SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission file number 001-13057

Polo Ralph Lauren Corporation

Registrant’s telephone number, including area code

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

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).     Yes þ          No o

At NovemberFebruary 7, 2002 48,841,97145,048,771 shares of the registrant’s Class A Common Stock, $.01 par value, were outstanding, 43,280,021 shares of the registrant’s Class B Common Stock, $.01 par value, were outstanding and 10,570,979 shares of the registrant’s Class C Common Stock, $.01 par value were outstanding.

POLO RALPH LAUREN CORPORATION

INDEX TO FORM 10-Q

1

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

See accompanying notes to consolidated financial statements.

2

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

See accompanying notes to consolidated financial statements.

3

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to consolidated financial statements.

4

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

1.     Basis of Presentation and Organization

     The accompanying unaudited consolidated financial statements include the accounts of Polo Ralph Lauren Corporation (“PRLC”) and its wholly and majority owned subsidiaries (collectively referred to as the “Company”, “we”, “us”, and “our”). The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted from this report as is permitted by such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The consolidated balance sheet data for March 30, 2002 is derived from the audited financial statements which are included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission for the year ended March 30, 2002 (“fiscal 2002”), which should be read in conjunction with these financial statements. Reference is made to such annual report on Form 10-K for a complete set of financial notes, including the Company’s significant accounting policies. The results of operations for the three and sixnine months ended SeptemberDecember 28, 2002 are not necessarily indicative of results to be expected for the entire fiscal year endedending March 29, 2003 (“fiscal 2003”).

     Effective December 30, 2001, for reporting purposes the Company changed the fiscal years of certain of its European subsidiaries in the consolidated financial statements to end on the Saturday closest to March 31 to conform with the fiscal year end of the Company. Previously, these European subsidiaries were consolidated and reported on a three-month lag with fiscal years ending December 31. Accordingly, we have included the SeptemberDecember 28, 2002 and March 30, 2002 balance sheets of these European subsidiaries in the accompanying SeptemberDecember 28, 2002 and March 30, 2002, consolidated balance sheets. We also have consolidated the results of operations of these European subsidiaries for the three and sixnine months ended September 28, 2002 and June 30, 2001 in the three and six months ended SeptemberDecember 28, 2002 and September 29, 2001 in the three and nine months ended December 28, 2002 and December 29, 2001 consolidated statements of operationsincome and cash flows. Had these European subsidiaries been consolidated on a consistent fiscal year basis for the three and sixnine months ended SeptemberDecember 29, 2001, net revenues would have been $659$565.0 million and $1,133$1,697.8 million, and net income would have been $66$25.0 million and $82$106.8 million, respectively.

     In the opinion of management, the accompanying unaudited consolidated financial statements contain all normal and recurring adjustments necessary to present fairly the consolidated financial condition, results of operations, and changes in cash flows of the Company for the interim periods presented.

2.     Restructuring and Special Charges

     During the third quarter of fiscal 2003, we completed a strategic review of our European businesses and formalized our plans to centralize and more efficiently consolidate its business operations. The major initiatives of the plan included the following: consolidation of our headquarters from five cities in three countries to one location; the consolidation of our European logistics operations to Italy; and the migration of all European information systems to a standard global system. In connection with the implementation of this plan, the Company has completed the consultation process regarding the headquarters in the United Kingdom and Italy and has recorded an $8.0 million restructuring charge during the third quarter of fiscal 2003 for severance and contract termination costs. The Company expects the final phase of the process, related to the French consultation regarding back office functions, to be completed during the fourth quarter of fiscal 2003.

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The major component of the activity in the restructuring charge taken for the quarter ended December 28, 2002 were as follows:

Total severance and termination benefits as a result of this restructuring related to approximately 100 employees. Total cash outlays related to this plan of approximately $3.1 million have been paid through December 28, 2002. It is expected that this plan will be completed, and the remaining liabilities will be paid, in fiscal 2004. The Company expects to take a fourth quarter restructuring charge of approximately $3.0 to $7.0 million, net of taxes, to complete the headquarter and back office relocation portion of our overall European consolidation plan.

     The major componentscomponent of the activity in the restructuring charge taken in connection with the Company’s 2001 Operational Plan (as defined in the Company’s fiscal 2002 Form 10-K) for the sixnine months ended SeptemberDecember 28, 2002 were as follows:

     Total severance and termination benefits as a result of the 2001 Operational Plan related to approximately 550 employees, all of whom have been terminated. Total cash outlays related to the 2001 Operational Plan are

5

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

expected to be approximately $40.7 million, $33.9$35.1 million of which have been paid through SeptemberDecember 28, 2002. We completed the implementation of the 2001 Operational Plan in fiscal 2002 and expect to settle the remaining liabilities in fiscal 20032004 or in accordance with contract terms.

     As of December 28, 2002, the Company has settled the remaining liabilities related to the 1999 Restructuring Plan. The major components of the restructuring activity in the restructuring charge taken in connection with the Company’s 1999 Restructuring Plan (as defined in the Company’s fiscal 2002 Form 10-K) for the sixnine months ended SeptemberDecember 28, 2002 were as follows:

     Total severance6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3.     Acquisitions

     In December 2002, the Company signed definitive agreements for a series of transactions which, if consummated, would result, among other things, in the Company having increased control over its master license for Japan. The agreements contemplate that the Company will acquire a 50% interest in its Japanese master license and termination benefitsan 18% equity interest in a company that will hold the sublicenses for the Company’s men’s, women’s and Polo Jeans businesses in Japan. The Company’s total investment in the transactions will be approximately $67 million and will be funded through the Company’s available cash. The transactions are expected to close in the fourth quarter of fiscal 2003.

During the three months ended December 28, 2002, the Company acquired six retail locations and related assets in Germany and Argentina from certain of our licensees for a purchase price of approximately $2.6 million and $2.2 million, respectively. Consistent with Statements of Financial Accounting Standards (“SFAS”) No. 141,Business Combinations, these acquisitions were accounted for as a resultpurchases.

     In connection with the purchase accounting for these acquisitions, the Company is in the process of evaluating the 1999 Restructuring Plan relatedtangible and intangible assets acquired and liabilities assumed. At December 28, 2002, the Company’s accounting for the acquisitions was based on preliminary valuation information, which is subject to approximately 280 employees, all of whom have been terminated. Total cash outlaysrevision. The sales and total assets related to the 1999 Restructuring Plan are approximately $39.5 million, $39.0 millionacquired entities were not material. The pro-forma effect of these two acquisitions on the historical results was not material. The transitional impairment tests were completed and did not result in an impairment charge.

     The Company finalized the purchase accounting for the acquisition of the assets of PRL Fashions of Europe SRL, which occurred on October 31, 2002, the result of which have been paid to date. We completedwas an increase in goodwill of approximately $0.3 million, which was recorded during the implementation of the 1999 Restructuring Plan in fiscal 2000 and expect to settle the remaining liabilities in fiscal 2003 or in accordance with contract terms.quarter ended December 28, 2002.

3.4.     Inventories

     Inventories are valued at lower of cost (first-in, first-out, “FIFO”) or market and consist of the following:

4.5.     Financing Agreements

     In November 2002, we terminated both our 1997 bank credit facility and our 1999 senior bank credit facility and entered into a new credit facility. The 1997 bank credit facility provided for a $225 million revolving line of credit and matured on December 31, 2002, while the 1999 senior bank credit facility consisted of a $20 million revolving line of credit and an $80 million term loan, both of which mature on June 30, 2003. The new credit facility with a syndicate of banks which consists of a $300 million revolving line of credit, subject to increase to $375 million, and is available for the issuance of letters of credit, acceptances and direct borrowings. This credit facility matures on November 18, 2005. As of December 28, 2002, we had $100 million outstanding under this new facility, which was the aggregate amount outstanding under the 1997 bank credit facility and 1999 senior bank credit facility at the time of extinguishment. Borrowings under this facility bear interest, at our option, at a Base Rate equal to the higher of the Federal Funds Effective Rate, as published by the Federal Reserve Bank of New York, plus  1/2 of one percent, and the prime commercial lending rate of JP Morgan Chase Bank in effect from time to time, or at the Eurodollar Rate (LIBOR) plus an interest margin based on the Federal Reserve Boards “Eurocurrency liabilities” reserve requirements.

7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Our 2002 bank credit facility requires that we maintain certain financial covenants:

	•	a minimum consolidated tangible net worth, and
	•	a maximum adjusted debt to EBITDAR (as such terms are defined in the credit facility) ratio.

The credit facility also contains covenants that, subject to specified exceptions, restrict our ability to:

	•	incur additional debt;
	•	incur liens and contingent liabilities;
	•	sell or dispose of our assets, including equity interests;
	•	merge with or acquire other companies, liquidate or dissolve;
	•	engage in businesses that are not a related line of business;
	•	make loans, advances, guarantees or stock repurchases;
	•	engage in transactions with affiliates; and
	•	make investments.

     Upon the occurrence of an event of default under the credit facility, the lenders may cease making loans, terminate the credit facility, and declare all amounts outstanding to be immediately due and payable. The credit facility specifies a number of events of default, many of which are subject to applicable grace or cure periods, including, among others, the failure to make timely principal and interest payments, to satisfy the covenants, or to maintain the required financial performance requirements described above. Additionally, the agreement provides that an event of default will occur if Mr. Ralph Lauren and related entities fail to maintain a specified minimum percentage of the voting power of our common stock. As of December 28, 2002, the Company was in compliance with all financial and non-financial debt covenants.

6.     Derivative Instruments

     In November 2002, the Company entered into forward contracts on 6.2 billion Japanese Yen that terminate in February 2003. These forward contracts were entered into to minimize the impact of foreign exchange fluctuations on the Japanese Yen purchase price in connection with the transactions described in Note 13. The forward contracts do not qualify for hedge accounting under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”) and as such the changes in the fair value of the contracts are recognized currently in earnings. In connection with recording these contracts at fair market value as of December 28, 2002, the Company recognized $1.3 million of foreign exchange gain on these forward contracts, included as a component of foreign currency (gain) losses, in the Consolidated Statement of Operations.

In June 2002, we entered into a cross currency rate swap, which expiresterminates in November 2006. The cross currency rate swap is being used to convert Euro 105.2 million, 6.125% fixed rate borrowings into $100.0 million, LIBOR plus 1.24% variable rate borrowings. We entered into the cross currency rate swap to minimize the impact of foreign exchange fluctuations in both principal and interest rate fluctuations onpayments resulting from Euro debt, and to minimize the impact of changes in the fair value of the Euro debt.debt due to changes in LIBOR, the benchmark interest rate. The swap has been designated as a fair value hedge under Statements of Financial Accounting Standards (“SFAS”)SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities.133. Hedge ineffectiveness is measured as the difference between the respective gains or losses recognized in earnings from the changes in the fair value of the cross currency rate swap and the Euro debt, and was deminimisde minimis for the sixthree and nine months ended SeptemberDecember 28, 2002.

68

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5.7.     Comprehensive Income

     For the three and sixnine months ended SeptemberDecember 28, 2002 and SeptemberDecember 29, 2001, comprehensive income was as follows:

     The income tax effect related to foreign currency translation adjustments and unrealized gains and losses on cash flow and foreign currency hedges, net, was a benefitan expense of $1.1$10.6 million in the three months ended SeptemberDecember 28, 2002, and a benefit of $2.1$2.7 million in the three months ended SeptemberDecember 29, 2001.

     The income tax effect related to foreign currency translation adjustments, cumulative transition adjustment gains, net, and unrealized losses on cash flow and foreign currency hedges, net, was an expense of $8.1 million in the nine months ended December 28, 2002, and a benefit of $2.5$1.0 million in the sixnine months ended September 28, 2002, and an expense of $1.7 million in the six months ended SeptemberDecember 29, 2001.

6.8.     Segment Reporting

     We have three reportable business segments: wholesale, retail and licensing. Our reportable segments are individual business units that offer different products and services. The segments are managed separately because each segment requires different strategic initiatives, promotional campaigns, marketing and advertising, based upon its own individual positioning in the market. Additionally, these segments reflect the reporting basis used internally by senior management to evaluate performance and the allocation of resources.

79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     Our net revenues and income from operations for the three and sixnine months ended SeptemberDecember 28, 2002 and SeptemberDecember 29, 2001, by segment were as follows:

Summarized below are our net revenues for the three and six months ended September 28, 2002 and September 29, 2001, by geographic location:

810

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Summarized below are our net revenues for the three and nine months ended December 28, 2002 and December 29, 2001 by geographic location:

7.9.     Goodwill and Other Intangible Assets

     Effective March 31, 2002, the Company adopted SFAS No. 142,Goodwill and Other Intangible Assets (“SFAS No. 142”).142. This accounting standard requires that goodwill and indefinite life intangible assets are no longer amortized but are subject to annual impairment tests. Other intangible assets with finite lives will continue to be amortized over their useful lives. The transitional impairment tests were completed and did not result in an impairment charge.

     In accordance with SFAS No. 142, the Company discontinued the amortization of goodwill effective March 31, 2002, and prior period amounts were not restated. A reconciliation of previously reported net income and earnings per share to the amounts adjusted for the exclusion of goodwill amortization, net of the related income tax effect, is as follows:

The net carrying value of goodwill as of September 28, 2002 and March 30, 2002 by operating segment is as follows (amounts in millions):

911

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The carrying value of goodwill as of December 28, 2002 and March 30, 2002 by operating segment is as follows:

8.10.     Recently Issued Accounting Pronouncements

In December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148,Accounting for Stock-based Compensation — Transition and Disclosure. The standard provides alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements for SFAS No. 123 to require more prominent and more frequent disclosures in financial statements about the effects of stock-based compensation. SFAS No. 148 is effective for fiscal years ending after December 31, 2002. We do not expect the adoption of this pronouncement to have a material effect on the consolidated results of operations or financial position.

     In June 2002, the FASB issued SFAS No. 146,Accounting for Costs Associated with Exit or Disposal Activities. The standard required companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or exit or disposal activity. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The Company will apply SFAS No. 146 on a prospective basis, and as such, does not expect the adoption of this pronouncementit to have aan initial material effectimpact on theour consolidated results of operations or financial position.position upon adoption.

     In November 2002, the FASB issued Financial Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.) FIN 45 requires certain guarantees to be recorded at fair value and requires a guarantor to make significant new disclosures, even when the likelihood of making any payments under the guarantee is remote. Generally, FIN 45 applies to certain types of financial guarantees that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying that is related to an asset, liability, or an equity security of the guaranteed party; performance guarantees involving contracts which require the guarantor to make payments to the guaranteed party based on another entity’s failure to perform under an obligating agreement; indemnification agreements that contingently require the guarantor to make payments

12

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

to an indemnified party based on changes in an underlying that is related to an asset, liability, or an equity security of the indemnified party; or indirect guarantees of the indebtedness of others. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. Disclosure requirements under FIN 45 are effective for financial statements ending after December 15, 2002 and are applicable to all guarantees issued by the guarantor subject to FIN 45’s scope, including guarantees issued prior to FIN 45. The Company has evaluated the accounting provisions of the interpretations and there was no material impact on its financial condition, results of operations or cash flows for the period ended December 28, 2002.

     In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities” with the objective of improving financial reporting by companies involved with variable interest entities. A variable interest entity is a corporation, partnership, trust, or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights, or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. Historically, entities generally were not consolidated unless the entity was controlled through voting interests. FIN 46 changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. A company that consolidates a variable interest entity is called the “primary beneficiary” of that entity. FIN 46 also requires disclosures about variable interest entities that a company is not required to consolidate but in which it has a significant variable interest. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003. The consolidation requirements of FIN 46 apply to existing entities in the first fiscal year or interim period beginning after June 15, 2003. Also, certain disclosure requirements apply to all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The Company is currently evaluating the provisions of the interpretation and does not expect any material impact to the financial statements as a result of adopting this interpretation.

11.     Commitments & Contingencies

     As of SeptemberDecember 28, 2002, the Company had $40.4$105.8 million outstanding in direct borrowings $80.0 million outstanding under the term loancredit facility and $226.6$238.1 million outstanding in Euro debt based on the quarter end Euro exchange rate. The Company was also contingently liable for $32.5$27.6 million in outstanding letters of credit primarily related to commitments for the purchase of inventory. The weighted-average interest rate on the Company’s borrowings at SeptemberDecember 28, 2002 was 5.7%5.5%.

     With regard to the Saipan class action litigation referred to in the fiscal 2002 Form 10-K, subsequent to the date of the fiscal 2002 Form 10-K, most of the remaining defendants agreed to a settlement with plaintiffs. A hearing on final court approval of the settlements is expected to be held in the spring of 2003.

     On September 18, 2002, an employee at one of the Company’s stores Toni Young, filed a lawsuit against Polo Retail, LLC and the Company in the United States District Court for the District of Northern California alleging violations of California antitrust and labor laws. The plaintiff purports to represent a class of employees who have allegedly been injured by Polo’s requirement that certain retail employees purchase and wear Polo Ralph Lauren merchandise as a condition of their employment. The complaint, as amended, seeks an unspecified amount of actual and punitive damages, disgorgement of profits and injunctive and declaratory relief. The Company answered the amended complaint on November 4, 2002,2002. A hearing on cross motions for summary judgement on the issue of whether the Company’s policies violated California law has been scheduled for August 14, 2003, and believes that the plaintiff’s claimsmotions are substantially without merit and intendsexpected to defend against them vigorously.be filed in June or July.

13

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     As the result of the failure of Jones Apparel Group (including its subsidiaries, “Jones”) to meet the minimum sales volumes for the year ended December 31, 2002 under the license agreements for the sale of products under the “Ralph” trademark between the Company and Jones dated May 11, 1998, these license agreements will terminate as of December 31, 2003. The Company has advised Jones that the termination of these licenses will automatically result in the termination of the licenses between the Company and Jones with respect to the “Lauren” trademark pursuant to the Cross Default and Term Extension Agreement, between the Company and Jones dated May 11, 1998. The Lauren license agreements would otherwise expire on December 31, 2006. Jones has advised the Company that it does not agree that the Lauren licenses will terminate on December 31, 2003. The Company is confident that its legal position is correct, and is in discussions with Jones regarding the Lauren and Ralph brands. Jones has reported that net sales of Lauren and Ralph products for the year ended December 31, 2002 were $548 million and $37 million, respectively.

12.     Reclassification

For comparative purposes, certain prior period amounts have been reclassified to conform to the current period’s presentation.

     In October 2002,January 2003, the Company signed an agreement in principlecompleted the assignment of the sublease for one store location for which if definitive agreements are executed and consummated, would result, among other things, in the Company having increased control over the license for Japan. The agreement in principle outlinesreceived proceeds of approximately $10 million, and recorded a seriesgain of transactions whereby the Company would acquire a 50% controlling interest in its Japanese master license and an 18% equity interest in a company that will hold the sublicensesapproximately $5 million for the Company’s men’s, women’s and Polo Jeans businesses in Japan. The Company’s total investment in the transactions will be approximately $70 million and will be funded through the Company’s available cash.fourth quarter ended March 29, 2003.

1014

POLO RALPH LAUREN CORPORATION

     The following discussion and analysis is a summary and should be read together with our consolidated financial statements and related notes thereto which are included herein. We utilize a 52-53 week fiscal year ending on the Saturday nearest March 31. Fiscal 2003 and fiscal 2002 end on March 29, 2003 and March 30, 2002, respectively, and each reflect a 52-week period. Due to the collaborative and ongoing nature of our relationships with our licensees, such licensees are referred to herein as “licensing partners” and the relationships are referred to herein as “licensing alliances.” Notwithstanding these references, however, the legal relationship between our licensees and us is one of licensor and licensee, and not one of partnership.

     Certain statements in this Form 10-Q and in future filings with the Securities and Exchange Commission, in our press releases and in oral statements made by or with the approval of authorized personnel constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations and are indicated by words or phrases such as “anticipate,” “estimate,” “expect,” “project,” “we believe,” “is or remains optimistic,” “currently envisions” and similar words or phrases and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: risks associated with a general economic downturn and other events leading to a reduction in discretionary consumer spending; risks associated with implementing our plans to enhance our worldwide luxury retail business, inventory management program and operating efficiency initiatives; risks associated with changes in the competitive marketplace, including the introduction of new products or pricing changes by our competitors; changes in global economic or political conditions; risks associated with our dependence on sales to a limited number of large department store customers, including risks related to extending credit to customers; risks associated with our dependence on our licensing partners for a substantial portion of our net income and risks associated with a lack of operational and financial control over licensed businesses; risks associated with financial distress of licensees, including the impact on our net income and business of one or more licensee’slicensees’ reorganization; risks associated with consolidations, restructurings and other ownership changes in the retail industry; risks associated with competition in the segments of the fashion and consumer product industries in which we operate, including our ability to shape, stimulate and respond to changing consumer tastes and demands by producing attractive products, brands and marketing, and our ability to remain competitive in the areas of quality and price; risks associated with uncertainty relating to our ability to implement our growth strategies; risks associated with our entry into new markets either through internal development activities or through acquisitions; risks associated with the possible adverse impact of our unaffiliated manufacturers’ inability to manufacture in a timely manner, to meet quality standards or to use acceptable labor practices; risks associated with changes in social, political, economic and other conditions affecting foreign operations or sourcing and the possible adverse impact of changes in import restrictions; risks related to our ability to establish and protect our trademarks and other proprietary rights; risks related to fluctuations in foreign currency affecting our foreign subsidiaries’ and foreign licensees’ results of operations and the relative prices at which we and our foreign competitors sell products in the same market and our operating and manufacturing costs outside of the United States; and, risks associated with our control by Lauren family members and the anti-takeover effect of multiple classes of stock. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

     We began operations in 1968 as a designer and marketer of premium quality men’s clothing and sportswear. Since our inception, we have grown through increased sales of existing product lines, the introduction of new brands and products, expansion into international markets, development of our retail operations and acquisitions. Our net revenues are generated from our three integrated operations: wholesale, retail and licensing.

1115

Results of Operations

     The table below sets forth the percentage relationship to net revenues of certain items in our consolidated statements of incomeoperations for the three and sixnine months ended SeptemberDecember 28, 2002 and SeptemberDecember 29, 2001:

Consolidation of European Entities — Change in Reporting Period

     Effective December 30, 2001, for reporting purposes the Companywe changed the fiscal years of certain of itsour European subsidiaries in the consolidated financial statements to end on the Saturday closest to March 31 to conform with the fiscal year end of the Company. Previously, these European subsidiaries were consolidated and reported on a three-month lag with fiscal years ending December 31. Accordingly, we have included the SeptemberDecember 28, 2002 and March 30, 2002 balance sheets of these European subsidiaries in the accompanying SeptemberDecember 28, 2002 and March 30, 2002 consolidated balance sheets. We also have consolidated the results of operations of these European subsidiaries for the three and sixnine months ended September 28, 2002 and June 30, 2001 in the three and six months ended SeptemberDecember 28, 2002 and September 29, 2001 in the three and nine months ended December 28, 2002 and December 29, 2001 consolidated statements of operationsincome and cash flows. Had these European subsidiaries been consolidated on a consistent fiscal year basis for the three and sixnine months ended SeptemberDecember 29, 2001, net revenues would have been $659$565.0 million and $1,133$1,697.8 million, and net income would have been $66$25.0 million and $82$106.8 million, respectively.

     Net Sales.Net sales increased 8.8%4.1% to $574.6$583.3 million in the three months ended SeptemberDecember 28, 2002, from $528.2$560.3 million in the three months ended SeptemberDecember 29, 2001. Had certain of the European subsidiaries been reported on a consistent fiscal year basis for the three months ended SeptemberDecember 28, 2001, net sales would have been $590.2 million.$510.9 million and the increase would have been 14.2%.

     Wholesale net sales increased 10.8%decreased 4.2% to $310.7$268.3 million in the three-month period, from $280.4$280.0 million in the corresponding period in fiscal 2002. Had certain of the European subsidiaries been reported on a consistent fiscal year basis for the three months ended December 29, 2001, wholesale net sales would have been $228.5 million, and the wholesale net sales for the three months ended December 29, 2001, would have represented an increase of 17.4%, driven by a $20.6 million, or approximately 62.4%, increase in the European wholesale business which resulted from continued European expansion and a full quarter’s inclusion of PRL Fashions of Europe S.r.L.’s operations of $9.1 million. PRL Fashions of Europe S.r.L. (hereafter referred to as “PRL Fashions”), which was acquired in October 2001, held licenses to sell women’s Ralph Lauren apparel in Europe, men’s and boys’ Polo Ralph Lauren apparel in Italy and men’s and women’s Polo Jeans Co.

16

     Retail net sales increased $34.8 million, or 12.4%, to $315.1 million in the three months ended December 28, 2002, from $280.3 million in the corresponding period in fiscal 2002. Had certain of the European subsidiaries been reported on a consistent fiscal year basis for the three months ended December 29, 2001, retail net sales would have been $282.4 million, and the increase would have been 11.6%, primarily driven by a $18.4 million, or 10.3%, increase in comparable outlet store sales and a $5.4 million, or 5.8%, increase in comparable total full price store sales (comparable store sales information includes both Polo Ralph Lauren stores and Club Monaco stores).

     Also impacting this increase is worldwide store expansion. During the three months ended December 28, 2002, we opened six Polo Ralph Lauren stores, two Club Monaco stores, two European outlet stores, and closed one Polo Jeans outlet store and one Club Monaco outlet store. At December 28, 2002, we operated 251 stores compared to 234 stores at the third quarter end of fiscal 2002. At December 28, 2002, the Company’s retail group consisted of 47 Polo Ralph Lauren stores, 58 Club Monaco stores, 94 full line outlet stores, 22 Polo Jeans outlet stores, 21 European outlet stores and nine Club Monaco outlet stores.

Licensing Revenue.Licensing revenue decreased 1.6% to $55.9 million in the three months ended December 28, 2002, from $56.8 million in the corresponding period of fiscal 2002. Had certain of the European subsidiaries been reported on a consistent fiscal year basis for the three months ended September 28,December 29, 2001, wholesale net saleslicensing revenue would have been $341.2$54.1 million, resulting in an 8.9% decrease. This decrease primarily reflects a strategic streamlining of the amount of product sold to the department stores and the eliminationlicensing revenue for the three months ended December 28, 2002, would have represented an increase of the women’s Ralph Lauren Sport3.3%, driven by greater licensing revenues from our international and the Lauren for men lines, resulting in a combined decreasehome licensing partners of approximately $66.5 million. These decreases were$1.7 million and $0.8 million, respectively, partially offset by a $43.2$0.8 million increase, or approximately 51.3%, in the European wholesale business which primarily reflects the acquisition in October 2001 of PRL Fashions of Europe S.R.L, which held licenses to sell women’s Ralph Lauren apparel in Europe, men’s and boys’ Polo Ralph Lauren apparel in Italy and men’s and women’s Polo Jeans Co. collections in Italy.less licensing revenues from certain domestic licensing partners.

     Retail salesGross Profit.Gross profit as a percentage of net revenues increased $16.0 million, or 6.5%, to $263.8 million48.2% in the three months ended SeptemberDecember 28, 2002, from $247.8 million in the corresponding period in fiscal 2002. Had certain of the European subsidiaries been reported on a consistent fiscal year basis for the three months ended September 29, 2001, retail net sales