Good morning, everyone, and thank you for calling the Polo Ralph Lauren's Third Quarter Fiscal 2011 Earnings Conference Call. [Operator Instructions] Now for opening remarks and introductions, it is my pleasure to turn the call over to Mr. James Hurley. Please go ahead, sir.

Good morning, and thank you for joining us on Polo Ralph Lauren's Third Quarter Fiscal 2011 Conference Call. The agenda for today's call includes Roger Farah, our President and Chief Operating Officer, who will give you an overview of the quarter and comment on our broader strategic initiatives; Jacki Nemerov, our Executive Vice President, will provide some product commentary; and Tracey Travis, our Chief Financial Officer, will provide operational and financial highlights from the third quarter in addition to reviewing our expectations for the remainder of fiscal 2011. After that, 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. 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 excellent third quarter results today. Consolidated sales rose 24%, including 15% comp store growth at our directly operated retail stores and concession shops and a 21% increase in our wholesale shipments. All regions of the world contributed to this strong performance. Most of the growth was fueled by the incredible appeal of the Ralph Lauren brand in our core men's, women's and children's apparel products. Emerging products and regions also continued to contribute, but the real momentum in the quarter came from the strength of our core, where customers are responding to the high-quality and compelling value of our merchandise across channels. We are clearly picking up substantial market share, particularly in the United States and in Europe. Simply put, we had a superb holiday season. We offered exceptional merchandise across all lifestyle sensibilities, from our most luxurious products in our Ralph Lauren stores to our aspirational assortments in our department stores worldwide. The strength of our merchandise was supported by world-class advertising and marketing efforts. Our innovative 4D light show alone has delivered more than $600 million media impressions worldwide since the event took place. And at point of sale, our product was showcased with spectacular in-store presentations. The holiday windows at our stores around the world are a destination. And we have strong placement in leading department stores as well, including our exclusive holiday tartan program at Macy's. We invest considerable resources in our creative presentations and field teams to ensure we are delivering the most compelling customer experience we can. These teams are tireless and a competitive advantage for us. We are effectively monetizing our top line momentum as you can see in our profit metrics. Operating profits increased 43%, and diluted EPS rose 56%…

Thank you, Roger, and good morning, everyone. There is no question that the momentum in our business around the world is fueled by the strength of our products. We are fortunate to be working with one of the world's most desirable brands, and we support this with an extraordinary investment in new merchandise development and product innovation. I believe it is a core competitive advantage for us. With 43 years of experience as a company, we know our customers really well. And in that time, we've appropriately evolved to address their dynamic lifestyle needs. In this last year alone, we have introduced exciting new handbag collections, a broad and compelling activewear assortment with RLX, our first fine jewelry collection, and just this week, we introduced a new luxury denim offering. Ralph Lauren denim is an entirely new lifestyle expression for us and new terrain for the women's designer-level merchandise. As Ralph's incredible vision is translated into new product ideas and lifestyle sensibilities, we were able to find incremental distribution opportunities to showcase the product. It not only makes us even more relevant to our existing customers but also allows us to appeal to new customers. This is especially important as we grow our international presence since many of the regions of the world don't yet appreciate all we have to offer. Given the diversity of our lifestyle labels and the complexity of our distribution around the world, we are careful to develop discrete product for discrete channels. As the business has grown over the years and as we've come to more directly control various labels and product categories, the complexity of what we are executing has also increased. But with this greater control, we were able to more effectively leverage our in-house expertise in design, manufacturing and merchandising across the…

Thank you, Jacki, and good morning, everyone. As you've seen in this morning's press release, our third quarter and year-to-date performance reflects exceptionally strong top line momentum and even more robust flow-through to profit growth. Consolidated net revenues in the third quarter were $1.5 billion, a 24% increase from the prior year period with growth in both our Wholesale and Retail segments exceeding 20%. Solid performance of our core men's, women's and children's apparel was enhanced by incremental sales from our newly transitioned Asian operations and some favorable calendar shifts, which accounted for approximately 400 basis points of the consolidated sales increase. Revenue growth exceeded our expectations, primarily due to the strength of our Retail segment, including considerable same-store sales growth at our directly operated stores at RalphLauren.com. Shipments to our global department store customers also exceeded our expectations this quarter. The net impact of foreign currency translation on our total reported revenue growth was negligible for the third quarter. The gross profit rate of 58.6% in the third quarter was 40 basis points above the prior year period, reflecting stronger full-priced sales that more than offset the initial impact of increasing cost of goods. Our comprehensive merchandising initiatives across all product categories and focused on our wholesale customers, retail stores and e-commerce sites, supported the excellent full-price sell-throughs we experienced. The strengthening of the Japanese yen more than offset the magnitude of the unfavorable currency impact we experienced from the euro translation and that we anticipated when we spoke with you in November. Expenses in the quarter included incremental costs associated with our Hong Kong operation as well as the South Korean pre-acquisition costs, our European e-commerce launch expenses, higher incentive compensation costs and global infrastructure support cost. Despite these investment expenditures, we achieved 160 basis points of operating…

[Operator Instructions] We'll take our first question from Omar Saad with Credit Suisse. Omar Saad - Crédit Suisse AG: I know you mentioned it a little bit, Tracey, in some of your comments, I was wondering how you guys are thinking about cotton inflation. It's obviously a big concern for a lot of investors in the sector right now. And I know you haven't given guidance for next year yet, but have you thought about strategy for pricing? And if you are going to use price as a tool, kind of how you think about demand elasticity across the sector, and does it vary by region? Just like to get an update on your thoughts there.

So Omar, this is a big question, and I'll try to answer it completely so it gets as much information out there that we're able to provide. Clearly, you've all heard, read and know the extraordinary inflationary raw materials issue. Cotton for sure, but all other fibers, cashmere, wool, on and on and on are experiencing enormous increases. Some of that I think you have to recognize is coming off the low base post-recession, so the comparison is distorted. But even with that said, it's extraordinary by any measure. So with raw materials being the most important part of a garment's cost, it's having a meaningful impact on how we think and plan and organize ourselves with that beginning to come into play in the back half of this year as we've talked about before, moving gradually through spring and then really coming on in more of a spike for fall and beyond. So I think we're all trying to monitor and watch that regularly. The other piece of that is the manufacturing costs are rising as well. And so it's sort of a double whammy of that, that is impacting everybody. We have taken a very clear position that we will not alter the quality of our materials, our manufacturing, our findings, our trims, or really where we're making product at this point. The backbone we think of our brand equity is the extraordinary products we make, and we think they've always been fairly priced for what they are. So that won't change. Our ability, we believe, to responsibly increase our prices later in the year, are based on that brand equity and our customers' belief that the products we provide represent not only extraordinary design but extraordinary value. So for us, our thoughts, as we head into fall and beyond, is to look at products, look at pricing by category, by region, and again, make a responsible adjustment that reflects the reality of cost of goods increases. And beyond the short-term impact of this, the question is, where is it going to go over the next two or three years? And quite frankly, at this point, nobody knows. So we have to be thoughtful about our expectation of how our consumers are going to react. And I don't think we'll really see a fair read on that until the fall. I think there will be selective price increases during the spring in the marketplace. We may get some modest read off of that. But I think, really, until we all get to fall of next year, we won't know whether the end consumer understands and accepts what will be a overall increase for most product categories. We just think with our brand, and our quality and the momentum we have, we've got to make responsible decisions about how we adjust our thinking on this.

Moving on, we'll now hear from Adrianne Shapira with Goldman Sachs.

Roger, I was just wondering, in light of the change in your guidance, EBIT margins now flat versus a down 50 basis points, help us think about what has changed in your thinking that gives you a bit more confidence there and how we should be thinking about that going forward in light of your comments of inflationary pressures. How should we be thinking about sources of opportunity as it relates to gross margin and expense control?

Adrianne, that's a good question. When we built the plans for the year, we had anticipated, in our third quarter, in our fourth quarter, that cost of goods would be rising because we saw that coming. And we had made a decision not to adjust retail pricing for third and fourth quarter, and therefore, the plan was built on compression. And what you saw in the third quarter, and it's why we're somewhat looking at the back half of the year, the whole six-month block of time, is our sell-throughs have been that much better. We are getting higher sell-throughs at full price, both in retail, online and our wholesale accounts worldwide, and that improved full-price sell-through has mitigated the gradual cost of goods increases. So with the kind of sales momentum we've had and the sell-throughs we've had, we have, obviously, reported today strong margin improvement against that backdrop. And that's sort of what we're looking at for the go-forward until we really get to the full impact of fall '11.

And now we'll hear from Robbie Ohmes with Bank of America Merrill Lynch.

Roger, I was hoping that maybe you could give us a little more detail on the Asia strategy, maybe near term. And I guess the question would be maybe more help on own store, and maybe luxury store growth in China versus what you're going to do with the concession stores. And should we expect the Sportswear business in China and the Concession business you're taking over to not grow as fast? Or will you change what's in those concession shops significantly? Maybe if you could sort of paint the picture for us of how you think you'll be executing over the next 24 months now that you control everything there.

Okay, Robbie, I think it's a terrific question given that I spent a lot of time this morning talking about Asia. And I think it's on everybody's mind. The other piece, and then I'll answer your question more directly, is we've noticed the extraordinary impact that the Chinese customer has had on other parts of the world as they travel. So getting our brand properly established in China and Hong Kong and other major capitals, we think will not only improve that part of the world, but their impact on Europe or the United States because what we're observing in other luxury brands is the extraordinary power they're exhibiting to buy those products outside their home market. With that said, we've now completed the major part of putting together what was a very fragmented licensing strategy in Asia. And as we've talked about in the past, the bulk of our licensees internationally have focused on men's Blue Label sportswear. So the locations, the concessions, or street locations, or mall locations, were primarily positioned to maximize that particular merchandise class. And so as we look to elevate the brand, bring more of a luxury assortment, clearly expand our women's and accessory and high-end Men's business, we've got to look at the portfolio of distribution points we have to see how they reflect against our go-forward position. Parallel to that, we are going to be aggressive in our desire to get the kind of locations -- and it's really going to be more than a 24-month period, but it's going to be for a very long time period -- to get the kind of locations we think we need to properly position the brand. What's happening in China is clearly major city growth in the Beijing, Shanghai, Hong Kong regions, but a lot of second and third tier cities are now beginning to gel and exhibiting the customer demand, and so we're going to have to look at those second and third tiers the same time we're looking at the primary cities for key locations. I also think it's clear to us that China, Hong Kong, is going to be more direct to customer, where a lot of the current network in Japan and Korea are concession shop in shops. So for us in China, more about the direct-to-customer through our own brick-and-mortar and ultimately, through e-commerce. We're going to have to move quickly to accelerate our strategy of e-commerce in that region because I think that will help overlay the brand positioning we're trying to achieve. So I tried to pepper my comments at the beginning with sequencing and thoughtfulness because I think this is really a once-in-a-lifetime opportunity to set properly the most unique region in the world. And what we've learned in the United States and what we've learned in Europe, we're going to try to apply.

And now we'll hear from UBS' Michael Binetti.

So, I think, Tracey, you gave a little detail on this, but you called out international e-commerce development as an input to retail margins in the quarter. And I think you alluded to Europe, Tracey, is this the ongoing comment that we expect France and Germany this year to come online or are we -- and I think Club Monaco later in the calendar year, are we looking at any e-commerce in Asia yet in that comment?

No, this is really in the quarter, the investment related to the launch of our U.K. e-commerce site, which happened in October. So that was primarily the investment related to that. And we also do have some investment related to the fact that we will be, as you are aware, launching France and Germany later in this calendar year. We are certainly exploring how we will go about launching e-commerce in Asia, but we're still in the exploration stage at this point in time. So not a lot of investment thus far and that is in the exploration stage right now.

Moving on, we’ll hear from Christine Chen with Needham & Company. Christine Chen - Needham & Company, LLC: Wondering if you could talk about regional performance in Europe and then with respect to South Korea, how is that customer different from the Japanese customer? I mean, South Korea is a pretty developed luxury market, and do you still expect it to be diluted by the $0.08 to $0.10 that you had initially talked about?

Well, the European business, which I think you heard me say, has had a extraordinary year of growth. The strong market positioning we have in the key markets of Europe has continued. So England, France, Germany have all been very, very strong markets as well as the Scandinavian countries. Spain, which went through a difficult period in the recession has started to come back a bit. And Italy has been a little bit more difficult, and I would say that's the most challenged market there. Most of the distribution in Italy is through multi-brand specialty stores and I think they've struggled the most coming through the recession. So over time, I think Europe will continue to perform, but it's going to be with some ups and downs by country. And our ability to go direct to the customer is going to be critical, and that's why we're pleased with the early U.K. e-commerce results and excited about France and Germany coming online, and then we have a rollout plan after that for the rest of the countries. South Korea, while mostly department store driven and concession shop driven, is actually a more vibrant market right now than Japan by a lot. The organic growth in that market has been strong. They also have a much stronger Tourist business of Chinese. Most of that is an arbitrage on pricing because the price of luxury goods in South Korea are cheaper than they are in China. So many Chinese see a weekend shopping excursion to Seoul as a exciting thing to do. So the organic market, while developed as you said, is continuing to grow and is getting a healthier tourist play than the markets in Japan.

And Christine, related to your question on dilution, we still do expect to experience those dilution costs. They are related to a couple of different things. One is just the acquisition costs related to the transaction. So we certainly incurred some fees related to the transition of the business from licensed to owned, whether it be legal fees or other fees associated with that, some incremental people cost as we added people to the business from a transition standpoint. And then, we did pay about $47 million to Doosan for the business. And that was a combination of the inventory that was transferred over the fixed assets, the net book value of the fixed assets that we acquired in the transition and other considerations. So the amortization of all of that from a purchase accounting standpoint is what's somewhat included in the dilution and that is impacting the fourth quarter. The other part of the fourth quarter and we had the same experience with Dickson from a transition standpoint, when we transition a license, oftentimes the transition leaves us with light fall inventory. And we had the same experience in Korea, so we are a bit light on our fall clearance inventory that we would normally be selling this time of year in January and February. We certainly have spring inventory from a selling standpoint. So the first couple of months of sale will be a bit light. But we expect that to certainly catch up in the second quarter as well. So all of those things are factored into the dilution. It's really a onetime dilution impact related to the transition of business.

David Glick with Buckingham Research Group has our next question.

Roger, I was hoping you can give us a little more color on your success in your new Madison Avenue women's and accessory store and wondering how you're thinking about the accessories category and how you merchandise it there, and how that could be extended to the balance of your retail stores.

Well, the reaction by the consumer was extraordinary. We thought we had aggressive plans, and we exceeded those. I think any local customer who watched the store go up for many, many years, as you all know, and was curious what we have done to their neighborhood came in and was overwhelmed with the presentation of the world of Ralph Lauren as well as the tourist customer. So both stores, the men's store and the women's and home stores, recorded extraordinary November, December performances. And really, the high end and the best products are what we sold the most of. The combination of the presentation, the merchandise and the extraordinary service levels that those stores provide, had us registering average sales checks more than 100% larger than in prior holiday seasons in those locations. So it was a combination of foot traffic and conversion. But really, the higher-priced products that we were converting to sales was extraordinary. The accessory presentations on the main floor is really Ralph's vision for the future. And for us to take an entire main floor and make it accessories, when this store was in the planning stages years ago, was a bold commitment to our ability to develop the right handbags, accessories, footwear and, of course, jewelry and watches. And we saw a strong customer reaction to all of that. Our challenge now will be to take that layering and representation of accessories and roll it out to more of our existing fleet as well as distorting new stores. As many of you know, our model in the past, where we had a lifestyle store was the main floor or the second floor was men's, and then you hit a third floor, maybe that was women's and maybe a fourth that was home. So we always had strong men's representation. But the Women's business, the Women's Accessory businesses, never got the real estate it deserved. This is really a stake in the ground and the customer reaction has been not only exciting, but reinforces that strategy. So new stores in Asia, new stores in Europe and our portfolio in the U.S. will be viewed with an eye towards that kind of distortion level.

We'll take our final question from Kate McShane with Citi Investment Research.

My question is on Club Monaco, which still seems to be doing extremely well. And I wondered, with all the conversation around e-commerce, if you could discuss a little bit how that e-commerce business is doing and what the further plans are for distributing Club Monaco in the U.K. beyond the ground distribution.

So Club Monaco has had a spectacular year. Through the first nine months, they continued to registers strong double-digit performance. Much of that has been on an extraordinary women's performance. So in a marketplace where women's has not been as buoyant over the last 12 months, Club Monaco has really struck a chord with their customer. And I think, if you've been in the store, their fashion look, the fit and the quality are all resonating with that customer. We're also getting strong performance from our large network of stores in Asia with the same products. So today, Club Monaco in the United States and Club Monaco in Asia has the same kind of products, and it is resonating very well. Additionally, this holiday season, we saw men's come on. So where men's was lagging a bit, it really picked up momentum into the holiday season, and we're pleased with the way that product is performing. So we're sticking our toe in Europe this month with a unique partnership with Brown's, and we are partnering with our European management to bring Club Monaco properly to Europe over time. And I think we'll hear more about that strategy as it unfolds. We regularly have Europeans coming into the United States asking us to bring Club Monaco and its sensibility to Europe. And we think that's a real opportunity as well. The third leg of that stool will obviously be to get Club Monaco from a commerce point of view online and not just informational. We think that there will be a high demand, and we're working with our in-house e-commerce team to make sure we're properly positioning them to participate in that part of the growth. So for us, it's international, not dissimilar to the Ralph Lauren strategy, direct to customer through e-commerce. And I think as we've now seen the product consistency and the customer reaction, we feel more comfortable with our response, which is a more integrated growth strategy. So that, I think, will be an important part of our success going forward. So with that, I know we've run a little long. We apologize, we started a little late. It's been an extraordinary quarter and nine months. Hopefully, some of the noise and shifts between quarter, we've tried to explain. But in the end, I think we're tracking to a year that is in excess of where we started at the beginning for all the right reasons. And we're obviously very excited about the new growth opportunities by product category that Jacki talked about or obviously the whole Asia-Pacific region, which we'll continue to talk about on every call. So thank you for your interest and appreciate you spending a little extra time with us today.

Ladies and gentlemen, that does conclude our conference call for today. Again, thank you for your participation.