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 notes thereto, which are included in this Annual Report on Form 10-K. We utilize a 52-53 week fiscal year ending on the Saturday immediately before or after March 31. As such, Fiscal 2021 ended on March 27, 2021 and was a 52-week period; Fiscal 2020 ended on March 28, 2020 and was a 52-week period; Fiscal 2019 ended on March 30, 2019 and was a 52-week period; and Fiscal 2022 will end on April 2, 2022 and will be a 53-week period.

			42

INTRODUCTION

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

*•*Overview. This section provides a general description of our business, global economic conditions and industry trends, and a summary of our financial performance for Fiscal 2021. 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 2021 and Fiscal 2020 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 March 27, 2021, which includes (i) an analysis of our financial condition as compared to the prior fiscal year-end; (ii) an analysis of changes in our cash flows for Fiscal 2021 and Fiscal 2020 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, our outstanding debt and covenant compliance, common stock repurchases, and payments of dividends; and (iv) a summary of our contractual and other obligations as of March 27, 2021.

• Market risk management. This section discusses how we manage our risk exposures related to foreign currency exchange rates, interest rates, and our investments as of March 27, 2021.

• 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.

OVERVIEW

Our Business

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

We organize our business into the following three reportable segments:

• North America — Our North America segment, representing approximately 45% of our Fiscal 2021 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in the U.S. and Canada, excluding Club Monaco. In North America, our retail business is primarily comprised of our Ralph Lauren stores, our factory stores, and our digital commerce site, www.RalphLauren.com. Our wholesale business in North America is comprised primarily of sales to department stores, and to a lesser extent, specialty stores.

			43

*•*Europe — Our Europe segment, representing approximately 27% of our Fiscal 2021 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in Europe, the Middle East, and Latin America, excluding Club Monaco. In Europe, our retail business is primarily comprised of our Ralph Lauren stores, our factory stores, our concession-based shop-within-shops, and our various digital commerce sites. Our wholesale business in Europe is comprised of a varying mix of sales to both department stores and specialty stores, depending on the country, as well as to various third-party digital partners.

• Asia — Our Asia segment, representing approximately 23% of our Fiscal 2021 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in Asia, Australia, and New Zealand. Our retail business in Asia is primarily comprised of our Ralph Lauren stores, our factory stores, our concession-based shop-within-shops, and our various digital commerce sites. In addition, we sell our products online through various third-party digital partner commerce sites. Our wholesale business in Asia is comprised primarily of sales to department stores, with related products distributed through shop-within-shops.

No operating segments were aggregated to form our reportable segments. In addition to these reportable segments, we also have other non-reportable segments, representing approximately 5% of our Fiscal 2021 net revenues, which primarily consist of (i) sales of Club Monaco branded products made through our retail and wholesale businesses in the U.S., Canada, and Europe, and our licensing alliances in Europe and Asia, and (ii) royalty revenues earned through our global licensing alliances, excluding Club Monaco. As discussed in "Recent Developments," on May 13, 2021, we announced the anticipated sale of our Club Monaco business, which is expected to close by the end of the first quarter of Fiscal 2022.

Approximately 52% of our Fiscal 2021 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 retail sales in our second and third fiscal quarters and higher wholesale sales in our second and fourth fiscal quarters. These trends result primarily from the timing of key vacation travel, back-to-school, and holiday shopping periods impacting our retail business and timing of seasonal wholesale shipments. As a result of changes in our business, consumer spending patterns, and the macroeconomic environment, including those resulting from pandemic diseases and other catastrophic events, historical quarterly operating trends and working capital requirements may not be indicative of our future performance. In addition, fluctuations in sales, operating income, and cash flows in any fiscal quarter may be affected by other events affecting retail sales, such as changes in weather patterns.

Recent Developments

COVID-19 Pandemic

Beginning in the fourth quarter of Fiscal 2020, a novel strain of coronavirus commonly referred to as COVID-19 emerged and spread rapidly across the globe, including throughout all major geographies in which we operate (North America, Europe, and Asia), resulting in adverse economic conditions and business disruptions, as well as significant volatility in global financial markets. Governments worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such factors, among others, have resulted in a significant decline in retail traffic, tourism, and consumer spending on discretionary items. Additionally, during this period of uncertainty, companies across a wide array of industries have implemented various initiatives to reduce operating expenses and preserve cash balances, including work furloughs, reduced pay, and severance actions, which could lower consumers' disposable income levels or willingness to purchase discretionary items. Further, even after such government restrictions and company initiatives are lifted, consumer behavior, spending levels, and/or shopping preferences, such as willingness to congregate in indoor shopping centers or other populated locations, could be adversely affected.

As a result of the COVID-19 pandemic, we have experienced varying degrees of business disruptions and periods of closure of our stores, distribution centers, and corporate facilities, as have our wholesale customers, licensing partners, suppliers, and vendors. During the first quarter of Fiscal 2021, the majority of our stores in key markets were closed for an average of 8 to 10 weeks due to government-mandated lockdowns and other restrictions, resulting in significant adverse impacts to our operating results. Resurgences in certain parts of the world resulted in further business disruptions periodically throughout Fiscal 2021, most notably in Europe where a significant number of our stores were closed for approximately two to three months during the second half of Fiscal 2021, including during the holiday period, due to government-mandated lockdowns and other restrictions. Such disruptions have continued into the first quarter of Fiscal 2022, impacting not only our businesses in Europe but also in other regions of the world (notably our retail operations in Japan and our sourcing operations in

			44

India). Further, the majority of our stores that are able to remain open have periodically been subject to limited operating hours and/or customer capacity levels in accordance with local health guidelines, with traffic remaining challenged. Our wholesale and licensing businesses have also been adversely affected, particularly in North America and Europe, as a result of store closures and lower traffic and consumer demand.

Throughout the pandemic, our priority has been to ensure the safety and well-being of our employees, customers, and the communities in which we operate around the world. We continue to consider the guidance of local governments and global health organizations and have implemented new health and safety protocols in our stores, distribution centers, and corporate facilities. We have also taken various preemptive actions to preserve cash and strengthen our liquidity position, including:

• amending our Global Credit Facility in May 2020 to temporarily waive our leverage ratio requirement (see Note 11 to the accompanying consolidated financial statements);

• issuing $1.250 billion of unsecured senior notes in June 2020, the proceeds of which are being used for general corporate purposes, including repayment of certain of our previously outstanding borrowings (see Note 11 to the accompanying consolidated financial statements);

• temporarily suspending our quarterly cash dividend and common stock repurchase program, effective beginning in the first quarter of Fiscal 2021 (see Note 16 to the accompanying consolidated financial statements);

• temporarily reducing the base compensation of our executives and senior management team, as well as our Board of Directors, for the first quarter of Fiscal 2021;

• furloughing or reducing work hours for a significant portion of our employees during the first half of Fiscal 2021;

• carefully managing our expense structure across all key areas of spend, including aligning inventory levels with anticipated demand, negotiating rent abatements with certain of our landlords, and postponing non-critical capital build-out and other investments and activities;

• pursuing relevant government subsidy programs related to COVID-19 business disruptions; and

• improving upon our cash conversion cycle largely driven by our accounts receivable collection efforts and extended vendor payment terms.

Despite the introduction of COVID-19 vaccines, the pandemic remains highly volatile and continues to evolve. Accordingly, we cannot predict for how long and to what extent the pandemic will impact our business operations or the global economy as a whole. We will continue to assess our operations location-by-location, considering the guidance of local governments and global health organizations to determine when our operations can begin returning to normal levels of business. See Item 1A — "Risk Factors — Risks Related to Macroeconomic Conditions — Infectious disease outbreaks, such as the COVID-19 pandemic, could have a material adverse effect on our business" for additional discussion regarding risks to our business associated with the COVID-19 pandemic.

Fiscal 2021 Strategic Realignment Plan

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

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

On October 29, 2020, we announced the planned transition of our Chaps brand to a fully licensed business model, consistent with our long-term brand elevation strategy in connection with our third initiative (see "Transition of Chaps Brand to a Licensing Model" further below for additional discussion).

Additionally, on February 3, 2021, our Board of Directors approved additional realignment actions related to our real estate initiative. Specifically, we plan to further rightsize and consolidate our global corporate offices to better align with our

			45

current organizational profile and new ways of working. We also expect to close certain of our stores to improve overall profitability. Additionally, we plan to complete the consolidation of our existing North America distribution centers in order to drive greater efficiencies, improve sustainability, and deliver a better consumer experience.

Finally, on May 13, 2021, in connection with our brand portfolio initiative, we announced that we have entered into an agreement to sell our Club Monaco business to Regent, L.P., a global private equity firm. The transaction is expected to close by the end of the first quarter of Fiscal 2022.

In connection with these collective realignment initiatives, we expect to incur total estimated pre-tax charges of approximately $300 million to $350 million, of which $236.8 million was recorded during Fiscal 2021. Once substantially completed by the end of Fiscal 2022, these actions are expected to result in gross annualized pre-tax expense savings of approximately $200 million to $240 million, a portion of which will be reinvested back into the business. These estimated charges and expense savings are subject to change based upon the completion of the sale of our Club Monaco business.

See Note 9 to our accompanying consolidated financial statements for additional discussion regarding charges recorded in connection with the Fiscal 2021 Strategic Restructuring Plan.

Transition of Chaps Brand to a Fully Licensed Business Model

On October 29, 2020, we announced the planned transition of our Chaps brand to a fully licensed business model, consistent with our long-term brand elevation strategy. Specifically, we have entered into a multi-year licensing partnership, taking effect on August 1, 2021 after a transition period, with an affiliate of 5 Star Apparel LLC, a division of the OVED Group, to manufacture, market, and distribute Chaps menswear and womenswear. The products will be sold at existing channels of distribution with opportunities for expansion into additional channels and markets globally.

This agreement is expected to create incremental value for the Company by enabling an even greater focus on elevating our core brands in the marketplace, reducing our direct exposure to the North America department store channel, and setting up Chaps to deliver on its potential with an experienced partner that is focused on nurturing the brand.

Swiss Tax Reform

In May 2019, a public referendum was held in Switzerland that approved the Federal Act on Tax Reform and AHV Financing (the "Swiss Tax Act"), which became effective January 1, 2020. The Swiss Tax Act eliminates certain preferential tax items at both the federal and cantonal levels for multinational companies and provides the cantons with parameters for establishing local tax rates and regulations. The Swiss Tax Act also provides transitional provisions, one of which allows eligible companies to increase the tax basis of certain assets based on the value generated by their business in previous years, and to amortize such adjustment as a tax deduction over a transitional period.

In connection with this transitional provision, we recorded a one-time income tax benefit and corresponding deferred tax asset of $122.9 million during Fiscal 2020, which reduced our effective tax rate by 3,760 basis points. Subsequently, during Fiscal 2021, we reduced this one-time tax benefit by $13.8 million due to new legislation enacted in connection with the European Union's anti-tax avoidance directive, which increased our effective rate by 1,840 basis points.

See Note 10 to the accompanying consolidated financial statements for additional discussion regarding the Swiss Tax Act.

Fiscal 2019 Restructuring Plan

On June 4, 2018, our Board of Directors approved a restructuring plan associated with our strategic objective of operating with discipline to drive sustainable growth (the "Fiscal 2019 Restructuring Plan"). The Fiscal 2019 Restructuring Plan included the following activities: (i) rightsizing and consolidation of our global distribution network and corporate offices; (ii) targeted severance-related actions; and (iii) closure of certain of our stores and shop-within-shops. Actions associated with the Fiscal 2019 Restructuring Plan resulted in gross annualized expense savings of approximately $80 million.

In connection with the Fiscal 2019 Restructuring Plan, we have recorded cumulative charges of $145.8 million since its inception, of which $48.5 million and $97.3 million were recorded during Fiscal 2020 and Fiscal 2019, respectively. Actions associated with the Fiscal 2019 Restructuring Plan are complete and no additional charges are expected to be incurred in connection with this plan.

			46

See Note 9 to our accompanying consolidated financial statements for additional discussion regarding charges recorded in connection with the Fiscal 2019 Restructuring Plan.

U.S. Tax Reform

In January 2018, new U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA") became effective. The TCJA significantly revised U.S. tax law by, among other provisions, lowering the U.S. federal statutory income tax rate from 35% to 21%, creating a territorial tax system that includes a one-time mandatory transition tax on previously deferred foreign earnings, and eliminating or reducing certain income tax deductions.

During our fiscal year ended March 31, 2018 ("Fiscal 2018"), we recorded net charges of $221.4 million within our income tax provision in connection with the TCJA. Subsequently, during Fiscal 2019, we recorded net unfavorable measurement period adjustments of $27.6 million as permitted by SEC Staff Accounting Bulletin No. 118. These measurement period adjustments increased our effective tax rate by 470 basis points during Fiscal 2019.

See Note 10 to the accompanying consolidated financial statements for additional discussion regarding the TCJA.

Global Economic Conditions and Industry Trends

The global economy and retail industry are impacted by many different factors. The COVID-19 pandemic has resulted in heightened uncertainty surrounding the future state of the global economy, as well as significant volatility in global financial markets. As discussed in "Recent Developments," governments worldwide have imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus. Such actions, together with changes in consumers' willingness to congregate in populated areas and lower levels of disposal income due to high unemployment rates, have resulted in significant business disruptions across a wide array of industries and an overall decline of the global economy. Despite the introduction of COVID-19 vaccines, it is not clear at this time how much longer the pandemic will last.

The global economy has also been impacted by the domestic and international political environment, including volatile international trade relations and civil and political unrest taking place in certain parts of the world. The U.S. in particular has experienced civil unrest centered around racial inequality and political allegiances. Additionally, the United Kingdom recently withdrew from the European Union, commonly referred to as "Brexit," whereby it ceased to be a member effective January 31, 2020. In December 2020, the United Kingdom and the European Union entered into an agreement that defines their future relationship, including terms of trade, that among its provisions will result in new tariffs on goods imported to the United Kingdom from the European Union that were manufactured elsewhere, as well as require additional administrative effort to import and export goods, adding friction and cost to transportation. Further, certain other worldwide events, including diplomatic tensions between the U.S. and China, acts of terrorism, taxation or monetary policy changes, fluctuations in commodity prices, and rising healthcare costs, also increase volatility in the global economy.

The retail landscape in which we operate has been significantly disrupted by the COVID-19 pandemic, including widespread temporary closures of stores and distribution centers and declines in retail traffic, tourism, and consumer spending on discretionary items. Prior to the COVID-19 pandemic, consumers had been increasingly shifting their shopping preference from physical stores to online. This shift in preference has accelerated during the pandemic and could be further amplified in the future as consumers may continue to prefer to avoid populated locations, such as shopping centers, in fear of exposing themselves to infectious diseases. Even before the pandemic, many retailers, including certain of our large wholesale customers, have been highly promotional and have aggressively marked down their merchandise on a periodic basis in an attempt to offset declines in physical store traffic. The retail industry, particularly in the U.S., has also experienced numerous bankruptcies, restructurings, and ownership changes in recent years. The COVID-19 pandemic could exacerbate these trends if companies do not have adequate financial resources and/or access to additional capital to withstand prolonged periods of adverse economic conditions. The continuation of these industry trends could further impact consumer spending and consumption behavior in our industry, which could have a material adverse effect on our business or operating results.

We have implemented various strategies globally to help address many of these current challenges and continue to build a foundation for long-term profitable growth centered around strengthening our consumer-facing areas of product, stores, and marketing across channels and driving a more efficient operating model. In response to the COVID-19 pandemic, we have taken preemptive actions to preserve cash and strengthen our liquidity position, as described in "Recent Developments." Investing in our digital ecosystem remains a primary focus and is a key component of our integrated global omni-channel strategy, particularly in light of the current COVID-19 pandemic, which has and could continue to reshape consumer shopping preferences. We continue to expand our offering of Connected Retailing capabilities to enhance the consumer experience,

			47

which now include virtual clienteling, Buy Online-Ship to Store, Buy Online-Pick Up in Store, curbside pickup, appointment scheduling, and mobile checkout and contactless payments. Further, during Fiscal 2021, we launched new digital flagships in Japan and Hong Kong, as well as our first subscription apparel rental service, the Lauren Look. We also continue to take deliberate actions to ensure promotional consistency across channels and to enhance the overall brand and shopping experience, including better aligning shipments and inventory levels with underlying demand. We also remain committed to optimizing our wholesale distribution channel and enhancing our department store consumer experience. We are closely monitoring the latest Brexit developments, including the December 2020 trade agreement, and are assessing risks and opportunities and developing strategies to mitigate our exposure.

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

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

Summary of Financial Performance

Operating Results

In Fiscal 2021, we reported net revenues of $4.401 billion, a net loss of $121.1 million, and net loss per diluted share of $1.65, as compared to net revenues of $6.160 billion, net income of $384.3 million, and net income per diluted share of $4.98 in Fiscal 2020. The comparability of our operating results has been affected by net adverse impacts related to COVID-19 business disruptions, as well as restructuring-related charges, impairment of assets, and certain other benefits (charges), including one-time income tax events, as discussed further below.

Our operating performance for Fiscal 2021 reflected revenue declines of 28.6% on a reported basis and 29.9% on a constant currency basis, as defined within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition" below. The decrease in net revenues during Fiscal 2021 was largely due to declines in North America and Europe driven by COVID-19 business disruptions.

Our gross profit as a percentage of net revenues increased by 570 basis points to 65.0% during Fiscal 2021, primarily driven by improved pricing and lower levels of promotional activity, lower non-routine inventory charges, and favorable geographic and channel mix.

Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues increased by 740 basis points to 60.0% during Fiscal 2021, primarily driven by operating deleverage on lower net revenues, partially offset by expense savings across various categories.

Net income decreased by $505.4 million to a net loss of $121.1 million in Fiscal 2021 as compared to Fiscal 2020, primarily due to a $360.6 million decline in operating income driven by COVID-19 business disruptions, a $104.2 million increase in our income tax provision, and higher non-operating expense, net. Net income per diluted share decreased by $6.63 to a net loss of $1.65 per share in Fiscal 2021 as compared to Fiscal 2020, due to the lower level of net income.

Our operating results during Fiscal 2021 and Fiscal 2020 included net restructuring-related charges, impairment of assets, and certain other charges totaling $254.4 million and $321.8 million, respectively, which had an after-tax effect of reducing net income by $201.5 million, or $2.71 per diluted share, and $244.8 million, or $3.17 per diluted share, respectively. Net income (loss) during Fiscal 2021 and Fiscal 2020 also reflected $46.6 million of incremental net tax expense and an income tax benefit of $122.9 million, respectively, recorded in connection with one-time income tax events.

Financial Condition and Liquidity

We ended Fiscal 2021 in a net cash and investments position (cash and cash equivalents plus investments, less total debt) of $1.144 billion, compared to $945.3 million as of the end of Fiscal 2020. The increase in our net cash and investments position was primarily due to our operating cash flows of $380.9 million, partially offset by our use of cash to invest in our business through $107.8 million in capital expenditures, to make dividend payments of $49.8 million (which had been previously declared during the fourth quarter of Fiscal 2020), and to support Class A common stock repurchases of $37.7 million, representing withholdings in satisfaction of tax obligations for stock-based compensation awards.

			48

We generated $380.9 million of cash from operations during Fiscal 2021, compared to $754.6 million during Fiscal 2020. The decline in cash provided by operating activities was due to a decrease 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, as compared to the prior fiscal year period.

Our equity decreased to $2.604 billion as of March 27, 2021, compared to $2.693 billion as of March 28, 2020, primarily due to our comprehensive loss and shares surrendered for tax withholdings, partially offset by the impact of stock-based compensation arrangements during Fiscal 2021.

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

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

• pretax charges incurred in connection with our restructuring activities, as well as certain other asset impairments and other benefits (charges), including those related to COVID-19 business disruptions, as summarized below (references to "Notes" are to the notes to the accompanying consolidated financial statements):

						Fiscal Years Ended
						March 27, 2021						March 28, 2020						March 30, 2019
						(millions)
Restructuring and other charges (see Note 9)						$	(170.5)					$	(67.2)					$	(130.1)
Impairment of assets (see Note 8)(a)						(96.0)						(38.7)						(25.8)
Non-routine inventory charges**(b)**						(29.3)						(159.5)						(7.2)
COVID-19-related bad debt reversals (expense)(c)						41.4						(56.4)						—
Total charges						$	(254.4)					$	(321.8)					$	(163.1)

**(a)**Fiscal 2020 includes a $7.1 million impairment of an equity method investment recorded within other income (expense), net in the consolidated statements of operations. All other impairment charges were recorded within impairment of assets in the consolidated statements of operations.

**(b)**Non-routine inventory charges are recorded within cost of goods sold in the consolidated statements of operations. Fiscal 2021 and Fiscal 2020 includes non-routine inventory charges of $21.0 million and $157.3 million, respectively, related to adverse impacts associated with COVID-19 business disruptions. All other non-routine inventory charges related to our restructuring plans (see Note 9).

**(c)**COVID-19-related bad debt reversals (expense) are recorded within SG&A expenses in the consolidated statements of operations.

• other adverse impacts related to COVID-19 business disruptions during Fiscal 2021 and Fiscal 2020;

• adverse impacts related to Hong Kong protest business disruptions during Fiscal 2020;

• incremental net tax expense of $46.6 million recorded within our income tax provision during Fiscal 2021 related to a valuation allowance provided against domestic losses attributable to COVID-19 business disruptions, international tax legislation enacted in connection with the European Union’s anti-tax avoidance directive, and a net operating loss carryback under the CARES Act, which collectively negatively impacted our effective tax rate by 6,230 basis points;

• a one-time benefit of $122.9 million recorded within our income tax provision in the consolidated statements of operations during Fiscal 2020 in connection with the Swiss Tax Act, which reduced our effective tax rate by 3,760 basis points. During Fiscal 2021, we reduced this one-time tax benefit by $13.8 million due to new legislation enacted, which increased the Company's effective tax rate by 1,840 basis points. See Note 10 to the accompanying consolidated financial statements for further discussion; and

• TCJA enactment-related charges of $27.6 million recorded within the income tax provision in the consolidated statements of operations during Fiscal 2019, which increased our effective tax rate by 470 basis points. See Note 10 to the accompanying consolidated financial statements for further discussion.

			49

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

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

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

			50

RESULTS OF OPERATIONS

Fiscal 2021 Compared to Fiscal 2020

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

						Fiscal Years Ended
						March 27, 2021						March 28, 2020						$ Change						% / bps Change
						(millions, except per share data)
Net revenues						$	4,400.8					$	6,159.8					$	(1,759.0)					(28.6		%)
Cost of goods sold						(1,539.4)						(2,506.5)						967.1						(38.6		%)
Gross profit						2,861.4						3,653.3						(791.9)						(21.7		%)
Gross profit as % of net revenues						65.0		%				59.3		%										570 bps
Selling, general, and administrative expenses						(2,638.5)						(3,237.5)						599.0						(18.5		%)
SG&A expenses as % of net revenues						60.0		%				52.6		%										740 bps
Impairment of assets						(96.0)						(31.6)						(64.4)						203.5		%
Restructuring and other charges						(170.5)						(67.2)						(103.3)						153.9		%
Operating income (loss)						(43.6)						317.0						(360.6)						NM
Operating income (loss) as % of net revenues						(1.0		%)				5.1		%										(610 bps)
Interest expense						(48.5)						(17.6)						(30.9)						175.9		%
Interest income						9.7						34.4						(24.7)						(71.8		%)
Other income (expense), net						7.6						(7.4)						15.0						NM
Income (loss) before income taxes						(74.8)						326.4						(401.2)						NM
Income tax benefit (provision)						(46.3)						57.9						(104.2)						NM
Effective tax rate**(a)**						(61.9		%)				(17.7		%)										(4,420 bps)
Net income (loss)						$	(121.1)					$	384.3					$	(505.4)					NM
Net income (loss) per common share:
Basic						$	(1.65)					$	5.07					$	(6.72)					NM
Diluted						$	(1.65)					$	4.98					$	(6.63)					NM

**(a)**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 $1.759 billion, or 28.6%, to $4.401 billion in Fiscal 2021 as compared to Fiscal 2020, including net favorable foreign currency effects of $80.7 million. On a constant currency basis, net revenues decreased by $1.840 billion, or 29.9%.

The following table summarizes the percentage change in our Fiscal 2021 consolidated comparable store sales as compared to the prior fiscal year, inclusive of adverse impacts related to COVID-19 business disruptions:

						% Change
Digital commerce comparable store sales						20		%
Comparable store sales excluding digital commerce						(36		%)
Total comparable store sales						(29		%)

			51

Our global average store count increased by 20 stores and concession shops during Fiscal 2021 compared with the prior fiscal year, largely driven by new openings in Asia. The following table details our retail store presence by segment as of the periods presented:

						March 27, 2021						March 28, 2020
Freestanding Stores:
North America						233						230
Europe						92						94
Asia						151						132
Other non-reportable segments						72						74
Total freestanding stores						548						530
Concession Shops:
North America						1						2
Europe						29						29
Asia						616						619
Other non-reportable segments						4						4
Total concession shops						650						654
Total stores						1,198						1,184

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

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

						Fiscal Years Ended												$ Change						Foreign Exchange Impact						$ Change						% Change
						March 27, 2021						March 28, 2020						As Reported									Constant Currency						As Reported						Constant Currency
						(millions)
Net Revenues:
North America						$	1,992.4					$	3,140.5					$	(1,148.1)					$	—					$	(1,148.1)					(36.6		%)				(36.6		%)
Europe						1,165.9						1,632.2						(466.3)						52.1						(518.4)						(28.6		%)				(31.8		%)
Asia						1,027.5						1,017.2						10.3						28.5						(18.2)						1.0		%				(1.8		%)
Other non-reportable segments						215.0						369.9						(154.9)						0.1						(155.0)						(41.9		%)				(41.9		%)
Total net revenues						$	4,400.8					$	6,159.8					$	(1,759.0)					$	80.7					$	(1,839.7)					(28.6		%)				(29.9		%)

North America net revenues — Net revenues decreased by $1.148 billion, or 36.6%, during Fiscal 2021 as compared to Fiscal 2020, on both a reported and constant currency basis.

The $1.148 billion net decline in North America net revenues was driven by:

• a $634.9 million net decrease related to our North America wholesale business, driven by COVID-19 business disruptions and continued challenging department store traffic trends; and

• a $513.2 million net decrease related to our North America retail business, inclusive of the adverse impact of COVID-19 business disruptions. On a constant currency basis, net revenues decreased by $513.1 million driven by decreases of $498.4 million in comparable store sales and $14.7 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our North America retail business, inclusive of adverse impacts related to COVID-19 business disruptions:

			52

						% Change
Digital commerce comparable store sales						11		%
Comparable store sales excluding digital commerce						(40		%)
Total comparable store sales						(30		%)

Europe net revenues — Net revenues decreased by $466.3 million, or 28.6%, during Fiscal 2021 as compared to Fiscal 2020, including net favorable foreign currency effects of $52.1 million. On a constant currency basis, net revenues decreased by $518.4 million, or 31.8%.

The $466.3 million net decline in Europe net revenues was driven by:

• a $357.5 million net decrease related to our Europe retail business, inclusive of the adverse impact of COVID-19 business disruptions, as well as net favorable foreign currency effects of $15.1 million. On a constant currency basis, net revenues decreased by $372.6 million driven by decreases of $336.2 million in comparable store sales and $36.4 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Europe retail business, inclusive of adverse impacts related to COVID-19 business disruptions:

						% Change
Digital commerce comparable store sales						56		%
Comparable store sales excluding digital commerce						(55		%)
Total comparable store sales						(43		%)

*•*a $108.8 million net decrease related to our Europe wholesale business driven by COVID-19 business disruptions partially offset by net favorable foreign currency effects of $37.0 million.

Asia net revenues — Net revenues increased by $10.3 million, or 1.0%, during Fiscal 2021 as compared to Fiscal 2020, including net favorable foreign currency effects of $28.5 million. On a constant currency basis, net revenues decreased by $18.2 million, or 1.8%.

The $10.3 million net increase in Asia net revenues was driven by:

• a $20.4 million net increase related to our Asia retail business, inclusive of the adverse impact of COVID-19 business disruptions, as well as net favorable foreign currency effects of $26.9 million. On a constant currency basis, net revenues decreased by $6.5 million, reflecting a decrease of $43.1 million in comparable store sales, partially offset by an increase of $36.6 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Asia retail business, inclusive of adverse impacts related to COVID-19 business disruptions:

						% Change
Digital commerce comparable store sales						54		%
Comparable store sales excluding digital commerce						(7		%)
Total comparable store sales						(6		%)

This increase was partially offset by a $10.1 million net decrease related to our Asia wholesale business driven by COVID-19 business disruptions, primarily in Japan.

Gross Profit. Gross profit decreased by $791.9 million, or 21.7%, to $2.861 billion in Fiscal 2021, including net favorable foreign currency effects of $60.2 million. Gross profit during Fiscal 2021 and Fiscal 2020 reflects adverse impacts related to COVID-19 business disruptions, including incremental inventory charges of $21.0 million and $157.3 million, respectively. Gross profit during Fiscal 2021 and Fiscal 2020 also reflects inventory charges of $8.3 million and $2.2 million, respectively, recorded in connection with our restructuring plans. Gross profit as a percentage of net revenues increased to 65.0% in Fiscal 2021 from 59.3% in Fiscal 2020. The 570 basis point improvement was primarily driven by improved pricing and lower levels of promotional activity, lower non-routine inventory charges recorded during Fiscal 2021 as compared to the prior fiscal year, and favorable geographic and channel mix.

			53

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

Selling, General, and Administrative Expenses. SG&A expenses include compensation and benefits, advertising and marketing, rent and occupancy, distribution, information technology, legal, depreciation and amortization, bad debt, and other selling and administrative costs. SG&A expenses decreased by $599.0 million, or 18.5%, to $2.639 billion in Fiscal 2021, including net unfavorable foreign currency effect of $40.7 million. The decrease in SG&A expenses reflects impacts related to COVID-19 business disruptions and our related mitigating actions, including (i) lower compensation-related expenses largely driven by employee furloughs and terminations, reduced pay for our executives, senior management team, and Board of Directors, and COVID-19-related government subsidies, (ii) lower rent and occupancy costs largely driven by reduced percentage-of-sales-based rent due to store closures and a reduction in traffic, as well as rent abatements negotiated with certain of our landlords, (iii) favorable COVID-19-related bad debt expense adjustments, and (iv) our operational discipline. SG&A expenses as a percentage of net revenues increased to 60.0% in Fiscal 2021 from 52.6% in Fiscal 2020. The 740 basis point increase was primarily due to operating deleverage on lower net revenues, partially offset by expense savings across various categories.

The $599.0 million decrease in SG&A expenses was driven by:

						Fiscal 2021 Compared to Fiscal 2020
						(millions)
SG&A expense category:
Compensation-related expenses						$	(263.9)
Bad debt expense						(86.3)
Rent and occupancy costs						(80.4)
Staff-related expenses						(59.4)
Selling-related expenses						(46.8)
Depreciation and amortization expense						(22.1)
Consulting fees						(16.8)
Marketing and advertising expenses						(13.0)
Shipping and handling costs						(7.6)
Other						(2.7)
Total decrease in SG&A expenses						$	(599.0)

We have been carefully evaluating our organizational and operating cost structures to better support long-term growth, with a focus on our (i) team organizational structures and ways of working; (ii) real estate footprint and related costs across our corporate offices, distribution centers, and direct-to-consumer retail and wholesale doors; and (iii) brand portfolio. Additionally, we plan to continue to closely manage our discretionary spending.

Impairment of Assets. During Fiscal 2021 and Fiscal 2020, we recorded non-cash impairment charges of $96.0 million and $31.6 million, respectively, to write-down certain long-lived assets. See Note 8 to the accompanying consolidated financial statements.

Restructuring and Other Charges. During Fiscal 2021 and Fiscal 2020, we recorded restructuring charges of $159.1 million and $37.6 million, respectively, primarily consisting of severance and benefits costs, as well as other charges of $11.4 million and $8.8 million, respectively, primarily related to rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired. Additionally, during Fiscal 2020, we recorded other charges of $20.8 million related to the charitable donation of the net cash proceeds received from the sale of our corporate jet. See Note 9 to the accompanying consolidated financial statements.

Operating Income (Loss). During Fiscal 2021, we reported an operating loss of $43.6 million, as compared to operating income of $317.0 million during Fiscal 2020. The $360.6 million decline in operating income reflects net adverse impacts related to COVID-19 business disruptions, as well as net favorable foreign currency effects of $19.5 million. Our operating

			54

results during Fiscal 2021 and Fiscal 2020 were also negatively impacted by restructuring-related charges, impairment of assets, and certain other charges (a portion of which related to COVID-19 business disruptions) totaling $254.4 million and $321.8 million, respectively, as previously discussed. Operating loss as a percentage of net revenues was 1.0% in Fiscal 2021, reflecting a 610 basis point decline from Fiscal 2020. The decline in operating income as a percentage of net revenues was primarily driven by the increase in SG&A expenses as a percentage of net revenues, partially offset by the increase in our gross margin and lower net restructuring-related charges, impairment of assets, and certain other charges recorded during Fiscal 2021 as compared to the prior fiscal year, 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
			March 27, 2021												March 28, 2020
			Operating Income (Loss)						Operating Margin						Operating Income (Loss)						Operating Margin						$ Change						Margin Change
			(millions)												(millions)												(millions)
Segment:
North America						$	334.0					16.8%						$	456.0					14.5%						$	(122.0)					230 bps
Europe						189.3						16.2%						336.3						20.6%						(147.0)						(440 bps)
Asia						148.2						14.4%						124.8						12.3%						23.4						210 bps
Other non-reportable segments						32.4						15.1%						85.2						23.0%						(52.8)						(790 bps)
						703.9												1,002.3												(298.4)
Unallocated corporate expenses						(577.0)												(618.1)												41.1
Unallocated restructuring and other charges						(170.5)												(67.2)												(103.3)
Total operating income (loss)						$	(43.6)					(1.0%)						$	317.0					5.1%						$	(360.6)					(610 bps)

North America operating margin improved by 230 basis points, primarily due to approximately 400 basis points attributable to net lower non-routine inventory charges and COVID-19-related bad debt expense recorded during Fiscal 2021 as compared to the prior fiscal year, partially offset by higher impairment of assets recorded during the current fiscal year. Partially offsetting this net favorable improvement in operating margin were the unfavorable impacts of approximately 90 basis points and 60 basis points attributable to our wholesale and retail businesses, respectively, both largely driven by an increase in SG&A expenses as a percentage of net revenues, partially offset by an increase in our gross margin. Our North America operating margin also reflected the unfavorable impact of approximately 20 basis points attributable to other factors, including unfavorable channel mix.

Europe operating margin declined by 440 basis points, primarily due to the unfavorable impact of approximately 790 basis points related to our retail business largely driven by an increase in SG&A expenses as a percentage of net revenues, partially offset by an increase in our gross margin. This decline in operating income was partially offset by approximately 180 basis points attributable to favorable channel mix and 160 basis points attributable to net lower non-routine inventory charges and COVID-19-related bad debt expense recorded during Fiscal 2021 as compared to the prior fiscal year, partially offset by higher impairment of assets recorded during the current fiscal year. The remaining change in operating margin was attributable to other factors, including slight improvement in our wholesale business.

Asia operating margin improved by 210 basis points, primarily due to approximately 190 basis points attributable to net lower non-routine inventory charges, COVID-19-related bad debt expense, and impairment of assets recorded during Fiscal 2021 as compared to the prior fiscal year, as well as favorable foreign currency effects of approximately 60 basis points. The increase in operating margin also reflected the favorable impact of approximately 20 basis points related to our retail business. These increases in operating margin were partially offset by the unfavorable impact of approximately 30 basis points related to our wholesale business largely driven by an increase in SG&A expenses as a percentage of net revenues. The remaining change in operating margin was attributable to other factors, including unfavorable channel mix.

Unallocated corporate expenses decreased by $41.1 million to $577.0 million in Fiscal 2021. The decline in unallocated corporate expenses was due to lower compensation-related expenses of $87.3 million and lower rent and occupancy costs of $24.3 million, partially offset by lower intercompany sourcing commission income of $33.9 million (which is offset at the segment level and eliminates in consolidation), higher impairment of asset charges of $33.2 million, and higher other expenses of $3.4 million.

			55

Unallocated restructuring and other charges increased by $103.3 million to $170.5 million in Fiscal 2021, as previously discussed above and in Note 9 to the accompanying consolidated financial statements.

Non-operating Income (Expense), Net. Non-operating income (expense), net is comprised of interest expense, interest income, and other income (expense), net, which includes foreign currency gains (losses), equity in income (losses) from our equity-method investees, and other non-operating expenses. During Fiscal 2021, we reported non-operating expense, net, of $31.2 million, as compared to non-operating income, net, of $9.4 million in Fiscal 2020. The $40.6 million decline in non-operating income was driven by:

*•*a $30.9 million increase in interest expense, primarily driven by the net increase in our borrowings during Fiscal 2021 (see "Financial Condition and Liquidity — Cash Flows"); and

• a $24.7 million decline in interest income, primarily driven by the decrease in our investment portfolio and lower interest rates in financial markets.

These unfavorable variances were partially offset by a $15.0 million favorable change in other income (expense), net, primarily driven by the absence of a $7.1 million impairment of an equity method investment recorded during Fiscal 2020, as well as higher net foreign currency gains during Fiscal 2021 as compared to the prior fiscal year.

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

We reported an income tax provision and effective tax rate of $46.3 million and (61.9%), respectively, in Fiscal 2021, as compared to an income tax benefit and effective tax rate of $57.9 million and (17.7%), respectively, in Fiscal 2020. The $104.2 million increase in our income tax provision was driven by the absence of a one-time benefit of $122.9 million recorded in connection with Swiss tax reform during the prior fiscal year, which reduced our prior fiscal year effective tax rate by 3,760 basis points. Our income tax provision in Fiscal 2021 also reflected incremental tax expense of $33.7 million primarily related to a valuation allowance provided against domestic losses attributable to significant COVID-19 business disruptions and $13.8 million related to international tax legislation enacted in connection with the European Union's anti-tax avoidance directive, partially offset by an income tax benefit of $0.9 million primarily due to a net operating loss carryback under the CARES Act. Collectively, this $46.6 million of net incremental tax expense unfavorably impacted our current fiscal period effective tax rate by 6,230 basis points. The remaining 1,950 basis point decline was attributable to tax impacts on stock-based compensation, as well as the absence of favorable settlements of certain international income tax audits that impacted the prior fiscal year. See Note 10 to the accompanying consolidated financial statements.

Net Income (Loss). We reported a net loss of $121.1 million in Fiscal 2021, as compared to net income of $384.3 million in Fiscal 2020. The $505.4 million decline in net income was primarily due to the decline in our operating income, the increase in our income tax provision, and higher non-operating expense, net, all as previously discussed. Our operating results during Fiscal 2021 and Fiscal 2020 included net restructuring-related charges, impairment of assets, and certain other charges totaling $254.4 million and $321.8 million, respectively, which had an after-tax effect of reducing net income by $201.5 million and $244.8 million, respectively. Net income (loss) during Fiscal 2021 and Fiscal 2020 also reflected $46.6 million of incremental net tax expense and an income tax benefit of $122.9 million, respectively, recorded in connection with one-time income tax events, as previously discussed.

Net Income (Loss) per Diluted Share. We reported a net loss per diluted share of $1.65 in Fiscal 2021, as compared to net income per diluted share of $4.98 in Fiscal 2020. The $6.63 per share decline was due to the lower level of net income, as previously discussed. Net income (loss) per diluted share in Fiscal 2021 and Fiscal 2020 were negatively impacted by $2.71 per share and $3.17 per share, respectively, as a result of net restructuring-related charges, impairment of assets, and certain other charges, as previously discussed. Net income (loss) per diluted share in Fiscal 2021 and Fiscal 2020 were also negatively impacted by $0.64 per share due to incremental net tax expense and favorably impacted by $1.59 per share due to an income tax benefit, respectively, recorded in connection with one-time tax events, as previously discussed.

			56

Fiscal 2020 Compared to Fiscal 2019

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

						Fiscal Years Ended
						March 28, 2020						March 30, 2019						$ Change						% / bps Change
						(millions, except per share data)
Net revenues						$	6,159.8					$	6,313.0					$	(153.2)					(2.4		%)
Cost of goods sold						(2,506.5)						(2,427.0)						(79.5)						3.3		%
Gross profit						3,653.3						3,886.0						(232.7)						(6.0		%)
Gross profit as % of net revenues						59.3		%				61.6		%										(230 bps)
Selling, general, and administrative expenses						(3,237.5)						(3,168.3)						(69.2)						2.2		%
SG&A expenses as % of net revenues						52.6		%				50.2		%										240 bps
Impairment of assets						(31.6)						(25.8)						(5.8)						22.8		%
Restructuring and other charges						(67.2)						(130.1)						62.9						(48.4		%)
Operating income						317.0						561.8						(244.8)						(43.6		%)
Operating income as % of net revenues						5.1		%				8.9		%										(380 bps)
Interest expense						(17.6)						(20.7)						3.1						(14.8		%)
Interest income						34.4						40.8						(6.4)						(15.8		%)
Other income (expense), net						(7.4)						0.6						(8.0)						NM
Income before income taxes						326.4						582.5						(256.1)						(44.0		%)
Income tax benefit (provision)						57.9						(151.6)						209.5						NM
Effective tax rate**(a)**						(17.7		%)				26.0		%										(4,370 bps)
Net income						$	384.3					$	430.9					$	(46.6)					(10.8		%)
Net income per common share:
Basic						$	5.07					$	5.35					$	(0.28)					(5.2		%)
Diluted						$	4.98					$	5.27					$	(0.29)					(5.5		%)

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

NM Not meaningful.

Net Revenues. Net revenues decreased by $153.2 million, or 2.4%, to $6.160 billion in Fiscal 2020 as compared to Fiscal 2019, including net unfavorable foreign currency effects of $77.1 million. On a constant currency basis, net revenues decreased by $76.1 million, or 1.2%, reflecting adverse impacts related to COVID-19 and Hong Kong protest business disruptions.

The following table summarizes the percentage change in our Fiscal 2020 consolidated comparable store sales as compared to the prior fiscal year, inclusive of adverse impacts related to COVID-19 and Hong Kong protest business disruptions:

						% Change
Digital commerce comparable store sales						3		%
Comparable store sales excluding digital commerce						(3		%)
Total comparable store sales						(2		%)

			57

Our global average store count increased by 43 stores and concession shops during Fiscal 2020 compared with the prior fiscal year, largely driven by new openings in Asia and Europe. The following table details our retail store presence by segment as of the periods presented:

						March 28, 2020						March 30, 2019
Freestanding Stores:
North America						230						224
Europe						94						87
Asia						132						115
Other non-reportable segments						74						75
Total freestanding stores						530						501
Concession Shops:
North America						2						2
Europe						29						29
Asia						619						622
Other non-reportable segments						4						5
Total concession shops						654						658
Total stores						1,184						1,159

In addition to our stores, we sold products online in North America and Europe through our various digital commerce sites, which include www.RalphLauren.com and www.ClubMonaco.com, among others, as well as through our Polo mobile app in North America and the United Kingdom. In Asia, we sold products online through our digital commerce site, www.RalphLauren.cn, which launched in September 2018, as well as through various third-party digital partner commerce sites.

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
						March 28, 2020						March 30, 2019						As Reported									Constant Currency						As Reported						Constant Currency
						(millions)
Net Revenues:
North America						$	3,140.5					$	3,202.9					$	(62.4)					$	(1.4)					$	(61.0)					(2.0		%)				(1.9		%)
Europe						1,632.2						1,683.0						(50.8)						(63.6)						12.8						(3.0		%)				0.8		%
Asia						1,017.2						1,041.0						(23.8)						(11.6)						(12.2)						(2.3		%)				(1.2		%)
Other non-reportable segments						369.9						386.1						(16.2)						(0.5)						(15.7)						(4.2		%)				(4.1		%)
Total net revenues						$	6,159.8					$	6,313.0					$	(153.2)					$	(77.1)					$	(76.1)					(2.4		%)				(1.2		%)

North America net revenues — Net revenues decreased by $62.4 million, or 2.0%, during Fiscal 2020 as compared to Fiscal 2019, including net unfavorable foreign currency effects of $1.4 million. On a constant currency basis, net revenues decreased by $61.0 million, or 1.9%, reflecting adverse impacts related to COVID-19 business disruptions.

The $62.4 million net decline in North America net revenues was driven by:

• a $101.2 million net decrease related to our North America wholesale business, largely driven by weaker demand and challenging department store traffic trends, as well as COVID-19 business disruptions.

This decrease was partially offset by:

• an increase of $38.8 million related to our North America retail business, inclusive of net unfavorable foreign currency effects of $0.7 million and the adverse impact of COVID-19 business disruptions. On a constant currency basis, net revenues increased by $39.5 million driven by an increase of $47.1 million in non-comparable

			58

store sales, partially offset by a decrease of $7.6 million in comparable store sales. The following table summarizes the percentage change in comparable store sales related to our North America retail business, inclusive of adverse impacts related to COVID-19 business disruptions:

						% Change
Digital commerce comparable store sales						1		%
Comparable store sales excluding digital commerce						(1		%)
Total comparable store sales						—		%

Europe net revenues — Net revenues decreased by $50.8 million, or 3.0%, during Fiscal 2020 as compared to Fiscal 2019, including net unfavorable foreign currency effects of $63.6 million. On a constant currency basis, net revenues increased by $12.8 million, or 0.8%, despite adverse impacts related to COVID-19 business disruptions.

The $50.8 million net decline in Europe net revenues was driven by:

• a $44.3 million net decrease related to our Europe wholesale business driven by net unfavorable foreign currency effects of $32.3 million and COVID-19 business disruptions, partially offset by stronger demand prior to the COVID-19 pandemic; and

• a $6.5 million net decrease related to our Europe retail business, inclusive of net unfavorable foreign currency effects of $31.3 million and the adverse impact of COVID-19 business disruptions. On a constant currency basis, net revenues increased by $24.8 million driven by an increase of $32.4 million in non-comparable store sales, partially offset by a decrease of $7.6 million in comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Europe retail business, inclusive of adverse impacts related to COVID-19 business disruptions:

						% Change
Digital commerce comparable store sales						11		%
Comparable store sales excluding digital commerce						(2		%)
Total comparable store sales						(1		%)

Asia net revenues — Net revenues decreased by $23.8 million, or 2.3%, during Fiscal 2020 as compared to Fiscal 2019, including net unfavorable foreign currency effects of $11.6 million. On a constant currency basis, net revenues decreased by $12.2 million, or 1.2%, reflecting adverse impacts related to COVID-19 and Hong Kong protest business disruptions.

The $23.8 million net decline in Asia net revenues was driven by:

• a $21.9 million net decrease related to our Asia retail business, inclusive of net unfavorable foreign currency effects of $10.7 million and the adverse impacts of COVID-19 and Hong Kong protest business disruptions. On a constant currency basis, net revenues decreased by $11.2 million, reflecting a decrease of $36.4 million in comparable store sales, partially offset by an increase of $25.2 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Asia retail business, inclusive of adverse impacts related to COVID-19 and Hong Kong protest business disruptions:

						% Change
Digital commerce comparable store sales						22		%
Comparable store sales excluding digital commerce						(5		%)
Total comparable store sales						(4		%)

• a $1.9 million net decrease related to our Asia wholesale business, inclusive of net unfavorable foreign currency effects of $0.9 million and the adverse impact of COVID-19 business disruptions.

Gross Profit. Gross profit decreased by $232.7 million, or 6.0%, to $3.653 billion in Fiscal 2020, including net unfavorable foreign currency effects of $53.7 million. The decline in gross profit reflects adverse impacts related to COVID-19 and Hong Kong protest business disruptions, including incremental inventory charges of $157.3 million. Gross profit during Fiscal 2020 and Fiscal 2019 also reflected inventory charges of $2.2 million and $7.2 million, respectively, recorded in connection with our restructuring plans. Gross profit as a percentage of net revenues decreased to 59.3% in Fiscal 2020 from

			59

61.6% in Fiscal 2019. The 230 basis point decline was primarily driven by higher inventory charges and deleverage on lower net revenues, partially offset by favorable geographic, channel, and product mix, improved pricing, and lower levels of promotional activity.

Selling, General, and Administrative Expenses. SG&A expenses increased by $69.2 million, or 2.2%, to $3.238 billion in Fiscal 2020, including net favorable foreign currency effects of $35.5 million. The increase in SG&A expenses reflects net adverse impacts related to COVID-19 and Hong Kong protest business disruptions, including incremental bad debt expense of $56.4 million. SG&A expenses as a percentage of net revenues increased to 52.6% in Fiscal 2020 from 50.2% in Fiscal 2019. The 240 basis point increase was primarily due to operating deleverage on lower net revenues and higher bad debt expense, both primarily attributable to the COVID-19 pandemic, as well as the unfavorable impact attributable to geographic and channel mix, as a greater portion of our revenue was generated by our retail businesses (which typically carry higher operating expense margins).

The $69.2 million net increase in SG&A expenses was driven by:

						Fiscal 2020 Compared to Fiscal 2019
						(millions)
SG&A expense category:
Bad debt expense						$	58.3
Compensation-related expenses						29.4
Marketing and advertising expenses						5.2
Staff-related expenses						(21.4)
Rent and occupancy expenses						(14.3)
Other						12.0
Total net increase in SG&A expenses						$	69.2

Impairment of Assets. During Fiscal 2020 and Fiscal 2019, we recorded non-cash impairment charges of $31.6 million and $21.2 million, respectively, to write-down certain long-lived assets in connection with our restructuring plans and identification of underperforming stores. Additionally, as a result of our decision to sell our corporate jet in connection with our cost savings initiative, we recorded a non-cash impairment charge of $4.6 million during Fiscal 2019 to reduce the carrying value of the asset being held-for-sale to its estimated fair value, less costs to sell. See Note 8 to the accompanying consolidated financial statements.

Restructuring and Other Charges. During Fiscal 2020 and Fiscal 2019, we recorded restructuring charges of $37.6 million and $93.6 million, respectively, in connection with our restructuring plans, primarily consisting of severance and benefits costs, as well as a loss on sale of property during the prior fiscal year period. Additionally, during Fiscal 2020, we recorded other charges of $29.6 million primarily related to the charitable donation of the net cash proceeds received from the sale of our corporate jet, and rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements had not yet expired. During Fiscal 2019, we recorded other charges of $36.5 million primarily related to our sabbatical leave program initiated during the fourth quarter of Fiscal 2019, depreciation expense associated with our former Polo store at 711 Fifth Avenue in New York City, and a customs audit. See Note 9 to the accompanying consolidated financial statements.

Operating Income. Operating income decreased by $244.8 million, or 43.6%, to $317.0 million in Fiscal 2020, including net unfavorable foreign currency effects of $18.2 million. The decline in operating income reflects net adverse impacts related to COVID-19 and Hong Kong protest business disruptions, including total incremental inventory charges and bad debt expense of $213.7 million, as previously discussed. Our operating results during Fiscal 2020 and Fiscal 2019 were also negatively impacted by restructuring-related charges, impairment of assets, and certain other charges totaling $101.0 million and $163.1 million, respectively, as previously discussed. Operating income as a percentage of net revenues decreased to 5.1% in Fiscal 2020 from 8.9% in Fiscal 2019. The 380 basis point decline was primarily driven by the decline in our gross margin and the increase in SG&A expenses as a percentage of net revenues, partially offset by lower restructuring-related charges recorded during Fiscal 2020 as compared to the prior fiscal year, all as previously discussed.

			60

Operating income 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
			March 28, 2020												March 30, 2019
			Operating Income						Operating Margin						Operating Income						Operating Margin						$ Change						Margin Change
			(millions)												(millions)												(millions)
Segment:
North America						$	456.0					14.5%						$	655.8					20.5%						$	(199.8)					(600 bps)
Europe						336.3						20.6%						392.8						23.3%						(56.5)						(270 bps)
Asia						124.8						12.3%						161.0						15.5%						(36.2)						(320 bps)
Other non-reportable segments						85.2						23.0%						118.7						30.7%						(33.5)						(770 bps)
						1,002.3												1,328.3												(326.0)
Unallocated corporate expenses						(618.1)												(636.4)												18.3
Unallocated restructuring and other charges						(67.2)												(130.1)												62.9
Total operating income						$	317.0					5.1%						$	561.8					8.9%						$	(244.8)					(380 bps)

North America operating margin declined by 600 basis points, primarily due to the unfavorable impact of 450 basis points related to incremental inventory charges and bad debt expense recorded in connection with COVID-19 business disruptions. The remaining 150 basis point decline largely related to adverse market conditions driven by the COVID-19 pandemic.

Europe operating margin declined by 270 basis points, primarily due to the net unfavorable impact of 210 basis points related to incremental inventory charges and bad debt expense recorded in connection with COVID-19 business disruptions, partially offset by lower non-cash charges recorded in connection with our restructuring plans during Fiscal 2020 as compared to the prior fiscal year. The decline in operating margin also reflected a 40 basis point decline largely related to adverse market conditions driven by the COVID-19 pandemic, as well as a 20 basis point decline related to unfavorable foreign currency.

Asia operating margin declined by 320 basis points, primarily due to the unfavorable impact of 160 basis points related to incremental inventory charges and bad debt expense recorded in connection with COVID-19 business disruptions. The remaining 160 basis point decline largely related to adverse market conditions driven by the COVID-19 pandemic and Hong Kong protests.

Unallocated corporate expenses decreased by $18.3 million to $618.1 million in Fiscal 2020. The decline in unallocated corporate expenses was due to lower compensation-related expenses of $11.5 million, lower staff-related expenses of $8.8 million, lower consulting fees of $6.7 million, and lower marketing and advertising expenses of $9.5 million, partially offset by lower intercompany sourcing commission income of $10.2 million (which is offset at the segment level and eliminates in consolidation) and higher other expenses of $8.0 million.

Unallocated restructuring and other charges decreased by $62.9 million to $67.2 million in Fiscal 2020, as previously discussed above and in Note 9 to the accompanying consolidated financial statements.

Non-operating Income (Expense), Net. During Fiscal 2020, we reported non-operating income, net, of $9.4 million, as compared to $20.7 million in Fiscal 2019. The $11.3 million decline was primarily driven by:

• an $8.0 million increase in other expense, net, driven by a $7.1 million impairment of an equity method investment recorded in Fiscal 2020. See Note 8 to the accompanying consolidated financial statements; and

• a $6.4 million decrease in interest income driven by the lower balance of our investment portfolio, as well as lower interest rates in financial markets during Fiscal 2020 as compared to the prior fiscal year.

Income Tax Benefit (Provision). We reported an income tax benefit and effective tax rate of $57.9 million and (17.7%), respectively, in Fiscal 2020, as compared to an income tax provision and effective tax rate of $151.6 million and 26.0%, respectively, in Fiscal 2019. The $209.5 million decline in the income tax provision was largely driven by lower pretax income primarily due to the adverse impacts of COVID-19 and Hong Kong protest business disruptions. The decline in our income tax

			61

provision also reflected a one-time benefit of $122.9 million recorded in Fiscal 2020 in connection with the Swiss Tax Act, which lowered our effective tax rate by 3,760 basis points, as well as the absence of a $27.6 million TCJA enactment-related charge recorded in the prior fiscal year, which negatively impacted our prior fiscal year effective tax rate by 470 basis points. In addition to this combined 4,230 basis point improvement related to tax reform impacts, the decline in our effective tax rate also reflected the net favorable impact of 140 basis points primarily attributable to other factors, including the tax impacts of earnings in lower taxed foreign jurisdictions versus the U.S. and favorable provision to tax return adjustments, partially offset by the unfavorable impact of additional income tax reserves associated with certain income tax audits. See Note 10 to the accompanying consolidated financial statements for discussion regarding the Swiss Tax Act and TCJA.

Net Income. Net income decreased to $384.3 million in Fiscal 2020, from $430.9 million in Fiscal 2019. The $46.6 million decline in net income was primarily due to the decrease in our operating income, partially offset by the decrease in our income tax provision, both as previously discussed. Net income during Fiscal 2020 and Fiscal 2019 reflected a one-time income tax benefit of $122.9 million recorded in connection with Swiss tax reform and TCJA enactment-related charges of $27.6 million, respectively, both as previously discussed. Our operating results during Fiscal 2020 and Fiscal 2019 were also negatively impacted by restructuring-related charges, impairment of assets (including an equity method investment), and certain other charges (including those related to COVID-19 business disruptions) totaling $321.8 million and $163.1 million, respectively, which had an after-tax effect of reducing net income by $244.8 million and $129.0 million, respectively.

Net Income per Diluted Share. Net income per diluted share decreased to $4.98 in Fiscal 2020, from $5.27 in Fiscal 2019. The $0.29 per share decline was due to the lower level of net income, as previously discussed, partially offset by lower weighted-average diluted shares outstanding during Fiscal 2020 driven by our share repurchases during Fiscal 2020. Net income per diluted share in Fiscal 2020 and Fiscal 2019 were favorably impacted by $1.59 per share as a result of a one-time income tax benefit recorded in connection with the Swiss Tax Act and negatively impacted by $0.34 per share as a result of TCJA enactment-related charges, respectively, both as previously discussed. Net income per diluted share in Fiscal 2020 and Fiscal 2019 were also negatively impacted by $3.17 per share and $1.58 per share, respectively, as a result of restructuring-related charges, impairment of assets (including an equity method investment), and certain other charges (including those related to COVID-19 business disruptions), as previously discussed.

FINANCIAL CONDITION AND LIQUIDITY

Financial Condition

The following table presents our financial condition as of March 27, 2021 and March 28, 2020.

						March 27, 2021						March 28, 2020						$ Change
						(millions)
Cash and cash equivalents						$	2,579.0					$	1,620.4					$	958.6
Short-term investments						197.5						495.9						(298.4)
Short-term debt**(a)**						—						(475.0)						475.0
Current portion of long-term debt**(a)**						—						(299.6)						299.6
Long-term debt**(a)**						(1,632.9)						(396.4)						(1,236.5)
Net cash and investments**(b)**						$	1,143.6					$	945.3					$	198.3
Equity						$	2,604.4					$	2,693.1					$	(88.7)

**(a)**See Note 11 to the accompanying consolidated financial statements for discussion of the carrying values of our debt.

(b)"Net cash and investments" is defined as cash and cash equivalents, plus investments, less total debt.

The increase in our net cash and investments position at March 27, 2021 as compared to March 28, 2020 was primarily due to our operating cash flows of $380.9 million, partially offset by our use of cash to invest in our business through $107.8 million in capital expenditures, to make dividend payments of $49.8 million (which had been previously declared during the fourth quarter of Fiscal 2020), and to support Class A common stock repurchases of $37.7 million, representing withholdings in satisfaction of tax obligations for stock-based compensation awards.

The decrease in equity was primarily attributable to our comprehensive loss and shares surrendered for tax withholdings, partially offset by the impact of stock-based compensation arrangements during Fiscal 2021.

			62

Cash Flows

Fiscal 2021 Compared to Fiscal 2020

						Fiscal Years Ended
						March 27, 2021						March 28, 2020						$ Change
						(millions)
Net cash provided by operating activities						$	380.9					$	754.6					$	(373.7)
Net cash provided by investing activities						195.0						702.1						(507.1)
Net cash provided by (used in) financing activities						356.8						(438.2)						795.0
Effect of exchange rate changes on cash, cash equivalents, and restricted cash						25.5						(15.2)						40.7
Net increase in cash, cash equivalents, and restricted cash						$	958.2					$	1,003.3					$	(45.1)

Net Cash Provided by Operating Activities. Net cash provided by operating activities decreased to $380.9 million during Fiscal 2021, from $754.6 million during Fiscal 2020. The $373.7 million net decline in cash provided by operating activities was due to a decrease 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, as compared to the prior fiscal year.

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

• a favorable change in our accrued liabilities, primarily driven by the increase in our restructuring reserve related to charges recorded in connection with the Fiscal 2021 Strategic Realignment Plan; and

• a favorable change in our accounts payable, driven by our extended payment terms.

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

• an unfavorable change related to our accounts receivable, largely driven by an increase in wholesale revenue during the fourth quarter of Fiscal 2021 as compared to the fourth quarter of Fiscal 2020;

• an unfavorable change in inventory, largely driven by lower COVID-19-related inventory charges recorded in Fiscal 2021 as compared to the prior year period; and

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

Net Cash Provided by Investing Activities. Net cash provided by investing activities was $195.0 million during Fiscal 2021, as compared to of $702.1 million during Fiscal 2020. The $507.1 million net decrease in cash provided by investing activities was primarily driven by:

• a $648.1 million decrease in proceeds from sales and maturities of investments, less purchases of investments. During Fiscal 2021, we received net proceeds from sales and maturities of investments of $302.6 million, as compared to $950.7 million during Fiscal 2020.

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

• a $162.5 million decrease in capital expenditures. During Fiscal 2021, we spent $107.8 million on capital expenditures, as compared to $270.3 million during Fiscal 2020. This decline reflects the temporary postponement of non-critical capital expenditures as a preemptive action to preserve cash and strengthen our liquidity position in response to business disruptions related to the COVID-19 pandemic. Our capital expenditures during Fiscal 2021 primarily related to international store openings and renovations, as well as enhancements to our information technology systems.

			63

In Fiscal 2022, we expect to spend approximately $250 million to $275 million on capital expenditures, in-line with our pre-pandemic levels, primarily related to store openings and renovations, as well as further investment in our digital infrastructure.

Net Cash Provided by (Used in) Financing Activities. Net cash provided by financing activities was $356.8 million during Fiscal 2021, as compared to net cash used in financing activities of $438.2 million during Fiscal 2020. The $795.0 million net increase in cash provided by financing activities was primarily driven by:

• a $657.1 million decrease in cash used to repurchase shares of our Class A common stock. During Fiscal 2021, $37.7 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 and no shares of Class A common stock were repurchased pursuant to our common stock repurchase program, which we have temporarily suspended as a preemptive action to preserve cash and strengthen our liquidity position in response to business disruptions related to the COVID-19 pandemic. On a comparative basis, during Fiscal 2020, $650.3 million in shares of Class A common stock were repurchased and $44.5 million in shares of Class A common stock were surrendered or withheld for taxes; and

• a $154.1 million decrease in payments of dividends, driven by the temporary suspension of our quarterly cash dividend program as a preemptive action to preserve cash and strengthen our liquidity position, as discussed in "Dividends" below.

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

• an $8.1 million decrease in cash proceeds from the issuance of debt, less debt repayments. During Fiscal 2021, we received $1.242 billion in proceeds from our issuance of 1.700% unsecured notes and 2.950% unsecured senior notes, a portion of which was used to repay $475 million of borrowings previously outstanding under our credit facilities and our previously outstanding $300 million principal amount of unsecured 2.625% senior notes that matured in August 2020. On a comparative basis, during Fiscal 2020 we borrowed $475 million under our credit facilities as a preemptive action to preserve cash and strengthen our liquidity in response to the COVID-19 pandemic.

Fiscal 2020 Compared to Fiscal 2019

						Fiscal Years Ended
						March 28, 2020						March 30, 2019						$ Change
						(millions)
Net cash provided by operating activities						$	754.6					$	783.8					$	(29.2)
Net cash provided by (used in) investing activities						702.1						(879.3)						1,581.4
Net cash used in financing activities						(438.2)						(605.7)						167.5
Effect of exchange rate changes on cash, cash equivalents, and restricted cash						(15.2)						(27.8)						12.6
Net increase (decrease) in cash, cash equivalents, and restricted cash						$	1,003.3					$	(729.0)					$	1,732.3

Net Cash Provided by Operating Activities. Net cash provided by operating activities decreased to $754.6 million during Fiscal 2020, from $783.8 million during Fiscal 2019. The $29.2 million net decline in cash provided by operating activities was due to a decrease 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, as compared to the prior fiscal year. The net favorable change related to our operating assets and liabilities, including our working capital, was primarily driven by:

• a favorable change related to our inventories, largely driven by higher inventory charges primarily related to adverse impacts associated with COVID-19 business disruptions;

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

			64

• a favorable change related to our accounts receivable, largely driven by lower wholesale sales during the fourth quarter of Fiscal 2020 as compared to the prior fiscal year driven by COVID-19 business disruptions, as well as the timing of cash receipts.

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

• an unfavorable change related to our income tax receivables and payables, largely as a result of the absence of charges recorded during the prior fiscal year in connection with the TCJA's mandatory transition tax; and

• an unfavorable change related to our accrued liabilities driven by larger decreases in our bonus accrual and restructuring reserves as compared to the prior fiscal year, as well as the timing of cash payments.

Net Cash Provided by (Used in) Investing Activities. Net cash provided by investing activities was $702.1 million during Fiscal 2020, as compared to net cash used in investing activities of $879.3 million during Fiscal 2019. The $1.581 billion net increase in cash provided by investing activities was primarily driven by:

• a $1.624 billion increase in proceeds from sales and maturities of investments, less purchases of investments. During Fiscal 2020, we received net proceeds from sales and maturities of investments of $950.7 million, as compared to making net investment purchases of $673.3 million during Fiscal 2019; and

• a $23.8 million decrease in payments made to settle net investment hedges.

These increases in cash provided by investing activities were partially offset by:

• a $72.6 million increase in capital expenditures. During Fiscal 2020, we spent $270.3 million on capital expenditures, as compared to $197.7 million during Fiscal 2019. Our capital expenditures during Fiscal 2020 primarily related to new store openings, retail and department store renovations, enhancements to our information technology systems, and the consolidation of our corporate office footprint.

Net Cash Used in Financing Activities. Net cash used in financing activities was $438.2 million during Fiscal 2020, as compared to $605.7 million during Fiscal 2019. The $167.5 million net decrease in cash used in financing activities was primarily driven by:

• a $386.8 million increase in cash proceeds from the issuance of debt, less debt repayments. During Fiscal 2020, we borrowed $475 million under our credit facilities as a preemptive action to preserve cash and strengthen our liquidity in response to the COVID-19 pandemic. During Fiscal 2019, we received $398.1 million in proceeds from our issuance of 3.750% unsecured senior notes in August 2018, a portion of which was used to repay our previously outstanding $300 million principal amount of unsecured 2.125% senior notes that matured in September 2018. Additionally, during Fiscal 2019 we repaid approximately $10 million that had been borrowed under our credit facilities during Fiscal 2018.

This decrease in cash used in financing activities was partially offset by:

• a $192.2 million increase in cash used to repurchase shares of our Class A common stock. During Fiscal 2020, we used $650.3 million to repurchase shares of Class A common stock pursuant to our common stock repurchase program, and an additional $44.5 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 2019, $470.0 million in shares of Class A common stock were repurchased and $32.6 million in shares of Class A common stock were surrendered or withheld for taxes;

• a $21.8 million decrease in proceeds from exercise of stock options; and

• a $13.2 million increase in payments of dividends, driven by an increase to the quarterly cash dividend per share (as discussed within "Dividends" below). Dividends paid amounted to $203.9 million and $190.7 million during Fiscal 2020 and Fiscal 2019, respectively.

			65

Sources of Liquidity

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

During Fiscal 2021, we generated $380.9 million of net cash flows from our operations. As of March 27, 2021, we had $2.777 billion in cash, cash equivalents, and short-term investments, of which $904.6 million were held by our subsidiaries domiciled outside the U.S. We are not dependent on foreign cash to fund our domestic operations. Undistributed foreign earnings that were subject to the TCJA's one-time mandatory transition tax as of December 31, 2017 are not considered to be permanently reinvested and may be repatriated to the U.S. in the future with minimal or no additional U.S. taxation. We intend to permanently reinvest undistributed foreign earnings generated after December 31, 2017 that were not subject to the one-time mandatory transition tax. However, if our plans change and we choose to repatriate post-2017 earnings to the U.S. in the future, we would be subject to applicable U.S. and foreign taxes.

The following table presents our total availability, borrowings outstanding, and remaining availability under our credit and overdraft facilities and Commercial Paper Program as of March 27, 2021:

						March 27, 2021
Description**(a)**						Total Availability						Borrowings Outstanding						Remaining Availability
						(millions)
Global Credit Facility and Commercial Paper Program**(b)**						$	500					$	9		(c)			$	491
Pan-Asia Credit Facilities						34						—						34
Japan Overdraft Facility						46						—						46

**(a)**As defined in Note 11 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 March 27, 2021.

We believe that the Global Credit Facility is adequately diversified with no undue concentration in any one financial institution. In particular, as of March 27, 2021, there were eight financial institutions participating in the Global Credit Facility, with no one participant maintaining a maximum commitment percentage in excess of 20%. In accordance with the terms of the agreement, we have the ability to expand our borrowing availability under the Global Credit Facility to $1 billion through the full term of the facility, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments.

Borrowings under the Pan-Asia Credit Facilities and Japan Overdraft Facility (collectively, the "Pan-Asia Borrowing Facilities") are guaranteed by the parent company and are granted at the sole discretion of the participating banks (as described within Note 11 to the accompanying consolidated financial statements), subject to availability of the respective banks' funds and satisfaction of certain regulatory requirements. We have no reason to believe that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the terms of the Global Credit Facility and the Pan-Asia Borrowing Facilities in the event of our election to draw additional funds in the foreseeable future.

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

			66

COVID-19 pandemic, could impede our ability to pay our obligations as they become due or return value to our shareholders, as well as delay previously planned expenditures related to our operations.

See Note 11 to the accompanying consolidated financial statements for additional information relating to our credit facilities.

Debt and Covenant Compliance

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

The indenture and supplemental indentures governing the 3.750% Senior Notes, 1.700% Senior Notes, and 2.950% Senior Notes (as supplemented, the "Indenture") contain certain covenants that restrict our ability, subject to specified exceptions, to incur certain liens; enter into sale and leaseback transactions; consolidate or merge with another party; or sell, lease, or convey all or substantially all of our property or assets to another party. However, the Indenture does not contain any financial covenants.

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

In March 2020, we borrowed $475.0 million under the Global Credit Facility as a preemptive action to preserve cash and strengthen our liquidity position in response to the COVID-19 pandemic, which was subsequently repaid in June 2020.

The Global Credit Facility contains a number of covenants, as described in Note 11 to the accompanying consolidated financial statements. As of March 27, 2021, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under our Global Credit Facility. The Pan-Asia Borrowing Facilities do not contain any financial covenants.

See Note 11 to the accompanying consolidated financial statements for additional information relating to our debt and covenant compliance.

Common Stock Repurchase Program

On May 13, 2019, our Board of Directors approved an expansion of our existing common stock repurchase program that allowed us to repurchase up to an additional $600 million of Class A common stock. As of March 27, 2021, the remaining availability under our Class A common stock repurchase program was approximately $580 million. Repurchases of shares of Class A common stock are subject to certain restrictions under our Global Credit Facility and more generally overall business and market conditions. Accordingly, as a result of business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 2021 we temporarily suspended our common stock repurchase program as a preemptive action to preserve cash and strengthen our liquidity position.

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

			67

Dividends

Except as discussed below, we have maintained a regular quarterly cash dividend program on our common stock since 2003. On May 13, 2019, our Board of Directors approved an increase to the quarterly cash dividend on our common stock from $0.625 to $0.6875 per share.

As a result of business disruptions related to the COVID-19 pandemic, effective beginning in the first quarter of Fiscal 2021 we temporarily suspended our quarterly cash dividend program as a preemptive action to preserve cash and strengthen our liquidity position. On May 19, 2021, our Board of Directors approved the reinstatement of our quarterly cash dividend program at the pre-pandemic amount of $0.6875 per share. The first quarterly dividend since such reinstatement will be payable to shareholders of record at the close of business on June 25, 2021, and will be paid on July 9, 2021.

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

Contractual and Other Obligations

Firm Commitments

The following table summarizes certain of our aggregate contractual obligations as of March 27, 2021, 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 2022						Fiscal 2023-2024						Fiscal 2025-2026						Fiscal 2027 and Thereafter						Total
						(millions)
Senior Notes						$	—					$	500.0					$	400.0					$	750.0					$	1,650.0
Interest payments on debt						45.6						78.5						64.3						94.0						282.4
Operating leases						332.7						570.5						362.5						458.4						1,724.1
Finance leases						33.7						70.7						72.1						312.7						489.2
Other lease commitments						10.4						21.9						25.6						49.5						107.4
Inventory purchase commitments						713.7						—						—						—						713.7
Mandatory transition tax payments						14.0						40.2						78.5						—						132.7
Other commitments						27.9						12.3						13.7						23.3						77.2
Total						$	1,178.0					$	1,294.1					$	1,016.7					$	1,687.9					$	5,176.7

The following is a description of our material, firmly committed obligations as of March 27, 2021:

• Senior Notes represent the principal amount of our outstanding 3.750% Senior Notes, 1.700% Senior Notes, and 2.950% Senior Notes. Amounts do not include any fair value adjustments, call premiums, unamortized debt issuance costs, or interest payments (see below);

• Interest payments on debt represent the semi-annual contractual interest payments due on our 3.750% Senior Notes, 1.700% Senior Notes, and 2.950% Senior Notes. Amounts do not include the impact of potential cash flows underlying our related swap contracts (see Note 13 to the accompanying consolidated financial statements for discussion of our swap contracts);

• Lease obligations represent fixed payments due over the lease term of our noncancelable leases of real estate and operating equipment, including rent, real estate taxes, insurance, common area maintenance fees, and/or certain other costs. For lease terms that have commenced, information has been presented separately for operating and finance leases. Other lease commitments relate to executed lease agreements for which the related lease terms have not yet commenced as of March 27, 2021;

			68

• Inventory purchase commitments represent our legally-binding agreements to purchase fixed or minimum quantities of goods at determinable prices;

• Mandatory transition tax payments represent our remaining tax obligation incurred in connection with the deemed repatriation of previously deferred foreign earnings pursuant to the TCJA (see Note 10 to the accompanying consolidated financial statements for discussion of the TCJA); and

*•*Other commitments primarily represent our legally-binding obligations under sponsorship, licensing, and other marketing and advertising 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 $91.4 million as of March 27, 2021, 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 March 27, 2021, which will be paid within one year, other than lease obligations, mandatory transition tax payments, and accrued interest payments on debt; and (ii) non-current liabilities that have no cash outflows associated with them (e.g., deferred income), or the cash outflows associated with them are uncertain or do not represent a "purchase obligation" as such 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.

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 $8.9 million as of March 27, 2021. 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 13 to the accompanying consolidated financial statements, we are exposed to a variety of risks, including the impact of changes in currency exchange rates on foreign currency-denominated balances, certain anticipated cash flows of our international operations, and the value of reported net assets of our foreign operations, as well as changes in the fair value of our fixed-rate debt obligations relating to fluctuations in benchmark interest rates. Accordingly, at times, in the normal course of business, we employ established policies and procedures to manage such risks, including the use of derivative financial instruments. We do not use derivatives for speculative or trading purposes.

Given our use of derivative instruments, we are exposed to the risk that the counterparties to such contracts will fail to meet their contractual obligations. To mitigate such counterparty credit risk, it is our policy to only enter into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. Our established policies and procedures for mitigating credit risk include ongoing review and assessment of the creditworthiness of our counterparties. We also enter into master netting arrangements with counterparties, when possible, to further mitigate credit risk. As a result of the above considerations, we do not believe that we are exposed to undue concentration of counterparty risk with respect to our derivative contracts as of March 27, 2021. However, we do have in aggregate $15.7 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 using forward foreign currency exchange and cross-currency swap contracts. Refer to Note 13 to the accompanying consolidated financial statements for a summary of the notional amounts and fair values of our outstanding forward foreign currency exchange and cross-currency swap contracts, as well as the impact on earnings and other comprehensive income of such instruments for the fiscal periods presented.

			69

Forward Foreign Currency Exchange Contracts

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

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

Our forward foreign currency exchange contracts are recorded at fair value in our consolidated balance sheets. To the extent such contracts are designated as qualifying cash flow hedges of inventory transactions, related gains or losses are initially deferred in equity as a component of accumulated other comprehensive income ("AOCI") and are subsequently recognized within cost of goods sold in our consolidated statements of operations when the related inventory is sold.

Cross-Currency Swap Contracts

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

Our pay-floating rate, receive-floating rate cross-currency swap contracts swap U.S. Dollar-denominated variable interest rate payments based on the contract's notional amount and 3-month London Interbank Offered Rate ("LIBOR") plus a fixed spread (as paid under a corresponding interest rate swap contract discussed below) for Euro-denominated variable interest rate payments based on 3-month Euro Interbank Offered Rate ("EURIBOR") plus a fixed spread, which, in combination with a corresponding interest rate swap contract, economically converts a portion of our fixed-rate U.S. Dollar-denominated senior note obligations to floating-rate Euro-denominated obligations.

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

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. In doing so, we assess the risk of loss in the fair values of these contracts that would result from hypothetical changes in foreign currency exchange rates. This analysis assumes a like movement by the foreign currencies in our hedge portfolio against the U.S. Dollar. As of March 27, 2021, a 10% appreciation or depreciation of the U.S. Dollar against the foreign currencies under contract would result in a net increase or decrease, respectively, in the fair value of our derivative portfolio of approximately $109 million. This hypothetical net change in fair value should ultimately be largely offset by the net change in the related underlying hedged items.

Interest Rate Risk Management

We periodically designate pay-floating rate, receive-fixed rate interest rate swap contracts as hedges against changes in the fair value of certain of our fixed-rate debt attributed to changes in a benchmark interest rate. To the extent of their notional amount, such contracts effectively swap the fixed interest rate on certain of our fixed-rate senior notes for a variable interest rate based on 3-month LIBOR plus a fixed spread.

			70

Sensitivity

As of March 27, 2021, we had no variable-rate debt outstanding. As such, our exposure to changes in interest rates primarily relates to changes in the fair values of our fixed-rate Senior Notes. As of March 27, 2021, the aggregate fair values of our Senior Notes were $1.731 billion. A 25-basis point increase or decrease in interest rates would decrease or increase, respectively, the aggregate fair values of our Senior Notes by approximately $22 million 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. Such potential increases or decreases in the fair value of our debt would only be realized if we were to retire all or a portion of the debt prior to its maturity.

Investment Risk Management

As of March 27, 2021, we had cash and cash equivalents on-hand of $2.579 billion, consisting of deposits in interest bearing accounts, investments in money market deposit accounts, and investments in time deposits with original maturities of 90 days or less. Our other significant investments included $197.5 million of short-term investments, consisting of investments in time deposits with original maturities greater than 90 days; and $9.0 million of restricted cash held in escrow with certain banks as collateral, primarily to secure guarantees in connection with certain international tax matters and real estate leases.

We actively monitor our exposure to changes in the fair value of our global investment portfolio in accordance with our established policies and procedures, which include monitoring both general and issuer-specific economic conditions, as discussed in Note 3 to the accompanying consolidated financial statements. Our investment objectives include capital preservation, maintaining adequate liquidity, diversification to minimize liquidity and credit risk, and achievement of maximum returns within the guidelines set forth in our investment policy. See Note 13 to the accompanying consolidated financial statements for further detail of the composition of our investment portfolio as of March 27, 2021.

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 involves estimating sales reserves, which represent the portion of gross revenues not expected to be realized. In particular, gross revenue related to our wholesale business is reduced by estimates of returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances. Gross revenue related to our retail business, including digital commerce sales, is also reduced by an estimate of returns.

In developing estimates of returns, discounts, end-of-season markdowns, operational chargebacks, and cooperative advertising allowances, we analyze historical trends, actual and forecasted seasonal results, current economic and market conditions, retailer performance, and, in certain cases, contractual terms. Estimates for operational chargebacks are based on actual customer notifications of order fulfillment discrepancies and historical trends. We review and refine these estimates on a quarterly basis. Our historical estimates of these amounts have not differed materially from actual results. However, unforeseen adverse future economic and market conditions, such as those resulting from widespread pandemic diseases and/or other catastrophic events, could result in our actual results differing materially from our estimates. A hypothetical 1% increase in our reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances as of March 27, 2021 would have reduced our Fiscal 2021 net revenues by approximately $2 million.

Similarly, we evaluate our accounts receivable balances to develop expectations regarding the extent to which they will ultimately be collected. Significant judgment and estimation are involved in this evaluation, including a receivables aging analysis which shows, by aged category, the percentage of receivables that has historically gone uncollected, an analysis of specific risks on a customer-by-customer basis for larger accounts (including consideration of their financial condition and ability to withstand potential prolonged periods of adverse economic conditions), and an evaluation of current and forecasted economic and market conditions over the respective asset's contractual life. Based on this information, we record an allowance

			71

for estimated amounts that we ultimately expect not to collect due to credit. Although we believe that we have adequately provided for these risks as part of our allowance for doubtful accounts, a severe and prolonged adverse impact on our major customers' business and operations beyond those forecasted could have a corresponding material adverse effect on our net revenues, cash flows, and/or financial condition. A hypothetical 1% increase in the level of our allowance for doubtful accounts as of March 27, 2021 would have increased our Fiscal 2021 SG&A expenses by less than $1 million.

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 retail inventory that is sold in our own stores and digital commerce sites directly to consumers. We also hold inventory that is sold through wholesale distribution channels to major department stores and specialty retail stores. Substantially all of our inventories are comprised of finished goods, which are stated at the lower of cost or estimated realizable value, with cost 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 (including those resulting from pandemic diseases and other catastrophic events), 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 economic 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. However, unforeseen adverse future economic and market conditions could result in our actual results differing materially from our estimates.

A hypothetical 1% increase in the level of our inventory reserves as of March 27, 2021 would have decreased our Fiscal 2021 gross profit by approximately $3 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 goodwill impairment 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 involves 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. However, if the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded in an amount equal to that excess. Any impairment charge recognized is limited to the amount of the respective reporting unit's allocated goodwill.

Determining the fair value of a reporting unit under the quantitative goodwill impairment test requires judgment and often involves the use of significant estimates and assumptions, including an assessment of external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as actual and planned financial

			72

performance. 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 involve significant estimates and assumptions, including projected future cash flows (including timing), discount rates reflecting the risks inherent in those future cash flows, perpetual growth rates, and selection of appropriate market comparable metrics and transactions.

We performed our annual goodwill impairment assessment as of the beginning of the second quarter of Fiscal 2021 using the qualitative approach discussed above. In performing the assessment, we considered the results of our most recent quantitative goodwill impairment test, which was performed as of the end of Fiscal 2020 and incorporated assumptions related to COVID-19 business disruptions, 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. No goodwill impairment charges were recorded during any of the fiscal years presented. See Note 12 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. If such estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is recognized to the extent that such asset's carrying value exceeds its fair value, as estimated 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 and lease-related right-of-use ("ROU") assets, 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 (including any potential sublease income for lease-related ROU assets) and its eventual disposition, where applicable. If such estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is recognized to the extent that such asset's carrying value exceeds its fair value, as estimated considering external market participant assumptions and discounted cash flows, including those based on estimated market rents for lease-related ROU assets. Assets to be disposed of and for which there is a committed plan of disposal (commonly referred to as assets held-for-sale) 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. For example, unforeseen adverse future economic and market conditions could negatively impact consumer behavior, spending levels, and/or shopping preferences and result in actual results differing from our estimates. Additionally, we may review and consider appraisals from accredited independent valuation firms to determine the fair value of long-lived assets, where applicable.

During Fiscal 2021, Fiscal 2020, and Fiscal 2019, we recorded non-cash impairment charges of $96.0 million, $38.7 million, and $21.2 million, respectively, to write-down the carrying values of certain long-lived assets based upon their assumed fair values. Additionally, during Fiscal 2019, we recorded a non-cash charge of $4.6 million to reduce the carrying value of our corporate jet being held-for-sale to its estimated fair value, less costs to sell. See Note 8 to the accompanying consolidated financial statements for further discussion.

			73

Income Taxes

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

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 10 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 potential losses relating to 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 that it is probable that a loss has been incurred and the amount of such loss is reasonably estimable. In addition, if it is considered reasonably possible that an unfavorable settlement of a contingency could exceed any 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 forfeitures which are estimated based on an analysis of historical experience and expected future trends.

Restricted Stock and Restricted Stock Units ("RSUs")

We have granted restricted shares of our Class A common stock to our non-employee directors and grant service-based RSUs to certain of our senior executives and other employees, as well as to our non-employee directors. In addition, we grant RSUs with performance-based and market-based vesting conditions to such senior executives and other key employees.

The fair values of our restricted stock, service-based RSU, and performance-based RSU awards are measured based on the fair value of our Class A common stock on the date of grant, adjusted to reflect the absence of dividends for any awards for which dividend equivalent amounts do not accrue while outstanding and unvested. Related compensation expense for performance-based RSUs is recognized over the employees' requisite service period, to the extent that our attainment of performance goals (upon which vesting is dependent) is deemed probable, and involves judgment as to expectations surrounding our achievement of certain defined operating performance metrics.

			74

The fair value of our market-based RSU awards, for which vesting is dependent upon total shareholder return ("TSR") of our Class A common stock over a three-year performance period relative to that of a pre-established peer group, is measured on the grant date based on estimated projections of our relative TSR over the performance period. These estimates are made using a Monte Carlo simulation, which models multiple stock price paths of our Class A common stock and that of the peer group to evaluate and determine our ultimate expected relative TSR performance ranking. Related compensation expense, net of estimated forfeitures, is recorded regardless of whether, and the extent to which, the market condition is ultimately satisfied. See Note 18 to the accompanying consolidated financial statements for further discussion.

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 any of the fiscal years presented. See Note 18 to the accompanying consolidated financial statements for further discussion.

Sensitivity

The assumptions used in calculating the grant date fair values of our stock-based compensation awards represent our best estimates. In addition, projecting the achievement level of certain performance-based awards, as well as estimating the number of awards expected to be forfeited, requires judgment. If actual results or forfeitures differ significantly from our estimates and assumptions, or if assumptions used to estimate the grant date fair value of future stock-based award grants are significantly changed, stock-based compensation expense and, therefore, our results of operations could be materially impacted. A hypothetical 10% change in our Fiscal 2021 stock-based compensation expense would have affected our net loss by approximately $6 million.

RECENTLY ISSUED ACCOUNTING STANDARDS

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