net increase (decrease) in cash and cash equivalents		$	212.0			$	(43.4	)		$	255.4

	57

Net Cash Provided by Operating Activities. Net cash provided by operating activities decreased to $952.3 million during Fiscal 2017, from $1.007 billion during Fiscal 2016. The $54.2 million net decrease in cash provided by operating activities was due to a decline in net income before non-cash charges, partially offset by a net favorable change related to our operating assets and liabilities, including our working capital. The net increase related to our working capital was primarily driven by:

•	a decline in our inventory levels, largely driven by our inventory management initiatives, lower sourcing costs, and the timing of inventory receipts.

This increase related to our working capital was partially offset by:

•	an unfavorable change in our accounts receivable, largely driven by the timing of cash collections; and

•	an unfavorable change in our prepaid expenses and other current assets, largely driven by the timing of payments.

Net Cash Used in Investing Activities. Net cash used in investing activities was $207.8 million during Fiscal 2017, as compared to $582.3 million during Fiscal 2016. The $374.5 million net decrease in cash used in investing activities was primarily driven by:

•	a $224.3 million increase in proceeds from sales and maturities of net investments, less cash used to purchase investments. During Fiscal 2017, we made net investment sales of $82.0 million, as compared to net investment purchases of $142.3 million during Fiscal 2016; and

•

a $133.7 million decline in capital expenditures. During Fiscal 2017, we spent $284.0 million on capital expenditures, as compared to $417.7 million during Fiscal 2016. Our capital expenditures during Fiscal 2017 primarily related to our global retail store openings, department store renovations, enhancements to our global information technology systems, and further development of our infrastructure.

In Fiscal 2018, we expect to spend approximately $300 million to $320 million in capital expenditures, primarily to support our global retail store and concession shop expansion and renovations, as well as the further development of our infrastructure and systems.

Net Cash Used in Financing Activities. Net cash used in financing activities was $518.1 million during Fiscal 2017, as compared to $472.8 million during Fiscal 2016. The $45.3 million net increase in cash used in financing activities was primarily driven by:

•

a $296.8 million increase in cash used to repay debt, less proceeds from debt issuances. During Fiscal 2017, we made $90.0 million in net repayments related to our commercial paper note issuances and repayments and repaid $26.1 million of borrowings previously outstanding under our credit facilities. During Fiscal 2016, we received net proceeds of $299.4 million from the issuance of our 2.625% unsecured senior notes and $26.1 million in borrowings under our credit facilities, which were partially offset by net repayments of $144.8 million related to our commercial paper note issuances and repayments; and

•	a $28.2 million decline in proceeds from the exercise of stock option.

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

•

a $285.2 million decrease in cash used to repurchase shares of our Class A common stock. During Fiscal 2017, we used $200.0 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $15.2 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 long-term stock incentive plans. On a comparative basis, during Fiscal 2016, we used $479.9 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $20.5 million in shares of Class A common stock were surrendered or withheld for taxes.

	58

Fiscal 2016 Compared to Fiscal 2015

		Fiscal Years Ended
		April 2, 2016				March 28, 2015				$ Change
		(millions)
Net cash provided by operating activities		$	1,006.5			$	893.3			$	113.2
Net cash used in investing activities		(582.3		)		(688.7		)		106.4
Net cash used in financing activities		(472.8		)		(420.6		)		(52.2		)
Effect of exchange rate changes on cash and cash equivalents		5.2				(81.7		)		86.9
Net decrease in cash and cash equivalents		$	(43.4	)		$	(297.7	)		$	254.3

Net Cash Provided by Operating Activities. Net cash provided by operating activities increased to $1.007 billion during Fiscal 2016, from $893.3 million during Fiscal 2015. The $113.2 million net increase in cash provided by operating activities was primarily due to a net favorable change related to our operating assets and liabilities, including our working capital, partially offset by a decline in net income before non-cash charges. The net favorable change related to our working capital was primarily driven by:

•	a favorable change in our accounts receivable balance, largely driven by lower net revenues at the end of Fiscal 2016 and the timing of cash collections; and

•	favorable changes in our (i) prepaid expenses and other current assets and (ii) accounts payable and accrued liabilities balances, both largely driven by the timing of payments.

Net Cash Used in Investing Activities. Net cash used in investing activities was $582.3 million during Fiscal 2016, as compared to $688.7 million during Fiscal 2015. The $106.4 million net decrease in cash used in investing activities was primarily driven by a $142.6 million decline in cash used to purchase investments, less proceeds from sales and maturities of investments. During Fiscal 2016, we made net investment purchases of $142.3 million, as compared to net investment purchases of $284.9 million during Fiscal 2015.

The above decrease in cash used in investing activities was partially offset by a $26.5 million increase in capital expenditures. During Fiscal 2016, we spent $417.7 million on capital expenditures, as compared to $391.2 million during Fiscal 2015. Our capital expenditures during Fiscal 2016 primarily related to our global retail store expansion, department store renovations, enhancements to our global information technology systems, and further development of our infrastructure, including the build-out of a new distribution center in High Point, North Carolina.

Net Cash Used in Financing Activities. Net cash used in financing activities was $472.8 million during Fiscal 2016, as compared to $420.6 million during Fiscal 2015. The $52.2 million increase in cash used in financing activities was primarily driven by:

•

a $53.2 million decrease in proceeds from debt issuances, less cash used to repay debt. During Fiscal 2016, we received net proceeds of $299.4 million from the issuance of our 2.625% unsecured senior notes and $26.1 million in borrowings under our credit facilities, which were partially offset by net repayments of $144.8 million related to our commercial paper note issuances and repayments. During Fiscal 2015, we received net proceeds of $233.9 million related to our commercial paper note issuances and repayments; and

•	a $12.1 million increase in cash used to pay dividends, primarily due to an increase in the quarterly cash dividend on our common stock from $0.45 per share to $0.50 per share effective beginning in the fourth quarter of Fiscal 2015. During Fiscal 2016, we used $170.3 million to pay dividends, as compared to $158.2 million during Fiscal 2015.

	59

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

•

a $31.2 million decrease in cash used to repurchase shares of our Class A common stock. During Fiscal 2016, we used $479.9 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $20.5 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 long-term stock incentive plans. On a comparative basis, during Fiscal 2015, we used $499.9 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $31.7 million in shares of Class A common stock were surrendered or withheld for taxes.

Sources of Liquidity

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

During Fiscal 2017, we generated $952.3 million of net cash flows from our operations. As of April 1, 2017, we had $1.353 billion in cash, cash equivalents, and short-term investments, of which $1.118 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.

The following table presents our total availability, borrowings outstanding, and remaining availability under our credit facilities and Commercial Paper Program as of April 1, 2017:

		April 1, 2017
Description(a)		Total Availability				Borrowings Outstanding				Remaining Availability
		(millions)
Global Credit Facility and Commercial Paper Program(b)		$	500			$	8		(c)	$	492
Pan-Asia Credit Facilities(d)		57				—				57

(a)	As defined in Note 12 to the accompanying consolidated financial statements.

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

(c)	Represents outstanding letters of credit for which we were contingently liable under the Global Credit Facility as of April 1, 2017.

(d)	During the first quarter of Fiscal 2018, we renewed the China Credit Facility with a reduced borrowing capacity of up to 50 million Chinese Renminbi (approximately $7 million). Accordingly, our total availability under the Pan-Asia Credit Facilities was reduced to approximately $49 million during the first quarter of Fiscal 2018. See Note 12 to the accompanying consolidated financial statements.

We believe that the Global Credit Facility is adequately diversified with no undue concentration in any one financial institution. In particular, as of April 1, 2017, there were nine financial institutions participating in the Global Credit Facility, with no one participant maintaining a maximum commitment percentage in excess of 20%. Borrowings under the Pan-Asia Credit Facilities are guaranteed by the parent company and are granted at the sole discretion of the participating regional branches of JPMorgan Chase (the "Banks"), subject to availability of the Banks' funds and satisfaction of certain regulatory requirements. We have no reason to believe that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the terms of the Global Credit Facility and the Pan-Asia Credit Facilities in the event of our election to draw funds in the foreseeable future.

	60

Our sources of liquidity are used to fund our ongoing cash requirements, including working capital requirements, global retail store and e-commerce expansion, construction and renovation of shop-within-shops, investment in infrastructure, including technology, acquisitions, joint ventures, payment of dividends, debt repayments, Class A common stock repurchases, settlement of contingent liabilities (including uncertain tax positions), and other corporate activities, including our restructuring actions. We believe that our existing sources of cash, the availability under our credit facilities, and our ability to access capital markets will be sufficient to support our operating, capital, and debt service requirements for the foreseeable future, the ongoing development of our businesses, and our plans for further business expansion.

See Note 12 to the accompanying consolidated financial statements for additional information relating to our credit facilities.

Common Stock Repurchase Program

As of April 1, 2017, the remaining availability under our Class A common stock repurchase program was approximately $100 million, reflecting the May 11, 2016 approval by our Board of Directors to expand the program by up to an additional $200 million of Class A common stock repurchases. Repurchases of shares of Class A common stock are subject to overall business and market conditions. Due to the heightened level of uncertainty surrounding potential changes to U.S. taxation policies, we currently do not expect to repurchase shares under our Class A common stock repurchase program during Fiscal 2018.

See Note 16 to the accompanying consolidated financial statements for additional information relating to our Class A common stock repurchase program.

Dividends

Since 2003, we have maintained, and intend to continue to maintain, a regular quarterly cash dividend program on our 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.

See Note 16 to the accompanying consolidated financial statements for additional information relating to our quarterly cash dividend program.

Debt and Covenant Compliance

In September 2013, we completed a registered public debt offering and issued $300 million aggregate principal amount of unsecured senior notes due September 26, 2018, which bear interest at a fixed rate of 2.125%, payable semi-annually (the "2.125% Senior Notes"). In August 2015, we completed a second registered public debt offering and issued an additional $300 million aggregate principal amount of unsecured senior notes due August 18, 2020, which bear interest at a fixed rate of 2.625%, payable semi-annually (the "2.625% Senior Notes").

The indenture and supplemental indentures governing the 2.125% Senior Notes and 2.625% Senior Notes (as supplemented, the "Indenture") contain certain covenants that restrict our ability, subject to specified exceptions, to incur certain liens; enter into sale and leaseback transactions; consolidate or merge with another party; or sell, lease, or convey all or substantially all of our property or assets to another party. However, the Indenture does not contain any financial covenants.

The Global Credit Facility contains a number of covenants, as described in Note 12 to the accompanying consolidated financial statements. As of April 1, 2017, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under our Global Credit Facility. The Pan-Asia Credit Facilities do not contain any financial covenants.

See Note 12 to the accompanying consolidated financial statements for additional information relating to our debt and covenant compliance.

	61

Contractual and Other Obligations

Firm Commitments

The following table summarizes certain of our aggregate contractual obligations as of April 1, 2017, 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 2018				Fiscal 2019-2020				Fiscal 2021-2022				Fiscal 2023 and Thereafter				Total
		(millions)
Senior Notes		$	—			$	300.0			$	300.0			$	—			$	600.0
Interest payments on Senior Notes		14.3				18.9				3.9				—				37.1
Capital leases		29.8				58.8				53.2				81.2				223.0
Operating leases		318.1				596.1				421.4				533.4				1,869.0
Inventory purchase commitments		674.6				0.2				—				—				674.8
Other commitments		40.1				66.4				26.7				—				133.2
Total		$	1,076.9			$	1,040.4			$	805.2			$	614.6			$	3,537.1

The following is a description of our material, firmly committed obligations as of April 1, 2017:

•	Senior Notes represents the principal amount of our outstanding 2.125% Senior Notes and 2.625% Senior Notes. Amounts do not include any fair value adjustments, call premiums, unamortized debt issuance costs, or interest payments (see below);

•	Interest payments on Senior Notes represent the semi-annual contractual interest payments due on our 2.125% Senior Notes and 2.625% Senior Notes. Amounts do not include the impact of potential cash flows underlying our swap contracts entered into during Fiscal 2016 (see Note 14 to the accompanying consolidated financial statements for discussion of our swap contracts);

•

Lease obligations represent the minimum lease rental payments due under noncancelable leases for our real estate and operating equipment. 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 70% of these lease obligations relate to our retail operations. Information has been presented separately for capital and operating 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 $62.7 million as of April 1, 2017, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever. The above table also excludes the following: (i) amounts recorded in current liabilities in our consolidated balance sheet as of April 1, 2017; 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, derivative financial instruments, 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 15 to the accompanying consolidated financial statements for a description of our contingent commitments not included in the above table.

	62

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 $9.7 million as of April 1, 2017. 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 14 to the accompanying consolidated financial statements, we are exposed to a variety of risks, including changes in foreign currency exchange rates relating to foreign currency-denominated balances, certain anticipated cash flows from our international operations, and possible declines in the value of reported net assets 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 April 1, 2017. However, we do have in aggregate $15.0 million of derivative instruments in net asset positions with seven 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 and cross-currency swap contracts. Refer to Note 14 to the accompanying consolidated financial statements for a summary of the notional amounts and fair values of our forward foreign currency exchange and cross-currency swap contracts outstanding as of April 1, 2017.

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, and the settlement of foreign currency-denominated balances. 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 of the respective exposure.

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.

	63

We record our forward foreign currency exchange contracts at fair value in our consolidated balance sheets. To the extent forward foreign currency exchange contracts are designated as cash flow hedges and are highly effective in offsetting changes in the value of the hedged items, 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 operations 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 Royalties/Settlement of Foreign Currency Balances — recognized within foreign currency gains (losses) during the period that the hedged balance is remeasured through earnings, generally through its settlement when the related payment occurs.

We recognized in earnings a net loss on forward foreign currency exchange contracts of $2.6 million during Fiscal 2017, and net gains of $32.4 million and $35.5 million during Fiscal 2016 and Fiscal 2015, respectively.

Cross-Currency Swap Contracts

During Fiscal 2016, we entered into two pay-floating rate, receive-floating rate cross-currency swaps, with notional amounts of €280 million and €274 million, which we designated as hedges of our net investment in certain of our European subsidiaries (the "Cross-Currency Swaps"). The Cross-Currency Swaps, which mature on September 26, 2018 and August 18, 2020, respectively, swap the U.S. Dollar-denominated variable interest rate payments based on the 3-month London Interbank Offered Rate ("LIBOR") plus a fixed spread for Euro-denominated variable interest rate payments based on the 3-month Euro Interbank Offered Rate plus a fixed spread. As a result, the Cross-Currency Swaps, in conjunction with the Interest Rate Swaps (as defined below), economically convert our $300 million fixed-rate 2.125% and $300 million fixed-rate 2.625% obligations to €280 million and €274 million floating-rate Euro-denominated liabilities, 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 and cross-currency swap 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 April 1, 2017, 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 $119 million. As our outstanding forward foreign currency exchange contracts are primarily designated as cash flow hedges of forecasted transactions, and as our cross-currency swap contracts are designated as hedges of our net investment in certain of our European subsidiaries, 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

During Fiscal 2016, we entered into two pay-floating rate, receive-fixed rate interest rate swap contracts which we designated as hedges against changes in the respective fair values of our fixed-rate 2.125% Senior Notes and our fixed-rate 2.625% Senior Notes attributed to changes in the benchmark interest rate (the "Interest Rate Swaps"). The Interest Rate Swaps, which mature on September 26, 2018 and August 18, 2020, respectively, both have notional amounts of $300 million and swap the fixed interest rates on our 2.125% Senior Notes and 2.625% Senior Notes for variable interest rates based on 3-month LIBOR plus a fixed spread.

Sensitivity

As of April 1, 2017, notwithstanding the aforementioned Interest Rate Swaps, 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. As of April 1, 2017, the fair values of our Senior Notes were $605.0 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 by approximately $4 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.

	64

Investment Risk Management

As of April 1, 2017, we had cash and cash equivalents on-hand of $668.3 million, consisting of deposits in interest bearing accounts and investments in money market funds and time deposits with original maturities of 90 days or less. Our other significant investments included $684.7 million of short-term investments, consisting of time deposits with original maturities greater than 90 days; $43.5 million of restricted cash placed in escrow with certain banks as collateral, primarily to secure guarantees in connection with certain international tax matters; and $21.4 million of investments with maturities greater than one year, consisting of time deposits.

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 14 to the accompanying consolidated financial statements for further detail of the composition of our investment portfolio as of April 1, 2017.

We evaluate investments held in unrealized loss positions, if any, 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 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, including our critical accounting policies, see Note 3 to the accompanying 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, revenue related to our wholesale business is reduced by estimates of returns, discounts, end-of-season markdowns, and operational chargebacks. Revenue related to our retail business, 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 April 1, 2017 would have decreased our Fiscal 2017 net revenues by approximately $2 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.

	65

See "Accounts Receivable" in Note 3 to the accompanying 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. We also hold retail inventory that is sold in our own stores and e-commerce sites directly to consumers. Substantially all of our inventories are comprised of finished goods, which are stated at the lower of cost or estimated realizable value, with cost primarily determined on a weighted-average cost 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. Actual results may differ from estimates 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 April 1, 2017 would have decreased our Fiscal 2017 gross profit by approximately $1 million.

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.

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

	66

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 2017 using the qualitative approach discussed above, while giving consideration to our most recent quantitative goodwill impairment test (the results of which indicated that the fair values of our reporting units significantly exceeded their respective carrying values). Based on the results of the qualitative impairment assessment performed, we concluded that it is more likely than not that the fair values of our reporting units significantly exceeded their respective carrying values and there were no reporting units at risk of impairment.

Subsequent to our Fiscal 2017 annual goodwill impairment assessment, we realigned our segment reporting structure during the fourth quarter of Fiscal 2017 as a result of significant organizational changes implemented in connection with the Way Forward Plan (see Note 20 to the accompanying consolidated financial statements). As a result of the realignment of our segment reporting structure, we reallocated the carrying amount of goodwill to our new reporting units based upon each reporting unit's relative fair value as of the first day of our fourth quarter of Fiscal 2017. In connection with this reallocation, we performed an interim assessment of the recoverability of goodwill assigned to our new reporting units using the quantitative approach described above. Based on the results of the quantitative impairment assessment performed, we concluded that the fair value of one of our new reporting units was less than its carrying value. As a result, a goodwill impairment charge of $5.2 million was recorded during the fourth quarter of Fiscal 2017 to fully write off the carrying value of the reporting unit's reallocated goodwill. The fair values of the remaining new reporting units significantly exceeded their respective carrying values and were not at risk of impairment. No goodwill impairment charges were recorded during Fiscal 2016 or Fiscal 2015. See Note 13 to the accompanying consolidated financial statements for further discussion.

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.

It is possible that our conclusions regarding impairment or recoverability of goodwill or other intangible assets could change in future periods if, for example, (i) our businesses do not perform as projected, (ii) overall economic conditions in future years vary from current assumptions, (iii) business conditions or strategies change from our current assumptions, or (iv) the identification of our reporting units change, among other factors. Such changes could result in a future impairment charge of goodwill or other intangible assets, which could have a material adverse effect on our consolidated financial position or results of operations.

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 2017, Fiscal 2016, and Fiscal 2015, we recorded non-cash impairment charges of $248.6 million, $48.8 million, and $6.9 million, respectively, to reduce the net carrying value of certain long-lived assets to their estimated fair values. See Note 9 to the accompanying 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

	67

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.

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 11 to the accompanying 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 have been 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.

No stock options were granted during Fiscal 2017 or Fiscal 2016. See Note 18 to the accompanying consolidated financial statements for further discussion.

Restricted Stock and Restricted Stock Units ("RSUs")

We grant restricted shares of our Class A common stock to our non-employee directors, and service-based RSUs to certain of our senior executives, as well as certain of our other employees. 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 Class A common stock on the date of grant, adjusted to reflect the absence of any awards not entitled to accrue dividend equivalents while outstanding. 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.

	68

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. No performance-based RSUs with a TSR modifier were granted during Fiscal 2017 or Fiscal 2016. See Note 18 to the accompanying consolidated financial statements for further discussion.

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 2017 net loss by approximately $4 million.

RECENTLY ISSUED ACCOUNTING STANDARDS

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