Good morning, and thank you for calling the Polo Ralph Lauren's Third (sic) [Fourth] Quarter Fiscal 2011 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 Polo Ralph Lauren's Fourth Quarter and Full Year Fiscal 2011 Conference Call. The agenda for the call includes Roger Farah, our President and Chief Operating Officer, who will give you an overview for the year 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 fourth quarter in addition to reviewing our initial expectations for fiscal 2012. 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 fourth quarter and fiscal '11 results that were much better than the expectations we articulated to you during the last year. We responded to a rapidly changing environment by pursuing additional market share opportunities and working to protect margins in the face of unprecedented inflationary pressures for our industry. At the same time, we made excellent progress on each of our strategic growth objectives and delivered the best operating results in our history, continuing the 5- and 10-year trends of double-digit sales and earnings growth and generating for the first time over $1 billion in EBITDA. Tracey will provide more complete commentary on our financial performance later on, but I did want to highlight some of our key achievements. The 14% increase in annual revenues was double our original outlook, fueled by the excellent momentum of our core apparel offerings, particularly in the U.S. and in Europe, where revenues rose at a double-digit rate. Diluted EPS growth of 22% was achieved after substantial reinvestment back in the businesses, including the startup of Southeast Asia and Greater China, the transition of South Korea and the development of international e-commerce. We also managed the initial onslaught of cost of goods inflation in the second half of the year and the negative impact of several calendar and holiday shifts, including a 53rd week last year that had more than a distorted impact on our fourth quarter results. And there were extraordinary items such as restructuring and store impairment charges and the disruption in Japan. The quality and consistency of our results, reflecting the clarity of our strategic focus and our ability to execute with excellence as we now have more direct control of our operations and key merchandising categories around the…

Thank you, Roger, and good morning, everyone. Fiscal 2011 was an exciting year for us with respect to the expansion and development of our products. We gained market share in most merchandise categories around the world. The double-digit growth we experienced in the U.S., Europe and Asia clearly demonstrate that customers not only responded to the compelling design and quality of our products but also to our strategic merchandising initiatives, which enabled us to generate significant sales growth. Our core business is performing exceedingly well across men's, women's and children's. The consistent upgrading of our in-store shops and visual presentation has been an important backdrop to support the momentum in our various brands. Our ability to expand the bandwidth of each of our brands to address new lifestyle sensibilities has deepened our relevance with the customer who knows they can always count on Ralph Lauren for distinctive high-quality merchandise in all aspects of their life. Emerging categories, such as accessories, dresses, activewear and footwear, offer excellent examples of our ability to extend our brand into new classification with tremendous success in a relatively short period of time. It has also allowed us to secure incremental distribution and floor space. We built a Lauren dress division from scratch just 3 years ago, hiring industry-leading talent to address an emerging category that was a natural extension for our core Lauren sportswear business. Today, we are already among, if not the, better leading dress resource in the department store channel, and we still have considerable growth before us, both in terms of expanded distribution and assortment. We just added evening and special occasion dresses, as well as special sizes to our dress assortment. Footwear is a similar story, one that is equally compelling in both men's and women's. The breadth of our footwear…

Thank you, Jacki, and good morning, everyone. As Roger highlighted earlier, we reported excellent full year operating results, and the fourth quarter, which despite the impact of meaningful calendar shifts that we described to you on our third quarter earnings call, exceeded our expectations given the continued momentum in our business. Incremental sales and profit within our Retail segment were the primary drivers of the upside, with all regions of the world contributing to the outperformance, although the heaviest concentration was achieved in the United States. Before I provide you with further insight into the fourth quarter's operational drivers, I do need to remind you of the nature of the calendar shifts we told you about in February that negatively affect comparisons with our prior-year periods, impacts that were reflected in the guidance we previously provided you for the fourth quarter. Roger mentioned them as well, and they do include an extra 53rd week that was in our results last year in the fourth quarter and a later Easter week this year that shifted that holiday sales growth into the first quarter of our fiscal 2012 versus the fourth quarter that we're reporting now. Lastly, we also mentioned the timing of the high-volume sales week post-Christmas that fell within our third quarter of fiscal 2011 compared to the fourth quarter of fiscal 2010. On a normalized calendar basis, we estimate the shifts alone negatively affected our reported sales growth in the quarter by approximately 10 full percentage points. Unless otherwise noted, my discussion of our fourth quarter business performance is based on our reported GAAP financial results, which reflect a 13-week period for fiscal 2011 and a 14-week period for the fourth quarter of fiscal 2010. On a reported basis, consolidated net revenues were $1.4 billion in the fourth quarter,…

[Operator Instructions] We'll take our first question from Kate McShane with Citi.

With your guidance for next year, how should we think about SG&A dollar growth? Will you be leveraging the spend next year, and has anything changed in terms of your expected level of spending in Southeast Asia and Korea versus when you last talked about the opportunities there?

We would expect, Kate, slight leverage. Again, our operating margin guidance does exclude, as I mentioned, any potential restructuring charges that might occur from the Greater China repositioning, so we would expect some slight SG&A leverage, excluding any charges. And again, the bulk of the operating margin decline would be related to cost-of-goods pressure. In terms of extra spending in Asia, we certainly are continuing to invest in infrastructure. We are continuing to invest in advertising as we rebrand our product in the market, and those are investments that will accelerate in fiscal 2012.

Our next question will come from Adrianne Shapira with Goldman Sachs.

Roger, you just talked about the input costs obviously mounting, and you're looking to increase prices in the fall. Could you perhaps quantify what you're expecting the input costs in the back half -- talk about what price increases you are planning to flow through, it doesn't sound as if fully. And given how strong the top line momentum is in light of the calendar shifts, it would seem as if we should be quite encouraged the ability to pass it through and quite encouraged about the elasticity of demand in light of how strong the momentum is.

Yes, Adrianne, let me just cover a couple of the questions you've got in there. One, the fourth quarter results we've reported is a bit of a Haley's Comet. The unusual combination of an extra week, the loss of Easter, the loss of the week after Christmas, really is a bit of a false read that I think Tracey tried to capture for you. If you take the run rate of sales through our third quarter, adjusted fourth quarter and the guidance we’ve provided for first quarter, you'll see that business really is quite strong, and really, all merchandise categories in all regions and all channels are contributing to that. So we're actually encouraged with the customers' response to our products and strategies. We did not take many price increases in the spring, even though we began to see some costs rising, but we have for fall. And those increases really are very dependent on the price point of the product and the merchandise categories. The actual cost-of-goods inflation, depending on the products, range from low- to mid-single-digits all the way up into the low-20s. And when you look at the breadth of product we have from the highest levels of collection in Purple Label down to products we make for Chaps, for Cole's [Kenneth Cole] and Penney's [J.C. Penney], some of the bigger cost movements were in the lower portion of that pyramid, and that's where we were more cautious about passing on the products as they came through. I also believe, and this is one person's opinion, that the cost of goods that we've all seen and read and talk so much about will begin to moderate into spring and fall of next year. I think that the supply and demand imbalance was real, and some of the other costs got run up for other reasons, and I think the more natural supply and demand will begin to take effect as we look at next year. So our point of view has been, we're not going to alter the quality, we're not going to alter the materials, trim, findings or the cut of the products. We're not going to alter where we make goods because our principles of product and product integrity has been so critical to our success, we think the customers want the same product and are going to pay more for it where appropriate. And then I think this pig in a python is going to play itself out over the next couple of seasons. We raised our gross margin in the last 7 years 900 basis points. So I think we've become very expert at sourcing, logistics and distribution, merchandising and really felt that a short-term blip was not something to throw us off our strategic mission. So a lot of that's embedded in your question, and I've expanded it in an effort to try to cover some of what I know is on all of your minds.

Next we’ll hear from Faye Landes with Consumer Edge Research. [Technical Difficulty]

Next question will come from Bob Drbul from Barclays Capital.

I was just wondering, on the price increases, when you think about men's versus women's versus kid's, are there more sort of categories that you're leery of raising price or where you think there will be more resistance?

No, I think that our point of view, Bob, was really about the high-end customer, the luxury customer, the higher parts of our distribution, the customer there who has been so voracious in their appetite for our products will pay higher prices where fair value is provided. And then we were more cautious with merchandise categories that were in other channels of distribution where we think the customer is going to be squeezed with a lot of inflationary things coming at them in the fall, and so we were more cautious with those product categories. But it really wasn't split across men's, women's, kid's or home or accessories.

Moving on, we'll hear from Robbie Ohmes with Bank of America Merrill Lynch.

Maybe a question for Jacki or Roger, if you want to jump in. I was curious if we could get a little more insight on to the expansion at Club Monaco and Rugby and the launch of Ralph Lauren Denim & Supply in Europe and sort of how that will be -- where it will be distributed and how it will be positioned relative to the existing business you guys have over there?

Well, I'll start with the Club Monaco and Rugby, and then I'm going to let Jacki jump in on Denim & Supply. Club Monaco, as you've been following, Robbie, the comps for years now has been extraordinarily successful with identifying their customer, the product offering and then the price value of what they've made. I think you also know that today, that production has been integrated into our overall manufacturing cycle. So we've had, for years, a lot of international retailers, knocking on the door, looking to get Club Monaco distributed in their market. We have partnered in Asia with distribution experts. But in Europe, our European team really felt that they had the ability to distribute it to key retailers as a Wholesale business, as well as looking at stand-alone store distribution. We had a test this February that started with Brown's in London that was extraordinarily successful, and we just think that product really appeals to an international customer. We see that in a lot of our New York stores, where we get a lot of tourists who are coming in to buy product they can't get in other parts of the world. So we think Club Monaco represents an opportunity, not only in Asia where we are, and we're growing successfully, but in Europe. Rugby, we'll be opening our first store in Europe later this year in London. There, again, we've had -- whether it's on the website or whether it's in the stores here in New York, we've had a tremendous reaction from our international customers. We opened a store in Japan last year that actually is the #2 store in volume in our network, and so we think Europe represents opportunities and are looking for additional locations going forward with Rugby. Jacki, you want to touch on Denim & Supply as we look at that business?

Absolutely. Well, the Denim & Supply business in Europe will replace the existing Polo Jeans Company business, which as you know, we decided to close in the U.S. about 4 years ago when we made that transition. It was a very different product in Europe and a much more elevated product for both Europe and Asia. And so what we decided to do over time, and we've been working on this for quite a while, is develop a brand new statement in denim with a very exciting Bohemian attitude, really driven to this younger customer and, over time, replace the Polo Jeans business. That will now take place for fall. So that will be the transition for Europe and Asia. The exciting part about the development of this brand is, now, we're planning a reintroduction in the U.S. of this vibrant category, and it will be launched in about 250 stores in the U.S. and in Canada. And with prime locations in men's and women's, with a very fresh impactful presentation, there will be strong marketing placed behind it, really speaking to this young customer. Our plan is to take a very unique style of marketing this product, really reaching this audience in a very unique way, and our plans for what and exactly will be done will be developed and you'll see over the next couple of months. But it's something we're very excited about, and so are the customers that we are participating with on this launch.

Next, we'll hear from David Glick with Buckingham Research Group.

Roger, I just wanted to get a sense for the relative growth in the U.S. versus Europe versus Asia that's embedded in your guidance. I mean you guys have talked for a long time about your ultimate goal of 1/3, 1/3, 1/3 and just wondering if you could help us calibrate how disproportionately Asia is growing relative to Europe relative to the U.S.

Yes, it's a good question, David, and I've got 1/3, 1/3, 1/3 tattooed on my forehead. We've had extraordinary growth in Europe. As you can see, we're putting together and seeing strong growth in Asia, excluding the issues in Japan for the moment. The only trouble is the U.S. keeps growing, and it's outrunning our estimates. So while we keep growing internationally, we're growing equally fast domestically. And I think as the Internet has added to the U.S. distribution pattern both our own and Wholesale as we keep launching new product categories like footwear, dresses, handbags, denim. The U.S. growth is equal to the extraordinary international growth. So I think as Tracey gave you some guidance to the first quarter and the full year, we are actually getting growth around the horn. And I think one of the surprises to us, and perhaps to all of you, was the strong core domestic Wholesale growth in the U.S. So I'm not sure how we're going to get to the 1/3, 1/3, 1/3 when the U.S. keeps growing, but we'll try.

Next, we'll hear from Jeff Klinefelter, Piper Jaffray.

Roger, just a question about the Asian region and the strategy there. Given your experience operating Japan directly over the last couple of years, Korea more recently and then heading into China with a greater emphasis, what have you learned from the Japan experience that impacted your Korean strategy? And then what do you expect both of those to do in terms of impacting your China strategy?

Yes, it's a good question. Each of those markets were run by a separate license group. So as we took back Japan, separate from China, Hong Kong, separate from Korea, each one of those were the transition of a long-term license to our ownership and control. And the Japanese business and the South Korea business are really heavily driven by department store shop-in-shops, and those marketplaces are heavily dominated by department store shop-in-shops. Those businesses, over many years, had a focus of men's casual, Blue Label sportswear. And in Japan, where we've had control of the business longer, we've seen tremendous reaction from the customer as we've begun to elevate product in women's and in kids and in other product categories as we've added visual enhancements and clarity, as we've sharpened our message, pre the earthquake and tsunami, we were beginning to see nice trends in what overall was a tough market. And one of the guidance issues for '12 isn't that Japan is not beginning to show some recovery from that, but it was against what our run rates would have been prior to that. Korea, where in fact, we've now had the business only for 5 months, we took on a terrific team of people that came with the acquisition, who really knew their products. And although the licensee did run down the inventories as we got to the end of the license in December, so we started January at a low level. As we've replenished inventory through the last 5 months, the customer there has responded, and that market has responded to better products, more elevated products and more fashion. So we feel very good about the long-term opportunity in Korea. Of course, many of you know that a lot of the business is in Seoul, Korea,…

Marie Driscoll with Standard & Poor's Equity Research has our next question. Marie Driscoll - S&P Equity Research: My question is about the Home category. It's exciting to hear that you're building it out, and I was wondering if you could just be more granular on what you're doing, both domestically and internationally.

In the Home business, we really started with what we feel is the foundation of that business, which is our textile business, so our bedding and bath. And that's a sizable business that we believe can really benefit from ownership and operating methods. We have been working hard on fresh new products. The teams have done a wonderful job of really looking at the balance of what that product should be. We began shipping in May, and our sales for the season have been very strong in Home. So that becomes the foundation. What we then did is looked carefully at each of our licenses, we determined which really were valuable for our future, which we needed to make changes with and so forth, and we have been working hard on this over the last 2 years with a heavy concentration in this last year. And every one of our licenses today's performance is up over last year. We've been working very closely on the content of that product. We've most recently added lighting and rugs, and the markets have gone extremely well for those categories of products. So all the changes that we've made, we're really starting to see very positive results from, and of course, we see Home, both in Ralph Lauren and Lauren, completely holistically so that as you enter the world of Ralph Lauren or you enter the world of Lauren, you're completely immersed in the entire experience in every category of products as we offer the customer wonderful choices for gifts and we offer them wonderful choices for their bedroom or their living room. And as I said, the size and scope of the categories is extensive, and we're very pleased today with the changes we've made, what we're seeing as a result and, as I said, the very positive business performance.

Michael Binetti with UBS.

I just want to try and make sure I understand how the margins are going to play out through the year here. So if I just look at the revenue guidance, it's pretty solid, and you said the biggest negative to operating margins is going to be the gross margin pressure. So am I wrong -- it sounds like the -- and you've touched on this a few times, that the SG&A is going to be increasing, it sounds like almost roughly the same pace as revenue, which would be a pretty big step up, right?

You're correct. And I mean, a part of the increase in SG&A is the fact that we do have a full year of our Korea business in this year versus only a -- really 2 months in our prior fiscal year. So that's a portion of the increase in SG&A. We also called out the fact that we are increasing our advertising spend to support some of the new initiatives like Home that Jacki spoke about and Denim & Supply and our international growth as well, and we're also expanding our e-commerce distribution. So we've spoken previously, and certainly on this call as well, that we're expanding e-commerce into Europe, and we're also exploring -- expanding into Asia as well. And that investment is also in our results for fiscal '12. So we are continuing to invest for future growth in addition to obviously the performance of our current core businesses, which are expected to grow quite nicely, as you mentioned.

Christine Chen with Needham & Company. Christine Chen - Needham & Company, LLC: I wanted to ask -- I know it's hard to quantify it, but the uncertainty in Japan, has that also affected some of the tourist business in maybe China or South Korea and anywhere else since they do travel? I mean, do you expect that to maybe resume? And then you had said that you expect South Korea to be accretive this year, correct? Dilutive in the near-term but ultimately at the end of the year, it should be accretive?

Yes, dilutive in the fourth quarter and accretive for the fiscal 2012 year.

Yes. And answer to your question about the Japanese tourist. I mean, clearly, in the 2 months right after the earthquake and tsunami, the tourist travel in Japan was dramatically down, although quite frankly, the Chinese tourist is today the dominant influence in really the gateway cities. One of the interesting subjects that's not often reported is the difficulty that Chinese tourists have to get visas to visit in the United States. So today, many of the tourists that are traveling out of China are really going to Europe. While that's a wonderful trip and a wonderful experience, we'd love to get more of them into the United States. But nevertheless, where you see Hawaii or other Asian destinations for tourism, the Japanese tourist is staying closer to home, although I think it's going to be a quarter-to-quarter update. We're already seeing some recovery in the mood and the spirit in Japan. There's definitely an attitude of trying to move on, and then we'll see how that plays out for the tourist business. But the headline issue on the tourist business is the Chinese, and their impact on the global shopping pattern, as I said earlier, is extraordinary, not just in their home market but as they move to other countries.

And we do have time for one more question. We'll take our final question from Faye Landes with Consumer Edge Research.

Just a quick follow-up on SG&A. Your points about next year's SG&A spending were explicit, so I appreciate that. But I was just wondering if you could talk about -- address 2 issues there. First of all, how should we think of this in the out-years? Obviously, there's lots of ways to spend money to support the business, so what kind of SG&A philosophy will you have after next year as businesses continue to ramp all over the world? And also, given some degree of uncertainty regarding consumer response to rising prices, which you had outlined earlier, how much flex do you have in the SG&A, how much could you crank it down, how much flexibility do you have to crank it down if sales aren't quite what you expected?

Great questions, Faye. So I'll start and perhaps Roger will finish up. One of the other impacts that I didn't mention that is impacting, if you just look at our SG&A, is how we are growing. So we called out the fact that in the fourth quarter, Retail grew faster than Wholesale. In fiscal 2012, we also called out the fact that Retail is growing faster than Wholesale, and our strategies to grow Asia are primarily Retail growth, whether they're concessions shops or freestanding stores. That does have an impact on SG&A. It's a mix impact. So with Retail, you have higher gross profit and higher SG&A costs. So that too is impacting us. As it relates to fiscal '12, I can only point you back to the recession, when we were faced very suddenly with reduction in sales and made some prudent choices as it relates to discretionary spending and other spending as well. So certainly, if the sales don't materialize, which we're pretty comfortable they will, again, we have been very thoughtful in terms of how we've planned price increases. But there's a lot of other economics noise in the environment with gas prices and food prices rising and everything else, that we will certainly make prudent choices, if need be, to manage the year, as we have previously. And in the future, I think you can expect us to continue to invest in growth strategies. I think that has been working very well for us in the last few years. It's the reason why Jacki spoke about our tremendous footwear growth this year. It's the reason why Europe has contributed as much as it has over the last few years for us as a company. We have been very smart and thoughtful on the executive leadership team here under Ralph's direction of investing in high-return projects, both in the near-term as well as long-term, and we certainly will continue to do that. And Asia represents, again, a very exciting opportunity for us along those lines. Roger?

Yes. Tracey's answer is complete. The only thing that I would add is the question to Jacki as we transition from what was a licensed textile business to own. We're obviously taking on expenses that used to be licensed, same for Korea, from a licensed category bringing it in-house. The launch of Denim & Supply, which is a new business, which comes with expenses before we start shipping. So we believe, Faye, that those will begin to moderate as we come full circle on most of the key license activities. And as we continue to see the kind of sales increases we've enjoyed, my expectation is we'll be able to leverage the expense line. And if I'm right, we'll begin to see, over the next 12 months, supply and demand get in better alignment, which will help mitigate some of the margin impacts. So I know we've run long this morning. We tried to cover a lot of information on fourth quarter, fiscal '12, some small highlights of the next 3-year outlook and what our focuses are going to be. We're very excited about the consumer trends and reactions to our strategies. We'll see how the fall pricing impacts. My guess is Polo Ralph Lauren product will continue to win and take market share, but when we get together in August to talk about early reads on fall, I think we'll have a better idea. So thank you for listening, and I appreciate your questions. We'll talk to you shortly.

And that does conclude today's teleconference. Thank you all for joining.