RALPH LAUREN CORP
For the period ended Jun 29, 2024. Filed Aug 7, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 29, 2024 · Filed Aug 7, 2024
RL$376.56-1.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-30; filed 2024-02-08.
0001037038-24-000008
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-29; filed 2024-08-07.
0001037038-24-000022
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 234 previous paragraphs and 196 current paragraphs.
111 unchanged; 69 reworded; 16 added; 41 removed; 13 previous and 0 current paragraphs rearranged.
Tables are not compared: 21 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
Recent Developments
Current report
Next Generation Transformation Project
Current report
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.
Current report
In connection with the preliminary phase of the NGT project, we incurred other charges of $2.3 million during the three-month period ended June 29, 2024, which were recorded within restructuring and other charges, net in the consolidated statements of operations.
Current report
Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues during the three months ended June 29, 2024 increased by 70 basis points to 56.2% as compared to the prior fiscal year period, driven by higher marketing investments due to the planned timing of key campaign events.
Current report
During the three-month periods ended June 29, 2024 and July 1, 2023, our operating results were negatively impacted by net restructuring-related charges and certain other charges (benefits) totaling $7.4 million and $33.7 million, respectively, which had an after-tax effect of reducing net income by $6.0 million, or $0.09 per diluted share, and $25.9 million, or $0.38 per diluted share, respectively.
Current report
Net Revenues. Net revenues increased by $15.7 million, or 1.1%, to $1.512 billion during the three months ended June 29, 2024 as compared to the three months ended July 1, 2023, including unfavorable foreign currency effects of $26.1 million. On a constant currency basis, net revenues increased by $41.8 million, or 2.8%, driven by our direct-to-consumer channels and international businesses.
Current report
The $23.5 million decline in North America net revenues was driven by:
Current report
•a $29.2 million decline related to our North America wholesale business driven by receipt timing shifts and planned reductions in excess product sales within the off-price wholesale channel.
Current report
Europe net revenues — Net revenues increased by $28.6 million, or 6.3%, during the three months ended June 29, 2024 as compared to the three months ended July 1, 2023. On a constant currency basis, net revenues increased by $32.3 million, or 7.2%.
Current report
•an $18.4 million increase related to our Europe retail business, inclusive of unfavorable foreign currency effects of $2.0 million. On a constant currency basis, net revenues increased by $20.4 million, reflecting increases of $18.3 million in comparable store sales and $2.1 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Europe retail business:
Current report
Asia net revenues — Net revenues increased by $13.4 million, or 3.6%, during the three months ended June 29, 2024 as compared to the three months ended July 1, 2023. On a constant currency basis, net revenues increased by $35.3 million, or 9.4%.
Current report
•an $18.7 million increase related to our Asia retail business, inclusive of unfavorable foreign currency effects of $20.7 million. On a constant currency basis, net revenues increased by $39.4 million, reflecting increases of $26.0 million in comparable store sales and $13.4 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Asia retail business:
Current report
Europe operating margin improved by 360 basis points, primarily due to the net favorable impact of approximately 420 basis points driven by an increase in gross margin, partially offset by an increase in SG&A expenses as a percentage of net revenues. The overall improvement in operating margin was partially offset by unfavorable foreign currency effects of 50 basis points, as well as the unfavorable impact of 10 basis points attributable to the absence of bad debt expense reversals recorded during the three months ended June 29, 2024 as compared to the prior fiscal year period.
Current report
•an unfavorable change related to our prepaid expenses and other current assets largely driven by the timing of cash payments;
Current report
•an unfavorable change in inventory driven by higher in-transit inventory, as well as higher product and freight costs.
Removed paragraphs (41)
Previous report
Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues during the three months ended December 30, 2023 increased by 80 basis points to 50.0% and by 160 basis points to 53.2% during the nine months ended December 30, 2023, primarily driven by higher compensation-related expenses, rent and occupancy costs, and marketing and advertising expenses.
Previous report
Our operating results during the three months ended December 30, 2023 were favorably impacted by net restructuring-related benefits 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 three months ended December 31, 2022, our operating results were negatively impacted by net restructuring-related charges and certain other charges (benefits) of $11.8 million, which had an after-tax effect of reducing net income by $9.6 million, or $0.15 per diluted share. During the nine-month periods ended December 30, 2023 and December 31, 2022, our operating results were negatively impacted by net restructuring-related charges and certain other charges (benefits) totaling $40.7 million and $31.3 million, respectively, which had an after-tax effect of reducing net income by $30.2 million, or $0.45 per diluted share, and $24.3 million, or $0.35 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.
Previous report
(b)Impairment of assets are recorded within SG&A expenses in the consolidated statements of operations. The impairment recorded during the nine months ended December 31, 2022 related to the write-down of certain long-lived assets in connection with our restructuring plans.
Previous report
•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.
Previous report
Net Revenues. Net revenues increased by $101.7 million, or 5.6%, to $1.934 billion during the three months ended December 30, 2023 as compared to the three months ended December 31, 2022, including favorable foreign currency effects of $15.1 million. On a constant currency basis, net revenues increased by $86.6 million, or 4.7%, driven by our international businesses.
Previous report
Our global average store count increased by 14 stores and concession shops during the three months ended December 30, 2023 compared with the three months ended December 31, 2022, driven by new openings primarily in Asia. The following table details our retail store presence by segment as of the periods presented:
Previous report
The $4.3 million decline in North America net revenues was driven by:
Previous report
•a $43.9 million decline related to our North America wholesale business as we carefully manage sell-ins to our wholesale customers to better align with consumer demand.
Previous report
Europe net revenues — Net revenues increased by $52.2 million, or 11.1%, during the three months ended December 30, 2023 as compared to the three months ended December 31, 2022. On a constant currency basis, net revenues increased by $30.0 million, or 6.4%.
Previous report
•a $42.4 million increase related to our Europe retail business, inclusive of favorable foreign currency effects of $11.3 million. On a constant currency basis, net revenues increased by $31.1 million, reflecting increases of $28.1 million in comparable store sales and $3.0 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Europe retail business:
Previous report
•a $9.8 million increase related to our Europe wholesale business largely driven by favorable foreign currency effects of $10.9 million and stronger re-order trends, largely offsetting the negative impact of lapping the prior fiscal year period's favorable post-pandemic wholesale allowances and a shift in timing of certain shipments earlier in the fiscal year to maximize full-price selling.
Previous report
Asia net revenues — Net revenues increased by $60.2 million, or 15.6%, during the three months ended December 30, 2023 as compared to the three months ended December 31, 2022. On a constant currency basis, net revenues increased by $67.5 million, or 17.5%.
Previous report
•a $63.9 million increase related to our Asia retail business, inclusive of unfavorable foreign currency effects of $7.1 million. On a constant currency basis, net revenues increased by $71.0 million, reflecting increases of $45.8 million in comparable store sales and $25.2 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Asia retail business:
Previous report
Operating Income. Operating income increased by $35.6 million, or 12.6%, to $317.7 million for the three months ended December 30, 2023, reflecting favorable foreign currency effects of $5.1 million. Additionally, our operating results included net restructuring-related charges and certain other charges (benefits), which had a favorable impact of $0.2 million during the three months ended December 30, 2023 and an unfavorable impact of $11.8 million during the three months ended December 31, 2022. Operating income as a percentage of net revenues was 16.4% for the three months ended December 30, 2023, reflecting a 100 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, partially offset by the increase in SG&A expenses as a percentage of net revenues, both as previously discussed.
Previous report
Europe operating margin improved by 40 basis points, primarily due in part to the net favorable impact of approximately 10 basis points driven by an increase in gross margin, largely offset by an increase in SG&A expenses as a percentage of net revenues, both largely attributable to channel mix. The overall improvement in operating margin also reflected favorable foreign currency effects of 20 basis points and the favorable impact of 10 basis points attributable to lower non-routine inventory charges recorded during the three months ended December 30, 2023 as compared to the prior fiscal year period.
Previous report
Asia operating margin improved by 90 basis points, primarily due to the net favorable impact of approximately 80 basis points driven by a decline in SG&A expenses as a percentage of net revenues, partially offset by a decline in gross margin. The overall improvement in operating margin also reflected favorable foreign currency effects of 10 basis points.
Previous report
Unallocated corporate expenses decreased by $14.1 million to $147.2 million during the three months ended December 30, 2023. The decline in unallocated corporate expenses was due to lower marketing and advertising expenses of $12.3 million, lower consulting fees of $5.3 million, and lower other expenses of $13.0 million, partially offset by higher compensation-related expenses of $16.5 million.
Previous report
Net Income. Net income increased to $276.6 million for the three months ended December 30, 2023, from $216.5 million for the three months ended December 31, 2022. The $60.1 million increase in net income was due to our higher operating income and non-operating income, net, as well as the decrease in our income tax provision, all as previously discussed. Additionally, our operating results during the three months ended December 30, 2023 were favorably impacted by net restructuring-related benefits and certain other charges (benefits) of $0.2 million, which had an after-tax effect of increasing net income by $1.5 million. During the three months ended December 31, 2022, our operating results were negatively impacted by net restructuring-related charges and certain other charges (benefits) of $11.8 million, which had an after-tax effect of reducing net income by $9.6 million.
Previous report
Nine Months Ended December 30, 2023 Compared to Nine Months Ended December 31, 2022
Previous report
Net Revenues. Net revenues increased by $160.7 million, or 3.3%, to $5.063 billion during the nine months ended December 30, 2023 as compared to the nine months ended December 31, 2022, including favorable foreign currency effects of $30.4 million. On a constant currency basis, net revenues increased by $130.3 million, or 2.7%, driven by our international businesses.
Previous report
North America net revenues — Net revenues decreased by $82.1 million, or 3.5%, during the nine months ended December 30, 2023 as compared to the nine months ended December 31, 2022. On a constant currency basis, net revenues decreased by $79.8 million, or 3.4%.
Previous report
The $82.1 million decline in North America net revenues was driven by:
Previous report
•a $108.7 million decline related to our North America wholesale business as we carefully manage sell-ins to our wholesale customers to better align with consumer demand, as well as the return to a more normalized timing of shipments following last year's supply chain disruption.
Previous report
•a $26.6 million increase related to our North America retail business. On a constant currency basis, net revenues increased by $27.8 million, reflecting increases of $26.8 million in comparable store sales and $1.0 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our North America retail business:
Previous report
Europe net revenues — Net revenues increased by $120.4 million, or 8.7%, during the nine months ended December 30, 2023 as compared to the nine months ended December 31, 2022. On a constant currency basis, net revenues increased by $56.9 million, or 4.1%.
Previous report
•an $86.8 million increase related to our Europe retail business, inclusive of favorable foreign currency effects of $29.2 million. On a constant currency basis, net revenues increased by $57.6 million, reflecting increases of $46.0 million in comparable store sales and $11.6 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Europe retail business:
Previous report
Asia net revenues — Net revenues increased by $135.6 million, or 13.1%, during the nine months ended December 30, 2023 as compared to the nine months ended December 31, 2022. On a constant currency basis, net revenues increased by $166.4 million, or 16.0%.
Previous report
•a $132.0 million increase related to our Asia retail business, inclusive of unfavorable foreign currency effects of $28.9 million. On a constant currency basis, net revenues increased by $160.9 million, reflecting increases of $100.2 million in comparable store sales and $60.7 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Asia retail business:
Previous report
Gross Profit. Gross profit increased by $172.9 million, or 5.4%, to $3.388 billion for the nine months ended December 30, 2023, including favorable foreign currency effects of $12.2 million. Gross profit as a percentage of net revenues increased to 66.9% for the nine months ended December 30, 2023 from 65.6% for the nine months ended December 31, 2022. The 130 basis point increase was primarily driven by lower freight costs, favorable geographic and channel mix, higher pricing, and lower non-routine inventory charges recorded during the nine months ended December 30, 2023 as compared to the prior fiscal year period, all partially offset by higher product costs.
Previous report
Selling, General, and Administrative Expenses. SG&A expenses increased by $163.0 million, or 6.4%, to $2.694 billion for the nine months ended December 30, 2023, including unfavorable foreign currency effects of $0.3 million. SG&A expenses as a percentage of net revenues increased to 53.2% for the nine months ended December 30, 2023 from 51.6% for the nine months ended December 31, 2022. The 160 basis point increase was driven by operating deleverage as SG&A expense growth outpaced revenue growth, largely attributable to geographic and channel mix resulting from growth of our international and retail businesses which typically carry higher operating expense margins.
Previous report
North America operating margin declined by 80 basis points, primarily due to the net unfavorable impact of approximately 140 basis points driven by an increase in SG&A expenses as a percentage of net revenues, partially offset by an increase in gross margin, both largely due to channel mix. This decline in overall operating margin was partially offset by the favorable impact of 60 basis points attributable to lower non-routine inventory charges recorded during the nine months ended December 30, 2023 as compared to the prior fiscal year period.
Previous report
Europe operating margin improved by 60 basis points, primarily due to favorable foreign currency effects of 40 basis points. The overall improvement in operating margin also reflected approximately 30 basis points driven by an increase in gross margin, partially offset by an increase in SG&A expenses as a percentage of net revenues, both largely due to channel mix. The improvement also reflected the favorable impact of 20 basis points attributable to lower non-routine inventory charges recorded during the nine months ended December 30, 2023 as compared to the prior fiscal year period. These improvements in operating margin were partially offset by the unfavorable impact of approximately 30 basis points attributable to channel mix.
Previous report
Unallocated restructuring and other charges, netincreased by $25.3 million to $45.6 million during the nine months ended December 30, 2023, as previously discussed above and in Note 7 to the accompanying consolidated financial statements.
Previous report
Income Tax Provision. The income tax provision and effective tax rate for the nine months ended December 30, 2023 were $110.3 million and 16.6%, respectively, compared to $152.3 million and 23.7%, respectively, for the nine months ended December 31, 2022. The $42.0 million decrease in our income tax provision was primarily driven by a 710 basis point decline in our effective tax rate, partially offset by an increase in our pretax income. The decline in our effective tax rate was due to a deferred tax benefit recognized as a result of transactions entered into as part of a reorganization of the Company's legal entity structure, the favorable impact of remeasuring net deferred tax assets as a result of recently enacted changes in tax legislation, and the absence of unfavorable prior year adjustments related to certain deferred tax assets and receivables. The decline in our effective tax rate was also due to 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 effective tax rate by 170 basis points. See Note 8 to the accompanying consolidated financial statements.
Previous report
Net Income per Diluted Share. Net income per diluted share increased to $8.31 for the nine months ended December 30, 2023, from $7.07 for the nine months ended December 31, 2022. The $1.24 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 30, 2023 driven by our share repurchases during the last twelve months. Net income per diluted share for the nine-month periods ended December 30, 2023 and December 31, 2022 were also negatively impacted by $0.45 per share and $0.35 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.
Previous report
•a favorable change related to our inventories, largely driven by a more normalized receipt cadence;
Previous report
•an unfavorable change related to our income tax receivables and payables largely driven by timing of cash receipts and payments, respectively.
Previous report
•a $500.0 million decrease in cash used to repay debt. During the nine months ended December 30, 2023, we did not issue or repay any debt. On a comparative basis, during the nine months ended December 31, 2022, we repaid our previously outstanding $500.0 million principal amount of unsecured 1.700% senior notes that matured on June 15, 2022; and
Previous report
As discussed in Note 8 to the accompanying consolidated financial statements, the Inflation Reduction Act ("IRA") was signed into law by President Biden in August 2022. Among its various provisions, the IRA imposes a 1% excise tax on share repurchases made after December 31, 2022.
Previous report
Goodwill Impairment Assessment
Showing the first 40 of 41 passages. Open the source sections for the rest.
Reworded paragraphs (69)
Previous wording
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 environmental, social, and governance 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:
Current wording
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:
Previous wording
•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), 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 the emerging Red Sea crisis and/or disruptions to major waterways such as the Suez and Panama canals;
Current wording
•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), 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 the recent Red Sea crisis and/or disruptions to major waterways such as the Suez and Panama canals;
Previous wording
•our ability to recruit and retain employees to operate our retail stores, distribution centers, and various corporate functions;
Current wording
•our ability to recruit and retain qualified employees to operate our retail stores, distribution centers, and various corporate functions;
Previous wording
•our ability to achieve our goals regarding environmental, social, and governance practices, including those related to climate change and our human capital;
Current wording
•our ability to achieve our goals regarding citizenship and sustainability practices, including those related to climate change, our human capital, and our supply chain;
Previous wording
•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 and military conflicts;
Current wording
•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;
Previous wording
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 immediately before or after March 31. As such, fiscal year 2024 will end on March 30, 2024 and will be a 52-week period ("Fiscal 2024"). Fiscal year 2023 ended on April 1, 2023 and was also a 52-week period ("Fiscal 2023"). The third quarter of Fiscal 2024 ended on December 30, 2023 and was a 13-week period. The third quarter of Fiscal 2023 ended on December 31, 2022 and was also a 13-week period.
Current wording
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 first quarter of Fiscal 2025 ended on June 29, 2024 and was a 13-week period. The first quarter of Fiscal 2024 ended on July 1, 2023 and was also a 13-week period.
Previous wording
•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 30, 2023. In addition, this section includes a discussion of transactions affecting comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future trends.
Current wording
•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 period ended June 29, 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.
Previous wording
•Results of operations. This section provides an analysis of our results of operations for the three-month and nine-month periods ended December 30, 2023 as compared to the three-month and nine-month periods ended December 31, 2022.
Current wording
•Results of operations. This section provides an analysis of our results of operations for the three-month period ended June 29, 2024 as compared to the three-month period ended July 1, 2023.
Previous wording
•Financial condition and liquidity. This section provides a discussion of our financial condition and liquidity as of December 30, 2023, 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 30, 2023 as compared to the nine months ended December 31, 2022; (iii) an analysis of our liquidity, including the availability under our commercial paper borrowing program and credit facilities, our supplier finance program, our 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 April 1, 2023.
Current wording
•Financial condition and liquidity. This section provides a discussion of our financial condition and liquidity as of June 29, 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 three months ended June 29, 2024 as compared to the three months ended July 1, 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.
Previous wording
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, Polo Ralph Lauren, Double RL, Lauren Ralph Lauren, Polo Ralph Lauren Children, and Chaps, among others.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
•North America— Our North America segment, representing approximately 47% of our Fiscal 2023 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 site, www.RalphLauren.com. Our wholesale business in North America is comprised primarily of sales to department stores and, to a lesser extent, specialty stores.
Current wording
•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.
Previous wording
•Europe— Our Europe segment, representing approximately 29% of our Fiscal 2023 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 partners.
Current wording
•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.
Previous wording
•Asia— Our Asia segment, representing approximately 22% of our Fiscal 2023 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, with related products distributed through shop-within-shops.
Current wording
•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.
Previous wording
Approximately 53% of our Fiscal 2023 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.
Current wording
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.
Previous wording
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 30, 2023 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 2024.
Current wording
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 period ended June 29, 2024 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 2025.
Previous wording
The global economy and retail industry are impacted by many different factors. Changes in economic conditions, most notably inflationary pressures (including increases in the cost of raw materials, transportation, and salaries & benefits), rising 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.) have become increasingly more promotional in an attempt to offset traffic declines and increase conversion. Certain other worldwide events and factors, such as international trade relations, new legislation and regulations, taxation or monetary policy changes, political and civil unrest, growing diplomatic tensions, and disruptions to major waterways used for international trade such as the Suez and Panama canals, among other factors, have also adversely impacted the global economy. The continuation of these trends could have a material adverse effect on our business or operating results.
Current wording
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), 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.) have become increasingly more promotional 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, with over 60 countries scheduled to hold national elections during 2024, including the U.S. presidential election in November. Any resulting changes in international trade relations, legislation and regulations (including those related to taxation 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.
Previous wording
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 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. Although our business has not been significantly impacted by the emerging Red Sea crisis, it could lead to shipping delays, inventory shortages, and/or higher freight costs in the near future and beyond. 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.
Current wording
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. Although our business has not been significantly impacted by the recent Red Sea crisis, we have experienced some shipping delays impacting the timing of receipts, and the continuation of such disruptions over a prolonged period could result in further inventory receipt delays and/or higher freight costs in the near-term and beyond. 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.
Previous wording
During the three months ended December 30, 2023, we reported net revenues of $1.934 billion, net income of $276.6 million, and net income per diluted share of $4.19, as compared to net revenues of $1.832 billion, net income of $216.5 million, and net income per diluted share of $3.20 during the three months ended December 31, 2022. During the nine months ended December 30, 2023, we reported net revenues of $5.063 billion, net income of $555.6 million, and net income per diluted share of $8.31, as compared to net revenues of $4.903 billion, net income of $490.4 million, and net income per diluted share of $7.07 during the nine months ended December 31, 2022. The comparability of our operating results has been affected by net restructuring-related charges and certain other benefits (charges), as well as non-recurring income tax events. We also continue to experience varying degrees of business disruptions resulting from the current macroeconomic environment, including inflationary pressures, ongoing military conflicts taking place in various parts of the world, and foreign currency volatility.
Current wording
During the three months ended June 29, 2024, we reported net revenues of $1.512 billion, net income of $168.6 million, and net income per diluted share of $2.61, as compared to net revenues of $1.496 billion, net income of $132.1 million, and net income per diluted share of $1.96 during the three months ended July 1, 2023. The comparability of our operating results has been affected by net restructuring-related charges and certain other benefits (charges). We also continue to experience varying degrees of business disruptions resulting from the current macroeconomic environment, including inflationary pressures, ongoing military conflicts taking place in various parts of the world, and foreign currency volatility, among other factors.
Previous wording
Our operating performance for the three-month and nine-month periods ended December 30, 2023 reflected revenue increases of 5.6% and 3.3%, respectively, on a reported basis and 4.7% and 2.7% on a constant currency basis, as defined within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition" below. Net revenue growth was led by our international businesses.
Current wording
Our operating performance for the three months ended June 29, 2024 as compared to the prior fiscal year period reflected revenue increases of 1.1% on a reported basis and 2.8% on a constant currency basis, as defined within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition" below. Net revenue growth was led by our direct-to-consumer channels and international businesses.
Previous wording
Our gross profit as a percentage of net revenues increased by 150 basis points to 66.5% during the three months ended December 30, 2023 and by 130 basis points to 66.9% during the nine months ended December 30, 2023, primarily driven by lower freight costs, favorable geographic and channel mix, higher pricing, and lower non-routine inventory charges recorded during the three-month and nine-month periods ended December 30, 2023 as compared to the prior fiscal year periods, all partially offset by higher product costs.
Current wording
Our gross profit as a percentage of net revenues increased by 150 basis points to 70.5% during the three months ended June 29, 2024 as compared to the prior fiscal year period, primarily driven by favorable product, channel, and geographic mix shifts, lower cotton costs, and average unit retail ("AUR") growth, partially offset by higher other product costs and unfavorable foreign currency effects.
Previous wording
Net income increased by $60.1 million to $276.6 million during the three months ended December 30, 2023 as compared to the three months ended December 31, 2022, primarily due to a $35.6 million increase in our operating income, a $13.8 million increase in non-operating income, net, and a $10.7 million decrease in our income tax provision. Net income per diluted share increased by $0.99 to $4.19 per share during 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 $65.2 million to $555.6 million during the nine months ended December 30, 2023 as compared to the nine months ended December 31, 2022, primarily due to a $42.0 million decrease in our income tax provision, as well as a $38.6 million increase in non-operating income, net, partially offset by a $15.4 million decline in our operating income. Net income per diluted share increased by $1.24 to $8.31 per share during the nine months ended December 30, 2023 primarily driven by the higher level of net income and lower weighted-average diluted shares outstanding.
Current wording
Net income increased by $36.5 million to $168.6 million during the three months ended June 29, 2024 as compared to the three months ended July 1, 2023, primarily due to a $42.1 million increase in our operating income and a $3.9 million increase in our non-operating income, net, partially offset by a $9.5 million increase in our income tax provision. Net income per diluted share increased by $0.65 to $2.61 per share during the three months ended June 29, 2024 driven by the higher level of net income and lower weighted-average diluted shares outstanding.
Previous wording
We ended the third quarter of Fiscal 2024 in a net cash and short-term investments position (calculated as cash and cash equivalents, plus short-term investments, less total debt) of $777.4 million, as compared to $427.2 million as of the end of Fiscal 2023. The increase in our net cash and short-term investments position was primarily due to our operating cash flows of $948.7 million, partially offset by our use of cash to support Class A common stock repurchases of $328.8 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to make dividend payments of $146.7 million, and to invest in our business through $124.9 million in capital expenditures.
Current wording
We ended the first 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 $619.4 million, as compared to $642.7 million as of the end of Fiscal 2024. The decrease in our net cash and short-term investments position was primarily due to our use of cash to support Class A common stock repurchases of $201.2 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to make dividend payments of $47.5 million, to invest in our business through $33.4 million in capital expenditures, and the unfavorable effect of exchange rate changes on our cash, cash equivalents, and restricted cash of $13.1 million, partially offset by our operating cash flows of $277.3 million.
Previous wording
Net cash provided by operating activities was $948.7 million during the nine months ended December 30, 2023, as compared to $397.0 million during the nine months ended December 31, 2022. The net increase in cash provided by operating activities was due to a net favorable change related to our operating assets and liabilities, including our working capital, as compared to the prior fiscal year period, as well as an increase in net income before non-cash charges.
Current wording
Net cash provided by operating activities was $277.3 million during the three months ended June 29, 2024, as compared to $270.7 million during the three months ended July 1, 2023. The net increase in cash provided by operating activities was due to an increase in net income before non-cash charges, partially offset by a net unfavorable change related to our operating assets and liabilities, including our working capital, as compared to the prior fiscal year period.
Previous wording
Our equity increased to $2.572 billion as of December 30, 2023 compared to $2.431 billion as of April 1, 2023 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 30, 2023.
Current wording
Our equity decreased to $2.367 billion as of June 29, 2024 compared to $2.450 billion as of March 30, 2024 due to our share repurchase activity and dividends declared during the three months ended June 29, 2024, partially offset by our comprehensive income and the net impact of stock-based compensation arrangements.
Previous wording
The comparability of our operating results for the three-month and nine-month periods ended December 30, 2023 and December 31, 2022 has been affected by certain events, including:
Current wording
The comparability of our operating results for the three-month periods ended June 29, 2024 and July 1, 2023 has been affected by certain events, including:
Previous wording
(a)Non-routine inventory benefits (charges) are recorded within cost of goods sold in the consolidated statements of operations. The benefits (charges) recorded during the three-month periods ended December 30, 2023 and December 31, 2022 primarily related to inventory adjustments due to 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 recognized in connection with delays in U.S. customs shipment reviews and approvals (approximately $4 million) and the COVID-19 pandemic (approximately $1 million). During the nine months ended December 31, 2022, the net charges recorded primarily related to the Russia-Ukraine war (approximately $11 million) and delays in U.S. customs shipment reviews and approvals (approximately $4 million), partially offset by reversals of amounts previously recognized in connection with the COVID-19 pandemic (approximately $2 million).
Current wording
(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 July 1, 2023 primarily related to reversals of amounts previously recognized in connection with the COVID-19 pandemic (approximately $1 million) and delays in U.S. customs shipment reviews and approvals (approximately $1 million).
Previous wording
(c)Non-routine bad debt expense reversals are recorded within SG&A expenses in the consolidated statements of operations. The reversals recorded during the nine-month periods ended December 30, 2023 and December 31, 2022 primarily related to charges previously recognized in connection with the Russia-Ukraine war.
Current wording
(b)Non-routine bad debt expense reversals are recorded within SG&A expenses in the consolidated statements of operations. The reversals recorded during the three months ended July 1, 2023 primarily related to charges previously recognized in connection with the Russia-Ukraine war.
Previous wording
Our global average store count increased by 41 stores and concession shops during the nine months ended December 30, 2023 compared with the nine months ended December 31, 2022, driven by new openings primarily in Asia.
Current wording
Our global average store count decreased by 16 stores and concession shops during the three months ended June 29, 2024 compared with the three months ended July 1, 2023, largely driven by strategic store closures in North America and Asia.
Previous wording
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 North America. We also sell products online through various third-party digital partner commerce sites, primarily in Asia.
Current wording
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 Ralph Lauren app in the U.S. We also sell products online through various third-party digital partner commerce sites, primarily in Asia.
Previous wording
North America net revenues — Net revenues decreased slightly by $4.3 million, or 0.5%, during the three months ended December 30, 2023 as compared to the three months ended December 31, 2022. On a constant currency basis, net revenues decreased by $4.5 million, or 0.5%.
Current wording
North America net revenues — Net revenues decreased by $23.5 million, or 3.7%, during the three months ended June 29, 2024 as compared to the three months ended July 1, 2023. On a constant currency basis, net revenues decreased by $23.0 million, or 3.6%.
Previous wording
•a $39.6 million increase related to our North America retail business. On a constant currency basis, net revenues increased by $39.3 million, reflecting increases of $34.2 million in comparable store sales and $5.1 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our North America retail business:
Current wording
•a $5.7 million increase related to our North America retail business. On a constant currency basis, net revenues increased by $6.1 million, reflecting increases of $4.4 million in comparable store sales and $1.7 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our North America retail business:
Previous wording
The $52.2 million increase in Europe net revenues was driven by:
Current wording
The $28.6 million increase in Europe net revenues was driven by:
Previous wording
•a $33.6 million increase related to our Europe wholesale business largely driven by favorable foreign currency effects of $34.3 million and stronger re-order trends, largely offsetting the negative impact of lapping the prior fiscal year period's favorable post-pandemic wholesale allowances.
Current wording
•a $10.2 million increase related to our Europe wholesale business largely driven by stronger re-order trends more than offsetting the negative impacts from timing receipt shifts and unfavorable foreign currency effects of $1.7 million.
Previous wording
The $60.2 million increase in Asia net revenues was driven by:
Current wording
The $13.4 million increase in Asia net revenues was driven by:
Previous wording
This increase was partially offset by a $3.7 million decline related to our Asia wholesale business, inclusive of unfavorable foreign currency effects of $0.2 million.
Current wording
This increase was partially offset by a $5.3 million decline related to our Asia wholesale business, inclusive of unfavorable foreign currency effects of $1.2 million.
Previous wording
Gross Profit. Gross profit increased by $95.3 million, or 8.0%, to $1.286 billion for the three months ended December 30, 2023, including favorable foreign currency effects of $8.6 million. Gross profit as a percentage of net revenues increased to 66.5% for the three months ended December 30, 2023 from 65.0% for the three months ended December 31, 2022. The 150 basis point increase was primarily driven by lower freight costs, favorable geographic and channel mix, higher pricing, and lower non-routine inventory charges recorded during the three months ended December 30, 2023 as compared to the prior fiscal year period, all partially offset by higher product costs.
Current wording
Gross Profit. Gross profit increased by $33.8 million, or 3.3%, to $1.066 billion for the three months ended June 29, 2024, including unfavorable foreign currency effects of $24.8 million. Gross profit as a percentage of net revenues increased to 70.5% for the three months ended June 29, 2024 from 69.0% for the three months ended July 1, 2023. The 150 basis point increase was primarily driven by favorable product, channel, and geographic mix shifts, lower cotton costs, and AUR growth, partially offset by higher other product costs and unfavorable foreign currency effects.
Previous wording
Selling, General, and Administrative Expenses. SG&A expenses include costs relating to compensation and benefits, advertising and marketing, rent and occupancy, distribution, information technology, legal, depreciation and amortization, bad debt, and other selling and administrative costs. SG&A expenses increased by $66.8 million, or 7.4%, to $967.6 million for the three months ended December 30, 2023, including unfavorable foreign currency effects of $3.5 million. SG&A expenses as a percentage of net revenues increased to 50.0% for the three months ended December 30, 2023 from 49.2% for the three months ended December 31, 2022. The 80 basis point increase was driven by operating deleverage as SG&A expense growth outpaced revenue growth, largely attributable to geographic and channel mix resulting from growth of our international and retail businesses which typically carry higher operating expense margins.
Current wording
Selling, General, and Administrative Expenses. SG&A expenses include costs relating to compensation and benefits, rent and occupancy, marketing and advertising, distribution, information technology, legal, depreciation and amortization, bad debt, and other selling and administrative costs. SG&A expenses increased by $19.9 million, or 2.4%, to $849.9 million for the three months ended June 29, 2024, including favorable foreign currency effects of $13.8 million. SG&A expenses as a percentage of net revenues increased to 56.2% for the three months ended June 29, 2024 from 55.5% for the three months ended July 1, 2023. The 70 basis point increase was driven by higher marketing investments due to the planned timing of key campaign events.
Previous wording
The $66.8 million increase in SG&A expenses was driven by:
Current wording
The $19.9 million increase in SG&A expenses was driven by:
Previous wording
Restructuring and Other Charges, Net. During the nine-month periods ended December 30, 2023 and December 31, 2022, we recorded net restructuring charges and benefits of $38.3 million and $6.2 million, respectively, primarily consisting of severance and benefits costs, as well as other charges of $14.3 million and $17.6 million, respectively, primarily related to rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired. Additionally, during the nine-month periods ended December 30, 2023 and December 31, 2022, we recognized $7.0 million and $3.5 million, respectively, of income related to consideration received from Regent in connection with our previously sold Club Monaco business. See Note 7 to the accompanying consolidated financial statements.
Current wording
Restructuring and Other Charges, Net. During the three-month periods ended June 29, 2024 and July 1, 2023, we recorded net restructuring charges of $3.3 million and $30.5 million, respectively, primarily consisting of severance and benefits costs, as well as other charges of $2.8 million and $5.1 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 three months ended June 29, 2024, we recorded other charges of $2.3 million in connection with our Next Generation Transformation project (refer to"Recent Developments" for additional discussion) and other income of $1.0 million 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.
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Previous report — wording carried elsewhere
Restructuring and Other Charges, Net. During the three-month periods ended December 30, 2023 and December 31, 2022, we recorded restructuring charges of $1.0 million and $0.8 million, respectively, as well as other charges of $4.7 million and $7.0 million, respectively, primarily related to rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired. Additionally, during the three months ended December 30, 2023, we recognized $5.0 million of income related to consideration received from Regent, L.P. ("Regent") in connection with our previously sold Club Monaco business.
Previous report — wording carried elsewhere
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.
Previous report — wording carried elsewhere
(a)Effective tax rate is calculated by dividing the income tax provision by income before income taxes.
Previous report — wording carried elsewhere
The following table summarizes the percentage change in our consolidated comparable store sales for the nine months ended December 30, 2023 as compared to the prior fiscal year period:
Previous report — wording carried elsewhere
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:
Previous report — wording carried elsewhere
This decline was partially offset by:
Previous report — wording carried elsewhere
The $120.4 million increase in Europe net revenues was driven by:
Previous report — wording carried elsewhere
The $135.6 million increase in Asia net revenues was driven by:
Previous report — wording carried elsewhere
•a $3.6 million increase related to our Asia wholesale business, inclusive of unfavorable foreign currency effects of $1.9 million.
Previous report — wording carried elsewhere
The $163.0 million increase in SG&A expenses was driven by:
Previous report — wording carried elsewhere
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:
Previous report — wording carried elsewhere
Non-operating Income (Expense), Net. During the nine months ended December 30, 2023, we reported non-operating income, net of $17.3 million as compared to non-operating expense, net of $21.3 million during the nine months ended December 31, 2022. The $38.6 million increase in non-operating income, net was mainly due to a $33.4 million increase in interest income driven by higher interest rates in financial markets and the higher average on-hand cash, cash equivalents, and short-term investments balance during the current fiscal year period as compared to the prior fiscal year period.
Previous report — wording carried elsewhere
During the nine months ended December 30, 2023, we generated $948.7 million of net cash flows from our operations. As of December 30, 2023, we had $1.917 billion in cash, cash equivalents, and short-term investments, of which $1.269 billion were held by our subsidiaries domiciled outside the U.S. We are not dependent on foreign cash to fund our domestic operations.