Good morning, and thank you for calling the Ralph Lauren Third Quarter Fiscal 2013 Earnings Conference Call. As a reminder, today's conference is being recorded. [Operator Instructions] Now for opening remarks and introductions, I would like to turn the conference over to Mr. James Hurley. Please go ahead, sir.

Good morning, and thank you for joining us on Ralph Lauren's Third Quarter Fiscal 2013 Conference Call. The agenda for this morning's call includes Roger Farah, our President and Chief Operating Officer, who will give you an overview of the quarter and comment on some of our broader strategic initiatives; Jacki Nemerov, our Executive Vice President, will provide some merchandising highlights; and Chris Peterson, our Chief Financial Officer, will provide operational and financial details for the third quarter, in addition to reviewing our expectations for fiscal 2013. After that, we will open up the call for your questions, which we please 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. The principal risks and uncertainties that could cause our results to differ materially from our current expectations are detailed in our SEC filings. And now I'll turn the call over to Roger.

Thank you, Jim, and good morning, everyone. We're pleased to be reporting better-than-expected third quarter and year-to-date profits this morning. Operating income rose 17% and diluted earnings per share was up 35%, excluding the Rugby-related charges, on sales growth of 2% in the third quarter. The strong profit flow-through really showcases the operational excellence of our global teams. Proactive and prudent planning, including thoughtful pricing and merchandise strategies, and disciplined expense management enabled us to improve our profitability despite sustained macroeconomic issues and several disruptive events in the 3-month period. During the quarter, revenue momentum was strongest at RalphLauren.com, Club Monaco, factory stores worldwide and our core North America wholesale operations. These top line trends were enhanced by excellent margin dynamics, a clear indication that we are gaining profitable market share in areas we are already very strong. We also experienced better trends out of Europe, where third quarter revenues increased 8% in constant currency led by growth at our retail operations. Momentum in the Americas and in Europe more than made up for the weakness in Japan and South Korea concession shops during the quarter. Club Monaco had a strong worldwide performance, a function of strong comp growth and expanded distribution, which is now included in the wholesale channel in Europe and e-commerce in North America. Both new and loyal customers are gravitating towards Club Monaco's compelling and unique merchandise assortments and the in-store experience. Our year-to-date results demonstrate that fiscal '13 is actualizing as the tale of 2 halves we described to you at the beginning of the year. Higher input costs and certain strategic decisions that weighed on sales and profit growth in the first half have transitioned to an improving profit growth story in the second half, supported by lower input costs, continued market share gains…

Thank you, Roger, and good morning, everyone. As our third quarter results attest, we had a superb holiday season. The power of Ralph's vision and the strength of our product gave us the confidence to plan for robust growth across all distribution channels and in key regions, particularly in our core merchandise categories. Despite the weak operating environment that Roger spoke about earlier, the loyalty our brand enjoys is unique. And based on our third quarter performance, I think it is fair to say that our confidence paid off. As I mentioned in November, we were executing a two-pronged merchandising strategy to capture both self-purchase and giftgiving occasions. We offered exceptional merchandise across all product categories from the most luxurious items at our Ralph Lauren stores to robust assortments in department stores worldwide, thereby effectively leveraging the powerful equity and universal desirability of our brand. Our holiday bright story was extremely successful and beautifully combined strong fashion pieces, key items for a cohesive offering that struck just the right chord with the consumer. This approach was highly effective, particularly for our core men's, women's and children's offerings. Across all brand tiers, the strength of the product, the clarity of our key item strategies and the compelling value proposition clearly resonated with the customer. As we've become a more globally-oriented company, our merchandising teams are achieving an increasingly stronger and more consistent product message while still responding to important regional considerations for fabrics, weight, color and fit. Based on our success this holiday season, I believe that greater global coordination of our merchandising teams is something we will continue to leverage. How our product is presented to the customer is another important focus for us since this is where Ralph's vision truly comes to life. Our strong collaboration with both retail…

Thank you, Jacki, and good morning, everyone. As you've seen in this morning's press release, we're reporting strong third quarter results today. Consolidated net revenues were $1.8 billion, 2% above the prior year period and in line with what we anticipated back in November, despite the disruptive operating environment Roger spoke to earlier. The growth in net revenues primarily reflects continued retail segment expansion that was partially offset by a planned contraction in wholesale shipments. Excluding the impact of strategic decisions to discontinue American Living and store closures associated with the company's Greater China repositioning efforts, in addition to the net negative impact of foreign currency translation, revenues increased 5% in the third quarter. Gross profit margin of 59.3% is a new peak level for the third quarter and was 220 basis points greater than the prior year, which was better than our expectations. The improvement in gross profit margin is primarily attributable to lower input costs, favorable product mix and operational discipline. Operating expenses of $790 million were 4% greater than the prior year, driven by overall business expansion including higher retail segment mix, continued investment in our growth initiatives and approximately $13 million of impairment and restructuring charges related to the discontinuation of Rugby. Operating expense rate of 42.8% was 60 basis points greater than the prior year, but was better than our initial expectations for the quarter, primarily due to disciplined expense management across the organization. Operating expense rate also benefited from a shift in the timing of certain marketing and IT infrastructure spending out of the third quarter and into the fourth quarter. Excluding Rugby-related charges, the third quarter's operating expense rate was approximately 10 basis points below the prior year. Operating income of $304 million was 13% greater than the prior year period and operating…

[Operator Instructions] And our first question will come from Omar Saad with ISI Group.

Roger, could you talk about Europe? It was interesting to hear you mention -- it sounded like you're seeing a reacceleration there. But it's interesting that it's happening more on the retail side than perhaps the wholesale side. Can you talk about some of your strategies for the European market? What you're seeing across the different channels? Obviously, it's a very complex market with many different countries and regions. And then with some of the areas you feel like you can really improve the business there and still drive growth. That'd be very helpful.

Okay, Omar, we talked on the last call, I think, about beginning to see some signs of strengthening business trends in Europe, and I reported the constant currency revenue increase of 8%, which is quite exciting given the market turbulence. Retail has led that charge, and we're excited to see that continue. The wholesale business is actually split by region because what we're seeing is ongoing softness in Italy, Spain and the southern part of Europe. It's partly why we planned for reduced shipments into that specialty distribution in Italy, both in an effort to cut back and also to make sure we could collect on shipments made. And also because the Spanish business, which is very large wholesale customer, with ECI, we planned for lower shipments. That was offset by stronger wholesale business in the northern countries, including Germany and the U.K. and the Scandinavian markets. So even within that headline statement, it's really a by-country conversation, and we actually saw strong sell-throughs in the wholesale shipments for this holiday season. So while I think Europe will continue to be plagued by some uncertainty, we are adjusting our plans, our strategies for a realistic point of view. I think the euro has strengthened, surprisingly, in the recent past. And I think that's a positive. And I think Europe continues to be experiencing tremendous tourism. Albeit slightly off the run rate of earlier in the year, it's still getting large numbers of tourists. And in our case, we continue to look for growing penetration of the Chinese. But until that comes, the Russians, the customers in the Middle East who know us, and interestingly enough, the third-largest tourist customer base in Europe is the Brazilians. So we continue to work both the domestic customer in Europe and the tourist customer. And I think that speaks to our online strategies. It's why we opened additional countries. Our online site is resonating with the customers, as well as the brick-and-mortar strategies that go with it. So all in all, Europe is probably better than we expected as we started this year.

Next question will come from Kate McShane with Citi.

With regard to the expense spending in fiscal year '14, I wondered if that was incorporating the flagship investment that you're planning to make in China, and if you can update us on the timing of those 3 flagships you've mentioned in the past.

Yes. I think that's clearly part of our thinking. I think that with regard to flagships in China, we're focused on trying to make sure we have the right real estate. I don't know that we'll wind up opening all 3 at the same time. I think this is more of a vision of over the next couple of years of what we'll do. But certainly, it's contemplated in our fiscal '14 plan that we will be opening stores throughout China, including a flagship location.

I think, Kate, you know that to find these unique locations takes time. We're very optimistic in the 3 cities we've articulated. We do have a flagship men's store opening up May-June of this year. We think it's going to be the World of Ralph Lauren as the Chinese have never seen it. But when you find the flagships, it's probably a year of dead rent and construction before you open the doors to take your first customers. So it's critical over time we get those. We're stalking them, they're stalking us. But at the end of the day, probably only one will open in fiscal '14.

Next question comes from Liz Dunn with Macquarie Capital.

So I'm interested in the 2014 outlook. It sounds as though you're saying sales growth will accelerate and SG&A investment will accelerate. But we saw some really nice earnings growth in this quarter. Any viewpoint on sort of whether or not that sort of that magnitude of earnings growth could continue through 2014?

Yes, I think at this point we're still in the planning stage, so we haven't completed the budget cycle for '14. So I think you're -- the overall comments we made about revenue growth accelerating, but also SG&A expenses being higher because of the investments we want to make in the long-term health of the business is what we're seeing in terms of how the budget's going to play out. But we're not at a point yet where we can provide detailed guidance in terms of what the net impact of that's going to be. And we certainly will plan to do that on the next call, in May, once we've completed the budget process.

I think, Liz, we have demonstrated over the years and over the quarters that we do a pretty good job of flowing through profit on incremental sales. And so as we communicate the May results, I would probably not expect ongoing 35% EPS growth every quarter. We're very proud of that. We aspire to that. But that might be a tad bullish.

Next question comes from Christian Buss with Crédit Suisse. Christian Buss - Crédit Suisse AG, Research Division: Yes, I was wondering if I could get some update on the more mature markets in Asia and how they're performing, and whether the initial response in China is as expected or ahead of plan.

Okay, Chris. I will try to respond to that. As you know, China is still in its infancy. We went through a very big decision to pull down most of the network that had been put in place by a 20-year plus relationship with a licensee, and that has played out over the last 18 months. And thankfully, we're lapping that as we head into the beginning of the new fiscal year. We're on track to open 11 stores this year, plus or minus a few 20 next year. And I think we're beginning to lay the foundation for what, over time, will be a very successful market. The bulk of our Asia Pac sales at the moment are generated in Japan and South Korea, and those are built on a network of shop and shops in the department stores. So we're really more dependent in those 2 key countries on footsteps generated by the department stores and then our ability to get market share within that footstep traffic. This third quarter for us, both of those department store models suffered traffic erosions. So while we think we picked up share, it was a more difficult trading environment. And the new stores in Hong Kong or China are still small in relation to the overall scale of the Korean and the Japanese markets. So the teams over there have worked very hard to refine assortments. We've learned every season more and more about that customer and what they want, and we're now beginning to supplement around it freestanding retail-owned stores in Japan, remerchandising Korea. And then, obviously, the Chinese business serviced in Macau or Taiwan or the Philippines or Malaysia is all oriented towards freestanding retail. I think the big change that maybe you all understand is that the early doors are primarily pure luxury. They are Collection, Black Label, Purple Label, and we feel very good about establishing that business. But we're also now feeling very bullish about the ability to open Polo stores, children's stores and Denim & Supply. So that the overall strategy of distribution in the market is balanced, allows us to attract customers within our pyramid of brands and we're getting good feedback every day on each one of those strategies.

We'll now hear from David Glick with Buckingham Research.

Roger, just wanted to get a little more color on the accessory business. Obviously, you're getting some nice growth there. I was wondering if you could perhaps dimensionalize the business for us in terms of the penetration, where you are and where you're headed, and in particular, how you might approach that business differently as you essentially kind of started a new business in China where obviously demand for accessories is very strong.

Yes, David, we are very committed to the growth of accessories and, of course, it always depends on what your definition of accessories are. I'm going to use the term broadly to be small leather goods, handbags, footwear, eyewear, jewelry, watches, et cetera. And as you know, it represents a smaller part of our luxury business than most other people considered in the luxury sector. As we are expanding our own retail footprint, we are respacing our stores. A lot of the Asian real estate will be positioned with expanded assortments available in accessories. Clearly the Madison Avenue stores reflect expanded assortments, and Europe will do the same. So we're really in the early stages of giving it main floor expanded space, and we're beginning to see good traction from the customer. At this point, it's not really a strategy loaded with a lot of wholesale expectations, although there'll be some. It's really our ability to deliver a message and a level of expertise in our own brick-and-mortar and e-commerce space. So that is playing out as the new real estate is coming on, and we're encouraged by not only the Ricky Bag, but some of the key merchandise categories that are going to be important to us going forward. As you know, we're pushing very hard on that at a luxury tier. That business is the backbone of most of our luxury competitors at high margins, high productivity. And I think we've said before, and we'll say it again, it's very important. We aspire to penetrations, particularly in Asia where the customer is very oriented towards accessories, to penetrations that are 5 or 6 times what we get today in our normal stores.

We'll hear from Michael Binetti with UBS.

Roger, on Europe, I was encouraged by your comments that Europe sounds like it's showing some green shoots there. On the wholesale business, could you just maybe give us some thoughts on what inning you think you're in as far as the proactive reduction in shipments there, when do we anniversary those initial cutbacks, and how you see it going -- how do you think about restarting that business and the growth outlook as you kind of start to anniversary those cuts? And then finally, on the comments you made about the Polo brand and maybe opening some stores specifically for that brand and shining a light on that, I think it's safe to assume that that's where the real scale benefits you enjoy as a business come from. And I assume that comes with some gross margin tailwinds for the company if that comes with a bigger mix over the next few years. Maybe you could address that.

Sure. I'll start with the Polo brands. As you know, we represent the most important menswear brands in the industry, in every market we're in, and the backbone of that has been Polo. And I think with all the excitement over the years about Purple Label and Black Label and RLX and all the other initiatives, we're very cognizant that Polo is in high demand around the world. And as we elevated assortments on a Madison Avenue or New Bond Street, we were shrinking the assortments of Polo represented in those stores to highlight the other luxury brands. And what we realized is that there was a tremendous appetite by our customers for what we call the Blue Label products, men's and women's and kids, that we weren't satisfying in the direct-to-customer. We certainly were excelling at the wholesale distribution where there is credible wholesale distribution available. But in parts of Asia and in other parts of the world, where you have to depend on direct-to-customer through your own stores, Brazil would be another example, we really got very excited, and Ralph has really led the charge on envisioning a more complete Polo story that we can take directly to the customer. That could be flagship locations or that could be smaller-sized footprints in appropriate sized markets. The margins on those business are higher than the total. So any incremental penetration of Polo is a positive for the overall company margins. In reference to your first question about -- I like the green shoots in Europe, we think that heading into fiscal '14, most of the recalibration of forward shipments has been done. If you go back about 5 years, the largest 2 wholesale countries for us in Europe were Italy and Spain. And today they're not. And so we've already seen over the course of several seasons and years a shift and a development in Germany, in France, in England and really the Scandinavian markets. But today I think we head into spring shipping for our calendar '14 and for fall bookings, and I think we're beginning to feel like that's leveled out.

We'll move to a question from Erinn Murphy with Piper Jaffray.

Roger, I just wanted to kind of circle back on one of the prior questions related to Europe, but really focusing more on the margin side. I guess, it's encouraging to see some of the improved margins, in the retail side in particular. Could you just maybe address some of the changes you've made throughout the year in terms of merchandise flows, mark-down rate management or just maybe changes that have happened in the in-store selling environment that have really driven some of this improvement? And then, as we think about that segment from a profitability perspective, how should we think about the longer-term potential both in Europe retail profitability as well as the global basis?

Okay, Erinn. Let me see if I can condense my thoughts because there's not a single syllable or a single sentence that talks to what has been a multi-year initiative to raise the profitability of retail. Some of you who followed the story over the years knew that, that was one of our core initiatives. And we've come a long way and we continue to exhibit margin upside even in what would be called a tough quarter from macro issues. I think we've just learned to be professional retailers. Our history as a company was really in the licensing and wholesale side of the distribution network, and I think we do that superbly. I think it's interesting, the wholesale team teaches the retail team, and we cross-pollinate best practices in terms of assortments, presentation, sales support, customer service. And then when you overlay the e-commerce business, both in wholesale and retail, I think we're really trying to approach and service a customer in any of the channels they want to shop in on a global basis more consistently. So we're definitely getting more professional about staffing alignments with traffic patterns. We're definitely getting more thoughtful about conversion rates, average dollar transaction, multiple sales, fulfilling orders for customers that may come through the Internet out of the brick-and-mortar if we don't have the inventory or vice versa. And I think we have achieved the level of profitability on the back of extraordinary sales per square foot, and we have driven and continue to drive the sales per square foot as an operating metric. The other thing that we try to focus on, I think to our advantage, is gross margin dollars returned per square foot. So it's not always margin rates or sales per square foot, but it's the ability to develop the dollars per square foot and how you allocate space and how you focus your attention that ultimately has dollars flowing to the bottom line. So there are a lot of things going on that probably would be longer than I could answer here. But I think we've got some real professionals worldwide, and I think we're trying to apply lessons learned in one channel or one product category or one region to the overall corporate initiatives.

And we will take our last question from Barbara Wyckoff with Credit Agricole. Barbara Wyckoff - Credit Agricole Securities (USA) Inc., Research Division: Going back to China, looking out 3 to 5 years in China, how would you see the balance of business kind of playing out, umbrella of Collection, Black Label, high-end luxury, the Blue Label type doors, crossing men's, women's, children's, and then the role of the outlets?

Okay, Barbara, I'm going to try. And I'm not sure whether 3 to 5 years or whatever we would define as medium and long term. I think the subject in China is really our pyramid of brands and our hierarchy of distribution will primarily occur in retail. So in other markets where we have a balance of retail and wholesale, the wholesale channels tend to carry a lot of Blue Label, a lot of the businesses that are more broad in their appeal and then our retail tends to focus on the more elevated luxury. I think given that China will be dominated by direct-to-consumer, whether brick-and-mortar or e-commerce, we will attempt over time to replicate the pyramid of products from the most elevated, most fashionable, most expensive straight through the hierarchy with a similar profile of real estate. That will partly be determined by square footage and location. It will probably be determined by productivity. And so as we continue to get better brand awareness in a country where our brands are not well known, we have to raise brand awareness about who we are and what we do. We also think beyond China, that will wash out into Europe and the United States and other markets. We just showed some statistics to our board yesterday that showed the Chinese today have now become the #1 luxury customer in the world, and they're 30% of the luxury buying in Europe and they're 15% of the luxury buying in the United States. And so our initiatives in China, while substantial and real, we think will have an extraordinary halo over the rest of the company in multiple locations. And today, it's not a very big part of our total. So our results and our achievements are absent meaningful contribution by the Chinese customer on a worldwide basis. So with that, I'd like to thank you all for listening and participating. We are all very excited about the results. We're very excited about the company's initiative around Sandy. We think we've got a beat on operating metrics for the balance of the year and into next year. So we look forward to updating you in May.

Thank you, sir. That does conclude today's teleconference. We do thank you all for your participation.