UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-13057

Ralph Lauren Corporation

(Exact name of registrant as specified in its charter)

Delaware		13-2622036
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
650 Madison Avenue,		10022
New York,	New York	(Zip Code)
(Address of principal executive offices)

(212) 318-7000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on which Registered
Class A Common Stock, $.01 par value	RL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

At November 4, 2022, 41,091,215 shares of the registrant's Class A common stock, $.01 par value, and 24,881,276 shares of the registrant's Class B common stock, $.01 par value, were outstanding.

RALPH LAUREN CORPORATION

INDEX

		Page
PART I. FINANCIAL INFORMATION (Unaudited)
Item 1.	Financial Statements:
	Consolidated Balance Sheets	2
	Consolidated Statements of Operations	3
	Consolidated Statements of Comprehensive Income	4
	Consolidated Statements of Cash Flows	5
	Consolidated Statements of Equity	6
	Notes to Consolidated Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	63
Item 4.	Controls and Procedures	63
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	64
Item 1A.	Risk Factors	64
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
Item 6.	Exhibits	65
Signatures		66

1

RALPH LAUREN CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	October 1, 2022		April 2, 2022
	(millions)
ASSETS
Current assets:
Cash and cash equivalents	$	1,107.1	$	1,863.8
Short-term investments	309.6		734.6
Accounts receivable, net of allowances of $194.5 million and $214.7 million	489.6		405.4
Inventories	1,261.4		977.3
Income tax receivable	54.1		63.7
Prepaid expenses and other current assets	218.8		172.5
Total current assets	3,440.6		4,217.3
Property and equipment, net	899.1		969.5
Operating lease right-of-use assets	1,016.7		1,111.3
Deferred tax assets	243.0		303.8
Goodwill	865.5		908.7
Intangible assets, net	95.6		102.9
Other non-current assets	173.1		111.2
Total assets	$	6,733.6	$	7,724.7
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	—	$	499.8
Accounts payable	498.0		448.7
Current income tax payable	89.9		53.8
Current operating lease liabilities	244.6		262.0
Accrued expenses and other current liabilities	877.1		991.4
Total current liabilities	1,709.6		2,255.7
Long-term debt	1,137.5		1,136.5
Long-term finance lease liabilities	323.8		341.6
Long-term operating lease liabilities	1,036.7		1,132.2
Non-current income tax payable	73.6		98.9
Non-current liability for unrecognized tax benefits	86.6		91.9
Other non-current liabilities	110.2		131.9
Commitments and contingencies (Note 13)
Total liabilities	4,478.0		5,188.7
Equity:
Class A common stock, par value $.01 per share; 107.7 million and 106.9 million shares issued; 41.4 million and 45.0 million shares outstanding	1.0		1.0
Class B common stock, par value $.01 per share; 24.9 million shares issued and outstanding	0.3		0.3
Additional paid-in-capital	2,789.5		2,748.8
Retained earnings	6,448.1		6,274.9
Treasury stock, Class A, at cost; 66.3 million and 61.9 million shares	(6,726.0)		(6,308.7)
Accumulated other comprehensive loss	(257.3)		(180.3)
Total equity	2,255.6		2,536.0
Total liabilities and equity	$	6,733.6	$	7,724.7

See accompanying notes.

2

RALPH LAUREN CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended				Six Months Ended
	October 1, 2022		September 25, 2021		October 1, 2022		September 25, 2021
	(millions, except per share data)
Net revenues	$	1,579.9	$	1,504.1	$	3,070.5	$	2,880.4
Cost of goods sold	(556.8)		(488.9)		(1,046.0)		(897.1)
Gross profit	1,023.1		1,015.2		2,024.5		1,983.3
Selling, general, and administrative expenses	(809.3)		(754.9)		(1,629.9)		(1,483.1)
Impairment of assets	(0.2)		(0.7)		(0.2)		(19.3)
Restructuring and other charges, net	(6.9)		(7.7)		(12.5)		(8.4)
Total other operating expenses, net	(816.4)		(763.3)		(1,642.6)		(1,510.8)
Operating income	206.7		251.9		381.9		472.5
Interest expense	(9.5)		(13.6)		(21.3)		(26.9)
Interest income	6.6		1.2		10.2		3.0
Other expense, net	(3.7)		(1.4)		(8.5)		(0.5)
Income before income taxes	200.1		238.1		362.3		448.1
Income tax provision	(49.6)		(44.8)		(88.4)		(90.1)
Net income	$	150.5	$	193.3	$	273.9	$	358.0
Net income per common share:
Basic	$	2.21	$	2.61	$	3.97	$	4.84
Diluted	$	2.18	$	2.57	$	3.90	$	4.75
Weighted-average common shares outstanding:
Basic	68.0		74.0		69.0		73.9
Diluted	69.0		75.3		70.3		75.3
Dividends declared per share	$	0.75	$	0.6875	$	1.50	$	1.375

See accompanying notes.

3

RALPH LAUREN CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended				Six Months Ended
	October 1, 2022		September 25, 2021		October 1, 2022		September 25, 2021
	(millions)
Net income	$	150.5	$	193.3	$	273.9	$	358.0
Other comprehensive income (loss), net of tax:
Foreign currency translation gains (losses)	(56.5)		(9.8)		(95.8)		0.8
Net gains on cash flow hedges	7.3		1.1		18.9		0.1
Net losses on defined benefit plans	—		—		(0.1)		(0.1)
Other comprehensive income (loss), net of tax	(49.2)		(8.7)		(77.0)		0.8
Total comprehensive income	$	101.3	$	184.6	$	196.9	$	358.8

See accompanying notes.

4

RALPH LAUREN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	October 1, 2022		September 25, 2021
	(millions)
Cash flows from operating activities:
Net income	$	273.9	$	358.0
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	108.1		113.1
Deferred income tax expense (benefits)	36.1		(0.1)
Non-cash stock-based compensation expense	40.7		40.6
Non-cash impairment of assets	0.2		19.3
Bad debt expense (reversals)	0.6		(0.9)
Other non-cash charges	13.1		1.8
Changes in operating assets and liabilities:
Accounts receivable	(113.8)		26.6
Inventories	(345.8)		(199.0)
Prepaid expenses and other current assets	(59.6)		(17.7)
Accounts payable and accrued liabilities	31.8		145.7
Income tax receivables and payables	28.9		6.2
Operating lease right-of-use assets and liabilities, net	(12.3)		(20.2)
Other balance sheet changes	—		(9.2)
Net cash provided by operating activities	1.9		464.2
Cash flows from investing activities:
Capital expenditures	(83.9)		(63.4)
Purchases of investments	(431.2)		(756.4)
Proceeds from sales and maturities of investments	849.2		279.5
Other investing activities	(6.0)		(2.1)
Net cash provided by (used in) investing activities	328.1		(542.4)
Cash flows from financing activities:
Repayments of long-term debt	(500.0)		—
Payments of finance lease obligations	(10.8)		(11.7)
Payments of dividends	(99.1)		(50.5)
Repurchases of common stock, including shares surrendered for tax withholdings	(417.3)		(39.9)
Net cash used in financing activities	(1,027.2)		(102.1)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(60.6)		(11.0)
Net decrease in cash, cash equivalents, and restricted cash	(757.8)		(191.3)
Cash, cash equivalents, and restricted cash at beginning of period	1,872.0		2,588.0
Cash, cash equivalents, and restricted cash at end of period	$	1,114.2	$	2,396.7

See accompanying notes.

5

RALPH LAUREN CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	Three Months Ended October 1, 2022
	Common Stock(a)			Additional Paid-in Capital				Treasury Stock at Cost
						Retained Earnings							Total Equity
	Shares	Amount						Shares	Amount		AOCI(b)
	(millions)
Balance at July 2, 2022	132.3	$	1.3	$	2,767.0	$	6,347.3	64.3	$	(6,543.4)	$	(208.1)	$	2,364.1
Comprehensive income:
Net income						150.5
Other comprehensive loss											(49.2)
Total comprehensive income													101.3
Dividends declared						(49.7)							(49.7)
Repurchases of common stock								2.0	(182.6)				(182.6)
Stock-based compensation				22.5									22.5
Shares issued pursuant to stock-based compensation plans	0.3	—		—									—
Balance at October 1, 2022	132.6	$	1.3	$	2,789.5	$	6,448.1	66.3	$	(6,726.0)	$	(257.3)	$	2,255.6
	Three Months Ended September 25, 2021
	Common Stock(a)			Additional Paid-in Capital				Treasury Stock at Cost
						Retained Earnings							Total Equity
	Shares	Amount						Shares	Amount		AOCI(b)
	(millions)
Balance at June 26, 2021	131.6	$	1.3	$	2,685.5	$	5,987.1	58.0	$	(5,844.9)	$	(111.3)	$	2,717.7
Comprehensive income:
Net income						193.3
Other comprehensive loss											(8.7)
Total comprehensive income													184.6
Dividends declared						(50.6)							(50.6)
Repurchases of common stock								0.1	(11.1)				(11.1)
Stock-based compensation				22.2									22.2
Shares issued pursuant to stock-based compensation plans	0.2	—		—									—
Balance at September 25, 2021	131.8	$	1.3	$	2,707.7	$	6,129.8	58.1	$	(5,856.0)	$	(120.0)	$	2,862.8

(a)Includes Class A and Class B common stock.

(b)Accumulated other comprehensive income (loss).

6

RALPH LAUREN CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(Unaudited)

	Six Months Ended October 1, 2022
	Common Stock(a)			Additional Paid-in Capital				Treasury Stock at Cost
						Retained Earnings							Total Equity
	Shares	Amount						Shares	Amount		AOCI(b)
	(millions)
Balance at April 2, 2022	131.8	$	1.3	$	2,748.8	$	6,274.9	61.9	$	(6,308.7)	$	(180.3)	$	2,536.0
Comprehensive income:
Net income						273.9
Other comprehensive loss											(77.0)
Total comprehensive income													196.9
Dividends declared						(100.7)							(100.7)
Repurchases of common stock								4.4	(417.3)				(417.3)
Stock-based compensation				40.7									40.7
Shares issued pursuant to stock-based compensation plans	0.8	—		—									—
Balance at October 1, 2022	132.6	$	1.3	$	2,789.5	$	6,448.1	66.3	$	(6,726.0)	$	(257.3)	$	2,255.6
	Six Months Ended September 25, 2021
	Common Stock(a)			Additional Paid-in Capital				Treasury Stock at Cost
						Retained Earnings							Total Equity
	Shares	Amount						Shares	Amount		AOCI(b)
	(millions)
Balance at March 27, 2021	131.0	$	1.3	$	2,667.1	$	5,872.9	57.8	$	(5,816.1)	$	(120.8)	$	2,604.4
Comprehensive income:
Net income						358.0
Other comprehensive income											0.8
Total comprehensive income													358.8
Dividends declared						(101.1)							(101.1)
Repurchases of common stock								0.3	(39.9)				(39.9)
Stock-based compensation				40.6									40.6
Shares issued pursuant to stock-based compensation plans	0.8	—		—									—
Balance at September 25, 2021	131.8	$	1.3	$	2,707.7	$	6,129.8	58.1	$	(5,856.0)	$	(120.0)	$	2,862.8

(a)Includes Class A and Class B common stock.

(b)Accumulated other comprehensive income (loss).

See accompanying notes.

7

RALPH LAUREN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In millions, except per share data and where otherwise indicated)

(Unaudited)

1.    Description of Business

Ralph Lauren Corporation ("RLC") is a global leader in the design, marketing, and distribution of luxury lifestyle products, including apparel, footwear & accessories, home, fragrances, and hospitality. RLC's long-standing reputation and distinctive image have been developed across a wide range of products, brands, distribution channels, and international markets. RLC's brand names include Ralph Lauren, Ralph Lauren Collection, Ralph Lauren Purple Label, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, and Chaps, among others. RLC and its subsidiaries are collectively referred to herein as the "Company," "we," "us," "our," and "ourselves," unless the context indicates otherwise.

The Company diversifies its business by geography (North America, Europe, and Asia, among other regions) and channel of distribution (retail, wholesale, and licensing). This allows the Company to maintain a dynamic balance as its operating results do not depend solely on the performance of any single geographic area or channel of distribution. The Company sells directly to consumers through its integrated retail channel, which includes its retail stores, concession-based shop-within-shops, and digital commerce operations around the world. The Company's 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 the Company has licensed the right to operate in defined geographic territories using its trademarks. In addition, the Company licenses to third parties for specified periods the right to access its various trademarks in connection with the licensees' manufacture and sale of designated products, such as certain apparel, eyewear, fragrances, and home.

The Company organizes its business into the following three reportable segments: North America, Europe, and Asia. In addition to these reportable segments, the Company also has other non-reportable segments. See Note 17 for further discussion of the Company's segment reporting structure.

2.    Basis of Presentation

Interim Financial Statements

These interim consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") and are unaudited. In the opinion of management, these consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the consolidated financial position, income (loss), comprehensive income (loss), and cash flows of the Company for the interim periods presented. In addition, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP") and the notes thereto have been condensed or omitted from this report as is permitted by the SEC's rules and regulations. However, the Company believes that the disclosures provided herein are adequate to prevent the information presented from being misleading.

This report should be read in conjunction with the Company's Annual Report on Form 10-K filed with the SEC for the fiscal year ended April 2, 2022 (the "Fiscal 2022 10-K").

Basis of Consolidation

These unaudited interim consolidated financial statements present the consolidated financial position, income (loss), comprehensive income (loss), and cash flows of the Company, including all entities in which the Company has a controlling financial interest and is determined to be the primary beneficiary. All significant intercompany balances and transactions have been eliminated in consolidation.

Additionally, as discussed in Note 8, the Company completed the sale of its Club Monaco business at the end of its first quarter of Fiscal 2022 (as defined below) on June 26, 2021. As a result, assets and liabilities related to the Club Monaco business were deconsolidated from the consolidated statement of financial position effective June 26, 2021, with Club Monaco's operating results included in the consolidated statements of income (loss), comprehensive income (loss), and cash flows through the end of the first quarter of Fiscal 2022. Financial statements issued prior to this transaction were not affected.

8

RALPH LAUREN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fiscal Periods

The Company utilizes a 52-53 week fiscal year ending on the Saturday immediately before or after March 31. As such, fiscal year 2023 will end on April 1, 2023 and will be a 52-week period ("Fiscal 2023"). Fiscal year 2022 ended on April 2, 2022 and was a 53-week period ("Fiscal 2022"). The second quarter of Fiscal 2023 ended on October 1, 2022 and was a 13-week period. The second quarter of Fiscal 2022 ended on September 25, 2021 and was also a 13-week period.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and notes thereto. Actual results could differ materially from those estimates.

Significant estimates inherent in the preparation of the consolidated financial statements include reserves for bad debt, customer returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances; the realizability of inventory; reserves for litigation and other contingencies; useful lives and impairments of long-lived tangible and intangible assets; fair value measurements; accounting for income taxes and related uncertain tax positions; valuation of stock-based compensation awards and related forfeiture rates; and reserves for restructuring activity, among others.

Reclassifications

Certain reclassifications have been made to the prior periods' financial information in order to conform to the current period's presentation.

Seasonality of Business

The Company's business is typically affected by seasonal trends, with higher levels of retail sales in its second and third fiscal quarters and higher wholesale sales in its second and fourth fiscal quarters. These trends result primarily from the timing of key vacation travel, back-to-school, and holiday shopping periods impacting its retail business and the timing of seasonal wholesale shipments. As a result of changes in its 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 the Company's 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, the Company's operating results and cash flows for the three-month and six-month periods ended October 1, 2022 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 2023.

COVID-19 Pandemic

Beginning in the fourth quarter of the Company's fiscal year ended March 28, 2020 ("Fiscal 2020"), a novel strain of coronavirus commonly referred to as COVID-19 emerged and spread rapidly across the globe, including throughout all major geographies in which the Company operates, resulting in adverse economic conditions and widespread business disruptions. Since then, governments worldwide have periodically imposed varying degrees of preventative and protective actions, such as temporary travel bans, forced business closures, and stay-at-home orders, all in an effort to reduce the spread of the virus.

As a result of the COVID-19 pandemic, the Company has experienced varying degrees of business disruptions since its beginning, including periods of closure of its stores and corporate-related facilities, as have the Company's wholesale customers, licensing partners, and suppliers. Such disruptions continued throughout Fiscal 2022 in certain regions, although to a lesser extent than the widespread significant disruptions experienced during the Company's fiscal year ended March 27, 2021 ("Fiscal 2021"), and have since extended into Fiscal 2023, most notably in Asia where approximately 50% of the Company's stores in China experienced closures for a significant portion of the first quarter, followed by sporadic closures during the second quarter impacting approximately 35% of the Company’s mainland stores. Further, throughout the course of the pandemic, the majority of the Company's stores that were able to remain open have periodically been subject to limited operating hours and/or customer capacity levels in accordance with local health guidelines, with traffic remaining challenged. However, the Company's digital commerce operations have grown significantly from pre-pandemic levels, due in part to its investments and enhanced capabilities, as well as changes in consumer shopping preferences.

9

RALPH LAUREN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The COVID-19 pandemic also continues to adversely impact the Company's distribution, logistic, and sourcing partners, including temporary factory closures, labor shortages, vessel, container and other transportation shortages, and port congestion. Such disruptions have reduced the availability of inventory, delayed timing of inventory receipts, and resulted in increased costs for both the purchase and transportation of such inventory.

Despite the development of COVID-19 vaccines, the pandemic remains volatile and continues to evolve, with resurgences and outbreaks occurring in various parts of the world, including those resulting from variants of the virus. Accordingly, the Company cannot predict for how long and to what extent the pandemic will continue to impact its business operations or the overall global economy. The Company will continue to assess its operations location-by-location, considering the guidance of local governments and global health organizations.

3.    Summary of Significant Accounting Policies

Revenue Recognition

The Company recognizes revenue across all channels of the business when it satisfies its performance obligations by transferring control of promised products or services to its customers, which occurs either at a point in time or over time, depending on when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized considers terms of sale that create variability in the amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or services, and is subject to an overall constraint that a significant revenue reversal will not occur in future periods. Sales and other related taxes collected from customers and remitted to government authorities are excluded from revenue.

Revenue from the Company's retail business is recognized when the customer takes physical possession of the products, which occurs either at the point of sale for merchandise purchased at the Company's own retail stores and shop-within-shop locations, or upon receipt of shipment for merchandise ordered through direct-to-consumer digital commerce sites. Such revenues are recorded net of estimated returns based on historical trends. Payment is due at the point of sale.

Gift cards purchased by customers are recorded as a liability until they are redeemed for products sold by the Company's retail business, at which point revenue is recognized. The Company also estimates and recognizes revenue for gift card balances not expected to ever be redeemed (referred to as "breakage") to the extent that it does not have a legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdiction as unclaimed or abandoned property. Such estimates are based upon historical redemption trends, with breakage income recognized in proportion to the pattern of actual customer redemptions.

Revenue from the Company's wholesale business is generally recognized upon shipment of products, at which point title passes and risk of loss is transferred to the customer. In certain arrangements where the Company retains the risk of loss during shipment, revenue is recognized upon receipt of products by the customer. Wholesale revenue is recorded net of estimates of returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances. Returns and allowances require pre-approval from management and discounts are based on trade terms. Estimates for end-of-season markdown reserves are based on historical trends, actual and forecasted seasonal results, an evaluation of current economic and market conditions, retailer performance, and, in certain cases, contractual terms. Estimates for operational chargebacks are based on actual customer notifications of order fulfillment discrepancies and historical trends. The Company reviews and refines these estimates on at least a quarterly basis. The Company's historical estimates of these amounts have not differed materially from actual results.

Revenue from the Company's licensing arrangements is recognized over time during the period that licensees are provided access to the Company's trademarks (i.e., symbolic intellectual property) and benefit from such access through their own sales of licensed products. These arrangements require licensees to pay a sales-based royalty, which for most arrangements, may be subject to a contractually-guaranteed minimum royalty amount. Payments are generally due quarterly and, depending on time of receipt, may be recorded as a liability until recognized as revenue. The Company recognizes revenue for sales-based royalty arrangements (including those for which the royalty exceeds any contractually-guaranteed minimum royalty amount) as licensed products are sold by the licensee. If a sales-based royalty is not ultimately expected to exceed a contractually-guaranteed minimum royalty amount, the minimum is generally recognized as revenue ratably over the respective contractual period. This sales-based output measure of progress and pattern of recognition best represents the value transferred to the licensee over the term of the arrangement, as well as the amount of consideration that the Company is entitled to receive

10

RALPH LAUREN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

in exchange for providing access to its trademarks. As of October 1, 2022, contractually-guaranteed minimum royalty amounts expected to be recognized as revenue during future periods were as follows:

	Contractually-Guaranteed Minimum Royalties(a)
	(millions)
Remainder of Fiscal 2023	$	42.4
Fiscal 2024	98.7
Fiscal 2025	62.5
Fiscal 2026	43.8
Fiscal 2027	40.4
Fiscal 2028 and thereafter	11.3
Total	$	299.1

(a)Amounts presented do not contemplate potential contract renewals or royalties earned in excess of the contractually-guaranteed minimums.

Disaggregated Net Revenues

The following tables disaggregate the Company's net revenues into categories that depict how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors for the fiscal periods presented:

	Three Months Ended
	October 1, 2022										September 25, 2021
	North America		Europe		Asia		Other		Total		North America		Europe		Asia		Other		Total
	(millions)
Sales Channel(a):
Retail	$	424.0	$	204.8	$	288.2	$	—	$	917.0	$	421.9	$	229.5	$	248.4	$	0.4	$	900.2
Wholesale	302.6		288.7		28.2		—		619.5		281.2		266.0		21.5		0.3		569.0
Licensing	—		—		—		43.4		43.4		—		—		—		34.9		34.9
Total	$	726.6	$	493.5	$	316.4	$	43.4	$	1,579.9	$	703.1	$	495.5	$	269.9	$	35.6	$	1,504.1

	Six Months Ended
	October 1, 2022										September 25, 2021
	North America		Europe		Asia		Other		Total		North America		Europe		Asia		Other		Total
	(millions)
Sales Channel(a):
Retail	$	861.8	$	420.7	$	602.1	$	—	$	1,884.6	$	834.1	$	400.3	$	521.2	$	27.2	$	1,782.8
Wholesale	565.5		488.4		48.4		—		1,102.3		531.1		450.1		36.9		5.3		1,023.4
Licensing	—		—		—		83.6		83.6		—		—		—		74.2		74.2
Total	$	1,427.3	$	909.1	$	650.5	$	83.6	$	3,070.5	$	1,365.2	$	850.4	$	558.1	$	106.7	$	2,880.4

(a)Net revenues from the Company's retail and wholesale businesses are recognized at a point in time. Net revenues from the Company's licensing business are recognized over time.

11

RALPH LAUREN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Deferred Income

Deferred income represents cash payments received in advance of the Company's transfer of control of products or services to its customers and generally consists of unredeemed gift cards (net of breakage) and advance royalty payments from licensees. The Company's deferred income balances were $17.3 million and $16.6 million as of October 1, 2022 and April 2, 2022, respectively, and were primarily recorded within accrued expenses and other current liabilities within the consolidated balance sheets. The majority of the deferred income balance as of October 1, 2022 is expected to be recognized as revenue within the next twelve months.

Shipping and Handling Costs

Costs associated with shipping goods to customers are accounted for as fulfillment activities and reflected as selling, general, and administrative ("SG&A") expenses in the consolidated statements of operations. Costs of preparing merchandise for sale, such as picking, packing, warehousing, and order charges ("handling costs"), are also included in SG&A expenses. Shipping and handling costs billed to customers are included in revenue.

A summary of shipping and handling costs for the fiscal periods presented is as follows:

	Three Months Ended				Six Months Ended
	October 1, 2022		September 25, 2021		October 1, 2022		September 25, 2021
	(millions)
Shipping costs	$	17.7	$	14.0	$	35.0	$	28.8
Handling costs	39.7		35.8		76.7		70.2

Net Income per Common Share

Basic net income per common share is computed by dividing net income attributable to common shares by the weighted-average number of common shares outstanding during the period. Weighted-average common shares include shares of the Company's Class A and Class B common stock. Diluted net income per common share adjusts basic net income per common share for the dilutive effects of outstanding restricted stock units ("RSUs"), stock options, and any other potentially dilutive instruments, only for the periods in which such effects are dilutive.

The weighted-average number of common shares outstanding used to calculate basic net income per common share is reconciled to shares used to calculate diluted net income per common share as follows:

	Three Months Ended		Six Months Ended
	October 1, 2022	September 25, 2021	October 1, 2022	September 25, 2021
	(millions)
Basic shares	68.0	74.0	69.0	73.9
Dilutive effect of RSUs and stock options	1.0	1.3	1.3	1.4
Diluted shares	69.0	75.3	70.3	75.3

All earnings per share amounts have been calculated using unrounded numbers. The Company has outstanding performance-based RSUs, which are included in the computation of diluted shares only to the extent that the underlying performance conditions (i) have been satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive. In addition, options to purchase shares of the Company's Class A common stock at an exercise price greater than the average market price of such common stock during the reporting period are anti-dilutive and therefore not included in the computation of diluted net income per common share. As of both October 1, 2022 and September 25, 2021, there were 0.4 million of additional shares issuable contingent upon vesting of performance-based RSUs and/or upon exercise of anti-dilutive stock options that were excluded from the diluted shares calculations.

12

RALPH LAUREN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Accounts Receivable

In the normal course of business, the Company extends credit to wholesale customers that satisfy certain defined credit criteria. Payment is generally due within 30 to 120 days and does not involve a significant financing component. Accounts receivable are recorded at amortized cost, which approximates fair value, and are presented in the consolidated balance sheets net of certain reserves and allowances. These reserves and allowances consist of (i) reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances (see the "Revenue Recognition" section above for further discussion of related accounting policies) and (ii) allowances for doubtful accounts.

A rollforward of the activity in the Company's reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances is presented as follows:

	Three Months Ended				Six Months Ended
	October 1, 2022		September 25, 2021		October 1, 2022		September 25, 2021
	(millions)
Beginning reserve balance	$	157.4	$	178.9	$	180.7	$	173.7
Amount charged against revenue to increase reserve	115.5		101.6		202.2		188.7
Amount credited against customer accounts to decrease reserve	(99.4)		(94.0)		(202.7)		(177.2)
Foreign currency translation	(6.7)		(1.7)		(13.4)		(0.4)
Ending reserve balance	$	166.8	$	184.8	$	166.8	$	184.8

An allowance for doubtful accounts is determined through analysis of accounts receivable aging, assessments of collectability based on evaluation of historical trends, the financial condition of the Company's customers and their ability to withstand prolonged periods of adverse economic conditions, and evaluation of the impact of current and forecasted economic and market conditions over the related asset's contractual life, among other factors.

A rollforward of the activity in the Company's allowance for doubtful accounts is presented as follows:

	Three Months Ended				Six Months Ended
	October 1, 2022		September 25, 2021		October 1, 2022		September 25, 2021
	(millions)
Beginning reserve balance	$	27.7	$	38.6	$	34.0	$	40.1
Amount recorded to expense to increase (decrease) reserve(a)	2.5		0.1		0.6		(0.9)
Amount written-off against customer accounts to decrease reserve	(1.6)		(0.6)		(4.9)		(1.3)
Foreign currency translation	(0.9)		(0.2)		(2.0)		—
Ending reserve balance	$	27.7	$	37.9	$	27.7	$	37.9

(a)Amounts recorded to bad debt expense are included within SG&A expenses in the consolidated statements of operations.

13

RALPH LAUREN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Concentration of Credit Risk

The Company sells its wholesale merchandise primarily to major department stores, specialty stores, and third-party digital partners around the world, and extends credit based on an evaluation of each customer's financial capacity and condition, usually without requiring collateral. In the Company's wholesale business, concentration of credit risk is relatively limited due to the large number of customers and their dispersion across many geographic areas. However, the Company has three key wholesale customers that generate significant sales volume. During Fiscal 2022, the Company's sales to its three largest wholesale customers accounted for approximately 16% of total net revenues. Substantially all of the Company's sales to its three largest wholesale customers related to its North America segment. As of October 1, 2022, these three key wholesale customers accounted for approximately 34% of total gross accounts receivable.

Inventories

The Company holds inventory that is sold in its retail stores and digital commerce sites directly to consumers. The Company also holds inventory that is to be sold through wholesale distribution channels to major department stores, specialty stores, and third-party digital partners. Substantially all of the Company's inventories consist of finished goods, which are stated at the lower of cost or estimated realizable value, with cost determined on a weighted-average cost basis. Inventory held by the Company totaled $1.261 billion, $977.3 million, and $928.2 million as of October 1, 2022, April 2, 2022, and September 25, 2021, respectively.

Derivative Financial Instruments

The Company records derivative financial instruments on its consolidated balance sheets at fair value. Changes in the fair value of derivative instruments that are designated and qualify for hedge accounting are either (i) offset through earnings against the changes in fair value of the related hedged assets, liabilities, or firm commitments or (ii) recognized in equity as a component of accumulated other comprehensive income (loss) ("AOCI") until the hedged item is recognized in earnings, depending on whether the instrument is hedging against changes in fair value or cash flows and net investments, respectively.

Each derivative instrument that qualifies for hedge accounting is expected to be highly effective in offsetting the risk associated with the related exposure. For each instrument that is designated as a hedge, the Company documents the related risk management objective and strategy, including identification of the hedging instrument, the hedged item, and the risk exposure, as well as how hedge effectiveness will be assessed over the instrument's term. To assess hedge effectiveness at the inception of a hedging relationship, the Company generally uses regression analysis, a statistical method, to evaluate how changes in the fair value of the derivative instrument are expected to offset changes in the fair value or cash flows of the related hedged item. The extent to which a hedging instrument has been and is expected to remain highly effective in achieving offsetting changes in fair value or cash flows is assessed by the Company on at least a quarterly basis.

Given its use of derivative instruments, the Company is exposed to the risk that counterparties to such contracts will fail to meet their contractual obligations. To mitigate such counterparty credit risk, the Company's policy is 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. The Company's established policies and procedures for mitigating credit risk include ongoing review and assessment of its counterparties' creditworthiness. The Company also enters into master netting arrangements with counterparties, when possible, to further mitigate credit risk. In the event of default or termination, these arrangements allow the Company to net-settle amounts payable and receivable related to multiple derivative transactions with the same counterparty. The master netting arrangements specify a number of events of default and termination, including the failure to make timely payments.

The fair values of the Company's derivative instruments are recorded on its consolidated balance sheets on a gross basis. For cash flow reporting purposes, proceeds received or amounts paid upon the settlement of a derivative instrument are classified in the same manner as the related item being hedged, primarily within cash flows from operating activities for its forward foreign exchange contracts and within cash flows from investing activities for its cross-currency swap contracts, both as discussed below.

14

RALPH LAUREN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash Flow Hedges

The Company uses forward foreign currency exchange contracts to mitigate its risk related to exchange rate fluctuations on inventory transactions made in an entity's non-functional currency. To the extent designated as cash flow hedges, related gains or losses on such instruments are initially deferred in equity as a component of AOCI and are subsequently recognized within cost of goods sold in the consolidated statements of operations when the related inventory is sold.

If a derivative instrument is dedesignated or if hedge accounting is discontinued because the instrument is not expected to be highly effective in hedging the designated exposure, any further gains (losses) are recognized in earnings each period within other income (expense), net. Upon discontinuance of hedge accounting, the cumulative change in fair value of the derivative instrument recorded in AOCI is recognized in earnings when the related hedged item affects earnings, consistent with the hedging strategy, unless the related forecasted transaction is probable of not occurring, in which case the accumulated amount is immediately recognized within other income (expense), net.

Hedges of Net Investments in Foreign Operations

The Company periodically uses cross-currency swap contracts to reduce risk associated with exchange rate fluctuations on certain of its net investments in foreign subsidiaries. Changes in the fair values of such derivative instruments that are designated as hedges of net investments in foreign operations are recorded in equity as a component of AOCI in the same manner as foreign currency translation adjustments. In assessing the effectiveness of such hedges, the Company uses a method based on changes in spot rates to measure the impact of foreign currency exchange rate fluctuations on both its foreign subsidiary net investment and the related hedging instrument. Under this method, changes in the fair value of the hedging instrument other than those due to changes in the spot rate are initially recorded in AOCI as a translation adjustment and are amortized into earnings as interest expense using a systematic and rational method over the instrument's term. Changes in fair value associated with the effective portion (i.e., those due to changes in the spot rate) are recorded in AOCI as a translation adjustment and are released and recognized in earnings only upon the sale or liquidation of the hedged net investment.

Undesignated Hedges

The Company uses undesignated hedges primarily to hedge foreign currency exchange rate risk related to third-party and intercompany balances and exposures. Changes in the fair values of such instruments are recognized in earnings each period within other income (expense), net.

See Note 12 for further discussion of the Company's derivative financial instruments.

Refer to Note 3 of the Fiscal 2022 10-K for a summary of all of the Company's significant accounting policies.

15

RALPH LAUREN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.