RALPH LAUREN CORP

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

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 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 second quarter of Fiscal 2025 ended on September 28, 2024 and was a 13-week period. The second quarter of Fiscal 2024 ended on September 30, 2023 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 third quarter of Fiscal 2025 ended on December 28, 2024 and was a 13-week period. The third quarter of Fiscal 2024 ended on December 30, 2023 and was also a 13-week period.

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 six-month periods ended September 28, 2024. In addition, this section includes a discussion of recent developments and transactions affecting comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future trends.

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 and nine-month periods ended December 28, 2024. In addition, this section includes a discussion of recent developments and transactions affecting comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future trends.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

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 six-month periods ended September 28, 2024 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 2025.

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 and nine-month periods ended December 28, 2024 are not necessarily indicative of the operating results and cash flows that may be expected for the full Fiscal 2025.

Previous wording

In connection with the preliminary phase of the NGT project, we incurred other charges of $5.7 million and $8.0 million during the three-month and six-month periods ended September 28, 2024, which were recorded within restructuring and other charges, net in the consolidated statements of operations.

Current wording

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

Previous 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), organized labor disputes, high interest rates, significant foreign currency volatility, bank failures, and concerns of a potential recession, continue to impact consumer discretionary income levels, spending, and sentiment in the U.S. and beyond. In response to such pressures, as well as in an effort to reduce elevated inventory levels, many retailers (particularly in the U.S.) continue to resort to promotional activity in an attempt to offset traffic declines and increase conversion. Furthermore, the department store sector has experienced numerous consolidations, restructurings, reorganizations, bankruptcies, and other ownership changes in recent times, as well as an increase in store closures. The future geopolitical landscape also remains particularly uncertain, with over 60 countries holding national elections during 2024, including the recent U.S. presidential election. Any resulting changes in international trade relations, legislation and regulations (including those related to taxation 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.

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

Previous wording

The global supply chain also continues to be negatively impacted by various factors, including the recent port strikes on the U.S. East and Gulf Coasts and ongoing disruptions in the Red Sea. Although our business has not been significantly impacted by such disruptions, we have experienced some shipping delays impacting the timing of inventory receipts, and 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.

Current wording

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

Previous wording

We have implemented various strategies globally to help address many of these current challenges and continue to build a foundation for long-term profitable growth centered around strengthening our consumer-facing areas of product, stores, and marketing across channels and driving a more efficient operating model. Our strategy for mitigating inflationary pressures includes numerous levers, including our commitment to driving average unit retail growth, leveraging our diversified supply chain and strong supplier relationships, elevating our product sustainability efforts, and leveraging our in-house quality control to reduce time and cost from the manufacturing process, among other efforts. We have also taken earlier receipts of inventory and strategically utilized faster means of transportation (i.e., air freight) when necessary to maximize full-price selling windows, as well as diverted certain near-term shipments to U.S. West Coast ports to mitigate risk should strikes on the East and Gulf Coasts resume on January 15, 2025. While we remain agile and mindful of the increasingly competitive promotional environment, we plan to continue driving our broader long-term strategy of brand elevation, which includes multiple levers to continue driving average unit retail growth and brand equity.

Current wording

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

Previous wording

During the three months ended September 28, 2024, we reported net revenues of $1.726 billion, net income of $147.9 million, and net income per diluted share of $2.31, as compared to net revenues of $1.633 billion, net income of $146.9 million, and net income per diluted share of $2.19 during the three months ended September 30, 2023. During the six months ended September 28, 2024, we reported net revenues of $3.238 billion, net income of $316.5 million, and net income per diluted share of $4.93, as compared to net revenues of $3.130 billion, net income of $279.0 million, and net income per diluted share of $4.15 during the six months ended September 30, 2023. The comparability of our operating results has been affected by net restructuring-related charges and certain other charges (benefits). We also continue to experience varying degrees of business disruptions resulting from the current macroeconomic environment, including global supply chain disruptions resulting from organized labor disputes, inflationary pressures, ongoing military conflicts taking place in various parts of the world, and foreign currency volatility, among other factors.

Current wording

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

Previous wording

Our operating performance for the three-month and six-month periods ended September 28, 2024 as compared to the prior fiscal year periods reflected revenue increases of 5.7% and 3.5%, respectively, on a reported basis and 5.6% and 4.3%, respectively, 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.

Current wording

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

Previous wording

Our gross profit as a percentage of net revenues increased by 150 basis points to 67.0% during the three months ended September 28, 2024 and by 140 basis points to 68.6% during the six months ended September 28, 2024, as compared to the prior fiscal year periods, primarily driven by favorable product, channel, and geographic mix shifts, lower cotton costs, and average unit retail ("AUR") growth, partially offset by higher other non-freight-related product costs.

Current wording

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

Previous wording

Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues during the three months ended September 28, 2024 increased by 60 basis points to 55.5% and by 60 basis points to 55.8% during the six months ended September 28, 2024 as compared to the prior fiscal year periods, largely attributable to geographic and channel mix resulting from growth of our international and retail businesses which typically carry higher operating expense margins, as well as increases across various expense categories, including higher marketing investments due to the planned timing of key campaign events.

Current wording

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

Previous wording

Our operating results during each of the three-month periods ended September 28, 2024 and September 30, 2023, were negatively impacted by net restructuring-related charges and certain other charges (benefits) totaling $18.4 million and $7.2 million, respectively, which had an after-tax effect of reducing net income by $14.2 million, or $0.23 per diluted share, and $5.8 million, or $0.09 per diluted share, respectively. During the six-month periods ended September 28, 2024 and September 30, 2023, our operating results were negatively impacted by net restructuring-related charges and certain other charges (benefits) totaling $25.8 million and $40.9 million, respectively, which had an after-tax effect of reducing net income by $20.2 million, or $0.31 per diluted share, and $31.7 million, or $0.46 per diluted share, respectively. Net income during both the three-month and six-month periods ended September 30, 2023 also reflected an income tax benefit of $11.8 million, or $0.18 and $0.17 per diluted share, respectively, recorded in connection with non-recurring income tax events.

Current wording

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

Previous wording

We ended the second 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 $548.2 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 $330.2 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to make dividend payments of $98.9 million, and to invest in our business through $75.1 million in capital expenditures, partially offset by our operating cash flows of $374.5 million and the favorable effect of exchange rate changes of $36.8 million primarily related to our cash and cash equivalents.

Current wording

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

Previous wording

Net cash provided by operating activities was $374.5 million during the six months ended September 28, 2024, as compared to $343.6 million during the six months ended September 30, 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.

Current wording

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

Previous wording

Our equity decreased to $2.442 billion as of September 28, 2024 compared to $2.450 billion as of March 30, 2024 due to our share repurchase activity and dividends declared during the six months ended September 28, 2024, partially offset by our comprehensive income and the net impact of stock-based compensation arrangements.

Current wording

Our equity increased to $2.539 billion as of December 28, 2024 compared to $2.450 billion as of March 30, 2024 due to our comprehensive income and the net impact of stock-based compensation arrangements, partially offset by our share repurchase activity and dividends declared during the nine months ended December 28, 2024.

Previous wording

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

Current wording

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

Previous 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 September 30, 2023 primarily related to reversals of amounts previously recognized in connection with delays in U.S. customs shipment reviews and approvals. The benefits recorded during the six months ended September 30, 2023 primarily related to reversals of amounts previously recognized in connection with delays in U.S. customs shipment reviews and approvals (approximately $3 million) and the COVID-19 pandemic (approximately $1 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 December 30, 2023 primarily related to reversals of amounts previously recognized in connection with delays in U.S. customs shipment reviews and approvals. The benefits recorded during the nine months ended December 30, 2023 primarily related to reversals of amounts previously recognized in connection with delays in U.S. customs shipment reviews and approvals (approximately $4 million) and the COVID-19 pandemic (approximately $1 million).

Previous 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-month and six-month periods ended September 30, 2023 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 nine months ended December 30, 2023 primarily related to charges previously recognized in connection with the Russia-Ukraine war.

Previous wording

•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 710 basis points and 350 basis points during the three-month and six-month periods ended September 30, 2023, respectively. See Note 8 to the accompanying consolidated financial statements for further discussion.

Current wording

•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 wording

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

Current wording

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

Previous wording

Europe net revenues — Net revenues increased by $67.7 million, or 6.9%, during the six months ended September 28, 2024 as compared to the six months ended September 30, 2023. On a constant currency basis, net revenues increased by $65.7 million, or 6.7%.

Current wording

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

Previous wording

•a $35.2 million increase related to our North America retail business. On a constant currency basis, net revenues increased by $35.9 million, reflecting increases of $29.8 million in comparable store sales and $6.1 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 $50.5 million increase related to our North America retail business. On a constant currency basis, net revenues increased by $51.8 million, reflecting an increase of $53.5 million in comparable store sales, partially offset by a decrease of $1.7 million in non-comparable store sales. The following table summarizes the percentage changes in comparable store sales related to our North America retail business:

Previous wording

The $39.1 million increase in Europe net revenues was driven by:

Current wording

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

Previous wording

•a $52.9 million increase related to our Europe retail business, inclusive of favorable foreign currency effects of $0.6 million. On a constant currency basis, net revenues increased by $52.3 million, reflecting increases of $50.3 million in comparable store sales and $2.0 million in non-comparable store sales. The following table summarizes the percentage change in comparable store sales related to our Europe retail business:

Current wording

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

Previous wording

•a $4.6 million increase related to our Europe wholesale business largely driven by favorable foreign currency effects of $3.1 million and stronger re-order trends more than offsetting a timing shift of inventory receipts into the second half of the fiscal year.

Current wording

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

Previous wording

The $31.8 million increase in Asia net revenues was driven by:

Current wording

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

Previous wording

This increase was partially offset by an $11.6 million decline related to our Asia wholesale business, reflecting decreases most notably in South Korea and Japan, inclusive of unfavorable foreign currency effects of $1.5 million.

Current wording

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

Previous wording

Gross Profit. Gross profit increased by $85.6 million, or 8.0%, to $1.156 billion for the three months ended September 28, 2024, including unfavorable foreign currency effects of $2.3 million. Gross profit as a percentage of net revenues increased to 67.0% for the three months ended September 28, 2024 from 65.5% for the three months ended September 30, 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 non-freight-related product costs.

Current wording

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

Previous wording

Selling, General, and Administrative Expenses. SG&A expenses include costs relating to compensation and benefits, marketing and advertising, rent and occupancy, distribution, information technology, legal, depreciation and amortization, bad debt, and other selling and administrative costs. SG&A expenses increased by $62.1 million, or 6.9%, to $958.4 million for the three months ended September 28, 2024, including unfavorable foreign currency effects of $1.5 million. SG&A expenses as a percentage of net revenues increased to 55.5% for the three months ended September 28, 2024 from 54.9% for the three months ended September 30, 2023. The 60 basis point increase was largely attributable to geographic and channel mix resulting from growth of our international and retail businesses which typically carry higher operating expense margins, as well as increases across various expense categories, including higher marketing investments due to the planned timing of key campaign events.

Current wording

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

Previous wording

The $62.1 million increase in SG&A expenses was driven by:

Current wording

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

Previous wording

Restructuring and Other Charges, Net. During the three-month periods ended September 28, 2024 and September 30, 2023, we recorded restructuring charges of $9.0 million and $6.8 million, respectively, as well as other charges of $4.1 million and $4.5 million, respectively, primarily related to rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired. In addition, during the three months ended September 28, 2024, we recorded other charges of $5.7 million in connection with our Next Generation Transformation project (refer to"Recent Developments" for additional discussion) and other income of $0.4 million and $2.0 million during the three-month periods ended September 28, 2024 and September 30, 2023, respectively, related to consideration received from Regent, L.P. in connection with our previously sold Club Monaco business. See Note 7 to the accompanying consolidated financial statements.

Current wording

Restructuring and Other Charges, Net. During the three-month periods ended December 28, 2024 and December 30, 2023, we recorded restructuring charges of $1.6 million and $1.0 million, respectively, as well as other charges of $2.2 million and $4.7 million, respectively, primarily related to rent and occupancy costs associated with certain previously exited real estate locations for which the related lease agreements have not yet expired. In addition, during the three months ended December 28, 2024, we recorded other charges of $9.1 million in connection with our Next Generation Transformation project (refer to"Recent Developments" for additional discussion) and other income of $0.7 million and $5.0 million during the three-month periods ended December 28, 2024 and December 30, 2023, respectively, related to consideration received from Regent, L.P. in connection with our previously sold Club Monaco business. See Note 7 to the accompanying consolidated financial statements.

Previous wording

Operating Income. Operating income increased by $14.4 million, or 8.8%, to $178.9 million for the three months ended September 28, 2024, reflecting unfavorable foreign currency effects of $3.8 million. Our operating results during the three-month periods ended September 28, 2024 and September 30, 2023 were negatively impacted by net restructuring-related charges and certain other charges (benefits) totaling $18.4 million and $7.2 million, respectively. Operating income as a percentage of net revenues was 10.4% for the three months ended September 28, 2024, reflecting a 30 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, as well as higher net restructuring-related charges and certain other charges (benefits) recorded during the three months ended September 28, 2024 as compared to the prior fiscal year period, all as previously discussed.

Current wording

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

Previous wording

North America operating margin improved by 110 basis points, primarily due to the net favorable impact of approximately 170 basis points driven by an increase in gross margin and a decrease in SG&A expenses as a percentage of net revenues. This overall improvement in operating margin was partially offset by the unfavorable impact of approximately 30 basis points attributable to channel mix and the unfavorable impact of 30 basis points attributable to the absence of non-routine inventory benefits during the three months ended September 28, 2024 as compared to those recorded during the prior fiscal year period.

Current wording

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

Previous wording

Europe operating margin improved by 70 basis points, primarily due to the net favorable impact of approximately 130 basis points driven by an increase in gross margin and a decrease in SG&A expenses as a percentage of net revenues. This overall improvement in operating margin was partially offset by the unfavorable impact of 40 basis points attributable to channel mix, as well as unfavorable foreign currency effects of 20 basis points.

Current wording

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

Previous wording

Asia operating margin improved by 310 basis points, primarily due to the net favorable impact of approximately 440 basis points driven by a decline in SG&A expenses as a percentage of net revenues and an increase in gross margin. This overall improvement in operating margin was partially offset by unfavorable foreign currency effects of 80 basis points and the unfavorable impact of approximately 50 basis points attributable to channel mix.

Current wording

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

Previous wording

Unallocated corporate expenses increased by $32.7 million to $351.6 million during the six months ended September 28, 2024. The increase in unallocated corporate expenses was due to higher marketing and advertising expenses of $15.8 million, higher non-income taxes of $12.1 million, higher compensation-related expenses of $9.0 million, and higher other expenses of $7.1 million, partially offset by lower rent and occupancy expenses of $11.3 million.

Current wording

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

Previous wording

Unallocated restructuring and other charges, netincreased by $9.1 million to $18.4 million during the three months ended September 28, 2024, as previously discussed above and in Note 7 to the accompanying consolidated financial statements.

Current wording

Unallocated restructuring and other charges, netincreased by $11.5 million to $12.2 million during the three months ended December 28, 2024, as previously discussed above and in Note 7 to the accompanying consolidated financial statements.