Ralph Lauren Corporation

Later, we will conduct a question and answer session. Instructions on how to ask a question will be given at that time. If you should require assistance during the call, please press star then zero. As a reminder, this conference is being recorded. I would now like to turn over the conference to our host, Ms. Amanda Vander Kim. Please go ahead.

Good morning and thank you for joining Ralph Lauren's third quarter fiscal 2022 conference call. With me today are Patrice Louvet, the company's president and chief executive officer, and Jane Nielsen, chief operating officer and chief financial officer. After prepared remarks, we will open up the call for your questions, which we ask that you limit to one per caller. During today's call, we will be making some forward-looking statements within the meaning of the federal securities laws, including our financial outlook. Forward-looking statements are not guarantees, and our actual results may differ materially from those expressed or implied in the forward-looking statements. Our expectations contain many risks and uncertainties. Principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings. To find disclosures and reconciliations of non-GAAP measures that we use when discussing our financial results, you should refer to this morning's earnings release and to our SEC filings that can be found on our Investor Relations website. And now, I'll turn the call over to Patrice.

Thank you, Corey. Good morning, everyone, and thank you for joining today's call. We were pleased to report strong third quarter performance during the important holiday season. Our better than expected results across all three regions are a testament to the outstanding work our teams have done to fundamentally reposition our business, elevate our brand, and pivot to offense, including in North America, where our turnaround is well under way. Our significant reset work is behind us, our brand is strong, and our growth is supported by multiple levers, from geographic and channel expansion to recruiting new higher-value consumers and developing high-potential product categories. While we expect these growth levers to be sustainable and deliver in the future, they are already driving profitable growth with all of our regions reporting positive increases to last year and pre-pandemic levels. And we delivered this broad-based performance while many of our markets around the world are still managing through the impacts of COVID. Let me share a few highlights from the third quarter across the five strategic pillars that we outlined at the start of our next great chapter plan. First, on our efforts to win over a new generation, consumers around the world are connecting more than ever to our brand positioning and product portfolio. Together with our multifaceted strategy for demand creation honed through the pandemic, we are engaging both new and existing consumers in exciting ways. This is particularly evident in our fiscal third quarter, where we shifted a significant portion of this year's investments to drive brand momentum across a diverse range of activities. From celebrity activations to the metaverse, we drove a significant increase in digital share of voice globally. These activations not only drove our strong top-line outperformance in the quarter, but also helped recruit younger, full-price consumers to the brand, particularly on our digital channels. New consumers on our digital sites grew 58% to double our wine. including an increased penetration of next generation under 35 and higher value consumers. For the critical holiday period, our brand tracking data showed that our high-impact campaigns further increased consumer perceptions of Ralph Lauren as a key destination for gifting in all regions. Online search trends across our family of brands also grew strong double digits to last year. significantly outperforming peers in our largest markets in Q3. Some of the innovative holiday campaigns that drove brand heat and enabled consumers to engage with and shop our brand in new ways included, first, we expanded our leadership in the metaverse with our Ralph Lauren Winter Escape program on Roblox, where we recreated the world of Ralph Lauren with an immersive holiday-themed user experience and exclusive digital apparel collection for purchase. Roblox is one of the top interactive digital platforms in the world, and particularly for Gen Z, with 47 million users. This follows last quarter's World of Ralph Lauren launch on another popular metaverse, Zepeto, where we continued to gain traction with over 2.5 million visits to date, and maintain the number one rank among all brands on the platform. You may have seen our mobile pop-ups and synchronized drone shows in select cities this holiday, featuring hundreds of drones lighting up the night sky to celebrate the return of festive dressing and our customizable gifts. We also drove highly successful live streaming events during the quarter, including our brand-elevating Singles' Day and far-fetched holiday live streams. In China, we continue to leverage our work with key influencers. Accompanying the launch of our first major fragrance in the market this fall, our collaboration with popular actor and singer Xiao Zhan sold 40,000 units of Ralph's Club fragrance in a six-hour period in December. Looking to the fourth quarter, we will continue to drive this momentum with iconic grand moments in sports and culture, including our Spring 22 fashion show in New York, our sponsorship of Team USA in the Winter Olympics opening today, and our second year sponsoring the Australian Open, all of which you will see amplified across our global digital campaigns. Moving to our second key initiative, energize core products, and accelerate high potential underdeveloped categories. Ralph created the quintessential American luxury lifestyle brand more than 50 years ago. His vision is one that has always been about a world to aspire to rather than any single product, category, or fashion cycle. While the polo brand and elevated sportswear still sit at the heart of what we do, Ralph Lauren is one of the few brands in the marketplace with the authenticity, quality, and credibility to deliver products ranging from fleece hoodies to evening gowns and from accessories to home. Our multi-category lifestyle proposition affords us the flexibility and competitive advantage to deliver for consumers whatever the backdrop. And this flexibility enables us to be agile as consumers shift their wardrobes to a new hybrid mix of elevated but comfortable casual styles. For example, mixing our women's cashmere joggers with our sophisticated Sawyer wool tuxedo jacket. Our fall holiday performance in Q3 is a great example of how Ralph and our design teams are effectively capturing this mix. which is translating into market share gains around the world. Let me share just a few of these highlights. Our Boston Commons apparel collection introduced an expanded assortment of elevated heritage icons, driving strong sales in our stores with our most aspirational consumers. Our holiday Cortina collection celebrated Alpine style in a sophisticated palette of blues and white. We drove a strong return of our sweater business with an expanded offering of our iconic cashmere styles, along with the introduction of new modern active hybrid models. And we continue to drive outsized performance in outerwear, one of our high potential categories, which has grown about 50% since the start of our next great chapter strategy. Q3 outerwear sales were fueled by an expanded range of active insulated models, including our newest collection of RLX performance for men, as well as elevated shirling, wools, and cashmere for women. As we continue to drive brand heat and new consumer acquisition, special capsules this quarter included Black on Black, our latest limited edition Major League Baseball drop, Our bold new U.S. Olympics capsule, inspiring a new generation with looks rooted in active and performance outerwear, fleece, and mitts. And for our brand loyalists on the Polo app, our seven days, seven drops Polo Bear skateboard decks with Gossip Girl star and skateboarder Evan Mock kicking off the event at our Prince Street store. Shifting gears to our third key initiative, drive targeted expansion in our regions and channels. We continued our long-term strategy of investing in our brand-elevating key city ecosystems around the world in the third quarter, with 40 new stores and concessions opening in top cities globally. This included our first European flagship opening since 2010 in Milan, with early performance beating our plans by double digits. The majority of our store openings were in Asia, and particularly the Chinese mainland, where our brand momentum remains very strong despite recurring COVID shutdowns. Our mainland sales were still up more than 20% to last year and 65% to double our Y in constant currency. The highly innovative emblematic concept stores we opened in Beijing and Shanghai earlier this year continue to perform ahead of our expectations lifting overall growth trends in their respective city ecosystems. And our singles day performance significantly outpaced the competition, despite our less promotional approach. As we start to expand our successful key city ecosystem blueprint around the world, we were particularly excited to open four new full price stores in North America this quarter in Miami, Chicago, Atlanta, and Detroit. This represents our highest number of full-price store openings in North America in six years and commences a new phase of retail growth in our home market following several years of repositioning. Having substantially reset the profitability of our full-price fleet over the past year through enhanced category offerings, new ways of selling, and operational discipline, we are moving forward with our plan to open about a dozen new margin accreted full price stores in North America over the next couple of years, moving to our priority of leading with digital sales for our total Ralph Lauren digital ecosystem, including our directly operated sites, departmentstore.com pure players and social commerce grew more than 40% in the third quarter in constant currency, and more than 60% to double L-Y, ahead of our plan. Within our own sites, digital sales grew more than 30%. This was driven primarily by full-priced holiday selling as we deliver the right mix of product, pullback on promotions, and invest in AI-powered targeting and new full-price consumer acquisitions. We continue to scale and expand on the connected retail capabilities we launched during the pandemic, from virtual selling appointments, to buy online, pick up in store, to product availability. We launched our first ever full catalog Ralph Lauren mobile shopping app in time for holiday, seamlessly leveraging our connected retail capabilities to deliver our most personalized and content rich platform to date. now touching on our work to operate with discipline to fuel growth our teams continue to operate with agility to mitigate macro headwinds delivering better than expected gross and operating margins again in the third quarter the global operating environment remains highly dynamic notably with covid supply chain and cost inflation still pressure points coming into calendar 2022 however We remain confident in our ability to manage these headwinds to deliver further growth and operating margin expansion through our proven pricing power, as well as our culture of cost discipline. This discipline is helping us to fuel our strategic investments in long-term growth. And further, part of investing in our business also includes a commitment to investing in our people and innovation. A few recent highlights include the following. In December, the Ralph Lauren Corporate Foundation announced a $2 million donation in scholarships for students at historically black colleges and universities. This is part of our broader commitment to invest directly in the future of black students with enhanced access to education and advancing our recruitment and development programs for black talent. We were also recently proud to achieve a score of 100% once again on the Human Rights Campaign Foundation's Corporate Equality Index and earned the designation as the best place to work for LGBTQ equality. On the sustainability front, just a few weeks ago, we were incredibly excited to launch our first product made with Clarus. a first-to-market patented technology that uses recycled cotton to create a high-performance fabric. Developed by Natural Fiber Welding, which we announced an investment in last year, Clarus has all the features we've come to expect from synthetic performance materials like comfort, breathability, and moisture management, while reducing our reliance on synthetics that use fossil fuels such as polyester and nylons. This is a critical step in scaling our use of recycled cotton and making progress on our target of sustainably sourcing 100% of our key materials, including cotton, by 2025. This latest launch comes on the heels of our groundbreaking introduction last year of Color on Demand, the world's first scalable zero-wastewater cotton dyeing system. And lastly, we announced an exciting new limited partnership with Franklin Venture Partners in Silicon Valley. Focused on female-led businesses, the partnership backs disruptive technologies and consumer solutions with the potential to positively transform the fashion industry. Like our investment in natural fiber welding, this move underscores our longstanding commitments to innovation, sustainability, and diversity, equity, and inclusion. In closing, Ralph and I are incredibly proud of the performance our teams have delivered through the first three quarters of the fiscal year. All channels and geographies are showing strong momentum as we build on an increasingly healthy foundation, leveraging work that we started well before the pandemic but accelerated through this time of challenge. Looking ahead, We are focused on driving sustainable growth, supported by continued investments across digital, our brand building and more personalized demand creation, as well as key markets and categories. We look forward to sharing more with you at our Investor Day this summer. With that, I'll turn it over to Jane to discuss our financial results, and I'll join her at the end to answer your questions.