RALPH LAUREN CORP (RL) FY 2025 MD&A

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following management's discussion and analysis of financial condition and results of operations ("MD&A") should be read together with our audited consolidated financial statements and notes thereto, which are included in this Annual Report on Form 10-K. We utilize a 52-53 week fiscal year ending on the Saturday closest to March 31. As such, Fiscal 2025 ended on March 29, 2025 and was a 52-week period; Fiscal 2024 ended on March 30, 2024 and was a 52-week period; Fiscal 2023 ended on April 1, 2023 and was a 52-week period; and Fiscal 2026 will end on March 28, 2026 and will be a 52-week period.

INTRODUCTION

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

•Overview.    This section provides a general description of our business, global economic conditions and industry trends, and a summary of our financial performance for Fiscal 2025. In addition, this section includes a discussion of recent developments and transactions affecting comparability that we believe are important in understanding our results of operations and financial condition, and in anticipating future trends.

•Results of operations.    This section provides an analysis of our results of operations for Fiscal 2025 and Fiscal 2024 as compared to the respective prior fiscal year.

•Financial condition and liquidity.    This section provides a discussion of our financial condition and liquidity as of March 29, 2025, which includes (i) an analysis of our financial condition as compared to the prior fiscal year-end; (ii) an analysis of changes in our cash flows for Fiscal 2025 and Fiscal 2024 as compared to the respective prior fiscal year; (iii) an analysis of our liquidity, including the availability under our commercial paper borrowing program and credit facilities, our supplier finance program, outstanding debt and covenant compliance, common stock repurchases, and payments of dividends; and (iv) a summary of our material cash requirements as of March 29, 2025.

•Market risk management.    This section discusses how we manage our risk exposures related to foreign currency exchange rates, interest rates, and our investments as of March 29, 2025.

•Critical accounting policies.    This section discusses our critical accounting policies considered to be important to our results of operations and financial condition, which typically require significant judgment and estimation on the part of management in their application. In addition, all of our significant accounting policies, including our critical accounting policies, are summarized in Note 3 to the accompanying consolidated financial statements.

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

OVERVIEW

Our Business

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

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

We organize our business into the following three reportable segments:

•North America — Our North America segment, representing approximately 43% of our Fiscal 2025 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses primarily in the U.S. and Canada. In North America, our retail business is primarily comprised of our Ralph Lauren stores, our outlet stores, and our digital commerce sites, www.RalphLauren.com and www.RalphLauren.ca. Our wholesale business in North America is comprised primarily of sales to department stores and, to a lesser extent, specialty stores.

•Europe — Our Europe segment, representing approximately 31% of our Fiscal 2025 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in Europe and emerging markets. In Europe, our retail business is primarily comprised of our Ralph Lauren stores, our outlet stores, our concession-based shop-within-shops, and our various digital commerce sites. Our wholesale business in Europe is comprised primarily of a varying mix of sales to both department stores and specialty stores, depending on the country, as well as to various third-party digital and licensee partners.

•Asia — Our Asia segment, representing approximately 24% of our Fiscal 2025 net revenues, primarily consists of sales of our Ralph Lauren branded products made through our retail and wholesale businesses in Asia, Australia, and New Zealand. Our retail business in Asia is primarily comprised of our Ralph Lauren stores, our outlet stores, our concession-based shop-within-shops, and our various digital commerce sites. In addition, we sell our products online through various third-party digital partner commerce sites. Our wholesale business in Asia is comprised primarily of sales to department stores and various third-party digital and licensee partners.

No operating segments were aggregated to form our reportable segments. In addition to these reportable segments, we also have other non-reportable segments, representing approximately 2% of our Fiscal 2025 net revenues, which primarily consist of Ralph Lauren and Chaps branded royalty revenues earned through our global licensing alliances.

Approximately 57% of our Fiscal 2025 net revenues were earned outside of the U.S. See Note 20 to the accompanying consolidated financial statements for further discussion of our segment reporting structure.

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

Recent Developments

Next Generation Transformation Project

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

In connection with the preliminary phase of the NGT project, we incurred other charges of $25.2 million and $5.1 million during Fiscal 2025 and Fiscal 2024, respectively, which were recorded within restructuring and other charges, net in the consolidated statements of operations.

Global Economic Conditions and Industry Trends

The global economy and retail industry are impacted by many uncontrollable factors. Most recently, the U.S. announced significant changes to its trade policies, including widespread tariff increases on imported goods, with potential further increases and revisions or terminations to existing trade agreements. In response, many countries have announced or are otherwise considering retaliatory tariffs on U.S. exports and other trade restrictions. This has led to significant uncertainty regarding the future relationship between the U.S. and other countries, as well as growing concerns about a global trade war, higher inflation, and a potential global recession, which has already caused significant volatility of global stock markets and foreign currency exchange rates.

Other recent economic conditions, including ongoing inflationary pressures, organized labor disputes, high interest rates, significant foreign currency volatility, and military conflicts (as discussed below), continue to impact consumer discretionary income levels, spending, and sentiment in the U.S. and beyond. In response to such pressures, as well as 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 also experienced consolidations, restructurings, bankruptcies, and other ownership changes in recent times, as well as an increase in store closures.

The global economy has also been negatively impacted by ongoing military conflicts, including the Russia-Ukraine and Israel-Hamas wars, militant attacks on cargo vessels in the Red Sea, and other hostilities in the Middle East. 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, affected 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 financial market volatility, among other factors, which have adversely impacted consumer sentiment and confidence. It is not clear at this time how long these conflicts will endure, or if they will escalate further with additional countries declaring war against each other, which could further amplify the impacts of the various macroeconomic factors described above and potentially result in a global recession.

The global supply chain has also 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.

We have implemented various global strategies to address many of these challenges and continue to build a foundation for long-term profitable growth by strengthening our consumer-facing areas and driving a more efficient operating model. We continue to monitor the current geopolitical landscape, including the potential impact of higher tariffs should they become effective. We have taken proactive measures in recent years to diversify our supply chain from a geographic perspective and believe we can further mitigate potential cost pressures associated with new tariffs through a combination of our disciplined inventory management, leveraging our relationships with suppliers to reduce product costs, our ability to change country of origin, and pricing actions. However, should the proposed tariffs become effective, our profitability will be negatively impacted. Regarding mitigating inflationary pressures, our strategy 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. Despite the competitive environment, we plan to continue driving our broader long-term strategy of brand elevation, which includes multiple levers to continue driving average unit retail growth and brand equity.

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

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

Summary of Financial Performance

Operating Results

In Fiscal 2025, we reported net revenues of $7.079 billion, net income of $742.9 million, and net income per diluted share of $11.61, as compared to net revenues of $6.631 billion, net income of $646.3 million, and net income per diluted share of $9.71 in Fiscal 2024. The comparability of our operating results has been affected by net restructuring-related charges, impairment of assets, and certain other charges (benefits), as well as foreign currency volatility. Our operating results are also susceptible to changes in macroeconomic conditions.

Our operating performance for Fiscal 2025 reflected revenue increases of 6.8% on a reported basis and 7.7% on a constant currency basis, as defined within "Transactions and Trends Affecting Comparability of Results of Operations and Financial Condition" below. Net revenues reflected growth across all of our reportable segments.

Our gross profit as a percentage of net revenues increased by 180 basis points to 68.6% during Fiscal 2025, primarily driven by the favorable geographic, channel, and product mix, average unit retail ("AUR") growth, and lower cotton costs, more than offsetting incremental pressure from non-cotton product costs and unfavorable foreign currency effects.

Selling, general, and administrative ("SG&A") expenses as a percentage of net revenues increased by 30 basis points to 54.6% during Fiscal 2025, largely attributable to geographic and channel mix, as well as increases across various expense categories, including higher compensation-related expenses and higher marketing investments due to planned key campaign events.

Net income increased by $96.6 million to $742.9 million in Fiscal 2025 as compared to Fiscal 2024, primarily due to a $175.7 million increase in our operating income, partially offset by a $76.7 million increase in our income tax provision. Net income per diluted share increased by $1.90 to $11.61 per share during Fiscal 2025 driven by the higher level of net income and lower weighted-average diluted shares outstanding.

During Fiscal 2025 and Fiscal 2024, our operating results were negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges (benefits) totaling $57.8 million and $69.9 million, respectively, which had an after-tax effect of reducing net income by $46.0 million, or $0.72 per diluted share, and $52.6 million, or $0.80 per diluted share, respectively. Net income during Fiscal 2024 also reflected an income tax benefit of $13.1 million, or $0.20 per diluted share, recorded in connection with non-recurring income tax events.

Financial Condition and Liquidity

We ended 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 $940.4 million, as compared to $642.7 million as of the end of Fiscal 2024. The increase in our net cash and short-term investments position during Fiscal 2025 as compared to Fiscal 2024 was primarily due to our operating cash flows of $1.235 billion, partially offset by our use of cash to support Class A common stock repurchases of $480.9 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to invest in our business through $216.2 million in capital expenditures, and to make dividend payments of $201.1 million.

Net cash provided by operating activities was $1.235 billion during Fiscal 2025, as compared to $1.070 billion during Fiscal 2024. 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.

Our equity increased to $2.589 billion as of March 29, 2025, 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 Fiscal 2025.

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

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

•pretax charges incurred in connection with our restructuring activities, as well as certain other benefits (charges) as summarized below (references to "Notes" are to the notes to the accompanying consolidated financial statements):

(a)Non-routine inventory benefits (charges) are recorded within cost of goods sold in the consolidated statements of operations. The benefits recorded during Fiscal 2024 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 $2 million). Non-routine inventory charges, net recorded during Fiscal 2023 primarily related to the Russia-Ukraine war (approximately $10 million) and delays in U.S. customs shipment reviews and approvals (approximately $5 million).

(b)Non-routine bad debt expense reversals are recorded within SG&A expenses in the consolidated statements of operations. Non-routine bad debt reversals, net recorded during Fiscal 2024 and Fiscal 2023 primarily related to charges previously recognized in connection with the Russia-Ukraine war.

•a one-time tax benefit of $13.1 million recorded within our income tax provision during Fiscal 2024 in connection with Swiss tax reform and the European Union's anti-tax avoidance directive, which decreased our Fiscal 2024 effective tax rate by 170 basis points. See Note 10 to the accompanying consolidated financial statements for further discussion.

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

Our discussion also includes reference to comparable store sales. Comparable store sales refer to the change in sales of our stores that have been open for at least 13 full fiscal months. Sales from our digital commerce sites are also included within comparable sales for those geographies that have been serviced by the related site for at least 13 full fiscal months. Sales for stores or digital commerce sites that are closed or shut down during the year are excluded from the calculation of comparable store sales. Sales for stores that are either relocated, enlarged (as defined by gross square footage expansion of 25% or greater), or generally closed for 30 or more consecutive days for renovation are also excluded from the calculation of comparable store sales until such stores have been operating in their new location or in their newly renovated state for at least 13 full fiscal months. All comparable store sales metrics are calculated on a 52-week and constant currency basis.

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

RESULTS OF OPERATIONS

Fiscal 2025 Compared to Fiscal 2024

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 table below and the discussion that follows have been calculated using unrounded numbers.

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

Net Revenues.    Net revenues increased by $447.6 million, or 6.8%, to $7.079 billion in Fiscal 2025 as compared to Fiscal 2024, reflecting growth across all of our reportable segments, partially offset by unfavorable foreign currency effects of $66.1 million. On a constant currency basis, net revenues increased by $513.7 million, or 7.7%.

The following table summarizes the percentage change in our Fiscal 2025 consolidated comparable store sales as compared to the prior fiscal year:

Our global average store count decreased by 20 stores and concession shops during Fiscal 2025 compared with the prior fiscal year, largely driven by concession shop closures in Asia and lower-tierd outlet store closures in North America. The following table details our retail store presence by segment as of the periods presented:

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

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

North America net revenues — Net revenues increased by $99.6 million, or 3.4%, during Fiscal 2025 as compared to Fiscal 2024. On a constant currency basis, net revenues increased by $103.9 million, or 3.5%.

The $99.6 million increase in North America net revenues was driven by:

•a $118.5 million increase related to our North America retail business. On a constant currency basis, net revenues increased by $121.9 million, reflecting increases of $114.3 million in comparable store sales and $7.6 million in non-comparable store sales. The increase in our comparable store sales reflected high-single digit AUR growth during Fiscal 2025 as compared to the prior fiscal year, as well as higher traffic. The following table summarizes the percentage changes in comparable store sales related to our North America retail business:

This increase was partially offset by an $18.9 million decline related to our North America wholesale business primarily driven by reduced excess inventory sales in the off-price wholesale channel.

Europe net revenues — Net revenues increased by $206.9 million, or 10.5%, during Fiscal 2025 as compared to Fiscal 2024. On a constant currency basis, net revenues increased by $220.1 million, or 11.2%.

The $206.9 million increase in Europe net revenues was driven by:

•a $132.8 million increase related to our Europe retail business, inclusive of unfavorable foreign currency effects of $6.2 million. On a constant currency basis, net revenues increased by $139.0 million, reflecting increases of $132.8 million in comparable store sales and $6.2 million in non-comparable store sales. The increase in our comparable store sales reflected low-double digit AUR growth during Fiscal 2025 as compared to the prior fiscal year, as well as higher traffic. The following table summarizes the percentage changes in comparable store sales related to our Europe retail business:

•a $74.1 million increase related to our Europe wholesale business largely driven by stronger re-order trends more than offsetting planned reductions within the off-price wholesale channel and unfavorable foreign currency effects of $7.0 million.

Asia net revenues — Net revenues increased by $142.8 million, or 9.1%, during Fiscal 2025 as compared to Fiscal 2024. On a constant currency basis, net revenues increased by $191.3 million, or 12.2%.

The $142.8 million increase in Asia net revenues was driven by:

•a $167.8 million increase related to our Asia retail business, inclusive of unfavorable foreign currency effects of $46.6 million. On a constant currency basis, net revenues increased by $214.4 million, reflecting increases of $151.4 million in comparable store sales and $63.0 million in non-comparable store sales. The increase in our comparable store sales reflected low-double digit AUR growth during Fiscal 2025 as compared to the prior fiscal year, as well as higher traffic. The following table summarizes the percentage changes in comparable store sales related to our Asia retail business:

This increase was partially offset by a $25.0 million decline related to our Asia wholesale business, largely driven by decreases in South Korea and Japan.

Gross Profit.    Gross profit increased by $421.1 million, or 9.5%, to $4.853 billion in Fiscal 2025, including unfavorable foreign currency effects of $62.8 million. Gross profit as a percentage of net revenues increased to 68.6% in Fiscal 2025 from 66.8% in Fiscal 2024. The 180 basis point improvement was primarily driven by the favorable impact of approximately 70 basis points attributable to geographic and channel mix. The remaining 110 basis point improvement was primarily due to AUR growth of approximately high-single digits, lower cotton costs, and favorable product mix, more than offsetting incremental pressure from non-cotton products costs and unfavorable foreign currency effects of approximately 20 basis points.

Gross profit is the difference between total net revenues and cost of goods sold. Cost of goods sold includes the amounts incurred to acquire and produce inventory for sale to our customers, including product costs, freight-in, and import costs, as well as changes in reserves for shrinkage and inventory realizability. Gains and losses associated with forward foreign currency exchange contracts that are designated and qualifying as cash flow hedges of inventory transactions are also recognized within cost of goods sold when the hedged inventory is sold. The costs of selling merchandise, including those associated with preparing merchandise for sale, such as picking, packing, warehousing, and order charges, are included in SG&A expenses in the consolidated statements of operations. As a result, our gross profit may not be comparable to that of other entities.

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 $262.5 million, or 7.3%, to $3.863 billion in Fiscal 2025, including favorable foreign currency effects of $30.8 million. SG&A expenses as a percentage of net revenues increased to 54.6% in Fiscal 2025 from 54.3% in Fiscal 2024. The 30 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 compensation-related expenses and marketing investments due to planned key campaign events.

The $262.5 million increase in SG&A expenses was driven by:

Impairment of Assets.    During Fiscal 2025, we recorded impairment charges of $0.8 million to write-down long-lived assets in connection with certain North America wholesale shops that are expected to close earlier than the end of their original estimated useful life due to the related customer declaring bankruptcy. On a comparative basis, no impairment charges were recorded during Fiscal 2024. See Note 8 to the accompanying consolidated financial statements.

Restructuring and Other Charges, Net.   During Fiscal 2025 and Fiscal 2024, we recorded net restructuring charges of $20.4 million and $55.8 million, respectively, primarily consisting of severance and benefits costs, as well as other charges of $11.4 million and $14.0 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 Fiscal 2025 and Fiscal 2024, we recorded other charges of $25.2 million and $5.1 million, respectively, in connection with our Next Generation Transformation project (refer to "Recent Developments" for additional discussion) and recorded other income of $2.8 million and $7.0 million, respectively, related to consideration received from Regent, L.P. in connection with our previously sold Club Monaco business. We donated this income to The Ralph Lauren Corporate Foundation, a non-profit, charitable foundation, which resulted in related offsetting donation expenses of $2.8 million and $7.0 million during Fiscal 2025 and Fiscal 2024, respectively. See Note 9 to the accompanying consolidated financial statements.

Operating Income.    Operating income increased by $175.7 million, or 23.2%, to $932.1 million during Fiscal 2025, reflecting unfavorable foreign currency effects of $32.0 million. Our operating results during Fiscal 2025 and Fiscal 2024 were negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges (benefits) totaling $57.8 million and $69.9 million, respectively. Operating income as a percentage of net revenues was 13.2% in Fiscal 2025, reflecting a 180 basis point improvement from Fiscal 2024. The improvement in operating income as a percentage of net revenues was primarily driven by the increase in our gross margin, as well as lower net restructuring-related charges and certain other charges (benefits) recorded during Fiscal 2025 as compared to the prior fiscal year, partially offset by the increase in SG&A expenses as a percentage of net revenues, all as previously discussed.

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

(a)See discussion above for additional information related to impairment of assets and restructuring and other charges, net recorded during the fiscal years presented.

North America operating margin improved by 240 basis points due to an increase of 230 basis points in gross margin and a decline of 10 basis points in SG&A expense as a percentage of net revenues. The overall improvement in operating margin was inclusive of the unfavorable impact of approximately 10 basis points attributable to channel mix.

Europe operating margin improved by 240 basis points entirely due to an increase in gross margin. The overall improvement in operating margin was inclusive of the unfavorable impacts of approximately 30 basis points and 20 basis points related to foreign currency effects and channel mix, respectively.

Asia operating margin improved by 280 basis points due to a decline of 190 basis points in SG&A expenses as a percentage of net revenues and an increase of 80 basis points in gross margin. The overall improvement in operating margin was inclusive of the unfavorable impacts of approximately 50 basis points and 20 basis points related to foreign currency effects and channel mix, respectively.

Corporate expenses increased by $108.4 million to $755.4 million in Fiscal 2025 as compared to the prior fiscal year. The increase in corporate expenses was due to higher compensation-related expenses of $50.7 million, higher non-income taxes of $23.9 million, higher marketing and advertising expenses of $13.5 million, lower intercompany sourcing commission of $9.3 million (which is offset at the segment level and eliminates in consolidation), lower non-routine inventory benefits of $4.5 million, and higher other expenses of $22.8 million, partially offset by lower rent and occupancy expenses of $16.3 million.

Non-operating Income (Expense), Net.    Non-operating income (expense), net is comprised of interest expense, interest income, and other income (expense), net, which includes foreign currency gains (losses), equity in income (losses) from our equity-method investees, and other non-operating expenses. During Fiscal 2025, we reported non-operating income, net, of $18.6 million as compared to $21.0 million during Fiscal 2024. The $2.4 million decrease in non-operating income, net was primarily driven by higher interest expense.

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

The income tax provision and effective tax rate in Fiscal 2025 were $207.8 million and 21.9%, respectively, compared to $131.1 million and 16.9%, respectively, in Fiscal 2024. The $76.7 million increase in our income tax provision was primarily driven by an increase in our pretax income, as well as a 500 basis point increase in our effective tax rate. The increase in our effective tax rate was due to the absence of prior year favorable adjustments related to the accrual of deferred tax assets in connection with a transaction entered into as part of a reorganization of our corporate entity structure, and revaluation of deferred tax assets as a result of tax rate changes enacted in the prior year period, partially offset by a current year favorable adjustment related to the revaluation of a deferred tax liability on foreign earnings. The increase in our effective tax rate was also due to the absence of a one-time tax benefit of $13.1 million recorded during Fiscal 2024 in connection with Swiss tax reform and the European Union's anti-tax avoidance directive, which lowered our prior fiscal year period effective tax rate by 170 basis points. See Note 10 to the accompanying consolidated financial statements.

Net Income.    Net income increased to $742.9 million in Fiscal 2025, from $646.3 million in Fiscal 2024. The $96.6 million increase in net income was primarily due to an increase in our operating income, partially offset by an increase in our income tax provision, both as previously discussed. Our operating results during Fiscal 2025 and Fiscal 2024 were negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges (benefits) totaling $57.8 million and $69.9 million, respectively, which had an after-tax effect of reducing net income by $46.0 million and $52.6 million, respectively. Net income during Fiscal 2024 also reflected an income tax benefit of $13.1 million recorded in connection with Swiss tax reform and the European Union's anti-tax avoidance directive, as previously discussed.

Net Income per Diluted Share.    Net income per diluted share increased to $11.61 in Fiscal 2025, from $9.71 in Fiscal 2024. The $1.90 per share increase was primarily driven by the higher level of net income, as previously discussed, and lower weighted-average diluted shares outstanding during Fiscal 2025 driven by our share repurchases during the last twelve months. Net income per diluted share for Fiscal 2025 and Fiscal 2024 were also negatively impacted by $0.72 per share and $0.80 per share, respectively, attributable to net restructuring-related charges, impairment of assets, and certain other charges (benefits), as previously discussed. Net income per diluted share during Fiscal 2024 was also favorably impacted by $0.20 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.

Fiscal 2024 Compared to Fiscal 2023

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

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

Net Revenues.    Net revenues increased by $187.8 million, or 2.9%, to $6.631 billion in Fiscal 2024 as compared to Fiscal 2023, including favorable foreign currency effects of $12.4 million. On a constant currency basis, net revenues increased by $175.4 million, or 2.7%. These increases were driven by our international businesses.

The following table summarizes the percentage change in our Fiscal 2024 consolidated comparable store sales as compared to the prior fiscal year:

Our global average store count increased by 30 stores and concession shops during Fiscal 2024 compared with the prior fiscal year, driven by new openings primarily in Asia. The following table details our retail store presence by segment as of the periods presented:

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

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

North America net revenues — Net revenues decreased by $70.0 million, or 2.3%, during Fiscal 2024 as compared to Fiscal 2023. On a constant currency basis, net revenues decreased by $67.8 million, or 2.2%.

The $70.0 million decline in North America net revenues was driven by:

•a $113.3 million decline related to our North America wholesale business as we carefully managed 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 the prior year's supply chain disruption.

This decline was partially offset by:

•a $43.3 million increase related to our North America retail business. On a constant currency basis, net revenues increased by $44.3 million, reflecting increases of $35.9 million in comparable store sales and $8.4 million in non-comparable store sales. The increase in our comparable store sales reflected high-single digit AUR growth during Fiscal 2024 as compared to Fiscal 2023, as well as higher traffic. The following table summarizes the percentage changes in comparable store sales related to our North America retail business:

Europe net revenues — Net revenues increased by $128.8 million, or 7.0%, during Fiscal 2024 as compared to Fiscal 2023. On a constant currency basis, net revenues increased by $59.2 million, or 3.2%.

The $128.8 million increase in Europe net revenues was driven by:

•a $112.9 million increase related to our Europe retail business, inclusive of favorable foreign currency effects of $31.4 million. On a constant currency basis, net revenues increased by $81.5 million, reflecting increases of $66.7 million in comparable store sales and $14.8 million in non-comparable store sales. The increase in our comparable store sales reflected low-teens AUR growth during Fiscal 2024 as compared to Fiscal 2023, as well as higher traffic. The following table summarizes the percentage changes in comparable store sales related to our Europe retail business:

•a $15.9 million increase related to our Europe wholesale business largely driven by favorable foreign currency effects of $38.2 million and stronger re-order trends, more than offsetting the negative impact of lapping the prior fiscal year's favorable post-pandemic wholesale allowances.

Asia net revenues — Net revenues increased by $139.9 million, or 9.8%, during Fiscal 2024 as compared to Fiscal 2023. On a constant currency basis, net revenues increased by $194.9 million, or 13.7%.

The $139.9 million increase in Asia net revenues was driven by:

•a $141.7 million increase related to our Asia retail business, inclusive of unfavorable foreign currency effects of $51.5 million. On a constant currency basis, net revenues increased by $193.2 million, reflecting increases of $116.9 million in comparable store sales and $76.3 million in non-comparable store sales. The increase in our comparable store sales reflected low-teens AUR growth during Fiscal 2024 as compared to Fiscal 2023, as well as higher traffic. The following table summarizes the percentage changes in comparable store sales related to our Asia retail business:

This increase was partially offset by a $1.8 million decline related to our Asia wholesale business, inclusive of unfavorable foreign currency effects of $3.5 million.

Gross Profit.    Gross profit increased by $266.0 million, or 6.4%, to $4.432 billion in Fiscal 2024, including unfavorable foreign currency effects of $4.9 million. Gross profit as a percentage of net revenues increased to 66.8% in Fiscal 2024 from 64.6% in Fiscal 2023. The 220 basis point improvement was primarily driven by the favorable impacts of approximately 90 basis points attributable to geographic and channel mix and 30 basis points attributable to lower non-routine inventory charges recorded during Fiscal 2024 as compared to the prior fiscal year. The remaining 100 basis point improvement was primarily due to lower freight costs and AUR growth of approximately low-double digits, more than offsetting incremental pressure from higher cotton costs and unfavorable foreign currency effects of 20 basis points.

Selling, General, and Administrative Expenses.    SG&A expenses increased by $191.6 million, or 5.6%, to $3.600 billion in Fiscal 2024, including favorable foreign currency effects of $11.4 million. SG&A expenses as a percentage of net revenues increased to 54.3% in Fiscal 2024 from 52.9% in Fiscal 2023. The 140 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.

The $191.6 million increase in SG&A expenses was driven by:

Impairment of Assets.    No impairment charges were recorded during Fiscal 2024. On a comparative basis, during Fiscal 2023, we recorded impairment charges of $9.7 million to write-down certain long-lived assets, primarily related to a certain previously exited real estate location for which the related lease agreement had not yet expired. See Note 8 to the accompanying consolidated financial statements.

Restructuring and Other Charges, Net.   During Fiscal 2024 and Fiscal 2023, we recorded net restructuring charges and benefits of $55.8 million and $19.2 million, respectively, primarily consisting of severance and benefits costs, as well as other charges of $14.0 million and $23.8 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 had not yet expired. In addition, during Fiscal 2024 we recorded other charges of $5.1 million in connection with our Next Generation Transformation project (refer to "Recent Developments" for additional discussion). Additionally, during Fiscal 2024 and Fiscal 2023, we recognized income of $7.0 million and $3.5 million, respectively, related to consideration received from Regent, L.P. in connection with our previously sold Club Monaco business. We donated this income to The Ralph Lauren Corporate Foundation, which resulted in related offsetting donation expenses of $7.0 million and $3.5 million during Fiscal 2024 and Fiscal 2023, respectively. See Note 9 to the accompanying consolidated financial statements.

Operating Income.    Operating income increased by $52.2 million, or 7.4%, to $756.4 million during Fiscal 2024, reflecting favorable foreign currency effects of $6.5 million. Our operating results during Fiscal 2024 and Fiscal 2023 were negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges (benefits) totaling $69.9 million and $66.0 million, respectively. Operating income as a percentage of net revenues was 11.4% in Fiscal 2024, reflecting a 50 basis point improvement from Fiscal 2023. The improvement 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.

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

(a)See discussion above for additional information related to impairment of assets and restructuring and other charges, net recorded during the fiscal years presented.

North America operating margin declined by 10 basis points due to an increase of 240 basis points in SG&A expense as a percentage of net revenues, more than offsetting an increase of 230 basis points in gross margin. The overall decline in operating margin was inclusive of the unfavorable impact of approximately 30 basis points attributable to channel mix.

Europe operating margin improved by 150 basis points due to an increase of 240 basis points in gross margin, more than offsetting an increase of 90 basis points in SG&A expenses as a percentage of net revenues. The overall improvement in operating margin was inclusive of favorable foreign currency effects of 20 basis points and the unfavorable impact of 40 basis points related to channel mix.

Asia operating margin improved by 110 basis points due to decline of 140 basis points in SG&A expenses as a percentage of net revenues, more than offsetting a decline in gross margin of 20 basis points. The overall improvement in operating margin was inclusive of unfavorable foreign currency effects of 20 basis points.

Corporate expenses decreased by $4.5 million to $647.0 million in Fiscal 2024 compared to Fiscal 2023. The decrease in corporate expenses was due to lower non-routine inventory charges recorded during Fiscal 2024 as compared to the prior fiscal year of $19.9 million, lower rent and occupancy expenses of $6.6 million, lower marketing and advertising expenses of $6.4 million, lower depreciation and amortization expenses of $5.6 million, lower consulting fees of $5.1 million, lower selling-related expenses of $4.6 million, and lower other expenses of $6.8 million, partially offset by higher compensation-related expenses of $50.5 million.

Non-operating Income (Expense), Net.    During Fiscal 2024, we reported non-operating income, net, of $21.0 million as compared to non-operating expense, net of $12.3 million during Fiscal 2023. The $33.3 million increase in non-operating income, net was mainly due to a $40.8 million increase in interest income driven by higher interest rates in financial markets and higher average on-hand cash, cash equivalents, and short-term investments balance during Fiscal 2024 compared to the prior fiscal year. The increase in interest income was partially offset by higher interest expense and other expense, net.

Income Tax Provision.    The income tax provision and effective tax rate in Fiscal 2024 were $131.1 million and 16.9%, respectively, compared to $169.2 million and 24.5%, respectively, in Fiscal 2023. The $38.1 million decrease in our income tax provision was primarily driven by the 760 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 changes enacted in tax legislation, and the absence of unfavorable prior year adjustments related to certain deferred tax assets and receivables, partially offset by the unfavorable impact of audit-related reserve adjustments. The decline in our effective tax rate was also due to a one-time tax benefit of $13.1 million recorded during 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 10 to the accompanying consolidated financial statements.

Net Income.    Net income increased to $646.3 million in Fiscal 2024, from $522.7 million in Fiscal 2023. The $123.6 million increase in net income was primarily due to an increase in our operating income and non-operating income, net, as well as a decrease in our income tax provision, all as previously discussed. Our operating results during Fiscal 2024 and Fiscal 2023 were negatively impacted by net restructuring-related charges, impairment of assets, and certain other charges (benefits) totaling $69.9 million and $66.0 million, respectively, which had an after-tax effect of reducing net income by $52.6 million and $52.9 million, respectively. Net income during Fiscal 2024 also reflected an income tax benefit of $13.1 million recorded in connection with Swiss tax reform and the European Union's anti-tax avoidance directive, as previously discussed.

Net Income per Diluted Share.    Net income per diluted share increased to $9.71 in Fiscal 2024, from $7.58 in Fiscal 2023. The $2.13 per share increase was primarily driven by the higher level of net income, as previously discussed, and lower weighted-average diluted shares outstanding during Fiscal 2024 driven by our share repurchases during the preceding twelve months. Net income per diluted share for Fiscal 2024 and Fiscal 2023 were also negatively impacted by $0.80 per share and $0.76 per share, respectively, attributable to net restructuring-related charges, impairment of assets, and certain other charges (benefits), as previously discussed. Net income per diluted share during Fiscal 2024 was also favorably impacted by $0.20 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.

FINANCIAL CONDITION AND LIQUIDITY

Financial Condition

The following table presents our financial condition as of March 29, 2025 and March 30, 2024.

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

The increase in our net cash and short-term investments position at March 29, 2025 as compared to March 30, 2024 was primarily due to our operating cash flows of $1.235 billion, partially offset by our use of cash to support Class A common stock repurchases of $480.9 million, including withholdings in satisfaction of tax obligations for stock-based compensation awards, to invest in our business through $216.2 million in capital expenditures, and to make dividend payments of $201.1 million.

The increase in our equity was attributable to our comprehensive income and the net impact of stock-based compensation arrangements, partially offset by our share repurchase activity and dividends declared during Fiscal 2025.

Cash Flows

Fiscal 2025 Compared to Fiscal 2024

Net Cash Provided by Operating Activities.    Net cash provided by operating activities was $1.235 billion during Fiscal 2025, as compared to $1.070 billion during Fiscal 2024. The $165.4 million net increase in cash provided by operating activities was due to an increase in net income before non-cash charges, as well as a net favorable change related to our operating assets and liabilities, including our working capital, as compared to the prior fiscal year.

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

•a favorable change in our accounts payable driven by the timing of cash payments, as well as a net favorable change in accrued liabilities largely driven by accrued payroll and benefits resulting from anticipated higher bonus achievement levels, partially offset by our restructuring reserve due to a decrease in restructuring charges recorded during the current fiscal year period as compared to the prior fiscal year period.

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

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

Net Cash Used in Investing Activities.    Net cash used in investing activities was $264.1 million during Fiscal 2025, as compared to $256.8 million during Fiscal 2024. The $7.3 million net increase in cash used in investing activities was primarily driven by:

•a $51.4 million increase in capital expenditures. During Fiscal 2025, we spent $216.2 million on capital expenditures, as compared to $164.8 million during Fiscal 2024. Our capital expenditures during Fiscal 2025 primarily related to store openings and renovations, enhancements to our information technology systems, and corporate office renovations.

This increase in cash used in investing activities was partially offset by:

•a $41.0 million decrease in purchases of investments, less proceeds from sales and maturities of investments. During Fiscal 2025, we made net investment purchases of $47.5 million, as compared to $88.5 million during Fiscal 2024.

In Fiscal 2026, we expect to spend approximately 4% to 5% of net revenues on capital expenditures, primarily related to the purchase of real estate, store openings and renovations, enhancements to our information technology systems (including those related to our Next Generation Transformation project), and a continuation of our corporate office renovations.

Net Cash Used in Financing Activities.    Net cash used in financing activities was $704.0 million during Fiscal 2025, as compared to $665.6 million during Fiscal 2024. The $38.4 million net increase in cash used in financing activities was primarily driven by:

•a $31.2 million increase in cash used to repurchase shares of our Class A common stock. During Fiscal 2025, we used $424.5 million to repurchase shares of our Class A common stock pursuant to our common stock repurchase program, and an additional $56.4 million in shares of our Class A common stock were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under our long-term stock incentive plans. On a comparative basis, during Fiscal 2024, we used $398.2 million to repurchase shares of our Class A common stock pursuant to our common stock repurchase program, and an additional $51.5 million in shares of our Class A common stock were surrendered or withheld for taxes.

Fiscal 2024 Compared to Fiscal 2023

Net Cash Provided by Operating Activities.    Net cash provided by operating activities was $1.070 billion during Fiscal 2024, as compared to $411.0 million during Fiscal 2023. The $658.7 million 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, as well as an increase in net income before non-cash charges.

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

•a favorable change related to our inventories, largely driven by a more normalized receipt cadence;

•a net favorable change in our accrued liabilities largely driven by the impact of a lower bonus achievement level realized during Fiscal 2023 as compared to the prior fiscal year and a favorable change in our restructuring reserve due to an increase in restructuring charges recorded during Fiscal 2024 as compared to the prior fiscal year, as well as a favorable change in accounts payable driven by the timing of cash payments; and

•a favorable change related to our accounts receivable, largely driven by a decline in wholesale net revenues and timing of cash receipts.

Net Cash Provided by (Used in) Investing Activities.    Net cash used in investing activities was $256.8 million during Fiscal 2024, as compared to net cash provided by investing activities of $471.5 million during Fiscal 2023. The $728.3 million net increase in cash used in investing activities was primarily driven by:

•a $783.3 million decrease in proceeds from sales and maturities of investments, less purchases of investments. During Fiscal 2024, we made net investment purchases of $88.5 million, as compared to receiving net proceeds from sales and maturities of investments of $694.8 million during Fiscal 2023.

This increase in cash used in investing activities was partially offset by:

•a $52.7 million decrease in capital expenditures. During Fiscal 2024, we spent $164.8 million on capital expenditures, as compared to $217.5 million during Fiscal 2023. Our capital expenditures during Fiscal 2024 primarily related to store openings and renovations, as well as enhancements to our information technology systems.

Net Cash Used in Financing Activities.    Net cash used in financing activities was $665.6 million during Fiscal 2024, as compared to $1.209 billion during Fiscal 2023. The $543.2 million net decrease in cash used in financing activities was primarily driven by:

•a $500.0 million decrease in cash used to repay debt. During Fiscal 2024, we did not issue or repay any debt. On a comparative basis, during Fiscal 2023, we repaid our previously outstanding $500.0 million principal amount of unsecured 1.700% senior notes that matured on June 15, 2022; and

•a $38.9 million decrease in cash used to repurchase shares of our Class A common stock. During Fiscal 2024, we used $398.2 million to repurchase shares of our Class A common stock pursuant to our common stock repurchase program, and an additional $51.5 million in shares of our Class A common stock were surrendered or withheld in satisfaction of withholding taxes in connection with the vesting of awards under our long-term stock incentive plans. On a comparative basis, during Fiscal 2023, we used $454.3 million to repurchase shares of our Class A common stock pursuant to our common stock repurchase program, and an additional $34.3 million in shares of our Class A common stock were surrendered or withheld for taxes.

Sources of Liquidity

Our primary sources of liquidity are the cash flows generated from our operations, our available cash and cash equivalents and short-term investments, availability under our credit and overdraft facilities and commercial paper program, and other available financing options. We also maintain access to the capital markets and may issue debt securities from time to time, which may provide an additional source of liquidity and/or funds to refinance existing debt.

During Fiscal 2025, we generated $1.235 billion of net cash flows from our operations. As of March 29, 2025, we had $2.083 billion in cash, cash equivalents, and short-term investments, of which $1.398 billion were held by our subsidiaries domiciled outside the U.S. We are not dependent on foreign cash to fund our domestic operations. Undistributed foreign earnings generated on or before December 31, 2017 that were subject to the one-time mandatory transition tax in connection with U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA") are not considered to be permanently reinvested and may be repatriated to the U.S. in the future with minimal or no additional U.S. taxation. We intend to permanently reinvest undistributed foreign earnings generated after December 31, 2017 that were not subject to the one-time

mandatory transition tax. However, if our plans change and we choose to repatriate post-2017 earnings to the U.S. in the future, we would be subject to applicable U.S. and foreign taxes.

The following table presents the total availability, borrowings outstanding, and remaining availability under our credit and overdraft facilities and Commercial Paper Program as of March 29, 2025:

(a)As defined in Note 11 to the accompanying consolidated financial statements.

(b)Borrowings under the Commercial Paper Program are supported by the Global Credit Facility. Accordingly, we do not expect combined borrowings outstanding under the Commercial Paper Program and the Global Credit Facility to exceed $750 million.

(c)Represents outstanding letters of credit for which we were contingently liable under the Global Credit Facility as of March 29, 2025.

We believe that the Global Credit Facility is adequately diversified with no undue concentration in any one financial institution. In particular, as of March 29, 2025, there were seven financial institutions participating in the Global Credit Facility, with no one participant maintaining a maximum commitment percentage in excess of 20%. In accordance with the terms of the agreement, we have the ability to expand our borrowing availability under the Global Credit Facility to $1.500 billion through the full term of the facility, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments.

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

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

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

Supplier Finance Program

We support a voluntary supplier finance program which provides certain of our inventory suppliers the opportunity, at their sole discretion, to sell their receivables due from us (which are generally due within 90 days) to a participating financial institution in exchange for receipt of a discounted payment amount made earlier than the payment term stipulated between us and the supplier. Our vendor payment terms and amounts due are not impacted by a supplier's decision to participate in the program. We have not pledged any assets and do not provide guarantees under the supplier finance program. Our payment

obligations outstanding under our supplier finance program were $181.0 million and $129.2 million as of March 29, 2025 and March 30, 2024, respectively, and were recorded within accounts payable in the consolidated balance sheets. See Note 3 to the accompanying consolidated financial statements for additional information relating to our supplier finance program.

Debt and Covenant Compliance

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

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

We have a credit facility that provides for a $750 million senior unsecured revolving line of credit through June 30, 2028, which may be used for working capital needs, capital expenditures, certain investments, general corporate purposes, and for funding of acquisitions, as well as used to support the issuance of letters of credit and the maintenance of the Commercial Paper Program (the "Global Credit Facility"). Borrowings under the Global Credit Facility may be denominated in U.S. Dollars and certain other currencies, including Euros, Hong Kong Dollars, and Japanese Yen. We have the ability to expand the borrowing availability under the Global Credit Facility to $1.500 billion, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments. There are no mandatory reductions in borrowing ability throughout the term of the Global Credit Facility.

The Global Credit Facility contains a number of covenants, as described in Note 11 to the accompanying consolidated financial statements. As of March 29, 2025, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under our Global Credit Facility. The Pan-Asia Borrowing Facilities do not contain any financial covenants.

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

Common Stock Repurchase Program

As of March 29, 2025, the remaining availability under our Class A common stock repurchase program was approximately $352 million. On May 15, 2025, our Board of Directors approved an expansion of our existing common stock repurchase program that allows us to repurchase up to an additional $1.500 billion of our Class A common stock, excluding related excise taxes. Repurchases of shares of our Class A common stock are subject to overall business and market conditions.

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

Dividends

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

On May 16, 2024, our Board of Directors approved an increase to our quarterly cash dividend on our common stock from $0.75 to $0.825 per share. On May 15, 2025, our Board of Directors approved an additional increase to the quarterly cash dividend on our common stock from $0.825 to $0.9125 per share. The first quarterly dividend to reflect this increase is expected to be payable to shareholders of record at close of business on June 27, 2025 and paid on July 11, 2025.

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

See Note 16 to the accompanying consolidated financial statements for additional information relating to our quarterly cash dividend program.

Material Cash Requirements

Firm Commitments

The following table summarizes certain of our aggregate material cash requirements as of March 29, 2025, and the estimated timing and effect that such obligations are expected to have on our liquidity and cash flows in future periods. We expect to fund these firm commitments with operating cash flows generated in the normal course of business and, if necessary, through availability under our credit facilities or other accessible sources of financing.

The following is a description of our material, firmly committed obligations as of March 29, 2025:

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

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

•Lease obligations represent fixed payments due over the lease term of our noncancelable leases of real estate and operating equipment, including rent, real estate taxes, insurance, common area maintenance fees, and/or certain other costs. For lease terms that have commenced, information has been presented separately for operating and finance leases. Other lease commitments relate to executed lease agreements for which the related lease terms have not yet commenced as of March 29, 2025;

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

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

•Real estate purchase commitment relates to our legally-binding agreement to purchase real estate located in New York City; and

•Other commitments primarily represent our legally-binding obligations related to sponsorship, licensing, and other marketing and advertising agreements; information technology-related service agreements; and pension-related obligations.

Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $193.3 million as of March 29, 2025, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever. The above table also excludes the following: (i) amounts recorded in current liabilities in our consolidated balance sheet as of March 29, 2025, which will be paid within one year, other than lease obligations, mandatory transition tax payments, and accrued interest payments on debt; and (ii) non-current liabilities that have no cash outflows associated with them (e.g., deferred income), or the cash outflows associated with them are uncertain or do not represent a "purchase obligation" as such term is used herein (e.g., deferred taxes, derivative financial instruments, asset retirement obligations, and other miscellaneous items).

We also have certain contractual arrangements that would require us to make payments if certain events or circumstances occur. See Note 15 to the accompanying consolidated financial statements for a description of our contingent commitments not included in the above table.

Off-Balance Sheet Arrangements

In addition to the commitments included in the above table, our other off-balance sheet firm commitments relating to our outstanding letters of credit amounted to $10.6 million as of March 29, 2025. We do not maintain any other off-balance sheet arrangements, transactions, obligations, or other relationships with unconsolidated entities that would be expected to have a material current or future effect on our consolidated financial statements.

MARKET RISK MANAGEMENT

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

Given our use of derivative instruments, we are exposed to the risk that the counterparties to such contracts will fail to meet their contractual obligations. To mitigate such counterparty credit risk, it is our policy to only enter into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. Our established policies and procedures for mitigating credit risk include ongoing review and assessment of the creditworthiness of our counterparties. We also enter into master netting arrangements with counterparties, when possible, to further mitigate credit risk. As a result of the above considerations, we do not believe that we are exposed to undue concentration of counterparty risk with respect to our derivative contracts as of March 29, 2025. However, we do have in aggregate $25.9 million of derivative instruments in net asset positions held across three creditworthy financial institutions.

Foreign Currency Risk Management

We manage our exposure to changes in foreign currency exchange rates using forward foreign currency exchange and cross-currency swap contracts. Refer to Note 13 to the accompanying consolidated financial statements for a summary of the notional amounts and fair values of our outstanding forward foreign currency exchange and cross-currency swap contracts, as well as the impact on earnings and other comprehensive income of such instruments for the fiscal years presented.

Forward Foreign Currency Exchange Contracts

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

Our foreign exchange risk management activities are governed by established policies and procedures. These policies and procedures provide a framework that allows for the management of currency exposures while ensuring the activities are conducted within our established guidelines. Our policies include guidelines for the organizational structure of our risk management function and for internal controls over foreign exchange risk management activities, including, but not limited to,

authorization levels, transaction limits, and credit quality controls, as well as various measurements for monitoring compliance. We monitor foreign exchange risk using different techniques, including periodic review of market values and performance of sensitivity analyses.

Cross-Currency Swap Contracts

We periodically designate pay-fixed rate, receive-fixed rate cross-currency swap contracts as hedges of our net investment in certain European subsidiaries. These contracts swap U.S. Dollar-denominated fixed interest rate payments based on the contract's notional amount and the fixed rate of interest payable on certain of our senior notes for Euro-denominated fixed interest rate payments, thereby economically converting a portion of our fixed-rate U.S. Dollar-denominated senior note obligations to fixed rate Euro-denominated obligations.

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

Sensitivity

We perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our forward foreign currency exchange and cross-currency swap contracts. In doing so, we assess the risk of loss in the fair values of these contracts that would result from hypothetical changes in foreign currency exchange rates. This analysis assumes a like movement by the foreign currencies in our hedge portfolio against the U.S. Dollar. As of March 29, 2025, a 10% appreciation or depreciation of the U.S. Dollar against the foreign currencies under contract would result in a net increase or decrease, respectively, in the fair value of our derivative portfolio of approximately $121 million. This hypothetical net change in fair value should ultimately be largely offset by the net change in the related underlying hedged items.

Interest Rate Risk Management

Sensitivity

As of March 29, 2025, we had no variable-rate debt outstanding. As such, our exposure to changes in interest rates primarily relates to changes in the fair values of our fixed-rate Senior Notes. As of March 29, 2025, the aggregate fair values of our Senior Notes were $1.089 billion. A 25-basis point increase or decrease in interest rates would decrease or increase, respectively, the aggregate fair values of our Senior Notes by approximately $9 million based on certain simplifying assumptions, including an immediate across-the-board increase or decrease in the level of interest rates with no other subsequent changes for the remainder of the period. Such potential increases or decreases in the fair value of our debt would only be realized if we were to retire all or a portion of the debt prior to its maturity.

Investment Risk Management

As of March 29, 2025, we had cash and cash equivalents on-hand of $1.922 billion, consisting of deposits in interest bearing accounts, investments in money market deposit accounts, and investments in time deposits with original maturities of 90 days or less. Our other significant investments included $160.5 million of short-term investments, consisting of time deposits with original maturities greater than 90 days.

We actively monitor our exposure to changes in the fair value of our global investment portfolio in accordance with our established policies and procedures, which include monitoring both general and issuer-specific economic conditions, as discussed in Note 3 to the accompanying consolidated financial statements. Our investment objectives include capital preservation, maintaining adequate liquidity, diversification to minimize liquidity and credit risk, and achievement of maximum returns within the guidelines set forth in our investment policy. See Note 13 to the accompanying consolidated financial statements for further detail of the composition of our investment portfolio as of March 29, 2025.

CRITICAL ACCOUNTING POLICIES

An accounting policy is considered to be critical if it is important to our results of operations, financial condition, and cash flows, and requires significant judgment and estimates on the part of management in its application. Our estimates are often based on complex judgments, assessments of probability, and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. It is also possible that other professionals, applying reasonable judgment to the same set of facts and circumstances, could develop and support a range of alternative estimated amounts. We believe that the

following list represents our critical accounting policies. For a discussion of all of our significant accounting policies, including our critical accounting policies, see Note 3 to the accompanying consolidated financial statements.

Sales Reserves and Uncollectible Accounts

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

In developing estimates of returns, discounts, end-of-season markdowns, operational chargebacks, and cooperative advertising allowances, we analyze historical trends, actual and forecasted seasonal results, current economic and market conditions, retailer performance, and, in certain cases, contractual terms. Estimates for operational chargebacks are based on actual customer notifications of order fulfillment discrepancies and historical trends. We review and refine these estimates on a quarterly basis. Our historical estimates of these amounts have not differed materially from actual results. However, unforeseen adverse future economic and market conditions, such as those resulting from widespread pandemic diseases and/or other catastrophic events, could result in our actual results differing materially from our estimates. A hypothetical 1% increase in our reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances as of March 29, 2025 would have reduced our Fiscal 2025 net revenues by approximately $1 million.

Similarly, we evaluate our accounts receivable balances to develop expectations regarding the extent to which they will ultimately be collected. Significant judgment and estimation are involved in this evaluation, including a receivables aging analysis which shows, by aged category, the percentage of receivables that has historically gone uncollected, an analysis of specific risks on a customer-by-customer basis for larger accounts (including consideration of their financial condition and ability to withstand potential prolonged periods of adverse economic conditions), and an evaluation of current and forecasted economic and market conditions over the respective asset's contractual life. Based on this information, we record an allowance for estimated amounts that we ultimately expect not to collect due to credit. Although we believe that we have adequately provided for these risks as part of our allowance for doubtful accounts, a severe and prolonged adverse impact on our major customers' business and operations beyond those forecasted could have a corresponding material adverse effect on our net revenues, cash flows, and/or financial condition. A hypothetical 1% increase in the level of our allowance for doubtful accounts as of March 29, 2025 would have increased our Fiscal 2025 SG&A expenses by less than $1 million.

See "Accounts Receivable" in Note 3 to the accompanying consolidated financial statements for an analysis of the activity in our sales reserves and allowance for doubtful accounts for each of the three fiscal years presented.

Inventories

We hold retail inventory that is sold in our own stores and digital commerce sites directly to consumers. We also hold inventory that is sold through wholesale distribution channels to major department stores and specialty retail stores. Substantially all of our inventories are comprised of finished goods, which are stated at the lower of cost or estimated realizable value, with cost determined on a weighted-average cost basis.

The estimated net realizable value of inventory is determined based on an analysis of historical sales trends of our individual product lines, the impact of market trends and economic conditions (including those resulting from pandemic diseases and other catastrophic events), and a forecast of future demand, giving consideration to the value of current orders in-house for future sales of inventory, as well as plans to sell inventory through our outlet stores, among other liquidation channels. Actual results may differ from estimates due to the quantity, quality, and mix of products in inventory, consumer and retailer preferences, and economic and market conditions. Reserves for inventory shrinkage, representing the risk of physical loss of inventory, are estimated based on historical experience and are adjusted based upon physical inventory counts. Our historical estimates of these costs and the related provisions have not differed materially from actual results. However, unforeseen adverse future economic and market conditions could result in our actual results differing materially from our estimates.

A hypothetical 1% increase in the level of our inventory reserves as of March 29, 2025 would have decreased our Fiscal 2025 gross profit by approximately $3 million.

Impairment of Goodwill and Other Intangible Assets

Goodwill and certain other intangible assets deemed to have indefinite useful lives are not amortized. Rather, goodwill and indefinite-lived intangible assets are assessed for impairment at least annually. Finite-lived intangible assets are amortized over their respective estimated useful lives and, along with other long-lived assets, are evaluated for impairment periodically whenever events or changes in circumstances indicate that their carrying values may not be fully recoverable.

We generally perform our annual goodwill impairment assessment using a qualitative approach to determine whether it is more likely than not that the fair value of a reporting unit is less than its respective carrying value. However, in order to reassess the fair values of our reporting units, we periodically perform a quantitative impairment analysis in lieu of using the qualitative approach.

Performance of the qualitative goodwill impairment assessment requires judgment in identifying and considering the significance of relevant key factors, events, and circumstances that affect the fair values of our reporting units. This requires consideration and assessment of external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as our actual and planned financial performance. We also give consideration to the difference between each reporting unit's fair value and carrying value as of the most recent date that a fair value measurement was performed. If the results of the qualitative assessment conclude that it is not more likely than not that the fair value of a reporting unit exceeds its carrying value, additional quantitative impairment testing is performed.

The quantitative goodwill impairment test involves comparing the fair value of a reporting unit with its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, the reporting unit's goodwill is considered not to be impaired. However, if the carrying value of a reporting unit exceeds its fair value, an impairment loss is recorded in an amount equal to that excess. Any impairment charge recognized is limited to the amount of the respective reporting unit's allocated goodwill.

Determining the fair value of a reporting unit under the quantitative goodwill impairment test requires judgment and often involves the use of significant estimates and assumptions, including an assessment of external factors such as macroeconomic, industry, and market conditions, as well as entity-specific factors, such as actual and planned financial performance. Similarly, estimates and assumptions are used when determining the fair values of other indefinite-lived intangible assets. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and the magnitude of any such charge. To assist management in the process of determining any potential goodwill impairment, we may review and consider appraisals from accredited independent valuation firms. Estimates of fair value are primarily determined using discounted cash flows, market comparisons, and recent transactions. These approaches involve significant estimates and assumptions, including projected future cash flows (including timing), discount rates reflecting the risks inherent in those future cash flows, perpetual growth rates, and selection of appropriate market comparable metrics and transactions.

We performed our annual goodwill impairment assessment as of the beginning of the second quarter of Fiscal 2025 using the qualitative approach discussed above. In performing the assessment, we considered the results of our most recent quantitative goodwill impairment test, which was performed as of the beginning of the second quarter of Fiscal 2024, the results of which indicated that the fair values of our reporting units significantly exceeded their respective carrying values. Based on the results of the qualitative impairment assessment, we concluded that it is not more likely than not that the fair values of our reporting units are less than their respective carrying values and there were no reporting units at risk of impairment. No goodwill impairment charges were recorded during any of the fiscal years presented. See Note 12 to the accompanying consolidated financial statements for further discussion.

In evaluating finite-lived intangible assets for recoverability, we use our best estimate of future cash flows expected to result from the use of the asset and its eventual disposition where probable. If such estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is recognized to the extent that such asset's carrying value exceeds its fair value, as estimated considering external market participant assumptions.

It is possible that our conclusions regarding impairment or recoverability of goodwill or other intangible assets could change in future periods if, for example, (i) our businesses do not perform as projected, (ii) overall economic conditions in future years vary from current assumptions, (iii) business conditions or strategies change from our current assumptions, or (iv) the identification of our reporting units change, among other factors. Such changes could result in a future impairment charge of goodwill or other intangible assets, which could have a material adverse effect on our consolidated financial position or results of operations.

Impairment of Other Long-Lived Assets

Property and equipment and lease-related right-of-use ("ROU") assets, along with other long-lived assets, are evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. In evaluating long-lived assets for recoverability, we use our best estimate of future cash flows expected to result from the use of the asset (including any potential sublease income for lease-related ROU assets) and its eventual disposition, where applicable. If such estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is recognized to the extent that such asset's carrying value exceeds its fair value, as estimated considering external market participant assumptions and discounted cash flows, including those based on estimated market rents for lease-related ROU assets. Assets to be disposed of and for which there is a committed plan of disposal (commonly referred to as assets held-for-sale) are reported at the lower of carrying value or fair value, less costs to sell.

In determining future cash flows, we take various factors into account, including changes in merchandising strategy, the emphasis on retail store cost controls, the effects of macroeconomic trends such as consumer spending, and the impacts of more experienced retail store managers and increased local advertising. Since the determination of future cash flows is an estimate of future performance, future impairments may arise in the event that future cash flows do not meet expectations. For example, unforeseen adverse future economic and market conditions could negatively impact consumer behavior, spending levels, and/or shopping preferences and result in actual results differing from our estimates. Additionally, we may review and consider appraisals from accredited independent valuation firms to determine the fair value of long-lived assets, where applicable.

During Fiscal 2025 and Fiscal 2023, we recorded impairment charges of $0.8 million and $9.7 million, respectively, to write-down the carrying values of certain long-lived assets based upon their assumed fair values. No impairment charges were recorded during Fiscal 2024. See Note 8 to the accompanying consolidated financial statements for further discussion.

Income Taxes

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

Deferred income taxes reflect the tax effect of certain net operating losses, capital losses, general business credit carryforwards, and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates. Valuation allowances are established when management determines that it is more likely than not that some portion or all of a deferred tax asset will not be realized. Tax valuation allowances are analyzed periodically by assessing the adequacy of future expected taxable income, which typically involves the use of significant estimates. Such allowances are adjusted as events occur, or circumstances change, that warrant adjustments to those balances.

See Note 10 to the accompanying consolidated financial statements for further discussion of income taxes.

Contingencies

We are periodically exposed to various contingencies in the ordinary course of conducting our business, including potential losses relating to certain litigation, alleged information system security breaches, contractual disputes, employee relation matters, various tax or other governmental audits, and trademark and intellectual property matters and disputes. We record a liability for such contingencies to the extent that we conclude that it is probable that a loss has been incurred and the amount of such loss is reasonably estimable. In addition, if it is considered reasonably possible that an unfavorable settlement of a contingency could exceed any established liability, we disclose the estimated impact on our liquidity, financial condition, and results of operations, if practicable. Management considers many factors in making these assessments. As the ultimate resolution of contingencies is inherently unpredictable, these assessments can involve a series of complex judgments about future events including, but not limited to, court rulings, negotiations between affected parties, and governmental actions. As a

result, the accounting for loss contingencies relies heavily on management's judgment in developing the related estimates and assumptions.

Stock-Based Compensation

We expense all stock-based compensation awarded to employees and non-employee directors based on the grant date fair value of the awards over the requisite service period, adjusted for forfeitures which are estimated based on an analysis of historical experience and expected future trends.

Restricted Stock Units ("RSUs")

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

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

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

Sensitivity

The assumptions used in calculating the grant date fair values of our stock-based compensation awards represent our best estimates. In addition, projecting the achievement level of certain performance-based awards, as well as estimating the number of awards expected to be forfeited, requires judgment. If actual results or forfeitures differ significantly from our estimates and assumptions, or if assumptions used to estimate the grant date fair value of future stock-based award grants are significantly changed, stock-based compensation expense and, therefore, our results of operations could be materially impacted. A hypothetical 10% change in our Fiscal 2025 stock-based compensation expense would have affected our net income by approximately $9 million.

RECENTLY ISSUED ACCOUNTING STANDARDS

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