Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Special Note Regarding Forward-Looking Statements

Various statements in this Form 10-Q, or incorporated by reference into this Form 10-Q, in future filings by us with the Securities and Exchange Commission (the "SEC"), in our press releases, and in oral statements made from time to time by representatives of the Company, may contain certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, statements regarding our current expectations about the Company's future operating results and financial condition, the implementation and results of our strategic plans and initiatives, store openings and closings, capital expenses, our plans regarding our quarterly cash dividend and Class A common stock repurchase programs, and our ability to meet citizenship and sustainability goals. Forward-looking statements are based on current expectations and are indicated by words or phrases such as "aim," "anticipate," "outlook," "estimate," "ensure," "commit," "expect," "project," "believe," "envision," "goal," "target," "can," "will," and similar words or phrases. These forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed in or implied by such forward-looking statements. These risks, uncertainties, and other factors include, among others:

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

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

  • the impact of economic, political, and other conditions on us, our customers, suppliers, vendors, and lenders, including potential business disruptions related to ongoing military conflicts taking place in various parts of the world, most notably the Russia-Ukraine and Israel-Hamas wars, other recent hostilities in the Middle East, and militant attacks on cargo vessels in the Red Sea, civil and political unrest, diplomatic tensions between the U.S. and other countries, high interest rates, and bank failures, among other factors described herein;

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

  • the potential impact to our business resulting from supply chain disruptions, including those caused by capacity constraints, closed factories and/or labor shortages (stemming from pandemic diseases, labor disputes, strikes, or otherwise), man-made or natural disasters, scarcity of raw materials, port congestion, and scrutiny or detention of goods produced in certain territories resulting from laws, regulations, or trade restrictions, such as those imposed by the Uyghur Forced Labor Prevention Act ("UFLPA") or the Countering America's Adversaries Through Sanctions Act ("CAATSA"), which could result in shipment approval delays leading to inventory shortages and lost sales, as well as potential shipping delays, inventory shortages, and/or higher freight costs resulting from port strikes, the recent Red Sea crisis, and/or disruptions to major waterways such as the Suez and Panama canals;

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

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

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

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

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

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

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

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

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

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

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

  • our ability to achieve our goals regarding citizenship and sustainability practices, including those related to climate change, our human capital, and our supply chain;

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

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

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

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

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

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

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

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

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

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

  • a variety of legal, regulatory, tax, political, and economic risks, including risks related to the importation and exportation of products which our operations are currently subject to, or may become subject to as a result of potential changes in legislation, and other risks associated with our international operations, such as compliance

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with the Foreign Corrupt Practices Act or violations of other anti-bribery and corruption laws prohibiting improper payments, and the burdens of complying with a variety of foreign laws and regulations, including tax laws, trade and labor restrictions, and related laws that may reduce the flexibility of our business;

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

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

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

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

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

These forward-looking statements are based largely on our expectations and judgments and are subject to a number of risks and uncertainties, many of which are unforeseeable and beyond our control. A detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations is included in our Annual Report on Form 10-K for the fiscal year ended March 30, 2024 (the "Fiscal 2024 10-K"). There are no material changes to such risk factors, nor have we identified any previously undisclosed risks that could materially adversely affect our business, operating results, and/or financial condition, as set forth in Part II, Item 1A — "Risk Factors" of this Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

In this Form 10-Q, references to "Ralph Lauren," "ourselves," "we," "our," "us," and the "Company" refer to Ralph Lauren Corporation and its subsidiaries, unless the context indicates otherwise. We utilize a 52-53 week fiscal year ending on the Saturday closest to March 31. As such, fiscal year 2025 will end on March 29, 2025 and will be a 52-week period ("Fiscal 2025"). Fiscal year 2024 ended on March 30, 2024 and was also a 52-week period ("Fiscal 2024"). The third quarter of Fiscal 2025 ended on December 28, 2024 and was a 13-week period. The third quarter of Fiscal 2024 ended on December 30, 2023 and was also a 13-week period.

INTRODUCTION

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

  • Overview. This section provides a general description of our business, global economic conditions and industry trends, and a summary of our financial performance for the three-month and nine-month periods ended December 28, 2024. In addition, this section includes a discussion of recent developments and transactions affecting comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future trends.

  • Results of operations. This section provides an analysis of our results of operations for the three-month and nine-month periods ended December 28, 2024 as compared to the three-month and nine-month periods ended December 30, 2023.

  • Financial condition and liquidity. This section provides a discussion of our financial condition and liquidity as of December 28, 2024, which includes (i) an analysis of our financial condition as compared to the prior fiscal year-end; (ii) an analysis of changes in our cash flows for the nine months ended December 28, 2024 as compared to the nine months ended December 30, 2023; (iii) an analysis of our liquidity, including the availability under our commercial paper borrowing program and credit facilities, our supplier finance program, outstanding debt and covenant compliance, common stock repurchases, and payments of dividends; and (iv) a description of any material changes in our material cash requirements since March 30, 2024.

  • Market risk management. This section discusses any significant changes in our risk exposures related to foreign currency exchange rates, interest rates, and our investments since March 30, 2024.

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  • Critical accounting policies. This section discusses any significant changes in our critical accounting policies since March 30, 2024. Critical accounting policies typically require significant judgment and estimation on the part of management in their application. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 3 of the Fiscal 2024 10-K.

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

OVERVIEW

Our Business

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

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

We organize our business into the following three reportable segments:

*•*North America — Our North America segment, representing approximately 44% of our Fiscal 2024 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses primarily in the U.S. and Canada. In North America, our retail business is primarily comprised of our Ralph Lauren stores, our outlet stores, and our digital commerce sites, www.RalphLauren.com and www.RalphLauren.ca. Our wholesale business in North America is comprised primarily of sales to department stores and, to a lesser extent, specialty stores.

*•*Europe — Our Europe segment, representing approximately 30% of our Fiscal 2024 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in Europe and emerging markets. In Europe, our retail business is primarily comprised of our Ralph Lauren stores, our outlet stores, our concession-based shop-within-shops, and our various digital commerce sites. Our wholesale business in Europe is comprised primarily of a varying mix of sales to both department stores and specialty stores, depending on the country, as well as to various third-party digital and licensee partners.

  • Asia — Our Asia segment, representing approximately 24% of our Fiscal 2024 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 outlet 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 and various third-party digital and licensee partners.

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 2% of our Fiscal 2024 net revenues, which primarily consist of Ralph Lauren and Chaps branded royalty revenues earned through our global licensing alliances.

Approximately 55% of our Fiscal 2024 net revenues were earned outside of the U.S. See Note 16 to the accompanying consolidated financial statements for further discussion of our segment reporting structure.

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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 (loss), and cash flows in any fiscal quarter may be affected by other events affecting retail sales, such as changes in weather patterns. Accordingly, our operating results and cash flows for the three-month and nine-month periods ended December 28, 2024 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 2025.

Recent Developments

Next Generation Transformation Project

We are in the early stages of executing a large-scale, multi-year global project that is expected to significantly transform the way in which we operate our business and further enable our long-term strategic pivot towards a global direct-to-consumer-oriented model (the "Next Generation Transformation project" or "NGT project"). The NGT project will be completed in phases and involves the redesigning of certain end-to-end processes and the implementation of a suite of information systems on a global scale. Such efforts are expected to result in significant process improvements and the creation of synergies across core areas of operations, including merchandise buying and planning, procurement, inventory management, retail and wholesale operations, and financial planning and reporting, better enabling us to optimize inventory levels and increase the speed with which we react to changes in consumer demand across markets, among other benefits.

In connection with the preliminary phase of the NGT project, we incurred other charges of $9.1 million and $17.1 million during the three-month and nine-month periods ended December 28, 2024, respectively, which were recorded within restructuring and other charges, net in the consolidated statements of operations.

Global Economic Conditions and Industry Trends

The global economy and retail industry are impacted by many different factors. Changes in economic conditions, most notably persisting inflationary pressures (including increases in the cost of raw materials, transportation, and salaries & benefits), organized labor disputes, high interest rates, significant foreign currency volatility, bank failures, and concerns of a potential recession, continue to impact consumer discretionary income levels, spending, and sentiment in the U.S. and beyond. In response to such pressures, as well as in an effort to reduce elevated inventory levels, many retailers (particularly in the U.S.) continue to resort to promotional activity in an attempt to offset traffic declines and increase conversion. Furthermore, the department store sector has experienced numerous consolidations, restructurings, reorganizations, bankruptcies, and other ownership changes in recent times, as well as an increase in store closures. The future geopolitical landscape also remains particularly uncertain, as over 60 countries held national elections during 2024, including the recent U.S. presidential election. Any resulting changes in international trade relations, legislation and regulations (including those related to taxation, tariffs, and importation), or economic and monetary policies, or heightened diplomatic tensions or political and civil unrest, among other potential impacts, could adversely impact the global economy and our operating results.

The global economy has also been negatively impacted by ongoing military conflicts taking place in various parts of the world, most notably the Russia-Ukraine and Israel-Hamas wars, other recent hostilities in the Middle East, and militant attacks on cargo vessels in the Red Sea. Although our voluntary decision to suspend operations in Russia has not resulted in a material impact to our consolidated financial statements and our ongoing operations in Israel are also not material, our business has been, and may continue to be, impacted by the broader macroeconomic implications resulting from these and other military conflicts, including inflationary pressures, unfavorable foreign currency exchange rates, increases in energy prices, food shortages, and volatility in financial markets, among other factors, which have adversely impacted consumer sentiment and confidence. It is not clear at this time how long these conflicts will endure, or if they will escalate further with additional countries declaring war against each other, which could further amplify the impacts of the various macroeconomic factors described above and potentially result in a global recession.

The global supply chain has been negatively impacted by various factors, including disruptions at U.S. ports and in the Red Sea. Although our business has not been significantly impacted by such disruptions, we have experienced some shipping delays impacting the timing of inventory receipts, and if such disruptions were to continue over a prolonged period, it could result in further inventory receipt delays and/or higher freight costs in the near-term and beyond.

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We have implemented various strategies globally to help address many of these current challenges and continue to build a foundation for long-term profitable growth centered around strengthening our consumer-facing areas of product, stores, and marketing across channels and driving a more efficient operating model. Our strategy for mitigating inflationary pressures includes numerous levers, including our ability to effectively increase prices, leveraging our diversified supply chain and strong supplier relationships, and leveraging our in-house quality control to reduce time and cost from the manufacturing process, among other efforts. We have also taken earlier receipts of inventory and strategically utilized faster means of transportation (i.e., air freight) when necessary to maximize full-price selling windows, as well as diverted certain near-term shipments to U.S. West Coast ports to mitigate risk had a labor agreement on the East and Gulf Coasts not been reached by the January 15, 2025 deadline. While we remain agile and mindful of the continued competitive promotional environment, we plan to continue driving our broader long-term strategy of brand elevation, which includes multiple levers to continue driving average unit retail growth and brand equity.

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

For a detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, see Part I, Item 1A — "Risk Factors" in our Fiscal 2024 10-K.

Summary of Financial Performance

Operating Results

During the three months ended December 28, 2024, we reported net revenues of $2.143 billion, net income of $297.4 million, and net income per diluted share of $4.66, as compared to net revenues of $1.934 billion, net income of $276.6 million, and net income per diluted share of $4.19 during the three months ended December 30, 2023. During the nine months ended December 28, 2024, we reported net revenues of $5.382 billion, net income of $613.9 million, and net income per diluted share of $9.57, as compared to net revenues of $5.063 billion, net income of $555.6 million, and net income per diluted share of $8.31 during the nine months ended December 30, 2023. The comparability of our operating results has been affected by net restructuring-related charges and certain other charges (benefits). We have also experienced varying degrees of business disruptions resulting from the current macroeconomic environment, including global supply chain disruptions, inflationary pressures, ongoing military conflicts taking place in various parts of the world, and foreign currency volatility, among other factors.

Our operating performance for the three-month and nine-month periods ended December 28, 2024 as compared to the prior fiscal year periods reflected revenue increases of 10.8% and 6.3%, respectively, on a reported basis and 11.2% and 6.9%, respectively, on a constant currency basis, as defined within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition" below. Net revenues reflected growth across all of our reportable segments.

Our gross profit as a percentage of net revenues increased by 190 basis points to 68.4% during the three months ended December 28, 2024 and by 160 basis points to 68.5% during the nine months ended December 28, 2024, as compared to the prior fiscal year periods, primarily driven by favorable product, channel, and geographic mix, lower cotton costs, and average unit retail ("AUR") growth, partially offset by higher freight and other product costs.

Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues during the three months ended December 28, 2024 declined by 30 basis points to 49.7% as compared to the prior fiscal year period, largely attributable to operating leverage on higher net revenues and our operational discipline, which more than offset increases across various expense categories, including compensation-related expenses, and geographic and channel mix resulting from growth of our international and retail businesses which typically carry higher operating expense margins. During the nine months ended December 28, 2024, SG&A expenses as a percentage of net revenues increased by 20 basis points to 53.4% as compared to the prior fiscal year period, largely attributable to geographic and channel mix, as well as increases across various expense categories, including higher marketing investments due to planned key campaign events and higher compensation-related expenses.

Net income increased by $20.8 million to $297.4 million during the three months ended December 28, 2024 as compared to the three months ended December 30, 2023, primarily due to a $72.0 million increase in our operating income, partially offset by a $33.1 million increase in our income tax provision and an $18.1 million increase in non-operating expense, net. Net income per diluted share increased by $0.47 to $4.66 per share during the three months ended December 28, 2024 as compared

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to the three months ended December 30, 2023, primarily driven by the higher level of net income and lower weighted-average diluted shares outstanding. Net income increased by $58.3 million to $613.9 million during the nine months ended December 28, 2024 as compared to the nine months ended December 30, 2023, primarily due to a $128.5 million increase in our operating income, partially offset by a $64.2 million increase in our income tax provision. Net income per diluted share increased by $1.26 to $9.57 per share during the nine months ended December 28, 2024 as compared to the nine months ended December 30, 2023, driven by the higher level of net income and lower weighted-average diluted shares outstanding.

Our operating results during the three months ended December 28, 2024 were negatively impacted by net restructuring-related charges and certain other charges (benefits) of $12.2 million, which had an after-tax effect of reducing net income by $10.5 million, or $0.16 per diluted share. During the three months ended December 30, 2023, our operating results were favorably impacted by net restructuring-related charges and certain other charges (benefits) of $0.2 million, which had an after-tax effect of increasing net income by $1.5 million, or $0.02 per diluted share. During the nine-month periods ended December 28, 2024 and December 30, 2023, our operating results were negatively impacted by net restructuring-related charges and certain other charges (benefits) totaling $38.0 million and $40.7 million, respectively, which had an after-tax effect of reducing net income by $30.7 million, or $0.48 per diluted share, and $30.2 million, or $0.45 per diluted share, respectively. Net income during the nine months ended December 30, 2023 also reflected an income tax benefit of $11.8 million, or $0.18 per diluted share, respectively, recorded in connection with non-recurring income tax events.

Financial Condition and Liquidity

We ended the third quarter of Fiscal 2025 in a net cash and short-term investments position (calculated as cash and cash equivalents, plus short-term investments, less total debt) of $1.001 billion, as compared to $642.7 million as of the end of Fiscal 2024. The increase in our net cash and short-term investments position was primarily due to our operating cash flows of $1.113 billion, partially offset by our use of cash to support Class A common stock repurchases of $404.6 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to make dividend payments of $150.1 million, to invest in our business through $136.3 million in capital expenditures, and the unfavorable effect of exchange rate changes of $40.9 million primarily related to our cash and cash equivalents.

Net cash provided by operating activities was $1.113 billion during the nine months ended December 28, 2024, as compared to $948.7 million during the nine months ended December 30, 2023. The net increase in cash provided by operating activities was due to an increase in net income before non-cash charges, as well as 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 increased to $2.539 billion as of December 28, 2024 compared to $2.450 billion as of March 30, 2024 due to our comprehensive income and the net impact of stock-based compensation arrangements, partially offset by our share repurchase activity and dividends declared during the nine months ended December 28, 2024.

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

The comparability of our operating results for the three-month and nine-month periods ended December 28, 2024 and December 30, 2023 has been affected by certain events, including:

  • pretax charges incurred in connection with our restructuring activities, as well as certain other benefits (charges), as summarized below (references to "Notes" are to the notes to the accompanying consolidated financial statements):
Three Months EndedNine Months Ended
December 28, 2024December 30, 2023December 28, 2024December 30, 2023
(millions)
Restructuring and other charges, net (see Note 7)$(12.2)$(0.7)$(38.0)$(45.6)
Non-routine inventory benefits**(a)**—0.9—4.5
Non-routine bad debt expense reversals**(b)**———0.4
Total charges, net$(12.2)$0.2$(38.0)$(40.7)

**(a)**Non-routine inventory benefits are recorded within cost of goods sold in the consolidated statements of operations. The benefits recorded during the three months ended December 30, 2023 primarily related to reversals of amounts previously recognized in connection with delays in U.S. customs shipment reviews and approvals. The benefits recorded during the nine months ended December 30, 2023 primarily related to reversals of amounts previously

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recognized in connection with delays in U.S. customs shipment reviews and approvals (approximately $4 million) and the COVID-19 pandemic (approximately $1 million).

**(b)**Non-routine bad debt expense reversals are recorded within SG&A expenses in the consolidated statements of operations. The reversals recorded during the nine months ended December 30, 2023 primarily related to charges previously recognized in connection with the Russia-Ukraine war.

  • a one-time tax benefit of $11.8 million recorded within our income tax provision during the second quarter of Fiscal 2024 in connection with Swiss tax reform and the European Union's anti-tax avoidance directive, which decreased our effective tax rate by 170 basis points during the nine months ended December 30, 2023. See Note 8 to the accompanying consolidated financial statements for further discussion.

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.

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RESULTS OF OPERATIONS

Three Months Ended December 28, 2024 Compared to Three Months Ended December 30, 2023

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

Three Months Ended
December 28, 2024December 30, 2023$ Change% / bps Change
(millions, except per share data)
Net revenues$2,143.5$1,934.0$209.510.8%
Cost of goods sold(677.4)(648.0)(29.4)4.5%
Gross profit1,466.11,286.0180.114.0%
Gross profit as % of net revenues68.4%66.5%190 bps
Selling, general, and administrative expenses(1,064.2)(967.6)(96.6)10.0%
SG&A expenses as % of net revenues49.7%50.0%(30 bps)
Restructuring and other charges, net(12.2)(0.7)(11.5)NM
Operating income389.7317.772.022.6%
Operating income as % of net revenues18.2%16.4%180 bps
Interest expense(11.6)(10.6)(1.0)9.4%
Interest income17.820.7(2.9)(14.1%)
Other income (expense), net(12.2)2.0(14.2)NM
Income before income taxes383.7329.853.916.4%
Income tax provision(86.3)(53.2)(33.1)62.7%
Effective tax rate**(a)**22.5%16.1%640 bps
Net income$297.4$276.6$20.87.5%
Net income per common share:
Basic$4.76$4.25$0.5112.0%
Diluted$4.66$4.19$0.4711.2%

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

NM Not meaningful.

Net Revenues. Net revenues increased by $209.5 million, or 10.8%, to $2.143 billion during the three months ended December 28, 2024 as compared to the three months ended December 30, 2023, reflecting growth across all of our reportable segments, partially offset by unfavorable foreign currency effects of $6.9 million. On a constant currency basis, net revenues increased by $216.4 million, or 11.2%.

The following table summarizes the percentage changes in our consolidated comparable store sales for the three months ended December 28, 2024 as compared to the prior fiscal year period:

% Change
Digital commerce8%
Brick and mortar13%
Total comparable store sales12%
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Our global average store count decreased by 21 stores and concession shops during the three months ended December 28, 2024 compared with the three months ended December 30, 2023, largely driven by strategic store closures in Asia and North America. The following table details our retail store presence by segment as of the periods presented:

December 28, 2024December 30, 2023
Freestanding Stores:
North America228237
Europe103105
Asia248228
Total freestanding stores579570
Concession Shops:
North America11
Europe2927
Asia649679
Total concession shops679707
Total stores1,2581,277

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

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

Three Months Ended$ ChangeForeign Exchange Impact$ Change% Change
December 28, 2024December 30, 2023As ReportedConstant CurrencyAs ReportedConstant Currency
(millions)
Net Revenues:
North America$997.7$933.3$64.4$(1.5)$65.96.9%7.1%
Europe604.4521.582.91.581.415.9%15.6%
Asia506.7446.460.3(6.8)67.113.5%15.0%
Other non-reportable segments34.732.81.9(0.1)2.05.9%6.0%
Total net revenues$2,143.5$1,934.0$209.5$(6.9)$216.410.8%11.2%

North America net revenues — Net revenues increased by $64.4 million, or 6.9%, during the three months ended December 28, 2024 as compared to the three months ended December 30, 2023. On a constant currency basis, net revenues increased by $65.9 million, or 7.1%.

The $64.4 million increase in North America net revenues was driven by:

  • a $50.5 million increase related to our North America retail business. On a constant currency basis, net revenues increased by $51.8 million, reflecting an increase of $53.5 million in comparable store sales, partially offset by a decrease of $1.7 million in non-comparable store sales. The following table summarizes the percentage changes in comparable store sales related to our North America retail business:
% Change
Digital commerce3%
Brick and mortar10%
Total comparable store sales8%
  • a $13.9 million increase related to our North America wholesale business primarily driven by improved Fall sell-out trends and strong replenishment orders.
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Europe net revenues — Net revenues increased by $82.9 million, or 15.9%, during the three months ended December 28, 2024 as compared to the three months ended December 30, 2023. On a constant currency basis, net revenues increased by $81.4 million, or 15.6%.

The $82.9 million increase in Europe net revenues was driven by:

*•*a $50.4 million increase related to our Europe retail business, inclusive of favorable foreign currency effects of $0.3 million. On a constant currency basis, net revenues increased by $50.1 million, reflecting increases of $49.5 million in comparable store sales and $0.6 million in non-comparable store sales. The following table summarizes the percentage changes in comparable store sales related to our Europe retail business:

% Change
Digital commerce14%
Brick and mortar18%
Total comparable store sales17%

*•*a $32.5 million increase related to our Europe wholesale business largely driven by stronger re-order trends and a timing shift of inventory receipts from the second quarter of Fiscal 2025 into the third quarter, which more than offset planned reductions within the off-price wholesale channel.

Asia net revenues — Net revenues increased by $60.3 million, or 13.5%, during the three months ended December 28, 2024 as compared to the three months ended December 30, 2023. On a constant currency basis, net revenues increased by $67.1 million, or 15.0%.

The $60.3 million increase in Asia net revenues was driven by:

*•*a $65.1 million increase related to our Asia retail business, inclusive of unfavorable foreign currency effects of $7.0 million. On a constant currency basis, net revenues increased by $72.1 million, reflecting increases of $51.6 million in comparable store sales and $20.5 million in non-comparable store sales. The following table summarizes the percentage changes in comparable store sales related to our Asia retail business:

% Change
Digital commerce29%
Brick and mortar13%
Total comparable store sales14%

This increase was partially offset by a $4.8 million decline related to our Asia wholesale business, largely driven by decreases in South Korea and Japan.

Gross Profit. Gross profit increased by $180.1 million, or 14.0%, to $1.466 billion for the three months ended December 28, 2024, including unfavorable foreign currency effects of $3.4 million. Gross profit as a percentage of net revenues increased to 68.4% for the three months ended December 28, 2024 from 66.5% for the three months ended December 30, 2023. The 190 basis point increase was primarily driven by favorable product, channel, and geographic mix, lower cotton costs, and AUR growth, partially offset by higher freight and other product costs.

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 product costs. These factors, among others, may cause gross profit as a percentage of net revenues to fluctuate from period to period.

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Selling, General, and Administrative Expenses. SG&A expenses include costs relating to compensation and benefits, marketing and advertising, rent and occupancy, distribution, information technology, legal, depreciation and amortization, bad debt, and other selling and administrative costs. SG&A expenses increased by $96.6 million, or 10.0%, to $1.064 billion for the three months ended December 28, 2024, including favorable foreign currency effects of $3.4 million. SG&A expenses as a percentage of net revenues declined to 49.7% for the three months ended December 28, 2024 from 50.0% for the three months ended December 30, 2023. The 30 basis point improvement was largely attributable to operating leverage on higher net revenues and our operational discipline, which more than offset increases across various expense categories, including compensation-related expenses, and geographic and channel mix resulting from growth of our international and retail businesses which typically carry higher operating expense margins.

The $96.6 million increase in SG&A expenses was driven by:

Three Months Ended December 28, 2024 Compared to Three Months Ended December 30, 2023
(millions)
SG&A expense category:
Compensation-related expenses$54.0
Rent and occupancy expenses14.9
Marketing and advertising expenses7.7
Selling-related expenses5.2
Shipping and handling costs4.2
Non-income-related taxes3.5
Other7.1
Total increase in SG&A expenses$96.6

Restructuring and Other Charges, Net. During the three-month periods ended December 28, 2024 and December 30, 2023, we recorded restructuring charges of $1.6 million and $1.0 million, respectively, as well as other charges of $2.2 million and $4.7 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. In addition, during the three months ended December 28, 2024, we recorded other charges of $9.1 million in connection with our Next Generation Transformation project (refer to "Recent Developments" for additional discussion) and other income of $0.7 million and $5.0 million during the three-month periods ended December 28, 2024 and December 30, 2023, respectively, related to consideration received from Regent, L.P. in connection with our previously sold Club Monaco business. See Note 7 to the accompanying consolidated financial statements.

Operating Income. Operating income increased by $72.0 million, or 22.6%, to $389.7 million for the three months ended December 28, 2024. Foreign currency effects were inconsequential to operating income during the three months ended December 28, 2024. Additionally, our operating results included net restructuring-related charges and certain other charges (benefits), which had an unfavorable impact of $12.2 million during the three months ended December 28, 2024 and a favorable impact of $0.2 million during the three months ended December 30, 2023. Operating income as a percentage of net revenues was 18.2% for the three months ended December 28, 2024, reflecting a 180 basis point increase from the prior fiscal year period. The increase in operating income as a percentage of net revenues was primarily driven by the increase in our gross margin, as well as the decrease in SG&A expenses as a percentage of net revenues, partially offset by the higher net restructuring-related charges and certain other charges (benefits) recorded during the three months ended December 28, 2024 as compared to the prior fiscal year period, all as previously discussed.

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

Three Months Ended
December 28, 2024December 30, 2023
Operating IncomeOperating MarginOperating IncomeOperating Margin$ ChangeMargin Change
(millions)(millions)(millions)
Segment:
North America$263.726.4%$204.621.9%$59.1450 bps
Europe168.827.9%123.423.7%45.4420 bps
Asia136.226.9%108.224.2%28.0270 bps
Other non-reportable segments30.186.8%29.489.9%0.7(310 bps)
598.8465.6133.2
Unallocated corporate expenses(196.9)(147.2)(49.7)
Unallocated restructuring and other charges, net(12.2)(0.7)(11.5)
Total operating income$389.718.2%$317.716.4%$72.0180 bps

North America operating margin improved by 450 basis points, primarily due to the favorable impact of approximately 460 basis points driven by an increase in gross margin and a decrease in SG&A expenses as a percentage of net revenues. This overall improvement in operating margin was partially offset by the unfavorable impact of 10 basis points attributable to the absence of non-routine inventory benefits during the three months ended December 28, 2024 as compared to those recorded during the prior fiscal year period.

Europe operating margin improved by 420 basis points, primarily due to the favorable impact of approximately 350 basis points driven by an increase in gross margin and a decrease in SG&A expenses as a percentage of net revenues. This overall improvement in operating margin also reflected favorable foreign currency effects of 70 basis points.

Asia operating margin improved by 270 basis points, primarily due to the favorable impact of approximately 320 basis points driven by a decline in SG&A expenses as a percentage of net revenues and an increase in gross margin. This overall improvement in operating margin was partially offset by unfavorable foreign currency effects of 50 basis points.

Unallocated corporate expenses increased by $49.7 million to $196.9 million during the three months ended December 28, 2024 as compared to the prior fiscal year. The increase in unallocated corporate expenses was due to higher compensation-related expenses of $26.5 million, lower intercompany sourcing commission of $9.2 million (which is offset at the segment level and eliminates in consolidation), higher non-income taxes of $3.3 million, and higher other expenses of $10.7 million.

Unallocated restructuring and other charges, net increased by $11.5 million to $12.2 million during the three months ended December 28, 2024, as previously discussed above and in Note 7 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 the three months ended December 28, 2024, we reported non-operating expense, net, of $6.0 million as compared to non-operating income, net, of $12.1 million during the three months ended December 30, 2023. The $18.1 million increase in non-operating expense, net was primarily driven by higher net foreign currency losses of $7.9 million as compared to the prior fiscal year period and a $6.4 million investment write-down recorded during the three months ended December 28, 2024.

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

The income tax provision and effective tax rate for the three months ended December 28, 2024 were $86.3 million and 22.5%, respectively, as compared to $53.2 million and 16.1%, respectively, for the three months ended December 30, 2023. The $33.1 million increase in our income tax provision was primarily driven by a 640 basis point increase in our effective tax rate, as well as an increase in our pretax income. The increase in our effective tax rate was primarily due to the absence of a prior fiscal year favorable deferred tax adjustment related to a transaction entered into as part of a reorganization of the Company's corporate entity structure. See Note 8 to the accompanying consolidated financial statements.

Net Income. Net income increased to $297.4 million for the three months ended December 28, 2024, from $276.6 million for the three months ended December 30, 2023. The $20.8 million increase in net income was due to the increases in our operating income, partially offset by increases in our income tax provision and non-operating expense, net, all as previously discussed. Additionally, our operating results during the three months ended December 28, 2024 were negatively impacted by net restructuring-related charges and certain other charges (benefits) of $12.2 million, which had an after-tax effect of reducing net income by $10.5 million. During the three months ended December 30, 2023, our operating results were favorably impacted by net restructuring-related charges and certain other charges (benefits) of $0.2 million, which had an after-tax effect of increasing net income by $1.5 million.

Net Income per Diluted Share. Net income per diluted share increased to $4.66 for the three months ended December 28, 2024, from $4.19 for the three months ended December 30, 2023. The $0.47 per share increase was primarily driven by the higher level of net income, as previously discussed, and lower weighted-average diluted shares outstanding during the three months ended December 28, 2024 driven by our share repurchases during the last twelve months. Net income per diluted share for the three-month periods ended December 28, 2024 and December 30, 2023 were also negatively impacted by $0.16 per share and favorably impacted by $0.02 per share, respectively, attributable to net restructuring-related charges and certain other charges (benefits), as previously discussed.

48

Nine Months Ended December 28, 2024 Compared to Nine Months Ended December 30, 2023

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.

Nine Months Ended
December 28, 2024December 30, 2023$ Change% / bps Change
(millions, except per share data)
Net revenues$5,381.7$5,063.5$318.26.3%
Cost of goods sold(1,694.1)(1,675.4)(18.7)1.1%
Gross profit3,687.63,388.1299.58.8%
Gross profit as % of net revenues68.5%66.9%160 bps
Selling, general, and administrative expenses(2,872.5)(2,693.9)(178.6)6.6%
SG&A expenses as % of net revenues53.4%53.2%20 bps
Restructuring and other charges, net(38.0)(45.6)7.6(16.7%)
Operating income777.1648.6128.519.8%
Operating income as % of net revenues14.4%12.8%160 bps
Interest expense(33.9)(30.6)(3.3)10.9%
Interest income55.852.23.66.8%
Other expense, net(10.6)(4.3)(6.3)140.7%
Income before income taxes788.4665.9122.518.4%
Income tax provision(174.5)(110.3)(64.2)58.4%
Effective tax rate**(a)**22.1%16.6%550 bps
Net income$613.9$555.6$58.310.5%
Net income per common share:
Basic$9.78$8.48$1.3015.3%
Diluted$9.57$8.31$1.2615.2%

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

Net Revenues. Net revenues increased by $318.2 million, or 6.3%, to $5.382 billion during the nine months ended December 28, 2024 as compared to the nine months ended December 30, 2023, reflecting growth across all of our reportable segments, partially offset by unfavorable foreign currency effects of $32.2 million. On a constant currency basis, net revenues increased by $350.4 million, or 6.9%.

The following table summarizes the percentage changes in our consolidated comparable store sales for the nine months ended December 28, 2024 as compared to the prior fiscal year period:

% Change
Digital commerce7%
Brick and mortar10%
Total comparable store sales9%

Our global average store count decreased by 18 stores and concession shops during the nine months ended December 28, 2024 compared with the nine months ended December 30, 2023, largely driven by strategic store closures in Asia and North America.

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

Nine Months Ended$ ChangeForeign Exchange Impact$ Change% Change
December 28, 2024December 30, 2023As ReportedConstant CurrencyAs ReportedConstant Currency
(millions)
Net Revenues:
North America$2,345.4$2,282.8$62.6$(2.4)$65.02.7%2.8%
Europe1,649.41,498.8150.63.5147.110.0%9.8%
Asia1,277.81,172.3105.5(33.2)138.79.0%11.8%
Other non-reportable segments109.1109.6(0.5)(0.1)(0.4)(0.4%)(0.4%)
Total net revenues$5,381.7$5,063.5$318.2$(32.2)$350.46.3%6.9%

North America net revenues — Net revenues increased by $62.6 million, or 2.7%, during the nine months ended December 28, 2024 as compared to the nine months ended December 30, 2023. On a constant currency basis, net revenues increased by $65.0 million, or 2.8%.

The $62.6 million increase in North America net revenues was driven by:

  • an $85.7 million increase related to our North America retail business. On a constant currency basis, net revenues increased by $87.7 million, reflecting increases of $83.3 million in comparable store sales and $4.4 million in non-comparable store sales. The following table summarizes the percentage changes in comparable store sales related to our North America retail business:
% Change
Digital commerce—%
Brick and mortar8%
Total comparable store sales6%

This increase was partially offset by a $23.1 million decline related to our North America wholesale business primarily driven by planned reductions within the off-price wholesale channel.

Europe net revenues — Net revenues increased by $150.6 million, or 10.0%, during the nine months ended December 28, 2024 as compared to the nine months ended December 30, 2023. On a constant currency basis, net revenues increased by $147.1 million, or 9.8%.

The $150.6 million increase in Europe net revenues was driven by:

*•*a $103.3 million increase related to our Europe retail business, inclusive of favorable foreign currency effects of $0.9 million. On a constant currency basis, net revenues increased by $102.4 million, reflecting increases of $99.8 million in comparable store sales and $2.6 million in non-comparable store sales. The following table summarizes the percentage changes in comparable store sales related to our Europe retail business:

% Change
Digital commerce14%
Brick and mortar14%
Total comparable store sales14%

*•*a $47.3 million increase related to our Europe wholesale business largely driven by stronger re-order trends more than offsetting planned reductions within the off-price wholesale channel.

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Asia net revenues — Net revenues increased by $105.5 million, or 9.0%, during the nine months ended December 28, 2024 as compared to the nine months ended December 30, 2023. On a constant currency basis, net revenues increased by $138.7 million, or 11.8%.

The $105.5 million increase in Asia net revenues was driven by:

*•*a $121.9 million increase related to our Asia retail business, inclusive of unfavorable foreign currency effects of $31.9 million. On a constant currency basis, net revenues increased by $153.8 million, reflecting increases of $107.0 million in comparable store sales and $46.8 million in non-comparable store sales. The following table summarizes the percentage changes in comparable store sales related to our Asia retail business:

% Change
Digital commerce24%
Brick and mortar10%
Total comparable store sales11%

This increase was partially offset by a $16.4 million decline related to our Asia wholesale business, largely driven by decreases in South Korea and Japan.

Gross Profit. Gross profit increased by $299.5 million, or 8.8%, to $3.688 billion for the nine months ended December 28, 2024, including unfavorable foreign currency effects of $30.5 million. Gross profit as a percentage of net revenues increased to 68.5% for the nine months ended December 28, 2024 from 66.9% for the nine months ended December 30, 2023. The 160 basis point increase was primarily driven by favorable product, channel, and geographic mix, lower cotton costs, and AUR growth, partially offset by higher freight and other product costs.

Selling, General, and Administrative Expenses. SG&A expenses increased by $178.6 million, or 6.6%, to $2.873 billion for the nine months ended December 28, 2024, including favorable foreign currency effects of $15.7 million. SG&A expenses as a percentage of net revenues increased to 53.4% for the nine months ended December 28, 2024 from 53.2% for the nine months ended December 30, 2023. The 20 basis point increase was largely attributable to geographic and channel mix resulting from growth of our international and retail businesses which typically carry higher operating expense margins, as well as increases across various expense categories, including higher marketing investments due to planned key campaign events and higher compensation related expenses.

The $178.6 million increase in SG&A expenses was driven by:

Nine Months Ended December 28, 2024 Compared to Nine Months Ended December 30, 2023
(millions)
SG&A expense category:
Compensation-related expenses$79.3
Marketing and advertising expenses41.7
Rent and occupancy expenses22.9
Non-income-related taxes15.6
Selling-related expenses12.2
Other6.9
Total increase in SG&A expenses$178.6

Restructuring and Other Charges, Net. During the nine-month periods ended December 28, 2024 and December 30, 2023, we recorded net restructuring charges of $13.9 million and $38.3 million, respectively, primarily consisting of severance and benefits costs, as well as other charges of $9.1 million and $14.3 million, respectively, primarily related to rent and occupancy costs associated with certain previously exited real estate locations in connection with our restructuring activities for which the related lease agreements have not yet expired. In addition, during the nine months ended December 28, 2024, we recorded other charges of $17.1 million in connection with our Next Generation Transformation project (refer to "Recent Developments" for additional discussion) and recorded other income of $2.1 million and $7.0 million during the nine-month

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periods ended December 28, 2024 and December 30, 2023, respectively, related to consideration received from Regent, L.P. in connection with our previously sold Club Monaco business. See Note 7 to the accompanying consolidated financial statements.

Operating Income. Operating income increased by $128.5 million, or 19.8%, to $777.1 million for the nine months ended December 28, 2024, reflecting unfavorable foreign currency effects of $14.8 million. Our operating results during the nine-month periods ended December 28, 2024 and December 30, 2023 were negatively impacted by net restructuring-related charges and certain other charges (benefits) totaling $38.0 million and $40.7 million, respectively. Operating income as a percentage of net revenues was 14.4% for the nine months ended December 28, 2024, reflecting a 160 basis point increase from the prior fiscal year period. The increase in operating income as a percentage of net revenues was primarily driven by the increase in our gross margin, as well as lower net restructuring-related charges and certain other charges (benefits) recorded during the nine months ended December 28, 2024 as compared to the prior fiscal year period, partially offset by the slight increase in SG&A expenses as a percentage of net revenues, all as previously discussed.

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

Nine Months Ended
December 28, 2024December 30, 2023
Operating IncomeOperating MarginOperating IncomeOperating Margin$ ChangeMargin Change
(millions)(millions)(millions)
Segment:
North America$505.421.6%$440.119.3%$65.3230 bps
Europe435.326.4%353.023.6%82.3280 bps
Asia329.725.8%269.923.0%59.8280 bps
Other non-reportable segments93.285.5%97.388.9%(4.1)(340 bps)
1,363.61,160.3203.3
Unallocated corporate expenses(548.5)(466.1)(82.4)
Unallocated restructuring and other charges, net(38.0)(45.6)7.6
Total operating income$777.114.4%$648.612.8%$128.5160 bps

North America operating margin improved by 230 basis points, primarily due to the favorable impact of approximately 250 basis points driven by an increase in gross margin and a decrease in SG&A expense as a percentage of net revenues. This overall improvement in operating margin was partially offset by the unfavorable impact of 20 basis points attributable to the absence of non-routine inventory benefits during the nine months ended December 28, 2024 as compared to those recorded during the prior fiscal year period.

Europe operating margin improved by 280 basis points, primarily due to the favorable impact of approximately 300 basis points driven by an increase in gross margin and a decrease in SG&A expenses as a percentage of net revenues, as well as favorable foreign currency effects of 10 basis points. This overall improvement in operating margin was partially offset by the unfavorable impact of 20 basis points attributable to channel mix, as well as the unfavorable impact of 10 basis points attributable to the absence of non-routine bad debt expense reversals during the nine months ended December 28, 2024 as compared to those recorded during the prior fiscal year period.

Asia operating margin improved by 280 basis points, primarily due to the favorable impact of approximately 360 basis points largely driven by a decline in SG&A expenses as a percentage of net revenues and an increase in gross margin. This overall improvement in operating margin was partially offset by unfavorable foreign currency effects of 50 basis points and the unfavorable impact of approximately 30 basis points attributable to channel mix.

Unallocated corporate expenses increased by $82.4 million to $548.5 million during the nine months ended December 28, 2024 as compared to the prior fiscal year. The increase in unallocated corporate expenses was due to higher compensation-related expenses of $35.5 million, higher marketing and advertising expenses of $15.6 million, higher non-income taxes of $15.4 million, lower intercompany sourcing commission of $11.2 million (which is offset at the segment level and eliminates in consolidation), and higher other expenses of $17.4 million, partially offset by lower rent and occupancy expenses of $12.7 million.

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Unallocated restructuring and other charges, net decreased by $7.6 million to $38.0 million during the nine months ended December 28, 2024, as previously discussed above and in Note 7 to the accompanying consolidated financial statements.

Non-operating Income (Expense), Net. During the nine months ended December 28, 2024, we reported non-operating income, net of $11.3 million as compared to $17.3 million during the nine months ended December 30, 2023. The $6.0 million net decrease in non-operating income, net was primarily driven by an investment write-down recorded during the nine months ended December 28, 2024.

Income Tax Provision. The income tax provision and effective tax rate for the nine months ended December 28, 2024 were $174.5 million and 22.1%, respectively, compared to $110.3 million and 16.6%, respectively, for the nine months ended December 30, 2023. The $64.2 million increase in our income tax provision was primarily driven by an increase in our pretax income, as well as a 550 basis point increase in our effective tax rate. The increase in our effective tax rate was due to the absence of prior year favorable adjustments related to the accrual of deferred tax assets in connection with a transaction entered into as part of a reorganization of the Company's corporate entity structure, and revaluation of deferred tax assets as a result of tax rate changes enacted in the prior year period, partially offset by a current year favorable adjustment related to the revaluation of a deferred tax liability on foreign earnings. The increase in our effective tax rate was also due to the absence of a one-time tax benefit of $11.8 million recorded during the second quarter of Fiscal 2024 in connection with Swiss tax reform and the European Union's anti-tax avoidance directive, which lowered our prior fiscal year period effective tax rate by 170 basis points. See Note 8 to the accompanying consolidated financial statements.

Net Income. Net income increased to $613.9 million for the nine months ended December 28, 2024, from $555.6 million for the nine months ended December 30, 2023. The $58.3 million increase in net income was primarily due to the increase in our operating income, partially offset by an increase in our income tax provision, both as previously discussed. Our operating results during the nine-month periods ended December 28, 2024 and December 30, 2023 were negatively impacted by net restructuring-related charges and certain other charges (benefits) totaling $38.0 million and $40.7 million, respectively, which had an after-tax effect of reducing net income by $30.7 million and $30.2 million, respectively. Net income during the nine months ended December 30, 2023 also reflected an income tax benefit of $11.8 million recorded in connection with Swiss tax reform and the European Union's anti-tax avoidance directive, as previously discussed.

Net Income per Diluted Share. Net income per diluted share increased to $9.57 for the nine months ended December 28, 2024, from $8.31 for the nine months ended December 30, 2023. The $1.26 per share increase was primarily driven by the higher level of net income, as previously discussed, and lower weighted-average diluted shares outstanding during the nine months ended December 28, 2024 driven by our share repurchases during the last twelve months. Net income per diluted share for the nine-month periods ended December 28, 2024 and December 30, 2023 were also negatively impacted by $0.48 per share and $0.45 per share, respectively, attributable to net restructuring-related charges and certain other charges (benefits), as previously discussed. Net income per diluted share during the nine months ended December 30, 2023 was also favorably impacted by $0.18 due to an income tax benefit recorded in connection with Swiss tax reform and the European Union's anti-tax avoidance directive, as previously discussed.

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FINANCIAL CONDITION AND LIQUIDITY

Financial Condition

The following table presents our financial condition as of December 28, 2024 and March 30, 2024:

December 28, 2024March 30, 2024$ Change
(millions)
Cash and cash equivalents$1,940.2$1,662.2$278.0
Short-term investments203.0121.082.0
Current portion of long-term debt**(a)**(399.5)—(399.5)
Long-term debt**(a)**(742.6)(1,140.5)397.9
Net cash and short-term investments$1,001.1$642.7$358.4
Equity$2,539.2$2,450.3$88.9

**(a)**See Note 9 to the accompanying consolidated financial statements for discussion of the carrying values of our debt.

The increase in our net cash and short-term investments position at December 28, 2024 as compared to March 30, 2024 was primarily due to our operating cash flows of $1.113 billion, partially offset by our use of cash to support Class A common stock repurchases of $404.6 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to make dividend payments of $150.1 million, to invest in our business through $136.3 million in capital expenditures, and the unfavorable effect of exchange rate changes of $40.9 million primarily related to our cash and cash equivalents.

The increase in our equity was attributable to our comprehensive income and the net impact of stock-based compensation arrangements, partially offset by our share repurchase activity and dividends declared during the nine months ended December 28, 2024.

Cash Flows

The following table details our cash flows for the nine-month periods ended December 28, 2024 and December 30, 2023:

Nine Months Ended
December 28, 2024December 30, 2023$ Change
(millions)
Net cash provided by operating activities$1,112.9$948.7$164.2
Net cash used in investing activities(224.4)(204.2)(20.2)
Net cash used in financing activities(571.2)(491.8)(79.4)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash(40.9)22.5(63.4)
Net increase in cash, cash equivalents, and restricted cash$276.4$275.2$1.2

Net Cash Provided by Operating Activities. Net cash provided by operating activities was $1.113 billion during the nine months ended December 28, 2024, as compared to $948.7 million during the nine months ended December 30, 2023. The $164.2 million net increase in cash provided by operating activities was due to an increase in net income before non-cash charges, as well as a net favorable change related to our operating assets and liabilities, including our working capital, as compared to the prior fiscal year period.

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

*•*a favorable change in our accounts payable driven by the timing of cash payments, as well as a net favorable change in accrued liabilities largely driven by the timing of accrued inventory and accrued payroll and benefits resulting from anticipated higher bonus achievement levels, partially offset by our restructuring reserve due to a

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decrease in restructuring charges recorded during the current fiscal year period as compared to the prior fiscal year period.

This increase related to our operating assets and liabilities was partially offset by:

  • an unfavorable change in inventory driven by higher in-transit inventory, as well as higher product and freight costs.

Net Cash Used in Investing Activities. Net cash used in investing activities was $224.4 million during the nine months ended December 28, 2024, as compared to $204.2 million during the nine months ended December 30, 2023. The $20.2 million net increase in cash used in investing activities was primarily driven by:

  • an $11.4 million increase in capital expenditures. During the nine months ended December 28, 2024, we spent $136.3 million on capital expenditures, as compared to $124.9 million during the nine months ended December 30, 2023. Our capital expenditures during the nine months ended December 28, 2024 primarily related to store openings and renovations, as well as enhancements to our information technology systems; and

  • an $11.0 million increase in purchases of investments, less proceeds from sales and maturities of investments. During the nine months ended December 28, 2024, we made net investment purchases of $89.3 million, as compared to $78.3 million during the nine months ended December 30, 2023.

Over the course of Fiscal 2025, we expect to spend approximately $200 million to $250 million on capital expenditures primarily related to store opening and renovations, as well as enhancements to our information technology systems and corporate office renovations.

Net Cash Used in Financing Activities. Net cash used in financing activities was $571.2 million during the nine months ended December 28, 2024, as compared to $491.8 million during the nine months ended December 30, 2023. The $79.4 million net increase in cash used in financing activities was primarily driven by:

  • a $75.8 million increase in cash used to repurchase shares of our Class A common stock. During the nine months ended December 28, 2024, we used $348.5 million to repurchase shares of our Class A common stock pursuant to our common stock repurchase program, and an additional $56.1 million in shares of our Class A common stock were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under our long-term stock incentive plans. On a comparative basis, during the nine months ended December 30, 2023, we used $277.7 million to repurchase shares of our Class A common stock pursuant to our common stock repurchase program, and an additional $51.1 million in shares of our Class A common stock were surrendered or withheld for taxes.

Sources of Liquidity

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

During the nine months ended December 28, 2024, we generated $1.113 billion of net cash flows from our operations. As of December 28, 2024, we had $2.143 billion in cash, cash equivalents, and short-term investments, of which $1.370 billion were held by our subsidiaries domiciled outside the U.S. We are not dependent on foreign cash to fund our domestic operations. Undistributed foreign earnings generated on or before December 31, 2017 that were subject to the one-time mandatory transition tax in connection with U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA") are not considered to be permanently reinvested and may be repatriated to the U.S. in the future with minimal or no additional U.S. taxation. We intend to permanently reinvest undistributed foreign earnings generated after December 31, 2017 that were not subject to the one-time mandatory transition tax. However, if our plans change and we choose to repatriate post-2017 earnings to the U.S. in the future, we would be subject to applicable U.S. and foreign taxes.

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The following table presents the total availability, borrowings outstanding, and remaining availability under our credit and overdraft facilities and Commercial Paper Program as of December 28, 2024:

December 28, 2024
Description**(a)**Total AvailabilityBorrowings OutstandingRemaining Availability
(millions)
Global Credit Facility and Commercial Paper Program**(b)**$750$11(c)$739
Pan-Asia Credit Facilities33—33
Japan Overdraft Facility32—32

**(a)**As defined in Note 9 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 $750 million.

**(c)**Represents outstanding letters of credit for which we were contingently liable under the Global Credit Facility as of December 28, 2024.

We believe that the Global Credit Facility is adequately diversified with no undue concentration in any one financial institution. In particular, as of December 28, 2024, there were seven 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 $1.500 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 9 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, payment of dividends, debt repayments, Class A common stock repurchases, settlement of contingent liabilities (including uncertain tax positions), and other corporate activities, including our restructuring actions. We believe that our existing sources of cash, the availability under our credit facilities, and our ability to access capital markets will be sufficient to support our operating, capital, and debt service requirements for the foreseeable future, the ongoing development of our businesses, and our plans for further business expansion. However, prolonged periods of adverse economic conditions or business disruptions in any of our key regions, or a combination thereof, such as those resulting from pandemic diseases and other catastrophic events, could impede our ability to pay our obligations as they become due or return value to our shareholders, as well as delay previously planned expenditures related to our operations.

See Note 9 to the accompanying consolidated financial statements and Note 11 of the Fiscal 2024 10-K for additional information relating to our credit facilities.

Supplier Finance Program

We support a voluntary supplier finance program which provides certain of our inventory suppliers the opportunity, at their sole discretion, to sell their receivables due from us (which are generally due within 90 days) to a participating financial institution in exchange for receipt of a discounted payment amount made earlier than the payment term stipulated between us and the supplier. Our vendor payment terms and amounts due are not impacted by a supplier's decision to participate in the program. We have not pledged any assets and do not provide guarantees under the supplier finance program. Our payment obligations outstanding under our supplier finance program were $216.2 million and $129.2 million as of December 28, 2024 and March 30, 2024, respectively, and were recorded within accounts payable in the consolidated balance sheets.

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Debt and Covenant Compliance

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

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

We have a credit facility that provides for a $750 million senior unsecured revolving line of credit through June 30, 2028, which may be used for working capital needs, capital expenditures, certain investments, general corporate purposes, and for funding of acquisitions, as well as 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 certain 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 $1.500 billion, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments. There are no mandatory reductions in borrowing ability throughout the term of the Global Credit Facility.

The Global Credit Facility contains a number of covenants, as described in Note 9 to the accompanying consolidated financial statements. As of December 28, 2024, 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 9 to the accompanying consolidated financial statements and Note 11 of the Fiscal 2024 10-K for additional information relating to our debt and covenant compliance.

Common Stock Repurchase Program

On February 2, 2022, our Board of Directors approved an expansion of our existing common stock repurchase program that allowed us to repurchase up to an additional $1.500 billion of our Class A common stock, excluding related excise taxes. As of December 28, 2024, the remaining availability under our Class A common stock repurchase program was approximately $428 million. Repurchases of shares of our Class A common stock are subject to overall business and market conditions.

See Note 13 to the accompanying consolidated financial statements for additional information relating to our Class A common stock repurchase program.

Dividends

We have generally maintained a regular quarterly cash dividend program on our common stock since 2003.

On May 16, 2024, our Board of Directors approved an increase to our quarterly cash dividend on our common stock from $0.75 to $0.825 per share.

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

See Note 13 to the accompanying consolidated financial statements for additional information relating to our quarterly cash dividend program.

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Material Cash Requirements

There have been no substantial changes to our material cash requirements as disclosed in our Fiscal 2024 10-K, other than those which occur in the ordinary course of business. Refer to the "Financial Condition and Liquidity — Contractual and Other Obligations" section of the MD&A in our Fiscal 2024 10-K for detailed disclosure of our material cash requirements as of March 30, 2024.

MARKET RISK MANAGEMENT

As discussed in Note 13 of the Fiscal 2024 10-K and Note 11 to the accompanying consolidated financial statements, we are exposed to a variety of levels and types of risks, including the impact of changes in currency exchange rates on foreign currency-denominated balances, certain anticipated cash flows of our international operations, and the value of reported net assets of our foreign operations, as well as changes in the fair value of our fixed-rate debt obligations relating to fluctuations in benchmark interest rates. Accordingly, in the normal course of business we assess such risks and, in accordance with our established policies and procedures, may use derivative financial instruments to manage and mitigate them. We do not use derivatives for speculative or trading purposes.

Given our use of derivative instruments, we are exposed to the risk that the counterparties to such contracts will fail to meet their contractual obligations. To mitigate such counterparty credit risk, it is our policy to only enter into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. Our established policies and procedures for mitigating credit risk include ongoing review and assessment of the creditworthiness of our counterparties. We also enter into master netting arrangements with counterparties, when possible, to further mitigate credit risk. As a result of the above considerations, we do not believe that we are exposed to undue concentration of counterparty risk with respect to our derivative contracts as of December 28, 2024. However, we do have in aggregate $62.0 million of derivative instruments in net asset positions held across eight creditworthy financial institutions.

Foreign Currency Risk Management

We manage our exposure to changes in foreign currency exchange rates using forward foreign currency exchange and cross-currency swap contracts. Refer to Note 11 to the accompanying consolidated financial statements for a summary of the notional amounts and fair values of our outstanding forward foreign currency exchange and cross-currency swap contracts, as well as the impact on earnings and other comprehensive income of such instruments as of December 28, 2024.

Forward Foreign Currency Exchange Contracts

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

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

Cross-Currency Swap Contracts

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

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

Investment Risk Management

As of December 28, 2024, we had cash and cash equivalents on-hand of $1.940 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 $203.0 million of short-term investments, consisting of investments in time deposits with original maturities greater than 90 days.

We actively monitor our exposure to changes in the fair value of our global investment portfolio in accordance with our established policies and procedures, which include monitoring both general and issuer-specific economic conditions, as discussed in Note 3 to the accompanying consolidated financial statements. Our investment objectives include capital preservation, maintaining adequate liquidity, diversification to minimize liquidity and credit risk, and achievement of maximum returns within the guidelines set forth in our investment policy. See Note 11 to the accompanying consolidated financial statements for further detail of the composition of our investment portfolio as of December 28, 2024.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are described in Note 3 of the Fiscal 2024 10-K. Our estimates are often based on complex judgments, assessments of probability, and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated amounts. For a complete discussion of our critical accounting policies, refer to the "Critical Accounting Policies" section of the MD&A in our Fiscal 2024 10-K.

There have been no significant changes in the application of our critical accounting policies since March 30, 2024.

Goodwill Impairment Assessment

We performed our annual goodwill assessment using a qualitative approach as of the beginning of the second quarter of Fiscal 2025. In performing the assessment, we identified and considered the significance of relevant key factors, events, and circumstances that affected the fair values and/or carrying amounts of our reporting units with allocated goodwill. These factors included external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as the Company's actual and expected financial performance. Additionally, we also considered the results of our most recent quantitative goodwill impairment test, which was performed as of the beginning of the second quarter of Fiscal 2024, the results of which indicated that the fair values of these reporting units significantly exceeded their respective carrying values. Based on the results of the qualitative impairment assessment, we concluded that it is not more likely than not that the fair values of our reporting units are less than their respective carrying values and there were no reporting units at risk of impairment.

RECENTLY ISSUED ACCOUNTING STANDARDS

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

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