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

Good morning, and thank you for joining us on Ralph Lauren's First 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 our broader strategic initiatives; Jacki Nemerov, our Executive Vice President, will provide some merchandising highlights; and Bob Madore, our interim Chief Financial Officer, will provide operational and financial details for the first quarter, in addition to reviewing our expectations for fiscal 2013. After that, we will open the call up for your questions, which we ask that you please 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 reported better-than-expected first quarter results this morning, delivering 4% revenue growth and diluted EPS that was 7% above the prior year period. The first quarter sales growth and margin structure were both better than we anticipated, and they demonstrate the tremendous operating discipline of our organization. I'm proud of these results, considering the global retail environment was increasingly challenging during the quarter, particularly for apparel merchandise. Revenue growth was well balanced across main channels of distribution, and were achieved on top of extraordinary gains in each of the prior 2 periods, 32% in the first quarter of last year and 13% in the first quarter of fiscal '11. This multiyear growth is a real testament of the diversity of our operating model. Strategic changes, we decided to make in our business, which include the impact of closing 60% of our Greater China distribution network and winding down American Living, combined with unfavorable foreign currency effects, suppressed our consolidated sales growth by approximately 500 basis points in the quarter. Organic growth in the quarter was close to 9%. Looking at our wholesale segment performance in the quarter. We continue to experience double-digit growth in North America, as we intensified our leadership position in core merchandise categories and in growing distribution of emerging products. Jacki will provide more insight into resilience of our North America wholesale trends later on this call. In Europe, where retailers and consumers alike are contending with unprecedented economic and political challenges, our first quarter wholesale results primarily reflect our decision to proactively scale back shipments at the specialty channel in order to calibrate inventories to more muted customer demand trends. Our first quarter European wholesale revenues were also negatively impacted by the shift in seasonal merchandise shipments and currency…

Thank you, Roger, and good morning, everyone. The growth we achieved across channels and regions in the first quarter affirms the strong consistent appeal of the Ralph Lauren aesthetic across a large and growing range of merchandise categories. We continue to enjoy a leadership position with more established categories while gaining excellent momentum with emerging ones. And our reported results only tell part of the story, because sales growth among products that we license to third parties, particularly for Polo and our Lauren brands, were also very strong in the quarter. Our first quarter sales results were supported by strong marketing and advertising for Lauren at Mother's Day, Polo at Father's Day and children heading to camp for the summer. The Ralph Lauren brand continues to resonate as the perfect gift choice across women, men and our children's category. Our association with world-class sporting events such as the U.S. and British Open Golf Tournament, Wimbledon and the Olympics, heightened the global exposure of our brand during the quarter. The elevated and iconic presentation of the Ralph Lauren brand through these high visibility partnerships will become even more valuable as we continue to develop our international businesses over the next several years. Today, I'd like to share with you what's behind our sustained success in the North American wholesale channel, where we've grown our revenues by more than 30% over the last 2 years. This growth is even more noteworthy when you consider the scale of our North American wholesale operations, which exceeded $2 billion in fiscal year '12. I'm extremely proud of not only the volume, but also the quality of this growth. In addition to the rigor of our sales planning process, we generate extremely high productivity for our core merchandise categories through the disciplined management of our department…

Thank you, Jacki, and good morning, everyone. As Roger mentioned earlier, our consolidated first quarter net revenues rose 4% to $1.6 billion, which was better than we anticipated, primarily as a result of higher wholesale shipments. Double-digit North American sales growth was mitigated by lower international revenues, primarily as a result of lower European wholesale volumes and the impact our a Greater China store network closures. Foreign currency effects negatively impacted consolidated sales growth by approximately 2% in the first quarter, which was primarily due to the weakness of the euro. Excluding strategic decisions to terminate certain North American and Asian operations and the impact of foreign currency translation, revenue growth would have been approximately 9% in the quarter. The gross profit margin of 62.3% was 70 basis points below the record level we achieved in the prior year period, and was in line with our expectations. The decline in gross profit margin was mostly a function of sustained impact of raw materials cost inflation at our retail segment, in addition to overall geographic and wholesale customer mix, primarily in Europe. Operating expenses rose 3% to $700 million in the quarter. Although the operating expense margin of 43.9% was 60 basis points below the prior year period, which was much better than the outlook we provided in May. The lower operating expense margin was primarily a result of disciplined operational management, particularly at our retail segment, and included a shift in the timing of certain expenses out of the first quarter and into the balance of fiscal 2013. Operating income of $292 million was 4% greater than the prior year, and the operating margin of 18.3% was 20 basis points below the prior year period, the net result of the lower gross profit margin and operating expense leverage I just…

[Operator Instructions] And we'll take our first question from Omar Saad with ISI group.

Roger, wanted to see if I could ask you about the retail business. It's a big focus for the company globally. You mentioned -- you had some interesting comments in your prepared remarks about maybe some of the shifts going on and the factory business is really holding up very well and that luxury apparel side in the full price might be a little bit more challenging. As you try to manage the brand kind of across these price points and diverse customer bases, what are the key elements there? Is it the macro factor that is playing the biggest piece? Are there product fashion issues that might be going on affecting as well? How do you think about managing that whole -- that retail business holistically across the channel, the price points, the different sub-brands, et cetera?

Yes. I think it's a good question, Omar, because we obviously have been focusing a lot on retail over the years since you've been following the story, as well as anybody, you notice our ongoing ability to develop a very profitable business model. I think what you're alluding to is some of the channel mix issues that go on between e-commerce or factory stores, the Ralph Lauren stores we own or even the licensed stores that we don't necessarily report as part of the retail comps. I think what's happening is in the first quarter and probably the first half of the year, we're going against some extraordinary comps last year. First quarter last year was plus 19% and double LOI was plus 7%. So we are up against some extraordinary changes. I also think what's happening on a macro basis is we're really dealing with a worldwide customer. We're seeing more and more the high end customer who shops in London and shopping in Paris or Dubai or New York or Beverly Hills or Asia, and so our efforts around a global customer consistency, merchandising consistency, marketing, the same standards for service is a big push for us around the globe. Now in the first quarter, the Ralph Lauren store business was softer than prior trends. I think most of that has been a footfall issue with the higher-end luxury apparel customer was not shopping in Europe or in key markets with the same kind of urgency they've had in the past. I think the accessory businesses, watch, jewelry businesses have held up better perhaps than the apparel customer. The other thing affecting that is the shifting of the tourist business. There is no doubt that Chinese tourists today are the #1 consumer who are traveling around the world…

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

Roger, I was wondering if you could comment at all about inventories at retail and clearance activity -- I'm sorry, inventories at your wholesale accounts and clearance activity in both the U.S. and the European market.

Sure. The inventories within our wholesale channel are very clean. As a matter of fact, Jacki and I were just talking about the August performance, which is strong, really, on the back of new fall receipts. So with a very strong double-digit spring, summer performance we've had, we're in good shape domestically. In the European markets, consistent with what we said earlier in the call, we actually chose not to ship some products into the market that were originally on order, combination of our concerns about their ability to sell through it, as well as some deteriorating credit with some of the customers. So the actual inventory levels in Europe are down, and the inventory in the channel is clearing through, perhaps a couple of weeks slower than this time last year in Europe. Domestically, we're fine.

We'll take our next question from Adrianne Shapira with Goldman Sachs.

Roger, it's impressive that you're maintaining your full year guidance despite the incremental stem that you talked about, and you've always spoken about the year -- as the year of 2 halves. I think we can appreciate the margin opportunity at the back half, but it clearly calls for revenues to accelerate in the back half. So if you could share with us why you and why should we be confident in that acceleration at the back half given some of the softer footfall issues you've talked about with the higher-end consumer impacting retail sales today.

Okay, Adrianne. Well, thank you for putting me on the spot as to whether I'm comfortable. But as you know, we try to be thoughtful in our guidance, we make no guarantees. It really did lay out, as a year that had 2 halves, the first half being impacted by all the things we've talked about. Many of those things begin to become less meaningful in the back half. So particularly in Asia, where we closed a lot of stores and that continued through the year, we do have the beginning of 15 new stores coming online during the fall. So that will begin to mitigate some of that. And the American Living shipments begin to get to be a smaller percent in the back half of the year as well. Obviously, FX is anybody's guess, and our forecast today really just reflects what the currency exchange rates are. So there's no new news there. We happen to think that the comparisons in comps get more favorable in the back half of the year. We've had extraordinary comps in the first half, and then they flattened out in the second half, we think, as customers began to accept the new pricing. We are fundamentally maintaining that pricing as cost of goods come down, so we'll get margin expansion, we hope, beginning next quarter. And we think we've got a great roster of products position for the retail channel, as well as the visibility we have into the wholesale channel at this point, at least through holiday, gives us some confidence in the guidance and the forecast we've given. Our willingness to invest long term, as you said, Adrianne, continues. But what's offsetting some of that is exchange rates are softer than we thought. We are closing our operations temporarily in Argentina that will be a small hit to the original guidance. And we've got an opportunity to take a couple extra great locations in China, which will also hurt the second half a little bit. But given the strong first quarter and given the visibility we have, that's our best thinking at the moment.

We'll take our next question from Michael Binetti with UBS.

Roger, maybe I know we've talked a little bit about the global retail outlook today. But maybe if I could focus in on Europe for just a minute, a little more color on what you're seeing in your own stores in Europe. And we heard from you guys in late May, and it seems like things got a little worse than what you were thinking, you would see Roger since then. So maybe some color on whether you think it's stabilized at this point? Or what gets you comfortable with what you're seeing over there right now as far as how you talk to us about the guidance on the retail side today? And then any -- maybe any -- just to follow up that, maybe any help you could give as we look at our models for gross margin outlook for the year beyond what you've given us to help out with the second quarter would be helpful -- in the back half of the year.

Okay. Well, let's talk about Europe. There's a lot of macro issues to deal with, and I'm not going to attempt to go through all of that with you. Our first quarter, when you put retail, wholesale together, on a constant currency basis was plus 3%. And while that's certainly down from where we've run in seasons past and years past, I think it's a very respectable number. We're seeing skittishness by our wholesale partners and orders, future bookings and forward orders. They are operating cautiously as their footfalls and business has been down. So they're trying to increase their turns and therefore, are looking more cautiously at initial orders. I think if business picks up, we'll be able to get some of that business back through replenishment. But net-net, by the end of the year, if we hit our forecast, we're looking to be flat to single digit up in Europe, depending on exchange rate. I think it's going to be lower wholesale businesses and higher retail businesses. And so we'll keep updating you every quarter, but that's our current point of view. The margin, as Jacki touched on and you've heard from others, we have certainly seen return of cotton, which is our primary raw material to pre-spike levels, somewhere in the low-80s, mid-80s per pound, which is a more normalized level. I think we'll begin to see that impact in the second quarter in the balance of the year. We talked in the past about wholesale inventories turning much faster. And therefore, new receipts with lower cost of goods go into the markup on sales, and that's what we're reporting. Markup and margin on sales, not receipts, but it comes through the wholesale distribution faster because of the turning inventory. Comes through more slowly in retail, where you've got on hand that have prior cost of goods, which were higher. And as the new receipts come in and they blend and they work their way through, I think we'll see the retail impact later in the year. So all in all, we're pleased with the retail prices, as I said earlier, we'll maintain. Cost of goods will start to come down. Obviously mix product categories will make that move around a little bit. But we think you'll start seeing that return in the second quarter.

We'll go next to Liz Dunn with Macquarie Capital.

In terms of the retail commentary, I just kind of want to dive in a little bit to the factory, because I was surprised at your positive comments on factory stores given the traffic drop-off that others have noted there. Is there something that you're doing differently? Or is it just the conversion that you kind of highlighted? And then also, as it relates to the China customer, does that also impact your business in Europe that you don't have as much mind share with that Chinese tourist customer.

Yes. Liz, I think the factory business has held up well, high single digits. That was really achieved on slightly negative footfalls early in the quarter that began to flatten out later in the quarter, and then as slightly positive as we head into the beginning of a new quarter. So we've seen some firming in the foot traffic there. I think our ability to outperform was really a tribute to the higher unit sales, the higher average price of the products, which became a higher unit in dollars sales and higher conversions. So we track rigorously how we convert the footsteps into sales, and we saw an increase both in the ticket pricing and the conversion rates, so that's good news, particularly if the footfall continues to creep up as we work our way into the critical back-to-school and early fall selling. The Chinese customer is, quite frankly, critical at the moment to the global sales of luxury products. Our conversations with many luxury brands is that it can be 25%, 30% or 40% of the European sales. But when you see reports of strong European sales for other luxury brands, 25% to 40% of it is coming from Chinese tourists. So us of the moment that's less than 2%. So until we get our network and our brand presence in China and better educate the customer, I think we're going to continue not to get a high penetration of Chinese in our international markets.

We'll go next to Christian Buss with Crédit Suisse. Christian Buss - Crédit Suisse AG, Research Division: I was wondering if you could talk a bit about your accessories penetration, where's that gone, and also about how the responses been to new lines in the accessory side.

Well, we've introduced our Ralph Lauren Collection handbag business and footwear business over the last couple of years, and have really built on the fashion in that product, the quality in that product and the broader appeal of that product. And we're very pleased with the direction of where we're headed with that accessory and footwear product. And we are really playing that as an important aspect of our own retail stores. So in all the new stores we've built, what you'll notice when you walk in is a great presentation of accessories, which includes handbags, belts, scarfs, a great presentation of footwear from the dressiest style to the most casual, and we've been working very diligently on the growth of those opportunities. We've seen some great penetration in the success of those businesses. But as I said, they're small and they're growing. In our department store business, where we have our Lauren brand and Polo brand, in Lauren, we began in footwear a few years ago, and we're seeing a great penetration and increase in sales. We just came off a marvelous season in our Lauren footwear business. We introduced Lauren handbags just under 2 years ago, and that is really starting to take on some great success, again, a great season and great growth. We've added Lauren handbags and Lauren footwear to Europe as well, and we're pleased with the early results there. Our Polo footwear has really accelerated very successfully, and we are now the #5 brand in men's footwear, which is quite an accomplishment from starting a couple of years ago, sort of not having a footwear business. And we are introducing our Polo men's accessories into our top doors for this fall. And because of, certainly, the power of our Polo brand, we're anticipating some very nice early results there on that product, which our intention is to build on the loyalty of that Polo customer, the introduction of this new category, the positive reaction we've gotten from our customers to the look of that product and the price point that we're introducing it at makes us feel very positive and very excited about what the future of that business can be as well.

We'll go next to David Glick with Buckingham Research Group.

Roger, just want to clarify your comments on Europe for your outlook for the year. You said flat to low single digits. Was that on a constant currency or a reported basis? And I was wondering if you could get into a little more detail on your comps in Europe in constant currency in Q1, how you're thinking about that for the balance of the year. And any color on Northern versus Southern Europe will be appreciated.

Okay. So my comments were really based on a constant currency. At this point, I'm not quite sure how to forecast it. We have, like others, seen weaknesses in Europe in the southern tier, not that we have big businesses in Greece, but certainly Italy, which at one point, was our largest country in Europe. Spain, which is also another large country, have seen the greatest impact of their businesses. Italy, almost all specialty store distribution; Spain, almost all department store distribution. The northern countries, whether it's Scandinavia, whether it's England, France, Germany all have performed better, and they continue to show more high potential parts of it. The other part of Europe that I talked about earlier, which we add in, the Middle East and Russia have also been very strong. So it's really a range of performances, depending on where in Europe you want to talk about. We see online growing. We see the retail growing. And I said earlier, we're going to be cautious about wholesale sell-ins. We want to manage the flow of product into the marketplace. We're also going to manage those places that in a specialty channel may have deteriorating credit metrics. So all of that rolls into my comments about viewing Europe for the year as kind of flat to mid-single digits on a comparable currency basis.

We'll go next to John Kernan with Cowen & Company.

So looks like this year, you expect to finish the year around a little bit above 15% operating margin as you reposition some of your distribution and you continue with the rollout of some of your newer product categories. What's the long term -- what's your long-term view on your operating margin? And is there any reason to believe that there isn't a meaningful long-term operating margin expansion potential as you continue your international rollout?

Okay. Well, I think you've been a student of our business. And other than the spike in the raw materials in the recent past, we've seen tremendous progress in growing our merchandise margins, and we would expect, as we continue to go out over the next couple of years, to see some of that growth rate return. Now the other thing that gives me some confidence about the long-term margin opportunities of the company is our ongoing ability once we fully integrate Asia, is a desire to get some expense leverage. As we spent many years integrating merchandise categories, product categories, regions, we do think we will get some expense leverage. The other piece that we think is exciting for the long-term prospects and margin is many of our new initiatives successfully accomplished should be high-margin businesses, not only the accessory business, but the margins in Asia should be meaningfully higher than the margins in either the United States or Europe. So a lot of the areas we're focusing on, I think, do speak well for the long-term margin opportunities of the company, and we'll see how they play out. I think at this point, operator, we've hit the time limit. So I thank everybody for their interest and their questions. Appreciate the focus this morning. We're very excited about the back half of the year, and think we're well positioned to navigate some of the short-term turbulence. So thank you very much.

And that does conclude today's conference. Ladies and gentlemen, thank you for your participation. You may now disconnect.