POLO RALPH LAUREN CORP - 10-K Annual Report

Back to GetFilings.com

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004

------------------------

FORM 10-K

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED MARCH 29, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 001-13057

POLO RALPH LAUREN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 13-2622036
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

650 MADISON AVENUE, NEW YORK, NEW YORK 10022
(212) 318-7000 (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
described in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

The aggregate market value of the registrant's voting stock held by
nonaffiliates of the registrant was approximately $920,639,610 as of September
27, 2002, the last business day of the registrant's most recently completed
second fiscal quarter.

At June 13, 2003 44,980,928 shares of the registrant's Class A Common
Stock, $.01 par value, 43,280,021 shares of the registrant's Class B Common
Stock, $.01 par value and 10,570,979 shares of the registrant's Class C Common
Stock, $.01 par value, were outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PART I

ITEM 1. BUSINESS

In this Form 10-K, references to "Polo," "ourselves," "we," "our," and "us"
refer to Polo Ralph Lauren Corporation and its subsidiaries, unless the context
requires otherwise. Due to the collaborative and ongoing nature of our
relationships with our licensees, such licensees are referred to in this Form
10-K as "licensing partners" and the relationships between Polo and these
licensees are referred to as "licensing alliances." Notwithstanding these
references, however, the legal relationship between ourselves and our licensees
is not one of partnership, but of licensor and licensee. Our fiscal year ends on
the Saturday nearest to March 31. All references to "2003," "2002" and "2001"
represent the 52-week fiscal years ended March 29, 2003, March 30, 2002, and
March 31, 2001, respectively.

We are a leader in the design, marketing and distribution of premium
lifestyle products. For 35 years, our reputation and distinctive image have been
consistently developed across an expanding number of products, brands and
international markets. Our brand names, which include "Polo," "Polo by Ralph
Lauren," "Ralph Lauren Purple Label," "Polo Sport," "Ralph Lauren," "RALPH,"
"Lauren," "Polo Jeans," "RL," "Chaps" and "Club Monaco," among others,
constitute one of the world's most widely recognized families of consumer
brands. We believe that, under the direction of Ralph Lauren, the
internationally renowned designer, we have influenced the manner in which people
dress and live in contemporary society, reflecting an American perspective and
lifestyle uniquely associated with Polo and Ralph Lauren.

We combine our consumer insight and design, marketing and imaging skills to
offer, along with our licensing partners, broad lifestyle product collections in
four categories:

- Apparel -- Products include extensive collections of men's, women's and
children's clothing;

- Home -- Coordinated products for the home include bedding and bath
products, furniture, fabric and wallpaper, paints, broadloom, tabletop
and giftware;

- Accessories -- Accessories encompass a broad range of products such as
footwear, eyewear, jewelry and leather goods, including handbags and
luggage; and

- Fragrance -- Fragrance and skin care products are sold under our
Glamourous, Romance, Polo, Lauren, Safari and Polo Sport brands, among
others.

Our website is http://investor.polo.com. We make available free of charge,
through our website, annual reports on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K, and any amendments to those reports filed or
furnished, pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934, as soon as reasonably practicable after we electronically file such
materials with, or furnish such materials to, the Securities and Exchange
Commission.

RECENT DEVELOPMENTS

On an ongoing basis, we continue to evaluate our business and growth
strategies. In the past year, we have completed several transactions and
acquisitions that we believe will enhance our business.

During the fourth quarter of fiscal 2003, we acquired, for approximately
$24.1 million and $47.6 million, respectively, a 50% interest in the Japanese
master license and an 18% equity interest in the company which holds the
sublicenses for the men's, women's and Polo Jeans business in Japan. In May
2003, we acquired an additional 2% equity interest in this company. Also in the
past year, we acquired several retail locations from certain of our licensees in
Belgium, Germany and Argentina for a total purchase price of approximately $4.6
million.

1

In addition to the above, we completed a strategic review of our European
businesses and formalized our plans to centralize and more efficiently
consolidate their business operations. The major initiatives of the plan
included the following: consolidation of our headquarters from five cities in
three countries to one location, the consolidation of our European logistics to
Italy and the migration of all European information systems to a standard global
system. We have completed the consultation of the headquarters and anticipate
completion of the consolidation and migration during fiscal 2004. In connection
with the implementation of this plan, we have recorded a $14.4 million
restructuring charge.

As the result of the failure of Jones Apparel Group, including its
subsidiaries (Jones), to meet the minimum sales volumes for the year ended
December 31, 2002, under the license agreements for the sale of products under
the "Ralph" trademark between us and Jones dated May 11, 1998, these license
agreements will terminate as of December 31, 2003. We have advised Jones that
the termination of these licenses will automatically result in the termination
of the licenses between us and Jones with respect to the "Lauren" trademark
pursuant to the Cross Default and Term Extension Agreement, between us and Jones
dated May 11, 1998. The Lauren license agreements would otherwise expire on
December 31, 2006.

On June 3, 2003, Jones filed a lawsuit against us in the Supreme Court of
the State of New York alleging, among other things, that we breached our
agreements with Jones with respect to the "Lauren" trademark by asserting our
rights pursuant to the Cross Default and Term Extension Agreement and that we
induced Ms. Jackwyn Nemerov, the former President of Jones, to breach the
non-compete and confidentiality clauses in Ms. Nemerov's employment agreement
with Jones. Jones has indicated that it will treat the Lauren license agreements
as terminated as of December 31, 2003. Jones is seeking compensatory damages of
$550.0 million as well as punitive damages and to enforce the provisions of Ms.
Nemerov's agreement. If Jones' lawsuit were to be determined adversely to us, it
could have a material adverse effect on our results of operations and financial
condition; however, we believe that the lawsuit is without merit and that we
will prevail. Also on June 3, 2003, we filed a lawsuit against Jones in the
Supreme Court of the State of New York seeking, among other things, an
injunction and a declaratory judgment that the Lauren license agreements
terminate as of December 31, 2003 pursuant to the terms of the Cross Default and
Term Extension Agreement. Jones has reported that net sales of Lauren and Ralph
products for the year ended December 31, 2002 were $548.0 million and $37.0
million, respectively.

The royalties that we received pursuant to the "Lauren" license agreements
and "Ralph" license agreements represented revenues in fiscal 2003 of
approximately $37.4 million and $5.3 million, respectively. We will no longer
receive these royalties after the third quarter of fiscal 2004, as a result of
the termination of the Lauren and Ralph license agreements on December 31, 2003.
The Company is preparing to begin production and marketing of the Lauren and
Ralph lines, with shipments beginning in January 2004. We expect that the income
from our sales of Lauren and Ralph products will replace the royalty revenue
previously attributable to the Lauren and Ralph license agreements.

OPERATIONS

We operate in three integrated business segments: wholesale, retail and
licensing. Details of our net revenues by business segment are shown in the
tables below. See also Note 17 to our

2

consolidated financial statements for fiscal 2003, fiscal 2002 and fiscal 2001
for further segment information.

WHOLESALE

Our wholesale business is divided primarily into two groups: Polo Brands
and Collection Brands. In both these wholesale groups, we offer several discrete
brand offerings. Each group is directed by teams consisting of design,
merchandising, sales and production staff who work together to conceive, develop
and merchandise product groupings organized to convey a variety of design
concepts.

POLO BRANDS

Our Polo Brands group sources, markets and distributes products under the
following brands:

POLO BY RALPH LAUREN. The Polo by Ralph Lauren menswear collection is a
complete men's wardrobe consisting of products related by theme, style, color
and fabric. Polo by Ralph Lauren menswear is generally priced at a range of
price points within the men's premium ready-to-wear apparel market. We currently
sell this collection through department stores, specialty stores and Polo Ralph
Lauren stores in the United States.

BLUE LABEL. The Blue Label collection of womenswear reflects a modern
interpretation of classic Ralph Lauren styles with a strong weekend focus. Blue
Label collection is generally priced at a range of price points within the
premium ready-to-wear apparel market. We currently sell the Blue Label
collection domestically and internationally through Polo Ralph Lauren stores and
through selected wholesale accounts in Europe and Asia. In Japan, our Blue Label
line is sold under the Ralph Lauren brand name.

POLO GOLF. The Polo Golf collection of men's and women's golf apparel is
targeted at the golf and resort markets. Price points are similar to those
charged for products in the Polo by Ralph Lauren line. We sell the Polo Golf
collection in the United States through leading golf clubs, pro shops and
resorts, in addition to department stores, specialty stores and Polo Ralph
Lauren stores.

RLX POLO SPORT. The RLX Polo Sport collection of menswear and womenswear
consists of functional sport and outdoor apparel for running, cross-training,
skiing, snowboarding and cycling. We sell RLX Polo Sport in the United States
through athletic specialty stores, in addition to Polo Ralph Lauren stores, at
price points competitive with those charged by other authentic sports apparel
companies.

3

COLLECTION BRANDS

Our Collection Brands group sources, markets and distributes products under
the following brands:

WOMEN'S RALPH LAUREN COLLECTION AND RALPH LAUREN BLACK LABEL. The Ralph
Lauren Collection expresses our up-to-the-moment fashion vision for women. Ralph
Lauren Black Label includes timeless versions of our most successful Collection
styles, as well as newly-designed classic signature styles. Collection and Black
Label are offered for limited distribution to premier fashion retailers and
through our own stores. Price points are at the upper end to luxury range.

MEN'S RALPH LAUREN AND PURPLE LABEL COLLECTION. In fall 1995, we
introduced our Purple Label collection of men's tailored clothing and, in fall
1997, to complement the tailored clothing line, we launched our Purple Label
sportswear line. We sell the Purple Label collection through a limited number of
premier fashion retailers, at price points at the upper end to luxury range.

CUSTOMERS AND SERVICE

Consistent with the appeal and distinctive image of our products and
brands, we sell our menswear and womenswear products primarily to leading
upscale department stores, specialty stores and golf and pro shops located
throughout the United States, which have the reputation and merchandising
expertise required for the effective presentation of Polo Ralph Lauren products.

Our wholesale products are distributed through the primary distribution
channels throughout the United States, Europe and other regions as listed in the
table below. In addition, we also sell excess and out-of-season products through
secondary distribution channels.

Department stores represent the largest customer group of our wholesale
group. Significant department store customers based on a percentage of wholesale
net sales for the year ended March 29, 2003 are:

- Dillard Department Stores, Inc., which represented 12.45%,

- Federated Department Stores, Inc., which represented 9.65%, and

- The May Department Stores Company, which represented 8.43%.

Collection Brands and Polo Brands products are primarily sold through their
respective sales forces. Our Collection Brands group maintains its primary
showrooms in New York City, whereas regional showrooms for the Polo Brands are
located in Atlanta, Chicago, Dallas and Los Angeles.

SHOP-WITHIN-SHOPS. As a critical element of our distribution to department
stores, we and our licensing partners utilize shop-within-shops to enhance brand
recognition, to permit more complete merchandising of our lines by the
department stores and to differentiate the presentation of products.
Shop-within-shops fixed assets primarily include items such as customized
freestanding fixtures, moveable wall cases and components, decorative items and
flooring. We capitalize our cost of these fixed assets and amortize them using
the straight-line method over their estimated useful lives of three to five
years.

4

During fiscal 2003, we added approximately 57 shop-within-shops and
refurbished approximately 91 shop-within-shops. At March 29, 2003, in the United
States we had approximately 1,496 shop-within-shops dedicated to our products
and more than 840 shop-within-shops dedicated to our licensed products.
Excluding significantly larger shop-within-shops in key department store
locations, the size of our shop-within-shops typically ranges from approximately
600 to 1,500 square feet for Polo Brands, from approximately 600 to 1,000 square
feet for our Collection Brands, and from approximately 300 to 900 square feet
for home furnishings. In total, we estimate that approximately 2.6 million
square feet of department store space in the United States is dedicated to our
shop-within-shops. In addition to shop-within-shops, we use exclusively fixtured
areas in department stores.

BASIC STOCK REPLENISHMENT PROGRAM. Basic products such as knit shirts,
chino pants and oxford cloth shirts can be ordered at any time through our basic
stock replenishment programs. For customers who reorder basic products, we
generally ship these products within one to five days of order receipt. These
products accounted for approximately 7.7% of our wholesale net sales in fiscal
2003. We have also implemented a seasonal quick response program to allow
replenishment of products which can be ordered for only a portion of each year.
One Ralph Lauren Home licensing partner offers a basic stock replenishment
program which includes towels and bedding products. Basic stock products
accounted for approximately 81% of net sales of our Ralph Lauren Home licensing
partners in fiscal 2003.

DIRECT RETAILING

We operate retail stores dedicated to the sale of our products. Located in
prime retail areas, our 110 full-price stores operate under the following names:

- - Polo Ralph Lauren.................. Polo Ralph Lauren stores feature the full-breadth of
the Ralph Lauren apparel, accessory and home product
assortments in an atmosphere consistent with the
distinctive attitude and luxury positioning of the
Ralph Lauren brand.
- - Club Monaco........................ Club Monaco stores feature updated, fashion apparel
and accessories for both men and women. The brand's
signature, clean and updated classic style form the
foundation of a modern wardrobe.
- - Club Monaco Caban.................. Caban home concept stores offer a unique shopping
experience by mixing both fashion and interior
design in a dynamic retail environment. Caban stores
feature a complete range of product in bath,
bedding, tabletop, home accessories, furniture and
apparel.

Our 145 outlet stores are generally located in outlet malls and operate as
Polo Ralph Lauren outlet stores, Polo Jeans outlet stores, Ralph Lauren Home
outlet stores and Club Monaco outlet stores.

In addition to our own retail operations, as of March 29, 2003, we had
granted licenses to independent parties to operate two stores in the United
States and 84 stores internationally. We receive the proceeds from the sale of
our products, which are included in wholesale net sales, to these stores and
also receive royalties, which are included in licensing revenue, from our
licensing partners who sell to these stores. We generally do not receive any
other compensation from these licensed store operators. See "Our Licensing
Alliances."

FULL-PRICE STORES

In addition to generating sales of our products, our worldwide full-price
stores set, reinforce and capitalize on the image of our brands. We have 6
Flagship Polo Ralph Lauren stores, which showcase our upper end luxury styles
and products and demonstrate our most refined

5

merchandising techniques. We also operate 41 Polo Ralph Lauren stores, 3 RRL
stores and 60 Club Monaco stores. During fiscal 2003, we added 16 store
openings, net of two store closings. Our stores range in size from approximately
3,500 to over 27,000 square feet. These full-price stores are situated in
upscale regional malls and major upscale street locations generally in large
urban markets. Our stores are generally leased for initial periods ranging from
5 to 10 years with renewal options.

OUTLET STORES

We extend our reach to additional consumer groups through our 93 domestic
Polo Ralph Lauren outlet stores, 22 Polo Jeans outlet stores, nine Club Monaco
outlet stores and 21 European outlet stores. During fiscal 2003, we added three
new outlet stores, net of four store closings.

- Polo Ralph Lauren outlet stores offer selections of our menswear,
womenswear, children's apparel, accessories, home furnishings and
fragrances. Ranging in size from 3,000 to 20,000 square feet, with an
average of approximately 8,900 square feet, the stores are principally
located in major outlet centers in 34 states and Puerto Rico.

- Polo Jeans outlet stores carry all classifications within the Polo Jeans
line, including denim, knit and woven tops, sweaters, outerwear, casual
bottoms and accessories. Polo Jeans outlet stores range in size from
2,600 to 5,100 square feet, with an average of 3,900 square feet, and are
principally located in major outlet centers in 13 states.

- Club Monaco outlet stores range in size from 6,100 to 12,500 square feet,
with an average of 8,800 square feet, and offer basic and fashion Club
Monaco items.

- European outlet stores offer selections of our menswear, womenswear,
children's apparel, accessories, home furnishings and fragrances. Ranging
in size from 2,500 to 13,200 square feet, with an average of
approximately 5,500 square feet, the stores are principally located in
major outlet centers in six countries.

Outlet stores purchase products directly from us, including our retail
stores, our product licensing partners and our suppliers. Outlet stores purchase
products from us generally at cost, and from our domestic product licensing
partners and our retail stores at negotiated prices. Outlet stores also source
basic products and styles directly from our suppliers. In fiscal 2003, our
domestic outlet stores purchased approximately 13.1% of their products from us,
45.8% from our product licensing partners, and 41.1% from other suppliers of
products.

OUR LICENSING ALLIANCES

Through licensing alliances, we combine our consumer insight and design,
marketing and imaging skills with the specific product or geographic
competencies of our licensing partners to create and build new businesses. We
seek out licensing partners who typically:

- are leaders in their respective markets,

- contribute the majority of our product development costs,

- provide the operational infrastructure required to support the business,
and

- own the inventory.

We grant product and international licensing partners the right to
manufacture and sell at wholesale specified products under one or more of our
trademarks. Our international licensing partners produce and source products
independently, as well as in conjunction with us and our product licensing
partners. As compensation for our contributions under these agreements, each
licensing partner pays us royalties based upon its sales of our products,
subject generally, to payment of a minimum royalty. Other than our Ralph Lauren
Home collection licenses, these

6

payments generally range from 2.5 to 20 percent of the licensing partners' sales
of the licensed products. In addition, licensing partners are required to
allocate between approximately two and four percent of their sales to advertise
our products. Larger allocations are required in connection with launches of new
products or in new territories.

We work closely with our licensing partners to ensure that products are
developed, marketed and distributed to address the intended market opportunity
and present consistently to consumers worldwide the distinctive perspective and
lifestyle associated with our brands. Virtually all aspects of the design,
production quality, packaging, merchandising, distribution, advertising and
promotion of Polo Ralph Lauren products are subject to our prior approval and
continuing oversight. The result is a consistent identity for Polo Ralph Lauren
products across product categories and international markets.

We had 17 product, 13 international and 11 home licensing partners as of
March 29, 2003. We derive a substantial portion of our net income from the
licensing revenue we receive from our licensing partners. Approximately 43.8% of
our licensing revenue for fiscal 2003 was derived from three licensing partners.
Jones Apparel Group, Inc. and Westpoint Stevens, Inc. each accounted for 16.4%
and 15.9%, respectively. Additionally, Seibu Department Stores, Ltd. accounted
for 11.5% of licensing revenue in fiscal 2003. (See Note 3 to our Consolidated
Financial Statements.)

PRODUCT LICENSING ALLIANCES

As of March 29, 2003, we had agreements with 17 product licensing partners
relating to our men's and women's sportswear, men's tailored clothing,
children's apparel, personalwear, accessories and fragrances. The products
offered by our product licensing partners are listed below.

- ---------------

* These licenses will terminate on December 31, 2003.

7

INTERNATIONAL LICENSING ALLIANCES

We believe that international markets offer additional opportunities for
our quintessential American designs and lifestyle image. We are committed to the
global development of our businesses. International expansion opportunities may
include:

- the roll out of new products and brands following their launch in the
U.S.,

- the introduction of additional product lines,

- the entrance into new international markets, and

- the addition of Ralph Lauren or Polo Ralph Lauren stores in these
markets.

We work with our international licensing partners to facilitate this
international expansion. International licensing partners also operate stores,
which at March 29, 2003, included 48 Polo Ralph Lauren stores, 3 Polo Sport
stores, 19 Polo Jeans stores, 3 Children's stores, 12 Ralph Lauren stores, 1 RRL
store, 26 Polo outlet stores, 3 Children's outlet stores and 6 Polo Jeans outlet
stores.

Our international licensing partners acquire the right to source, produce,
market and/or sell some or all of our products in a given geographical area.
Economic arrangements are similar to those of our domestic product licensing
partners. We design licensed products either alone or in collaboration with our
domestic licensing partners. Domestic licensees generally provide international
licensing partners with product or patterns, piece goods, manufacturing
locations and other information and assistance necessary to achieve product
uniformity, for which they are often compensated.

Our ability to maintain and increase royalties under foreign licenses is
dependent upon certain factors not within our control, including fluctuating
currency rates, currency controls, withholding requirements levied on royalty
payments, governmental restrictions on royalty rates, political instability and
local market conditions.

See "Risk Factors -- Risks Related to Our Business -- Our business is
exposed to domestic and foreign currency fluctuations" and "Risk
Factors -- Risks Related to Our Business -- Our business is subject to risks
associated with importing products."

RALPH LAUREN HOME

Together with our licensing partners, we offer an extensive collection of
home products which draw upon, and add to, the design themes of our other
product lines, contributing to our complete lifestyle concept. Products are sold
under the Ralph Lauren Home and Lauren Ralph Lauren brands in three primary
categories: bedding and bath, home decor and home improvement.

In addition to designing and developing the creative concepts and products,
we manage the marketing and distribution of our brands, and in some cases, the
sales of our products for our licensees. Together with our nine domestic and two
international home product licensing partners, representatives of our design,
merchandising, product development and sales staff collaborate to conceive,
develop and merchandise the various products as a complete home furnishing
collection. In general, our licensing partners manufacture, own the inventory
and ship the products.

We perform a broader range of services for our Ralph Lauren Home licensing
partners, as compared to our other licensing partners. The services we perform
include design, operating showrooms, marketing, advertising and, in some cases,
sales. As a result, we receive a higher average royalty rate from our Ralph
Lauren Home collection licensing partners, typically ranging from 15% to 17%.
Our Ralph Lauren Home licensing alliances generally have three to five year
terms and often grant the licensee conditional renewal options.

8

Ralph Lauren Home products are positioned at the upper tiers of their
respective markets and are offered at a range of price levels. These products
are generally distributed through several channels of distribution, including
department stores, specialty home furnishings stores, interior design showrooms,
customer direct mail catalogs, home centers, and the Internet. As with our other
products, the use of shop-within-shops is central to our department store
distribution strategy.

The Ralph Lauren Home and Lauren Ralph Lauren products offered by us and
our domestic licensing partners are:

WestPoint Stevens, Inc. accounted for approximately 69.7% of Ralph Lauren
Home licensing revenue in fiscal 2003. See "Risk Factors -- Risks Related to Our
Business -- Our business could suffer as a result of consolidations,
restructurings and other ownership changes in the retail industry."

DESIGN

Our products reflect a timeless and innovative American style associated
with and defined by the Polo design team and Ralph Lauren. Our consistent
emphasis on innovative and distinctive design has been an important contributor
to the prominence, strength and reputation of the Polo Ralph Lauren brands.

We form design teams around our brands and product categories to develop
concepts, themes and products for each of our businesses. These teams work in
close collaboration with merchandising, sales and production staff and licensing
partners in order to gain market and other input.

All Polo Ralph Lauren products are designed by, or under the direction of,
Ralph Lauren and our design staff, which is divided into five departments:
Menswear, Womenswear, Children's, Accessories and Home. Club Monaco's design
staff is located in New York and is divided into three teams: Menswear,
Womenswear and Home.

We operate a research and development facility in Greensboro, North
Carolina, a testing lab in Singapore and pattern rooms in New York, New Jersey
and Singapore.

9

MARKETING

Our marketing program communicates the themes and images of the Polo Ralph
Lauren brands and is an integral feature of our product offering. Worldwide
marketing is managed on a centralized basis through our advertising and public
relations departments in order to ensure consistency of presentation.

We create the distinctive image advertising for all our Polo Ralph Lauren
products, conveying the particular message of each brand within the context of
our core themes. Advertisements generally portray a lifestyle rather than a
specific item and often include a variety of Polo Ralph Lauren products offered
by both ourselves and our licensing partners. Our primary advertising medium is
print, with multiple page advertisements appearing regularly in a range of
fashion, lifestyle and general interest magazines. Major print advertising
campaigns are conducted during the fall and spring retail seasons with additions
throughout the year to coincide with product deliveries. In addition to print,
some product categories we have utilized television and outdoor media in their
marketing programs for certain product categories.

Our licensing partners typically spend between two and four percent of
their sales of our products for advertising. We directly coordinate advertising
placement for domestic product licensing partners. Together with our licensing
partners we collectively spent more than $200.0 million worldwide to advertise
and promote Polo Ralph Lauren products in fiscal 2003.

We conduct a variety of public relations activities. Each of our spring and
fall womenswear collections are presented at major fashion shows in New York,
which typically generate extensive domestic and international media coverage. We
introduce each of the spring and fall menswear collections at major fashion
shows in cities such as New York or Milan, Italy. In addition, we organize
in-store appearances by our models and sponsors, professional golfers,
snowboarders, triathletes and sports teams.

SOURCING, PRODUCTION AND QUALITY

Over 290 different manufacturers worldwide produce our apparel products. We
source finished products and piece goods. Piece goods include fabric, buttons
and similar raw materials and are sourced primarily with respect to our
Collection Brands. Finished products consist of manufactured and fully assembled
products ready for shipment to our customers. We contract for the manufacture of
our products and do not own or operate any production facilities of our own. As
part of our efforts to reduce costs and enhance the efficiency of our sourcing
process, we have shifted a substantial portion of our sourcing to foreign
suppliers. In fiscal 2003, approximately 5%, by dollar volume, of our products
were produced in the United States and the Americas; and approximately 95%, by
dollar volume, were produced in Hong Kong, Canada and other foreign countries.
See "Risk Factors -- Risks Related to Our Business -- Our business is subject to
risks associated with importing products."

Two manufacturers engaged by us accounted for approximately 16% and 12% of
our total production during fiscal 2003, respectively. The primary production
facilities of these two manufacturers are located in Asia.

Production is divided broadly into three categories:

- LDP Purchasing -- purchases of finished products, where the supplier is
responsible for the purchasing and carrying of raw materials, including
all logistics and inbound duties and arrangements (custom and broker) to
selected country port of entry;

- FOB Purchasing -- purchases of finished products, where the supplier is
responsible for the purchasing and carrying of raw materials; and

- CMT Purchasing -- cut, make and trim purchasing, where we are responsible
for purchasing and moving raw materials to finished product assemblers
located around the world.

10

We must commit to manufacture the majority of our garments before we
receive customer orders. We also must commit to purchase fabric from mills well
in advance of our sales. If we overestimate the demand for a particular product
which we cannot sell to our primary customers, we may use the excess for
distribution in our outlet stores or sell the product through secondary
distribution channels. If we overestimate the need for a particular fabric or
yarn, that fabric or yarn can be used in garments made for subsequent seasons or
made into past season's styles for distribution in our outlet stores.

We have been working closely with suppliers in recent years to reduce lead
times to maximize fulfillment (e.g., shipment) of orders and to permit re-orders
of successful programs. In particular, we have increased the number of
deliveries within certain brands each season so that merchandise is kept fresh
at the retail level.

Suppliers operate under the close supervision of our global manufacturing
division headquartered in the Far East. All garments are produced according to
our specifications. Production and quality control staff in the United States
and in the Far East monitor manufacturing at supplier facilities in order to
correct problems prior to shipment of the final product. Procedures have been
implemented under our vendor certification and compliance programs, so that
quality assurance is focused upon as early as possible in the production process
and flow ready merchandise activities, allowing merchandise to be received at
the distribution facilities and shipped to customers with minimal interruption.

We retain independent buying agents in Europe to assist us in selecting and
overseeing independent third-party manufacturers, sourcing fabric and other
products and materials, monitoring quota and other trade regulations, as well as
performing some quality control functions.

COMPETITION

Competition is strong in the segments of the fashion and consumer product
industries in which we operate. We compete with numerous designers and
manufacturers of apparel and accessories, fragrances and home furnishing
products, domestic and foreign, including Liz Claiborne, Inc., Nautica
Enterprises, Inc., Jones Apparel Group, Inc., Tommy Hilfiger Corporation, Calvin
Klein, Inc. and Giorgio Armani Spa in the branded apparel market sector, and
Gucci Group N.V. and LVMH Moet Hennessy Louis Vuitton in the luxury market
sector. Some of our competitors may be significantly larger and have
substantially greater resources than us. We compete primarily on the basis of
fashion, quality and service, which depend on our ability to:

- shape and stimulate consumer tastes and preferences by producing
innovative, attractive and exciting products, brands and marketing,

- anticipate and respond to changing consumer demands in a timely manner,

- maintain favorable brand recognition,

- develop and produce high quality products that appeal to consumers,

- appropriately price our products,

- provide strong and effective marketing support,

- ensure product availability, and

- obtain sufficient retail floor space and effectively present our products
at retail.

See "Risk Factors -- Risks Relating to the Industry in Which we
Compete -- We face intense competition in the worldwide apparel industry."

11

DISTRIBUTION

We continue to evaluate the adequacy of our distribution and warehousing
facilities and related processes.

To facilitate distribution domestically, men's and women's products are
shipped from manufacturers to our distribution center in Greensboro, North
Carolina for inspection, sorting, packing and shipment to retail customers. The
facility is designed to allow for high density cube storage, and utilizes bar
code technology to provide inventory management and carton controls. Product
traffic management is coordinated from this facility. European distribution and
warehousing during fiscal 2003 was handled by third party distribution centers,
however, with the European restructuring, the majority of the distribution will
be consolidated into one third party facility located in Parma, Italy.

Our full-price store and outlet store distribution and warehousing are
principally handled through the Greensboro distribution center. During fiscal
2003, we also used a facility in New Jersey, which will be closed in June 2003.

Club Monaco utilizes third party distribution facilities in Ontario,
California and New Jersey. The New Jersey facility will be closed in June 2003.

MANAGEMENT INFORMATION SYSTEM

We implement our management information systems to make the marketing,
manufacturing, importing and distribution functions of our business operate more
efficient by providing, among other things:

- comprehensive order processing,

- production information,

- accounting information, and

- enterprise view of information for the marketing, manufacturing,
importing and distribution functions of our business.

We have installed sophisticated point-of-sale registers in our stores that
enable us to track inventory from store receipt to final sale on a real-time
basis. We believe our merchandising and financial system, coupled with our
point-of-sale registers and software programs, allow for rapid stock
replenishment, concise merchandise planning and real-time inventory accounting.

We also utilize a sophisticated automated replenishment system to
facilitate the processing of replenishment and fashion orders from our wholesale
customers, the movement of goods through distribution channels, and the
collection of information for planning and forecasting. We have a collaborative
relationship with many of our suppliers that enables the Company to reduce cash
to cash cycles in management of our inventory.

CREDIT CONTROL

We manage our own credit function. We sell our merchandise primarily to
major department stores across the United States and extend credit based on an
evaluation of the customer's financial condition, usually without requiring
collateral. We monitor credit levels and the financial condition of our
customers on a continuing basis to minimize credit risk. We do not factor our
accounts receivables or maintain credit insurance to manage the risks of bad
debts. Our bad debt write-offs were $3.8 million in fiscal 2003, representing
less than one percent of net revenues. See "Risk Factors -- Risks Related to Our
Business -- Our business could be negatively impacted by the financial
instability of our customers."

12

BACKLOG

We generally receive wholesale orders for apparel products approximately
three to five months prior to the time the products are delivered to stores. All
such orders are subject to cancellation for late delivery. As of March 29, 2003,
our summer and fall backlog was $136.5 million and $367.9 million, respectively.
Our backlog depends upon a number of factors, including the timing of the market
weeks for our particular lines, during which a significant percentage of our
orders are received, and the timing of shipments. As a consequence, a comparison
of backlog from period to period is not necessarily meaningful and may not be
indicative of eventual shipments.

TRADEMARKS

We own the "Polo," "Ralph Lauren" and the famous polo player astride a
horse trademarks in the United States. Other trademarks we own include, among
others:

- - "Chaps" - "RRL"
- - "Polo Sport" - "Club Monaco"
- - "Lauren/Ralph Lauren" - various trademarks pertaining to
- - "RALPH" fragrances and cosmetics

In acquiring the "RRL" trademarks, we agreed to allow Mr. Lauren to retain
the royalty-free right to use as trademarks "Ralph Lauren," "Double RL" and
"RRL" in perpetuity in connection with, among other things, beef and living
animals. The trademarks "Double RL" and "RRL" are currently used by the Double
RL Company, an entity wholly owned by Mr. Lauren. In addition, Mr. Lauren has
the right to engage in personal projects involving film or theatrical
productions (not including or relating to our business) through RRL Productions,
Inc., a company wholly owned by Mr. Lauren.

Our trademarks are the subjects of registrations and pending applications
throughout the world for use on a variety of items of apparel, apparel-related
products, home furnishings and beauty products, as well as in connection with
retail services, and we continue to expand our worldwide usage and registration
of related trademarks. In general, trademarks remain valid and enforceable as
long as the marks are used in connection with the products and services and the
required registration renewals are filed. We regard the license to use the
trademarks and our other proprietary rights in and to the trademarks as valuable
assets in marketing our products and, on a worldwide basis, vigorously seek to
protect them against infringement. See Item 3 -- "Legal Proceedings." As a
result of the appeal of our trademarks, our products have been the object of
counterfeiting. We have a broad enforcement program which has been generally
effective in controlling the sale of counterfeit products in the United States
and in major markets abroad.

In markets outside of the United States, our rights to some or all of our
trademarks may not be clearly established. In the course of our international
expansion, we have experienced conflicts with various third parties which have
acquired ownership rights in certain trademarks, including "Polo" and/or a
representation of a polo player astride a horse, which would have impeded our
use and registration of our principal trademarks. While such conflicts are
common and may arise again from time to time as we continue our international
expansion, we have successfully resolved such conflicts in the past through both
legal action and negotiated settlements with third-party owners of the
conflicting marks. See "Risk Factors -- Risks Related to Our Business -- Our
trademarks and other intellectual property rights may not be adequately
protected outside the United States" and Item 3 -- "Legal Proceedings."

13

Two agreements by which we resolved conflicts with third-party owners of
other trademarks currently impose restrictions or monetary obligations on us. In
one, we reached an agreement with a third party which owned competing
registrations in numerous European and South American countries for the
trademark "Polo" and a symbol of a polo player astride a horse. By virtue of the
agreement, we have acquired that third party's portfolio of trademark
registrations in exchange for the payment of our royalties in Central America
and South America and parts of the Caribbean solely in respect of our use of
trademarks which include "Polo" and the polo player symbol, and not, for
example, "Ralph Lauren" alone, "Lauren/Ralph Lauren," "RRL," and others. This
obligation to share royalties with respect to Central and South America and
parts of the Caribbean expires in 2013, but we also have the right to terminate
this obligation at any time by paying $3.0 million.

The second agreement was reached with a third party which owned conflicting
registrations of the trademarks "Polo" and a polo player astride a horse in the
United Kingdom, Hong Kong and South Africa. Under the agreement, the third party
retains the right to use the "Polo" and polo player symbol marks in South Africa
and all other countries that comprise Sub-Saharan Africa, and we agreed to
restrict use of those Polo marks in those countries to fragrances and cosmetics
solely as part of the composite trademark "Ralph Lauren" and the polo player
symbol, as to which our use is unlimited, and to the use of the polo player
symbol mark on women's and girls' apparel and accessories and women's and girls'
handkerchiefs. By agreeing to those restrictions, we secured the unlimited right
to use our trademarks in the United Kingdom and Hong Kong without payment of any
kind, and the third party is prohibited from distributing products under those
trademarks in those countries.

GOVERNMENT REGULATION

Our import operations are subject to constraints imposed by bilateral
textile agreements between the United States and a number of foreign countries.
These agreements, which have been negotiated bilaterally either under the
framework established by the World Trade Organization regarding international
trade in textiles, known as the "WTO Agreement on Textiles and Clothing," or
other applicable statutes, impose quotas on the amounts and types of merchandise
which may be imported into the United States from these countries. These
agreements also allow the signatories to adjust the quantity of imports for
categories of merchandise that, under the terms of the agreements, are not
currently subject to specific limits.

Our imported products are also subject to U.S. customs duties which
comprise a material portion of the cost of the merchandise. See "Risk Factors --
Risks Related To Our Business -- Our business is subject to risks associated
with importing products."

Apparel products and other merchandise sold by Polo may also be subject to
regulation in the United States by other governmental agencies, including the
Federal Trade Commission, United States Fish and Wildlife Service and the
Consumer Products Safety Commission. These regulations relate principally to
product labeling, licensing requirements and flammability testing. We believe
that we are in substantial compliance with regulations, as well as applicable
federal, state, local, and foreign rules and regulations governing the discharge
of materials hazardous to the environment. We do not estimate any significant
capital expenditures for environmental control matters either in the current
year or expected in the near future. Our licensed products and licensing
partners are also subject to regulation. Our agreements require our licensing
partners to operate in compliance with all laws and regulations, and we are not
aware of any violations which could reasonably be expected to have a material
adverse effect on our business.

Although we have not in the past suffered any material inhibition from
doing business in desirable markets in the past, we cannot assure that
significant impediments will not arise in the future as we expand product
offerings and additional trademarks to new markets.

14

EMPLOYEES

As of March 29, 2003, we had approximately 10,800 employees, consisting of
approximately 9,000 in the United States and approximately 1,800 in foreign
countries. Approximately 20 of our United States production and distribution
employees in the womenswear business are members of the Union of Needletrades,
Industrial & Textile Employees under an industry association collective
bargaining agreement, which our womenswear subsidiary has adopted. We consider
our relations with both our union and non-union employees to be good.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Various statements in this Form 10-K or incorporated by reference into this
Form 10-K, in future filings by us with the SEC, in our press releases and in
oral statements made by or with the approval of authorized personnel constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are based on current
expectations and are indicated by words or phrases such as "anticipate,"
"estimate," "expect," "project," "we believe," "is or remains optimistic,"
"currently envisions" and similar words or phrases and involve known and unknown
risks, uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Some of the factors that could affect our financial performance or
cause actual results to differ from our estimates in, or underlying, such
forward-looking statements are set forth under the heading of "Risk Factors."
Forward-looking statements include statements regarding, among other items:

- our anticipated growth strategies,

- our intention to introduce new products and enter into new licensing
alliances,

- our plans to open new retail stores,

- anticipated effective tax rates in future years,

- future expenditures for capital projects,

- our ability to continue to maintain our brand image and reputation,

- our ability to continue to initiate cost cutting efforts and improve
profitability,

- our plans to expand internationally, and

- our efforts to improve the efficiency of our distribution system.

These forward-looking statements are based largely on our expectations and
are subject to a number of risks and uncertainties, many of which are beyond our
control. Actual results could differ materially from these forward-looking
statements as a result of the facts described in "Risk Factors" including, among
others, changes in the competitive marketplace, including the introduction of
new products or pricing changes by our competitors, changes in the economy, and
other events leading to a reduction in discretionary consumer spending. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, we cannot assure you that the
forward-looking information contained in this Form 10-K will in fact transpire.

RISK FACTORS

The following risk factors should be read carefully in connection with
evaluating our business and the forward-looking statements contained in this
Form 10-K. Any of the following risks could

15

materially adversely affect our business, our operating results, our financial
condition and the actual outcome of matters as to which forward-looking
statements are made in this Report.

RISKS RELATED TO OUR BUSINESS

THE LOSS OF THE SERVICES OF MR. RALPH LAUREN OR OTHER KEY PERSONNEL COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.

Mr. Ralph Lauren's leadership in the design, marketing and operational
areas has been a critical element of our success. The loss of his services, or
any negative market or industry perception arising from his loss, could have a
material adverse effect on our business. Our other executive officers have
substantial experience and expertise in our business and have made significant
contributions to our growth and success. The unexpected loss of services of one
or more of these individuals could also adversely affect us. We are currently
not protected by a material amount of key-man or similar life insurance covering
Mr. Lauren or any of our other executive officers. We have entered into
employment agreements with Mr. Lauren and several other of our executive
officers.

A SUBSTANTIAL PORTION OF OUR NET SALES AND GROSS PROFIT IS DERIVED FROM A SMALL
NUMBER OF LARGE CUSTOMERS.

Several of our department store customers, including some under common
ownership, account for significant portions of our wholesale net sales. We
believe that a substantial portion of sales of our licensed products by our
domestic licensing partners, including sales made by our sales force of Ralph
Lauren Home products, are also made to our largest department store customers.
Our three significant department store customers accounted for 30.5% of our
wholesale net sales during fiscal 2003, while our ten largest customers
accounted for approximately 43.0% of our wholesale net sales during fiscal 2003.

We do not enter into long-term agreements with any of our customers.
Instead, we enter into a number of purchase order commitments with our customers
for each of our lines every season. A decision by the controlling owner of a
group of stores or any other significant customer, whether motivated by
competitive conditions, financial difficulties or otherwise, to decrease the
amount of merchandise purchased from us or our licensing partners, or to change
their manner of doing business with us or our licensing partners, could have a
material adverse effect on our financial condition and results of operations.
See "Business -- Operations -- Domestic Customers and Service."

OUR BUSINESS COULD BE NEGATIVELY IMPACTED BY THE FINANCIAL INSTABILITY OF OUR
CUSTOMERS.

We sell our merchandise primarily to major department stores across the
United States and extend credit based on an evaluation of each customer's
financial condition, usually without requiring collateral. However, the
financial difficulties of a customer could cause us to curtail business with
that customer. We may also assume more credit risk relating to that customer's
receivables. We had three customers, Dillard Department Stores, Inc., Federated
Department Stores, Inc. and The May Department Stores Company, which in
aggregate constituted 30.0% of trade accounts receivable outstanding at March
29, 2003. Our inability to collect on our trade accounts receivable from any one
of these customers could have a material adverse effect on our business or
financial condition. See "Business -- Credit Control."

OUR BUSINESS COULD SUFFER AS A RESULT OF A MANUFACTURER'S INABILITY TO PRODUCE
OUR GOODS ON TIME AND TO OUR SPECIFICATIONS.

We do not own or operate any manufacturing facilities and therefore depend
upon independent third parties for the manufacture of all of our products. Our
products are
16

manufactured to our specifications by both domestic and international
manufacturers. During fiscal 2003, approximately 5%, by dollar value, of our
men's and women's products were manufactured in the United States and
approximately 95%, by dollar value, of these products were manufactured in Hong
Kong and other foreign countries. The inability of a manufacturer to ship orders
of our products in a timely manner or to meet our quality standards could cause
us to miss the delivery date requirements of our customers for those items,
which could result in cancellation of orders, refusal to accept deliveries or a
reduction in purchase prices, any of which could have a material adverse effect
on our financial condition and results of operations.

OUR BUSINESS COULD SUFFER IF WE NEED TO REPLACE MANUFACTURERS.

We compete with other companies for the production capacity of our
manufacturers and import quota capacity. Some of these competitors have greater
financial and other resources than we have, and thus may have an advantage in
the competition for production and import quota capacity. If we experience a
significant increase in demand, or if an existing manufacturer of ours must be
replaced, we may have to expand our third-party manufacturing capacity. We
cannot assure you that this additional capacity will be available when required
on terms that are acceptable to us. See "Business -- Sourcing, Production and
Quality." We enter into a number of purchase order commitments each season
specifying a time for delivery, method of payment, design and quality
specifications and other standard industry provisions, but do not have long-
term contracts with any manufacturer. None of the manufacturers we use produce
our products exclusively.

IF A MANUFACTURER OF OURS FAILS TO USE ACCEPTABLE LABOR PRACTICES, OUR BUSINESS
COULD SUFFER.

Two of the manufacturers engaged by us accounted for approximately 16% and
12% of our total production during fiscal 2003. The primary production
facilities of these two manufacturers are located in Asia. We require our
licensing partners and independent manufacturers to operate in compliance with
applicable laws and regulations. While our internal and vendor operating
guidelines promote ethical business practices and our staff periodically visits
and monitors the operations of our independent manufacturers, we do not control
these manufacturers or their labor practices. The violation of labor or other
laws by an independent manufacturer of ours, or by one of our licensing
partners, or the divergence of an independent manufacturer's or licensing
partner's labor practices from those generally accepted as ethical in the United
States, could interrupt, or otherwise disrupt the shipment of finished products
to us or damage our reputation. Any of these, in turn, could have a material
adverse effect on our financial condition and results of operations.

OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH IMPORTING PRODUCTS.

As of March 29, 2003, we source a significant portion of our products
outside the United States through arrangements with 234 foreign manufacturers in
37 different countries. Approximately 95%, by dollar volume, of our products
were produced in Hong Kong, Canada and other foreign countries in fiscal 2003.
Risks inherent in importing our products include:

- quotas imposed by bilateral textile agreements,

- changes in social, political and economic conditions which could result
in the disruption of trade from the countries in which our manufacturers
or suppliers are located,

- the imposition of additional regulations relating to imports,

- the imposition of additional duties, taxes and other charges on imports,

- significant fluctuations of the value of the dollar against foreign
currencies, and

- restrictions on the transfer of funds.

17

Any one of these factors could have a material adverse effect on our
financial condition and results of operations. See "Business -- Sourcing,
Production and Quality."

WE ARE DEPENDENT UPON THE REVENUE GENERATED BY OUR LICENSING ALLIANCES.

Approximately 47.9% of our income from operations for fiscal 2003 was
derived from licensing revenue received from our licensing partners.
Approximately 43.8% of our licensing revenue for fiscal 2003 was derived from
three licensing partners. Jones Apparel Group, Inc. and Westpoint Stevens, Inc.
each accounted for 16.4% and 15.9%, respectively. In June 2003, one of our
licensing partners, The Westpoint Stevens, Inc., filed for bankruptcy protection
under the federal bankruptcy laws. We cannot determine what impact, if any, this
filing will have on our financial condition, results of operations or cash
flows. Additionally, Seibu Department Stores, Ltd. accounted for 11.5% of
licensing revenue in fiscal 2003. See Note 3 to our Consolidated Financial
Statements.

We had no other licensing partner which accounted for more than 10.0% of
our licensing revenue in fiscal 2003. The interruption of the business of any
one of our material licensing partners due to any of the factors discussed
immediately below could also adversely affect our licensing revenues and net
income.

WE RELY ON OUR LICENSING PARTNERS TO PRESERVE THE VALUE OF OUR LICENSES.

The risks associated with our own products also apply to our licensed
products in addition to any number of possible risks specific to a licensing
partner's business, including, for example, risks associated with a particular
licensing partner's ability to:

- obtain capital,

- manage its labor relations,

- maintain relationships with its suppliers,

- manage its credit risk effectively, and

- maintain relationships with its customers.

Although some of our license agreements prohibit licensing partners from
entering into licensing arrangements with our competitors, generally our
licensing partners are not precluded from offering, under other brands, the
types of products covered by their license agreements with us. A substantial
portion of sales of our products by our domestic licensing partners are also
made to our largest customers. While we have significant control over our
licensing partners' products and advertising, we rely on our licensing partners
for, among other things, operational and financial control over their
businesses.

FAILURE TO MAINTAIN LICENSING PARTNERS COULD HARM OUR BUSINESS.

Although we believe in most circumstances we could replace existing
licensing partners if necessary, our inability to do so for any period of time
could adversely affect our revenues, both directly from reduced licensing
revenue received and indirectly from reduced sales of our other products. See
"Business -- Operations -- Our Licensing Alliances."

OUR TRADEMARKS AND OTHER INTELLECTUAL PROPERTY RIGHTS MAY NOT BE ADEQUATELY
PROTECTED OUTSIDE THE UNITED STATES.

We believe that our trademarks and other proprietary rights are important
to our success and our competitive position. We devote substantial resources to
the establishment and protection of our trademarks on a worldwide basis. In the
course of our international expansion,

18

we have, however, experienced conflict with various third parties that have
acquired or claimed ownership rights in certain trademarks that include Polo
and/or a representation of a polo player astride a horse, or otherwise have
contested our rights to our trademarks. We have in the past successfully
resolved these conflicts through both legal action and negotiated settlements,
none of which, we believe, has had a material impact on our financial condition
and results of operations. Nevertheless, we cannot assure you that the actions
we have taken to establish and protect our trademarks and other proprietary
rights will be adequate to prevent imitation of our products by others or to
prevent others from seeking to block sales of our products as a violation of the
trademarks and proprietary rights of others. Also, we cannot assure you that
others will not assert rights in, or ownership of, trademarks and other
proprietary rights of ours or that we will be able to successfully resolve these
types of conflicts to our satisfaction. In addition, the laws of certain foreign
countries may not protect proprietary rights to the same extent as do the laws
of the United States. See "Business -- Trademarks."

WE CANNOT ASSURE THE SUCCESSFUL IMPLEMENTATION OF OUR GROWTH STRATEGY.

As part of our growth strategy, we seek to extend our brands, expand our
geographic coverage, increase direct management of Polo Ralph Lauren brands by
opening more of our own stores, strategically acquiring select licensees and
enhancing our operations. Implementation of our strategy involves the continued
expansion of our business in Europe and other international areas. We may have
difficulty hiring and retaining qualified key employees or otherwise
successfully managing the required expansion and consolidation of our
infrastructure in Europe. In addition, Europe, as a whole, lacks the large
wholesale distribution channels found in the United States, and we may have
difficulty developing successful distribution strategies and alliances in each
of the major European countries.

Implementation of our strategy also involves the continued expansion of our
network of retail stores, both in the United States and abroad. There can be no
assurance that we will be able to purchase or lease desirable store locations or
renew existing store leases on acceptable terms. Furthermore, we cannot assure
you that we will be able to successfully integrate the business of any licensee
that we acquire into our own business or achieve any expected cost savings or
synergies from such integration.

OUR BUSINESS IS EXPOSED TO DOMESTIC AND FOREIGN CURRENCY FLUCTUATIONS.

We generally purchase our products in U.S. dollars. However, we source most
of our products overseas and, as such, the cost of these products may be
affected by changes in the value of the relevant currencies. Changes in currency
exchange rates may also affect the U.S. dollar value of the foreign currency
denominated prices at which our international businesses sell products.
Furthermore, our international licensing revenue generally is derived from sales
in foreign currencies. These foreign currencies include the Japanese Yen and the
Euro, and this revenue could be materially affected by currency fluctuations.
Approximately 23.0% of our licensing revenue was received from international
licensing partners in fiscal 2003. Although we hedge some exposures to changes
in foreign currency exchange rates arising in the ordinary course of business,
we cannot assure you that foreign currency fluctuations will not have a material
adverse impact on our financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

19

OUR ABILITY TO CONDUCT BUSINESS IN INTERNATIONAL MARKETS MAY BE AFFECTED BY
LEGAL, REGULATORY, POLITICAL AND ECONOMIC RISKS.

Our ability to capitalize on growth in new international markets and to
maintain the current level of operations in our existing international markets
is subject to risks associated with international operations. These include:

- the burdens of complying with a variety of foreign laws and regulations,

- unexpected changes in regulatory requirements, and

- new tariffs or other barriers to some international markets.

We are also subject to general political and economic risks in connection
with our international operations, including:

- political instability,

- changes in diplomatic and trade relationships, and

- general economic fluctuations in specific countries or markets.

We cannot predict whether quotas, duties, taxes, or other similar
restrictions will be imposed by the United States, the European Union, Japan, or
other countries upon the import or export of our products in the future, or what
effect any of these actions would have on our business, financial condition or
results of operations. Changes in regulatory, geopolitical policies and other
factors may adversely affect our business in the future or may require us to
modify our current business practices.

AN ADVERSE RESULT IN THE LAWSUIT THAT JONES FILED AGAINST THE COMPANY COULD HAVE
A MATERIAL ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On June 3, 2003, Jones filed a lawsuit against us alleging, among other
things, that we breached our agreements with Jones with respect to the "Lauren"
trademark by asserting our rights pursuant to the Cross Default and Term
Extension Agreement with Jones and that we induced Ms. Jackwyn Nemerov, the
former President of Jones, to breach the non-compete and confidentiality clauses
in Ms. Nemerov's employment agreement with Jones. Jones is seeking compensatory
damages of $550.0 million as well as punitive damages and to enforce the
provisions of Ms. Nemerov's agreement. If Jones' lawsuit were to be determined
adversely to us, it could have a material adverse effect on our results of
operations and financial condition.

RISKS RELATING TO THE INDUSTRY IN WHICH WE COMPETE

WE FACE INTENSE COMPETITION IN THE WORLDWIDE APPAREL INDUSTRY.

We face a variety of competitive challenges from other domestic and foreign
fashion-oriented apparel and casual apparel producers, some of which may be
significantly larger and more diversified and have greater financial and
marketing resources than we have. We compete with these companies primarily on
the basis of:

- anticipating and responding to changing consumer demands in a timely
manner,

- maintaining favorable brand recognition,

- developing innovative, high-quality products in sizes, colors and styles
that appeal to consumers,

- appropriately pricing products,

- providing strong and effective marketing support,

20

- creating an acceptable value proposition for retail customers,

- ensuring product availability and optimizing supply chain efficiencies
with manufacturers and retailers, and

- obtaining sufficient retail floor space and effective presentation of our
products at retail.

We also face competition from companies selling apparel and home products
through the Internet. Increased competition in the worldwide apparel,
accessories and home product industries, including Internet-based competitors,
could reduce our sales, prices, and margins and adversely affect our results of
operations.

THE SUCCESS OF OUR BUSINESS DEPENDS ON OUR ABILITY TO RESPOND TO CONSTANTLY
CHANGING FASHION TRENDS AND CONSUMER DEMANDS.

Our success depends in large part on our ability to originate and define
fashion product and home product trends, as well as to anticipate, gauge and
react to changing consumer demands in a timely manner. Our products must appeal
to a broad range of consumers whose preferences cannot be predicted with
certainty and are subject to rapid change. We cannot assure you that we will be
able to continue to develop appealing styles or successfully meet constantly
changing consumer demands in the future. In addition, we cannot assure you that
any new products or brands that we introduce will be successfully received by
consumers. Any failure on our part to anticipate, identify and respond
effectively to changing consumer demands and fashion trends could adversely
affect retail and consumer acceptance of our products and leave us with a
substantial amount of unsold inventory or missed opportunities. If that occurs,
we may be forced to rely on markdowns or promotional sales to dispose of excess,
slow-moving inventory, which may harm our business. At the same time, our focus
on tight management of inventory may result, from time to time, in our not
having an adequate supply of products to meet consumer demand and cause us to
lose sales. See "Business -- Sourcing, Production and Quality."

A DOWNTURN IN THE ECONOMY MAY AFFECT CONSUMER PURCHASES OF DISCRETIONARY ITEMS
AND LUXURY RETAIL PRODUCTS, WHICH COULD ADVERSELY AFFECT OUR SALES.

The industries in which we operate are cyclical. Many factors affect the
level of consumer spending in the apparel, cosmetic, fragrance and home products
industries, including, among others:

- general business conditions,

- interest rates,

- the availability of consumer credit,

- taxation, and

- consumer confidence in future economic conditions.

Consumer purchases of discretionary items and luxury retail products, including
our products, may decline during recessionary periods and also may decline at
other times when disposable income is lower. A downturn in the economies in
which we, or our licensing partners, sell our products, whether in the United
States or abroad, may adversely affect our sales. The current economic
conditions have and may continue to adversely affect consumer spending and sales
of our products.

OUR BUSINESS COULD SUFFER AS A RESULT OF CONSOLIDATIONS, RESTRUCTURINGS AND
OTHER OWNERSHIP CHANGES IN THE RETAIL INDUSTRY.

In recent years, the retail industry has experienced consolidation and
other ownership changes. Some of our customers have operated under the
protection of the federal bankruptcy
21

laws. In the future, retailers in the United States and in foreign markets may
undergo changes that could decrease the number of stores that carry our products
or increase the ownership concentration within the retail industry, including:

- consolidating their operations,

- undergoing restructurings,

- undergoing reorganizations, or

- realigning their affiliations.

While to date these changes in the retail industry have not had a material
adverse effect on our business or financial condition, our business could be
materially affected by these changes in the future. See "Risk Factors -- Risks
Related to Our Business -- We are dependent upon the revenue generated by our
licensing alliances."

ITEM 2. PROPERTIES

Our distribution and administrative functions are conducted in both leased
and owned facilities. We also lease space for our retail and outlet stores,
showrooms, and warehouse and office space in various domestic and international
locations. We do not own any real property except for our distribution facility
in Greensboro, North Carolina and a parcel of land adjacent to the facility, and
a Polo Ralph Lauren store in Southampton, New York.

The following table sets forth information with respect to our key
properties:

The leases for our non-retail facilities (approximately 41 in all) provide
for aggregate annual rentals of approximately $25.4 million in fiscal 2003. We
anticipate that we will be able to extend those leases which expire in the near
future on terms satisfactory to us or, if necessary, locate substitute
facilities on acceptable terms.

As of March 29, 2003, the Company operated 255 retail stores, totaling 1.82
million square feet. Aggregate annual rentals for retail space in fiscal 2003
totaled approximately $72.8 million. We anticipate that we will be able to
extend those leases which expire in the near future on satisfactory terms or
relocate to more desirable locations.

ITEM 3. LEGAL PROCEEDINGS

On June 3, 2003, Jones filed a lawsuit against us in the Supreme Court of
the State of New York alleging, among other things, that we breached our
agreements with Jones with respect to the "Lauren" trademark by asserting our
rights pursuant to the Cross Default and Term Extension Agreement and that we
induced Ms. Jackwyn Nemerov, the former President of Jones, to breach the
non-compete and confidentiality clauses in Ms. Nemerov's employment agreement
with Jones. Jones has indicated that it will treat the Lauren license agreements
as terminated as of December 31, 2003. Jones is seeking compensatory damages of
$550.0 million as well as punitive damages and to enforce the provisions of Ms.
Nemerov's agreement. If Jones' lawsuit were to be determined adversely to us, it
could have a material adverse effect on our results of

22

operations and financial condition; however, we believe that the lawsuit is
without merit and that we will prevail. Also on June 3, 2003, we filed a lawsuit
against Jones in the Supreme Court of the State of New York seeking, among other
things, an injunction and a declaratory judgment that the Lauren license
agreements terminate as of December 31, 2003 pursuant to the terms of the Cross
Default and Term Extension Agreement. The parties have stipulated to consolidate
the two cases.

On September 18, 2002, an employee at one of the Company's stores filed a
lawsuit against Polo Retail, LLC and the Company in the United States District
Court for the District of Northern California alleging violations of California
antitrust and labor laws. The plaintiff purports to represent a class of
employees who have allegedly been injured by a requirement that certain retail
employees purchase and wear Company apparel as a condition of their employment.
The complaint, as amended, seeks an unspecified amount of actual and punitive
damages, disgorgement of profits and injunctive and declaratory relief. The
Company answered the amended complaint on November 4, 2002. A hearing on cross
motions for summary judgment on the issue of whether the Company's policies
violated California law has been scheduled for August 14, 2003, and the motions
are expected to be filed in June or July 2003.

On April 14, 2003, a second putative class action was filed in the San
Francisco Superior Court. This suit, brought by the same attorneys, alleges near
identical claims to these in the federal class action. The class representatives
consist of former employees and the plaintiff in the federal court action.
Defendants in this class action include the Company, Polo Retail, LLC, Fashions
Outlet of America, Inc., Polo Retail, Inc., San Francisco Polo, Ltd. as well as
a non-Polo corporate defendant and two current managers. As in the federal
action, the complaint seeks an unspecified amount of action and punitive,
restitution of monies spent, and declaratory relief. The Company intends to file
a motion to stay the state court class action pending resolution of the federal
class action.

In January 1999, two actions were filed in California naming as defendants
more than a dozen United States-based companies that, at the time, sourced
apparel garments from Saipan (Commonwealth of the Northern Mariana Islands) and
a large number of Saipan-based factories. The actions asserted that the Saipan
factories engaged in unlawful practices relating to the recruitment and
employment of foreign workers, and that the apparel companies, by virtue of
their alleged relationships with the factories, had violated various Federal and
state laws.

One action, filed in California Superior Court in San Francisco by a union
and three public interest groups, alleged unfair competition and false
advertising and equitable relief, unspecified amounts for restitution and
disgorgement of profits, interest and an award of attorneys' fees. The second,
filed in Federal court for the Central District of California and subsequently
transferred first to the United States District Court for the District of Hawaii
and then to the United States District Court in Saipan, was brought on behalf of
a purported class consisting of the Saipan factory workers. It alleged claims
under the Federal civil RICO statute, Federal peonage and involuntary servitude
laws, the Alien Tort Claims Act, and state tort law, and sought equitable relief
and unspecified damages, including treble and punitive damages, interest and an
award of attorney's fees.

Although we were not named as a defendant in these suits, we source
products in Saipan, and counsel for the plaintiffs in these actions informed us
that we were a potential defendant in these or similar actions. Together with
some other potential defendants, we entered into an agreement to settle any
claims for nonmaterial consideration.

As part of the settlement, we were named as a defendant, along with certain
other apparel companies, in a State Court action in California styled Union of
Needletrades Industrial and Textile Employees, et al. v. Brylane, L.P., et al.,
in the San Francisco County Superior Court, and in a Federal Court action styled
Doe I. et al. v. Brylane, L.P., et al. in the United States District Court for
the District of Hawaii, that mirrored portions of the larger State and Federal
Court actions but did not include RICO and certain of the other claims alleged
in those actions. The

23

California action was subsequently dismissed as part of the settlement, and the
federal court action was transferred to the United States District Court in
Saipan. On April 23, 2003, the Federal Court gave final approval of the
settlement and dismissed the claims of the settlement class members against the
Company with prejudice.

On October 1, 1999, we filed a lawsuit against the United States Polo
Association Inc., Jordache, Ltd. and certain other entities affiliated with
them, alleging that the defendants were infringing on our famous trademarks.
This lawsuit continues to proceed as both sides are awaiting the court's
decision on various motions. In connection with this lawsuit, on July 19, 2001,
the United States Polo Association and Jordache filed a lawsuit against us in
the United States District Court for the Southern District of New York. This
suit, which is effectively a counterclaim by them in connection with the
original trademark action, asserts claims related to our actions in connection
with our pursuit of claims against the United States Polo Association and
Jordache for trademark infringement and other unlawful conduct. Their claims
stem from our contacts with the United States Polo Association's and Jordache's
retailers in which we informed these retailers of our position in the original
trademark action. The United States Polo Association and Jordache seek $50.0
million in compensatory damages and $50.0 million in punitive damages from us.
This new suit has been consolidated with the original trademark action for
purposes of discovery and trial. We believe that the United States Polo
Association's and Jordache's claims are substantially without merit and intend
to pursue our claims and defend against those of the United States Polo
Association and Jordache vigorously.

We are otherwise involved from time to time in legal claims involving
trademark and intellectual property, licensing, employee relations and other
matters incidental to our business. We believe that the resolution of these
other matters currently pending will not individually or in aggregate have a
material adverse effect on our financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 29, 2003.

PART II

ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS

Our Class A common stock is traded on the NYSE under the symbol "RL." The
following table sets forth, for the periods indicated, the high and low closing
prices per share for our Class A common stock for each quarterly period in our
two most recent fiscal years as reported on the NYSE Composite Tape.

24

Since our initial public offering, and as of March 29, 2003, we had not
declared any cash dividends on our common stock other than dividends paid in
1998 to holders of Class B common stock and Class C common stock in connection
with our reorganization and the initial public offering. On May 20, 2003, the
Board of Directors instituted a regular quarterly cash dividend of $0.05 per
share, or $0.20 per share on an annual basis, on Polo Ralph Lauren Common stock.
The initial dividend is payable to shareholders of record at the close of
business on June 27, 2003, and will be paid on July 11, 2003.

As of June 13, 2003, there were 1,320 holders of record of our Class A
common stock, 5 holders of record of our Class B common stock and 5 holders of
record of our Class C common stock.

25

ITEM 6. SELECTED FINANCIAL DATA

The table below provides selected consolidated financial data for the five
fiscal years in the period ended March 29, 2003. We derived the income statement
data for the three fiscal years in the period ended March 29, 2003 and the
balance sheet data as of March 29, 2003 and March 30, 2002 from our consolidated
financial statements and accompanying notes, included elsewhere in this Form
10-K, which were audited by Deloitte & Touche LLP, independent auditors. We
derived the data for the two fiscal years in the period ended April 1, 2000 from
the audited consolidated financial statements and accompanying notes of Polo
Ralph Lauren Corporation and subsidiaries contained in our annual report on Form
10-K for the years ended April 1, 2000 and April 3, 1999 which are not included
in this Form 10-K. You should read this selected consolidated financial data
together with our consolidated financial statements and the notes to those
financial statements as well as the discussion under the caption "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Form 10-K.

- ---------------

Notes:

(1) All periods presented represent a 52-week year, except fiscal 1999, which
represents a 53-week year.

(2) The fiscal 2000 change in accounting principle relates to the Company's
change in accounting for start-up activities.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion and analysis is a summary and should be read
together with our Consolidated Financial Statements and related notes thereto
which are included in this Annual Report. We use a 52-53 week fiscal year ending
on the Saturday nearest March 31. All references to "2003," "2002" and "2001"
represent the 52-week fiscal years ended March 29, 2003, March 30, 2002 and
March 31, 2001, respectively.

GENERAL

We operate in three integrated business operation segments: wholesale,
retail and licensing. The following table sets forth net revenues for each
business segment for the last three fiscal years. Fiscal 2002 reflects the
change in the fiscal year end of certain of our European subsidiaries as
reported in our Consolidated Financial Statements. See "Consolidation of
European Entities -- Change in Reporting Period."

Wholesale consists of women's and men's apparel designed and marketed
worldwide, which are divided primarily into two groups: Polo Brands and
Collection Brands. In both of the wholesale groups, we offer discrete brand
offerings, each directed by teams comprising design, merchandising, sales and
production staff who work together to conceive, develop and merchandise product
groupings organized to convey a variety of design concepts. This segment
includes the core business Polo Ralph Lauren, Blue Label, Polo Golf, RLX Polo
Sport, Women's Ralph Lauren Collection and Black Label, and Men's Ralph Lauren
and Purple Label Collection.

Retail consists of our worldwide Polo Ralph Lauren retail operations that
sell the product through full-price and outlet stores and Club Monaco full-price
and outlet stores.

27

Our licensing business consists of product, international and home
licensing alliances which each pay us royalties based upon its sales of our
product subject to a payment of minimum royalty. Product, international and
Ralph Lauren Home licensing alliances accounted for 53.5%, 23.7% and 22.8%,
respectively, of total licensing revenue in fiscal 2003 and 51.9%, 25.9% and
22.2%, respectively, of total licensing revenue in fiscal 2002. We work closely
with our licensing partners to ensure that products are developed, marketed and
distributed consistent with the distinctive perspective and lifestyle associated
with our brand.

As a result of the failure of Jones Apparel Group, including its
subsidiaries (Jones), to meet the minimum sales volumes for the year ended
December 31, 2002, under the license agreements for the sale of products under
the "Ralph" trademark between us and Jones dated May 11, 1998, these license
agreements will terminate as of December 31, 2003. We have advised Jones that
the termination of these licenses will automatically result in the termination
of the licenses between us and Jones with respect to the "Lauren" trademark
pursuant to the Cross Default and Term Extension Agreement, between us and Jones
dated May 11, 1998. The Lauren license agreements would otherwise expire on
December 31, 2006.

On June 3, 2003, Jones filed a lawsuit against us in the Supreme Court of
the State of New York alleging among other things, that we breached our
agreements with Jones with respect to the "Lauren" trademark by asserting our
rights pursuant to the Cross Default and Term Extension Agreement and that we
induced Ms. Jackwyn Nemerov, the former President of Jones, to breach the
non-compete and confidentiality clauses in Ms. Nemerov's employment agreement
with Jones. Jones has indicated that it will treat the Lauren license agreements
as terminated as of December 31, 2003. Jones is seeking compensatory damages of
$550.0 million as well as punitive damages and to enforce the provisions of Ms.
Nemerov's agreement. If Jones' lawsuit were to be determined adversely to us, it
could have a material adverse effect on our results of operations and financial
condition; however, we believe that the lawsuit is without merit and that we
will prevail. Also on June 3, 2003, we filed a lawsuit against Jones in the
Supreme Court of the State of New York seeking among other things an injunction
and a declaratory judgment that the Lauren license agreements terminate as of
December 31, 2003 pursuant to the terms of the Cross Default and Term Extension
Agreement. Jones has reported that net sales of Lauren and Ralph products for
the year ended December 31, 2002 were $548.0 million and $37.0 million,
respectively.

The royalties that we received pursuant to the "Lauren" license agreements
and "Ralph" license agreements represented revenues in fiscal 2003 of
approximately $37.4 million and $5.3 million, respectively. We will no longer
receive these royalties after the third quarter of fiscal 2004, as a result of
the termination of the Lauren and Ralph license agreements on December 31, 2003.
The Company is preparing to begin production and marketing of the Lauren and
Ralph lines, with shipments beginning in January 2004. We expect that the income
from our sales of Lauren and Ralph products will replace the royalty revenue
previously attributable to the Lauren and Ralph license agreements.

RECENT ACQUISITIONS

In February 2003, we acquired a 50% interest in the Japanese master license
for the Polo Ralph Lauren men's, women's and jeans business in Japan. The total
purchase price of the interest in the Japanese master license was 2.8 billion
Yen, or approximately $24.1 million, based on the average exchange rate in
effect on that date. In addition, we acquired an 18% equity interest in the
company which holds the sublicenses for the Polo Ralph Lauren men's, women's and
jeans business in Japan for a purchase price of 5.6 billion Yen, or
approximately $47.6 million based on the average exchange rate in effect on that
date. In May 2003, we acquired an additional 2% equity interest in this company.
Unaudited pro forma information related to these acquisitions is not included,
as the impact of this transaction is not material to

28

our consolidated results. Please refer to "Note 3 to Consolidated Financial
Statements" for a discussion of these acquisitions.

We have also acquired six retail locations and related assets in Germany
and Argentina from certain of our licensees during the third quarter of fiscal
2003. In October 2001, we acquired PRL Fashions of Europe S.R.L., which holds
licenses to sell our women's Ralph Lauren apparel in Europe, as well as our
men's and boys' Polo Ralph Lauren and our Polo Jeans apparel in Italy, and we
acquired the Ralph Lauren store in Brussels from one of our licensees.

RESTRUCTURINGS

FISCAL 2003 RESTRUCTURING AND SPECIAL CHARGES

During the third quarter of fiscal 2003, we completed a strategic review of
our European businesses and formalized our plans to centralize and more
efficiently consolidate our business operations. The major initiatives of the
plan included the following: consolidation of our headquarters from five cities
in three countries to one location, the consolidation of our European logistics
operations to Italy and the migration of all European information systems to a
standard global system. We have completed the consultation process for
consolidation of the headquarters and anticipate completion of the consolidation
and migration during fiscal 2004. In connection with the implementation of this
plan, the Company has recorded a $14.4 million restructuring charge, of which
$3.8 million has been paid through March 29, 2003.

FISCAL 2001 OPERATIONAL PLAN AND FISCAL 1999 RESTRUCTURING PLAN

During fiscal 2001 and 1999 we implemented two plans: the 2001 Operational
Plan and the 1999 Restructuring Plan. As of March 29, 2003, we settled all
remaining liabilities related to the 1999 Restructuring Plan. In May 2003, we
settled $4.6 million of the remaining $5.2 million liabilities related to the
2001 Operational Plan and expect to settle the remaining $0.6 million in fiscal
2004.

RESULTS OF OPERATIONS

The table below sets forth the percentage relationship to net revenues of
certain items in our consolidated statements of income for our last three fiscal
years:

29

CONSOLIDATION OF EUROPEAN ENTITIES -- CHANGE IN REPORTING PERIOD

Effective December 30, 2001, for reporting purposes the Company changed the
fiscal year ends of its European subsidiaries as reported in the consolidated
financial statements to the Saturday closest to March 31 to conform with the
fiscal year end of the Company. Previously, certain of the European subsidiaries
were consolidated and reported on a three-month lag with a fiscal year ending
December 31. Accordingly, the net activity shown below for the three-month
period ended December 29, 2001, for those European subsidiaries is reported as
an adjustment to retained earnings in the fourth quarter of fiscal 2002 in the
accompanying financial statements:

Net income for the year ended March 30, 2002, for the consolidated Company
as if the European subsidiaries remained on a three-month lag would have been
$159.7 million.

FISCAL 2003 COMPARED TO FISCAL 2002

NET SALES. Net sales for fiscal 2003 were $2.189 billion, an increase of
$67.0 million, or 3.2%, over net sales for fiscal 2002. Had certain of the
European subsidiaries been reported on a consistent fiscal year basis for the
year ended March 30, 2002, net sales would have been $2.094 billion resulting in
a current fiscal year increase of 4.6%.

Wholesale net sales decreased $11.0 million, or 0.9%, to $1.187 billion for
fiscal 2003 from $1.198 billion in fiscal 2002. Had certain of the European
subsidiaries been reported on a consistent fiscal year basis for the year ended
March 30, 2002, wholesale net sales would have been $1.164 billion and the
increase would have been 2.0%. Increases in the European wholesale business of
$105.3 million, which resulted primarily from continued European expansion and
the inclusion of PRL Fashions' operations for the full year, as well as the
favorable impact of Euro currency fluctuation, were offset by a strategic
streamlining of the amount of product sold to the department stores and the
elimination of the women's Ralph Lauren Sport and the Lauren for Men lines which
contributed a decrease of $70.2 million.

Retail net sales increased $77.7 million, or 8.4%, to $1.002 billion for
fiscal 2003 from $924.3 million in fiscal 2002. Had certain of the European
subsidiaries been reported on a consistent fiscal year basis for the year ended
March 30, 2002, retail net sales would have been $929.4 million, resulting in a
$72.5 million increase. This increase was primarily driven by the $49.4 million,
or 8.4%, increase in comparable outlet store sales, which was offset by $7.1
million, or 2.3%, decrease in our total full-price stores (comparable store
sales information includes both Polo Ralph Lauren stores and Club Monaco
stores). The increase also reflected the favorable impact of Euro currency
fluctuation.

Also impacting this increase is worldwide store expansion. During the year
ended March 29, 2003, the Company opened 19 stores, net of closings, ending the
period with 255 stores as compared to 236 stores in the prior year, which
accounted for approximately $30 million of our increase in net sales. Included
in these openings were 11 Polo Ralph Lauren stores, seven Club Monaco stores
(including two Club Monaco Caban Home stores), and seven outlet stores
(including one full line outlet store, one Polo Jeans outlet store and five
European outlet stores). Offsetting these openings were the closings of three
outlet stores (including two full line outlet stores and one Polo Jeans outlet
store), two Club Monaco stores and one Club Monaco outlet store.

30

LICENSING REVENUE. Licensing revenue increased approximately $8.6 million,
or 3.6%, to $250.0 million in fiscal 2003. Had certain of the European
subsidiaries been reported on a consistent fiscal year basis for the year ended
March 30, 2002, licensing revenue would have been $237.4 million, resulting in a
5.3%, or $12.6 million, increase primarily driven by increased revenues from our
international and product licensing partners of approximately $4.2 million and
$8.5 million, respectively.

GROSS PROFIT. Gross profit dollars increased $60.8 million, or 5.3%, in
fiscal 2003 over fiscal 2002. Gross profits as a percent of net sales increased
to 49.5% in 2003 from 48.5% in 2002. Had certain of the European subsidiaries
been reported on a consistent fiscal year basis for the year ended March 30,
2002, gross profit percentage would have been 48.2%. The increase in gross
profit rate reflected improved product performance and merchandise margins in
the domestic retail businesses, offset by a less than 100 basis point reduction
in wholesale.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses (SG&A) increased $67.2 million, or 8.0%, to $904.7
million in fiscal 2003 from $837.6 million, as compared to fiscal 2002. These
expenses as a percent of net sales increased to 37.1% in 2003 from 35.4% in
2002. Had certain of the European subsidiaries been reported on a consistent
fiscal year basis for the year ended March 30, 2002, SG&A expenses would have
been $845.0 million, or 36.3% of net revenues. The increase in fiscal 2003 was
primarily higher selling salaries and related costs in connection with the
incremental increase in retail sales and worldwide store expansion, the
expansion of the European wholesale business, the inclusion of PRL Fashions'
operations, which was acquired in October 2002, as well as the impact of a
stronger Eurodollar currency fluctuation. These increases were offset by the
elimination of goodwill amortization of $9.1 million as a result of the
implementation of Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets," and the recording of a gain of
approximately $5.0 million related to an assignment of the sub-lease for one
store location.

RESTRUCTURING CHARGE. During fiscal 2003, we completed a strategic review
of our European businesses and formalized our plans to centralize and more
efficiently consolidate our operations. The major initiatives of our plan
included the following: consolidation of our headquarters from five cities in
three countries to one location; the consolidation of our European logistics
operations to Italy; and the migration of all European information systems to a
standard global system. We have completed the consultation process for
consolidation of the headquarters and anticipate completion of the consolidation
and migration during fiscal 2004. In connection with the implementation of this
plan, the Company has recorded a $14.4 million restructuring charge, of which
$3.8 million has been paid through March 29, 2003.

During fiscal 2002, the Company recorded a $16.0 million restructuring
charge for lease termination costs associated with the closure of our retail
stores due to market factors that were less favorable than originally estimated
during the second quarter of fiscal 2001.

FOREIGN CURRENCY LOSES (GAINS). The effect of foreign currency decreased
to a loss of $0.5 million in fiscal 2003, compared to a $1.8 million gain in
fiscal 2002. In fiscal 2003, these losses primarily related to approximately
$3.2 million of transaction losses on the unhedged portion of our Euro debt in
the first quarter of the fiscal year, which resulted from increases in the
Eurodollar rate until we entered into the cross currency swap in June 2002.
These losses were partially offset by $2.4 million of gains realized on the
Japanese forward contracts, which we further describe in the "Liquidity and
Capital Resources" section. In fiscal 2002, the gains were derived from
transaction gains on the unhedged portion of our Euro debt, which resulted from
decreases in the Eurodollar rate.

INTEREST EXPENSE, NET. Interest expense decreased to $13.5 million in
fiscal 2003 from $19.0 million in fiscal 2002. This decrease was primarily due
to decreased short-term borrowings and long-term Euro debt borrowings of $12.0
million and $7.7 million, respectively, during the
31

fiscal year ended March 29, 2003. The remaining decrease of approximately $2.9
million resulted from reduced interest rates as a result of the cross currency
swap, which was entered into in connection with our Euro debt in June 2002 and
is further described in the "Liquidity and Capital Resources" section. These
decreases were partially offset by higher Eurodollar exchange rates, which
effect the Euro denominated interest payments on the portion of the Euro debt
not covered by the cross currency swap.

PROVISION FOR INCOME TAXES. Our tax provision for 2003 was $100.2 million
as compared to $103.5 million in 2002, a 36.5% and 37.5% effective tax rate,
respectively. This decline is the result of the implementation of tax
strategies.

NET INCOME. Net income increased in 2003 to $174.2 million from $172.5
million in 2002, or 7.1% and 7.3% of net revenues, respectively. Diluted
earnings per common share was $1.76 and $1.75 for fiscal 2003 and fiscal 2002,
respectively.

FISCAL 2002 COMPARED TO FISCAL 2001

NET SALES. Net sales increased 7.1% to $2.1 billion in fiscal 2002 from
$2.0 billion in fiscal 2001. Wholesale net sales increased 13.7% to $1.2 billion
in fiscal 2002 from $1.1 billion in fiscal 2001. Wholesale growth primarily
reflects the benefit from the inclusion of two strong quarters for the periods
January through March 2002 and 2001 for certain of the European entities. See
"Consolidation of European Entities -- Change in Reporting Period." The impact
of consolidating the European subsidiaries on a March 30 fiscal year resulted in
an increase in wholesale revenues of approximately $80.0 million, or 7.1%.

Retail sales decreased by less than 1.0% to $924.3 million in fiscal 2002
from $928.6 million in fiscal 2001. Our Polo Ralph Lauren full-price stores
decreased $14.3 million and our Club Monaco stores decreased $8.4 million due to
the effects of a promotionally driven and highly competitive retail store
environment and the current economic conditions exacerbated by the events of
September 11th. Also contributing to the decrease was the closing, in connection
with our 2001 Operational Plan, of our Polo Jeans Co. full-price retail stores
during fiscal 2001, which had sales of $18.0 million during fiscal 2001. These
decreases were offset by significant increases in our outlet business of
approximately $29.8 million. In fiscal 2002, the impact of consolidating the
European subsidiaries on a March 30 fiscal year resulted in a decrease in retail
revenues of approximately $3.0 million, less than 1.0%. See "Consolidation of
European Entities -- Change in Reporting Period."

Comparable store sales, which represent net sales of stores open in both
reporting periods for the full portion of such periods, decreased 3.0%. The
comparable store declines were due to the effects of a promotionally driven and
highly competitive retail environment. At March 30, 2002, we operated 236
stores: 6 Ralph Lauren stores, 33 Polo Ralph Lauren stores, 55 Club Monaco
full-price stores, 94 Polo outlet stores, 22 Polo Jeans Co. outlet stores, 16
European outlet stores and 10 Club Monaco outlet stores.

LICENSING REVENUE. Licensing revenue decreased approximately $2.0 million,
representing less than a 1% decrease, to $241.4 million in fiscal 2002 from
$243.4 million in fiscal 2001. Increases from one licensee within our home
collection business and from our international licensed business, particularly
in Asia, were offset by decreased royalty revenue from a significant product
licensee and decreased royalties from our Italian licensee, the business and
certain assets of which we acquired in October 2001. In fiscal 2002, the impact
of consolidating the European subsidiaries on a March 30 fiscal year increased
licensing revenues by approximately $0.4 million, less than 1%. See
"Consolidation of European Entities -- Change in Reporting Period."

GROSS PROFIT. Gross profit as a percentage of net revenues increased to
48.5% in fiscal 2002 from 47.8% in fiscal 2001. This increase was mainly
attributable to wholesale gross margins

32

in that $41.5 million of inventory writedowns were recorded in fiscal 2001 in
connection with the implementation of our operational review and our decision to
accelerate the disposition of aged inventory. In addition, retail gross margins
decreased 1.4% due to the effects of a promotionally driven and highly
competitive retail store environment, resulting in higher markdowns taken. In
fiscal 2002, the impact of consolidating the European subsidiaries on a March 30
fiscal year increased gross profit by approximately $41.0 million, representing
less than 4% of total gross profit and less than 0.2 gross percentage points.
See "Consolidation of European Entities -- Change in Reporting Period."

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses as a
percentage of net revenues decreased to 35.4% in fiscal 2002 from 36.9% in
fiscal 2001. This decrease in SG&A expenses as a percentage of net revenues was
primarily due to a charge of $18.1 million recorded in the second quarter of
fiscal 2001 relating to nonrecurring charges associated with targeted
opportunities for improvement, including the termination of operating contracts,
streamlining of certain corporate and operating functions, and employee-related
matters. In addition, the Company has recorded $2.9 million of gain on the sale
of our 50% joint venture interest in a 44,000-square-foot building located in
the SoHo district of New York City. In fiscal 2002, the impact of consolidating
the European subsidiaries on a March 30 fiscal year increased SG&A expenses by
approximately $20.0 million, less than 3%. See "Consolidation of European
Entities -- Change in Reporting Period."

RESTRUCTURING CHARGE. During fiscal 2002, the Company recorded a $16.0
million restructuring charge for lease termination costs associated with the
closure of our retail stores due to market factors that were less favorable than
originally estimated during the second quarter of fiscal 2001. During fiscal
2001, the Company recorded a $123.6 million restructuring charge related to our
2001 Operational Plan which included lease and contract termination costs, store
fixed asset writedowns and severance and termination benefits.

FOREIGN CURRENCY LOSSES (GAINS). The effect of foreign currency decreased
to a gain of $1.8 million in fiscal 2002, compared to a $5.8 million gain in
fiscal 2001. These gains were derived from transaction gains on the unhedged
portion of our Euro debt which resulted from decreases in the Eurodollar rate.

INTEREST EXPENSE, NET. Interest expense decreased to $19.0 million in
fiscal 2002 from $25.1 million in fiscal 2001. This decrease was due to lower
levels of borrowings and the repayment of approximately $53.0 million of
short-term borrowings during the fiscal year. In addition, we repurchased $10.6
million of our outstanding Euro debt in fiscal 2002.

PROVISION FOR INCOME TAXES. The effective tax rate decreased to 37.5% in
fiscal 2002 from 39.5% in fiscal 2001, resulting from the implementation of tax
strategies.

NET INCOME. Net income increased in fiscal 2002 to $172.5 million from
$59.3 million in fiscal 2001, or 7.3% and 2.7% of net revenues, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Our primary ongoing cash requirements are to fund growth in working capital
(primarily accounts receivable and inventory) to support projected sales
increases, construction and renovation of shop-within-shops, investment in the
technological upgrading of our distribution centers and information systems,
expenditures related to retail store expansion, acquisitions and other corporate
activities, including financing the start-up costs of bringing the "Lauren" and
"Ralph" lines in house. Sources of liquidity to fund ongoing and future cash
requirements include cash flows from operations, cash and cash equivalents,
credit facilities and other borrowings.

We ended fiscal 2003 with $343.6 million in cash and cash equivalents and
$349.4 million of debt outstanding compared to $244.7 million and $318.4 million
of cash and cash equivalents and debt outstanding, respectively, at March 30,
2002. This represents a $67.8 million improvement in
33

our debt net of cash position over the last twelve months which is primarily
attributable to the differences in working capital due to the factors discussed
below, partially offset by approximately $73.0 million of purchase price
payments connected with our acquisition to acquire a 50% interest in the
Japanese master license and an 18% equity interest in the company which holds
the sublicenses for the Polo Ralph Lauren men's, women's and jeans business in
Japan. Capital expenditures were $98.7 million for fiscal 2003, compared to
$88.0 million in fiscal 2002. Also, in the past year, we have acquired several
retail locations from certain of our licensees in Belgium, Germany and Argentina
for a total purchase price of approximately $4.6 million.

As of March 29, 2003, we had $100.9 million outstanding in short-term bank
borrowings, of which $50.0 million was repaid in April 2003 with the remainder
anticipated to be repaid in June 2003. Additionally, we had $248.5 million
outstanding in long-term Euro debt based on the quarter-end Euro exchange rate.
We were also contingently liable for $19.1 million in outstanding letters of
credit primarily related to commitments for the purchase of inventory. The
weighted-average interest rate on our borrowings at March 29, 2003 was 5.4%.

Accounts receivable increased to $375.8 million, or 6.3% at March 29, 2003
compared to $353.6 million at March 30, 2002 due to the timing of shipments. The
increase also reflected the favorable impact of Euro currency fluctuation.
Improvements were made in our days sales outstanding; however, the incremental
effect of these improvements was offset by the additional royalty receivables
recorded in fiscal 2003 compared to fiscal 2002.

Inventories increased $14.0 million, or 4.0%, at the end of 2003 compared
to the end of 2002. This increase reflects the build up of certain inventory for
European retail stores as part of our continued expansion. The increase also
reflected the favorable impact of Euro currency fluctuation. In addition,
improvements in the management of the Company's supply chain resulting in better
forecasting and distribution have resulted in increased average inventory
turnover rates for the year ended March 29, 2003 as compared to the same period
in fiscal 2002.

Net Cash Provided by Operating Activities. Net cash provided by operating
activities decreased to $269.0 million during 2003 compared to $299.7 million in
2002. This $30.7 million decrease in cash flow was driven primarily by
year-over-year changes in accounts receivable, inventories, prepaid expenses and
accounts payable.

During fiscal 2003, we completed a strategic review of our European
businesses and formalized our plans to centralize and more efficiently
consolidate its business operations. In connection with the implementation of
this plan, we recorded a restructuring charge of $14.4 million and had total
cash outlays of approximately $3.8 million during the year ended March 29, 2003.
It is expected that the remaining liabilities will be paid throughout fiscal
2004.

During fiscal 2001 and 1999 we implemented two plans: the 2001 Operational
Plan and 1999 Restructuring Plan. Total cash outlays related to the 2001
Operational Plan and 1999 Restructuring Plan were $9.8 million and $2.7 million,
respectively, for the year ended March 29, 2003. As of March 29, 2003, we
settled all remaining liabilities related to the 1999 Restructuring Plan. In May
2003, we settled $4.6 million of the remaining $5.2 million liabilities related
to the 2001 Operational Plan and expect to settle the remaining $0.6 million in
fiscal 2004.

Net Cash Used in Investing Activities. Net cash used in investing
activities increased to $166.3 million in fiscal 2003, as compared to $116.0
million in fiscal 2002. Both the fiscal 2003 and fiscal 2002 net cash used
primarily reflected shop-within-shops and other capital expenditures related to
retail expansion and upgrading our systems and facilities. Our anticipated
capital expenditures for fiscal 2004 approximate $110.0 million. The fiscal 2003
net cash used also reflects $78.0 million primarily for our acquisition to
acquire a 50% interest in the Japanese master license and an 18% equity interest
in the company which holds the sublicenses for the Polo Ralph Lauren men's,
women's and jeans business in Japan, whereas the fiscal 2002 net cash used
reflects $23.7 million for the acquisition of PRL Fashions.

34

Also, in the past year, we have acquired several retail locations from
certain of our licensees in Belgium, Germany and Argentina for a total purchase
price of approximately $4.6 million. Consistent with SFAS No. 141, "Business
Combinations," the acquisition of the 50% interest in the Japanese master
license and the several retail locations were accounted for under purchase
accounting.

In connection with the acquisition of the Japanese master license, the
Company recorded tangible assets of $11.0 million, an intangible license valued
at $9.9 million and liabilities assumed of $8.5 million based on estimated fair
values as determined by management utilizing information available at this time.
Goodwill of $13.0 million was recognized for the excess of the purchase price
over the preliminary estimate of fair market value of the net assets acquired.
In connection with the purchase accounting for the remaining acquisitions, the
Company is in the process of evaluating the tangible and intangible assets
acquired and liabilities assumed. At March 29, 2003, the Company's accounting
for the fiscal 2003 acquisitions was based on preliminary valuation information,
which is subject to revision. The sales and total assets related to the acquired
entities were not material. The pro forma effect of these acquisitions on the
historical results was not material.

Net Cash Used in Financing Activities. Net cash used in financing
activities was $16.7 million in fiscal 2003, compared to $40.3 million in fiscal
2002. This change is primarily due to the net repayment of short-term debt of
$12.0 million, the repurchase of $7.7 million of our Euro debt and the
repurchase of our common stock of $4.7 million, offset by the proceeds from the
issuance of common stock of $7.7 million for fiscal 2003; compared to $52.2
million of short-term debt repayment, $10.6 million of Euro debt repurchases,
$2.1 million of common stock repurchases offset by the proceeds from the
issuance of common stock of $24.5 million in fiscal 2002.

In March 1998, the Board of Directors authorized the repurchase, subject to
market conditions, of up to $100.0 million of our Class A common stock. Share
repurchases were to be made in the open market over a two-year period, which
commenced April 1, 1998. The Board of Directors has extended the stock
repurchase program through March 31, 2004. Shares acquired under the repurchase
program will be used for stock option programs and for other corporate purposes.
As of March 29, 2003, we had repurchased 4,105,932 shares of our Class A common
stock at an aggregate cost of $77.9 million. As of March 29, 2003, we had
approximately $22.1 million remaining in our stock repurchase program.

In November 1999, we issued Euro 275.0 million of 6.125% notes due November
2006. Our Euro debt is listed on the London Stock Exchange. The net proceeds
from the Euro offering were $281.5 million, based on the Euro exchange rate on
the issuance date. Interest on the Euro debt is payable annually. A portion of
these net proceeds was used to acquire Poloco S.A.S. and the remaining net
proceeds were retained for general corporate purposes. In fiscal 2003, we
repurchased Euro 8.4 million, or $7.7 million, based on Euro exchange rates at
the time of repurchase, of our outstanding Euro debt.

In November 2002, we terminated both our 1997 bank credit facility and our
1999 senior bank credit facility and entered into a new credit facility. The
1997 bank credit facility provided for a $225.0 million revolving line of credit
and matured on December 31, 2002, while the 1999 senior bank credit facility
consisted of a $20.0 million revolving line of credit and an $80.0 million term
loan, both of which were scheduled to mature on June 30, 2003. The new credit
facility is with a syndicate of banks and consists of a $300.0 million revolving
line of credit, subject to increase to $375.0 million, which is available for
direct borrowings and the issuance of letters of credit. It will mature on
November 18, 2005. As of March 29, 2003, we had $100.0 million outstanding under
the new facility, which was the aggregate amount outstanding under the old
facilities at the time of extinguishment, $50.0 million of which was repaid in
April 2003 and the remaining $50.0 million is expected to be repaid in June
2003. Borrowings under this facility bear interest, at our option,

35

at a rate equal to (i) the higher of the Federal Funds Effective Rate, as
published by the Federal Reserve Bank of New York, plus 1/2 of one percent, and
the prime commercial lending rate of JP Morgan Chase Bank in effect from time to
time, or (ii) the LIBO Rate (as defined) in effect from time to time, as
adjusted for the Federal Reserve Board's Eurocurrency Liabilities maximum
reserve percentages, and a margin based on our then current credit ratings. As
of March 29, 2003, the margin was 0.75%.

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

- a minimum consolidated tangible net worth, and

- a maximum of Adjusted Debt to EBITDAR (as such terms are defined in the
credit facility) ratio.

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

- incur additional debt;

- incur liens and contingent liabilities;

- sell or dispose of our assets, including equity interests;

- merge with or acquire other companies, liquidate or dissolve;

- engage in businesses that are not a related line of business;

- make loans, advances or guarantees;

- engage in transactions with affiliates; and

- make investments.

Upon the occurrence of an event of default under the credit facility, the
lenders may cease making loans, terminate the credit facility, and declare all
amounts outstanding to be immediately due and payable. The credit facility
specifies a number of events of default, many of which are subject to applicable
grace or cure periods, including, among others, the failure to make timely
principal and interest payments, to satisfy the covenants, or to maintain the
required financial performance requirements described above. Additionally, the
agreement provides that an event of default will occur if Mr. Ralph Lauren and
related entities fail to maintain a specified minimum percentage of the voting
power of our common stock. As of March 29, 2003, the Company was in compliance
with all financial and non-financial debt covenants.

On May 20, 2003, the Board of Directors declared a regular quarterly cash
dividend of $0.05 per share, or $0.20 per share on an annual basis, on Polo
Ralph Lauren common stock. The dividend is payable to shareholders of record at
the close of business on June 27, 2003 and will be paid on July 11, 2003.

We believe that cash from ongoing operations and funds available under our
credit facility and from our initial Euro debt offering will be sufficient to
fund our current level of operations, capital requirements, the stock repurchase
program, cash dividends and other corporate activities for the next twelve
months.

In January 2003, the Company completed the assignment of the sub-lease for
one store location for which the Company received proceeds of approximately
$10.0 million and recorded a gain of approximately $5.0 million in the fourth
quarter ended March 29, 2003.

36

The following table summarizes as of March 29, 2003, the Company's
contractual cash obligations by future periods:

Derivative Instruments. In June 2002, we entered into a cross currency
rate swap, which terminates in November 2006. The cross currency rate swap is
being used to convert Euro 105.2 million, 6.125% fixed rate borrowings into
$100.0 million, LIBOR plus 1.24% variable rate borrowings. We entered into the
cross currency rate swap to minimize the impact of foreign exchange fluctuations
in both principal and interest payments resulting from the Euro debt, and to
minimize the impact of changes in the fair value of the Euro debt due to changes
in LIBOR, the benchmark interest rate. The swap has been designated as a fair
value hedge under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended and interpreted. Hedge ineffectiveness is
measured as the difference between the respective gains or losses recognized in
earnings from the changes in the fair value of the cross currency rate swap and
the Euro debt; and was de minimis for fiscal 2003.

Occasionally, we purchase short-term foreign currency contracts as hedges
relating to identifiable currency positions to reduce our risk from exchange
rate fluctuations on inventory purchases or to neutralize month-end balance
sheet and other expected exposures. To the extent that these derivative
instruments do not qualify for hedge accounting under SFAS No. 133, they are
recorded at fair value, with all gains or losses recognized immediately in the
current period earnings. In November 2002, we entered into forward contracts on
6.2 billion Japanese Yen that terminated in February 2003. While these
transactions do not qualify for hedge accounting under SFAS No. 133, we entered
into these forward contracts to minimize the impact of foreign exchange
fluctuations on the Japanese Yen denominated purchase price described in the
agreements related to the purchase of a 50% interest in the Japanese master
license and an 18% equity interest in the company which holds the sublicenses
for the Polo Ralph Lauren men's, women's and jeans business in Japan, which were
consummated during the fourth quarter of fiscal 2003. We recognized $2.4 million
of foreign currency gains on this transaction, which are recorded in foreign
currency losses(gains) in the Consolidated Statements of Income.

We recognize foreign currency gains or losses in connection with our Euro
debt and certain short-term foreign currency contracts based on fluctuations in
foreign exchange rates. In connection with recording these contracts at fair
market value, we recognized $3.2 million in foreign currency losses in fiscal
2003, and $1.8 million in fiscal 2002, included as a component of foreign
currency losses (gains) in the Consolidated Statements of Income.

Off-Balance Sheet Arrangements. The Company does not have any off-balance
sheet financing arrangements or unconsolidated special purpose entities.

SEASONALITY OF BUSINESS

Our business is affected by seasonal trends, with higher levels of
wholesale sales in our second and fourth quarters and higher retail sales in our
second and third quarters. These trends result primarily from the timing of
seasonal wholesale shipments to retail customers and key

37

vacation travel and holiday shopping periods in the retail segment. As a result
of the growth in our retail operations and licensing revenue, historical
quarterly operating trends and working capital requirements may not be
indicative of future performances. In addition, fluctuations in sales and
operating income in any fiscal quarter may be affected by the timing of seasonal
wholesale shipments and other events affecting retail sales.

Fiscal 2002 reflects the change in the fiscal year end of certain of our
European subsidiaries as reported in our consolidated financial statements. See
"Consolidation of European Entities -- Change in Reporting Period."

In connection with our acquisition of a 50% interest in the Japanese master
license and the 18% equity interest in the company which holds the sublicenses
for the Polo Ralph Lauren men's, women's and jeans business in Japan, results
for these operations will be reflected in our consolidated financial statements
for the three months ended June 28, 2003.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Estimates by their nature are based on judgments
and available information and therefore, actual results could differ from those
estimates.

Critical accounting policies are those that are most important to the
portrayal of the Company's financial condition and the results of operations,
and require management's most difficult, subjective and complex judgments, as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. The Company's most critical accounting policies, discussed
below, pertain to revenue recognition, accounts receivable, inventories,
goodwill, other intangibles and long-lived assets. In applying such policies,
management must use some amounts that are based upon its informed judgments and
best estimates. Because of the uncertainty inherent in these estimates, actual
results could differ from estimates used in applying the critical accounting
policies. Changes in such estimates, based on more accurate future information,
may affect amounts reported in future periods. The Company is not aware of any
reasonably likely events or circumstances which would result in different
amounts being reported that would materially affect its financial condition or
results of operations.

REVENUE RECOGNITION

Wholesale sales are recognized upon shipment of products to customers since
title and risk of loss passes upon shipment and are recorded net of returns,
discounts and allowances. Returns and allowances require pre-approval from
management. Estimates for end of season allowances are based on historic trends,
seasonal results, an evaluation of current economic conditions and retailer
performance. The Company's historical estimates of these costs have not differed
materially from actual results. Sales by our retail and outlet stores are
recognized when goods are sold to consumers, net of returns. Licensing revenue
is recognized based upon shipment of licensed products sold by our licensees,
net of allowances.

ACCOUNTS RECEIVABLE, NET

In the normal course of business, the Company extends credit to customers,
which satisfy pre-defined credit criteria. Accounts receivable, net, as shown on
the Consolidated Balance Sheets, is net of allowances and anticipated discounts.
An allowance for doubtful accounts is determined through analysis of the aging
of accounts receivable at the date of the financial statements, assessments of
collectibility based on historic trends and an evaluation of the economic
conditions. Costs associated with potential returns of products as well as
allowable
38

customer markdowns and operational chargebacks, net of the expected recoveries,
are included as a reduction to net sales and are part of the provision for
allowances included in accounts receivable, net. These provisions result from
divisional seasonal negotiations, as well as historic deduction trends net of
expected recoveries, and the evaluation of current market conditions. The
Company's historical estimates of these costs have not differed materially from
actual results.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out, FIFO,
method), or market. The Company continually evaluates the composition of its
inventories assessing slow-turning, ongoing product as well as prior seasons'
fashion product. Estimates may differ from actual results due to quantity,
quality and mix of products in inventory, consumer and retailer preferences and
market conditions. The Company's historical estimates of these costs have not
differed materially from actual results.

GOODWILL, OTHER INTANGIBLES AND LONG-LIVED ASSETS

Effective March 31, 2002, the Company adopted the provisions of SFAS No.
142. SFAS No. 142 requires that goodwill and intangible assets with indefinite
lives no longer are to be amortized, but rather be tested at least annually for
impairment. This pronouncement also requires that intangible assets with
definite lives continue to be amortized over their respective lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

Goodwill represents the excess of purchase cost over the fair value of net
assets of businesses acquired. Before adopting the provisions of SFAS No. 142,
we amortized goodwill on a straight-line basis over its estimated useful life,
ranging from 11 to 40 years. Beginning in fiscal 2003, consistent with the
requirements of SFAS No. 142, we no longer amortize goodwill. The Company
reviews goodwill annually for impairment. In addition, trademarks that are owned
that have been deemed to have indefinite lives are reviewed at least annually
for potential value impairment. Trademarks that are licensed by the Company from
third parties are amortized over the individual terms of the respective license
agreement, which approximates 10 years. Goodwill amortization expense was $9.1
million and $8.0 million in fiscal 2002 and 2001, respectively. Accumulated
goodwill amortization was $23.7 million at March 30, 2002.

We assess the carrying value of long-lived and intangible assets, with
finite lives, as current facts and circumstances indicate that they may be
impaired. In evaluating the fair value and future benefits of such assets, we
perform an analysis of the anticipated undiscounted future net cash flows of the
individual assets over the remaining amortization period and would recognize an
impairment loss if the carrying value exceeded the expected future cash flows.
The impairment loss would be measured based upon the difference between the fair
value of the asset and its recorded carrying value. See Note 9 for long-lived
and intangible asset writedowns recorded in connection with our fiscal 2001
Operational Plan and fiscal 1999 Restructuring Plan. During fiscal 2003, there
were no material impairment losses recorded in connection with this analysis.

Our significant accounting policies are more fully described in Note 1 to
Our Consolidated Financial Statements.

ALTERNATIVE ACCOUNTING METHODS

In certain instances, accounting principles generally accepted in the
United States allow for the selection of alternative accounting methods. The
Company's significant policies that involve the selection of alternative methods
are accounting for stock options and inventories.

39

- Two alternative methods for accounting for stock options are available,
the intrinsic value method and the fair value method. The Company uses
the intrinsic value method of accounting for stock options, and
accordingly, no compensation expense has been recognized. Under the fair
value method, the determination of the pro forma amounts involves several
assumptions including option life and future volatility. If the fair
value method were used, diluted earnings per share for 2003 would
decrease approximately 10%. See Note 1 to the Consolidated Financial
Statements.

- Two alternative methods for accounting for inventories are the FIFO
method and the last-in, first-out (LIFO) method. The Company accounts for
all inventories under the FIFO method. Two alternative methods for
accounting for retail inventories are the retail method and the cost
method. The Company accounts for all retail inventories under the cost
method.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity." This statement requires that certain financial
instruments that, under previous guidance, issuers could account for as equity
be classified as liabilities in statements of financial position. Most of the
guidance in SFAS No. 150 is effective for all financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. The Company does not
expect the adoption of this pronouncement to have a material effect on the
consolidated results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." This statement amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. This statement is effective for contracts entered into or modified
after June 30, 2003, except as for the provisions that relate to SFAS No. 133
implementation issues that have been effective for fiscal quarters that began
prior to June 15, 2003, which should continue to be applied in accordance with
their respective effective dates. The Company does not expect the adoption of
this pronouncement to have a material effect on the consolidated results of
operations or financial position.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure." This statement provides alternative
methods of transition for a voluntary change to the fair value method of
accounting for stock-based employee compensation. In addition, SFAS No. 148
amends the disclosure requirements for SFAS No. 123, "Accounting for Stock-Based
Compensation," to require more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. SFAS No. 148
is effective for fiscal years ending after December 31, 2002. The Company does
not intend to expense stock options; therefore the adoption of this statement
did not have any impact on the consolidated financial position or results of
operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement required companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by SFAS No. 146 include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or exit or disposal activity. SFAS No.
146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. The Company has adopted the provisions of SFAS No. 146.

40

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

In November 2002, the FASB issued FIN 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others." FIN 45 requires certain guarantees to be recorded at
fair value and requires a guarantor to make significant new disclosures, even
when the likelihood of making any payments under the guarantee is remote.
Generally, FIN 45 applies to certain types of financial guarantees that
contingently require the guarantor to make payments to the guaranteed party
based on changes in an underlying that is related to an asset, liability or an
equity security of the guaranteed party; performance guarantees involving
contracts which require the guarantor to make payments to the guaranteed party
based on another entity's failure to perform under an obligating agreement;
indemnification agreements that contingently require the guarantor to make
payments to an indemnified party based on changes in an underlying that is
related to an asset, liability or an equity security of the indemnified party;
or indirect guarantees of the indebtedness of others. The initial recognition
and initial measurement provisions of FIN 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. Disclosure
requirements under FIN 45 are effective for financial statements ending after
December 15, 2002, and are applicable to all guarantees issued by the guarantor
subject to FIN 45's scope, including guarantees issued prior to FIN 45. The
Company adopted the accounting and disclosure provisions of FIN 45 in its March
29, 2003 financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The market risk inherent in our financial instruments represents the
potential loss in fair value, earnings or cash flows arising from adverse
changes in interest rates or foreign currency exchange rates.

We manage these exposures through operating and financing activities and,
when appropriate, through the use of derivative financial instruments. Our
policy allows for the use of derivative financial instruments for identifiable
market risk exposures, including interest rate and foreign currency
fluctuations.

During fiscal 2003, there were significant fluctuations in the value of the
Euro dollar exchange rate. In June 2002, we entered into a cross currency rate
swap to minimize the impact of foreign exchange fluctuations on the long-term
Euro debt and the impact of fluctuations in the interest rate on the fair value
of the long-term Euro debt. The following quantitative disclosures are based on
quoted market prices and theoretical pricing models obtained through independent
pricing sources for the same or similar types of financial instruments, taking
into consideration
41

the underlying terms and maturities. These quantitative disclosures do not
represent the maximum possible loss or any expected loss that may occur, since
actual results may differ from those estimates.

FOREIGN CURRENCY EXCHANGE RATES

We are exposed to market risk related to changes in foreign currency
exchange rates. We have assets and liabilities denominated in certain foreign
currencies related to international subsidiaries. At March 29, 2003, we had
outstanding foreign exchange contracts in Europe to purchase $92.5 million U.S.
dollars through March 2004. We believe that these financial instruments should
not subject us to undue risk due to foreign exchange movements because gains and
losses on these contracts should offset losses and gains on the assets,
liabilities, and transactions being hedged. We are exposed to credit-related
losses if the counterparty to the financial instruments fails to perform its
obligations. However, we do not expect the counterparty, which presently has
high credit ratings, to fail to meet its obligations.

Our primary foreign currency exposure relates to our Euro debt. As of March
29, 2003, the fair value of our fixed Euro debt was $252.4 million, based on its
quoted market price as listed on the London Stock exchange and translated using
Euro exchange rates in effect as of March 29, 2003. The potential increase in
fair value of our fixed rate Euro debt resulting from a hypothetical 10% adverse
change in exchange rates would have been approximately $27.2 million at March
29, 2003. As of March 29, 2003, a hypothetical immediate 10% adverse change in
exchange rates would have had a $1.7 million unfavorable impact over a one-year
period on our earnings and cash flows. We employ a cross-currency fair value
hedging strategy utilizing swaps to effectively convert a portion of our
Euro-denominated debt into USD-denominated debt. For further information, see
Note 12 to our Consolidated Financial Statements.

INTEREST RATES

Our primary interest rate exposure relates to our fixed and variable rate
debt. The potential increase in fair value of our fixed rate Euro debt resulting
from a hypothetical 10% adverse change in interest rates would have been
approximately $3.7 million at March 29, 2003. We employ a fair value cross
currency hedging strategy utilizing swaps to effectively float a portion of our
interest rate exposure on our fixed rate Euro debt.

The primary interest rate exposure on floating rate financing arrangements
are with respect to the United States. We had approximately $100.9 million in
variable rate financing arrangements at March 29, 2003. As of March 29, 2003, a
hypothetical immediate 10% adverse change in interest rates, as they relate to
the maximum available borrowings under our variable rate financial instruments,
would have a $0.9 million unfavorable impact over a one-year period on our
earnings and cash flows. We employ an interest rate hedging strategy utilizing
swaps to effectively fix substantially all of our interest rate exposure on our
outstanding variable rate debt. For further information, see Note 12 to our
Consolidated Financial Statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See the "Index to Consolidated Financial Statements" appearing at the end
of this report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

42

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

See Item 13.

ITEM 11. EXECUTIVE COMPENSATION

See Item 13.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

See Item 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required to be included by Item 10 through 13 of Form 10-K
will be included in our proxy statement for the 2003 Annual Meeting of
Stockholders, which will be filed within 120 days after the close of our fiscal
year ended March 29, 2003, and that information is incorporated herein by
reference to that proxy statement.

ITEM 14. CONTROLS AND PROCEDURES

Within the 90-day period prior to the date of this report, an evaluation
was performed under the supervision and with the participation of the Company's
management, including the Chairman and Chief Executive Officer, and the Senior
Vice President of Finance and Chief Financial Officer, of the effectiveness of
the design and operation of the Company's disclosure controls and procedures.
Based on that evaluation, the Company's management, including the Chairman and
Chief Executive Officer, and the Senior Vice President of Finance and Chief
Financial Officer, concluded that the Company's disclosure controls and
procedures (as defined in Rule 13a-14c promulgated under the Securities Exchange
Act of 1934) are effective. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date of completion of their evaluation.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) 1, 2. Financial Statements and Schedules. See index on Page F-1.

3. Exhibits

- ---------------
* Incorporated herein by reference.

+ Exhibits is a management contract or compensatory plan or arrangement.

** Portions of Exhibits 10.5-10.14 have been omitted pursuant to a request for
confidential treatment and have been filed separately with the Securities and
Exchange Commission.

(b) No current report on Form 8-K was filed by us with the Securities and
Exchange Commission during the last quarter of fiscal 2003.

46

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) Securities Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on June 18, 2003.

POLO RALPH LAUREN CORPORATION

By: /s/ GERALD M. CHANEY

------------------------------------
Gerald M. Chaney
Senior Vice President of Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.

48

CERTIFICATION

I, Ralph Lauren, certify that:

1. I have reviewed this annual report on Form 10-K of Polo Ralph Lauren
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ RALPH LAUREN
--------------------------------------
Ralph Lauren
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)

Date: June 18, 2003

49

CERTIFICATION

I, Gerald M. Chaney, certify that:

1. I have reviewed this annual report on Form 10-K of Polo Ralph Lauren
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

/s/ GERALD M. CHANEY
--------------------------------------
Gerald M. Chaney
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)

Date: June 18, 2003

50

POLO RALPH LAUREN CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes
thereto.

F-1

INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
POLO RALPH LAUREN CORPORATION
NEW YORK, NEW YORK

We have audited the accompanying consolidated balance sheets of Polo Ralph
Lauren Corporation and subsidiaries (the "Company") as of March 29, 2003 and
March 30, 2002, and the related consolidated statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended March 29,
2003. Our audits also included the financial statement schedule listed in the
Index at Item 15. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of March 29,
2003 and March 30, 2002, and the results of their operations and their cash
flows for each of the three years in the period ended March 29, 2003, in
conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, such financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

As discussed in Notes 1 and 6 to the consolidated financial statements,
effective March 31, 2002 the Company changed its method of accounting for
goodwill and other intangible assets to conform to Statement of Financial
Accounting Standards No. 142.

As discussed in Note 1 to the consolidated financial statements, the
Company eliminated the 90-day reporting lag for certain of its European
subsidiaries. The results of operations of these subsidiaries for the period
October 1, 2001 through December 29, 2001 are reflected as an adjustment to
retained earnings in the consolidated financial statements for the year ended
March 30, 2002.

/s/ DELOITTE & TOUCHE LLP

New York, New York
May 20, 2003
(June 3, 2003 as to Note 20)

F-2

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.
F-3

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes to consolidated financial statements.
F-4

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

See accompanying notes to consolidated financial statements.
F-5

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to consolidated financial statements.
F-6

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes to consolidated financial statements.
F-7

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT WHERE OTHERWISE INDICATED)

1. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Polo Ralph
Lauren Corporation (PRLC) and its wholly and majority owned subsidiaries. All
intercompany balances and transactions have been eliminated. PRLC and its
subsidiaries are collectively referred to herein as "we," "us," "our" and
"ourselves."

BUSINESS

We design, license, contract for the manufacture of, market and distribute
men's and women's apparel, accessories, fragrances, skin care products and home
furnishings. Our sales are principally to major department and specialty stores
located throughout the United States and Europe. We also sell directly to
consumers through full-price and outlet Polo Ralph Lauren and Club Monaco stores
located throughout the United States, Canada, Europe and Asia.

We are party to licensing agreements which grant the licensee exclusive
rights to use our various trademarks in connection with the manufacture and sale
of designated products in specified geographical areas. The license agreements
typically provide for designated terms with renewal options based on achievement
of specified sales targets. The agreements also require that certain minimum
amounts be spent on advertising for licensed products. Additionally, as part of
the licensing arrangements, each licensee is typically required to enter into a
design services agreement pursuant to which design and other creative services
are provided. The license and design services agreements provide for payments
based on specified percentages of net sales of licensed products. Additionally,
we have granted royalty-free licenses to independent parties to operate Polo
stores to promote the sale of our merchandise and our licensees' merchandise
both domestically and internationally.

FISCAL YEAR

Our fiscal year ends on the Saturday nearest to March 31. All references to
"2003," "2002" and "2001" represent the 52-week fiscal years ended March 29,
2003, March 30, 2002 and March 31, 2001.

We have included the March 29, 2003 and March 30, 2002 balance sheets of
our wholly owned European subsidiaries in the accompanying March 29, 2003 and
March 30, 2002, consolidated balance sheets. We also have consolidated the
results of operations of our wholly owned European subsidiaries for the years
ended March 29, 2003, March 30, 2002 and December 31, 2000, in the March 29,
2003, March 30, 2002 and March 31, 2001 consolidated statements of income,
stockholders' equity and cash flows.

CONSOLIDATION OF EUROPEAN ENTITIES -- CHANGE IN REPORTING PERIOD

Effective December 30, 2001, for reporting purposes the Company changed the
fiscal year ends of its European subsidiaries as reported in the consolidated
financial statements to the Saturday closest to March 31 to conform with the
fiscal year end of the Company. Previously, certain of the European subsidiaries
were consolidated and reported on a three-month lag with a fiscal year ending
December 31. Accordingly, the net activity shown below for the three-month

F-8

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

period ended December 29, 2001, for those European subsidiaries is reported as
an adjustment to retained earnings in the fourth quarter of fiscal 2002 in the
accompanying financial statements.

Net income for the year ended March 30, 2002, for the consolidated Company as if
the European subsidiaries remained on a three-month lag would have been $159.7
million.

USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Estimates by their nature are based on judgments
and available information and therefore, actual results could differ from those
estimates.

Critical accounting policies are those that are most important to the
portrayal of the Company's financial condition and the results of operations,
and require management's most difficult, subjective and complex judgments, as a
result of the need to make estimates about the effect of matters that are
inherently uncertain. The Company's most critical accounting policies, discussed
below, pertain to revenue recognition, accounts receivable, inventories,
goodwill, other intangibles and long-lived assets. In applying such policies,
management must use some amounts that are based upon its informed judgments and
best estimates. Because of the uncertainty inherent in these estimates, actual
results could differ from estimates used in applying the critical accounting
policies. Changes in such estimates, based on more accurate future information,
may affect amounts reported in future periods. The Company is not aware of any
reasonably likely events or circumstances which would result in different
amounts being reported that would materially affect its financial condition or
results of operations.

REVENUE RECOGNITION

Wholesale sales are recognized upon shipment of products to customers since
title and risk of loss passes upon shipment and are recorded net of returns,
discounts and allowances. Returns and allowances require pre-approval from
management. Estimates for end of season allowances are based on historic trends,
seasonal results, an evaluation of current economic conditions and retailer
performance. The Company's historical estimates of these costs have not differed
materially from actual results. Sales by our retail and outlet stores are
recognized when goods are sold to consumers, net of returns. Licensing revenue
is recognized based upon shipment of licensed products sold by our licensees,
net of allowances.

ACCOUNTS RECEIVABLE, NET

In the normal course of business, the Company extends credit to customers
which satisfy pre-defined credit criteria. Accounts receivable, net, in the
Consolidated Balance Sheets, is net of allowances and anticipated discounts. An
allowance for doubtful accounts is determined through

F-9

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

analysis of the aging of accounts receivable at the date of the financial
statements, assessments of collectibility based on historic trends and an
evaluation of the economic conditions. Costs associated with potential returns
of products as well as allowable customer markdowns and operational chargebacks,
net of the expected recoveries, are included as a reduction to net sales and are
part of the provision for allowances included in accounts receivable, net. These
provisions result from divisional seasonal negotiations as well as historic
deduction trends net of expected recoveries and the evaluation of current market
conditions. The Company's historical estimates of these costs have not differed
materially from actual results.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out, FIFO,
method), or market. The Company continually evaluates the composition of its
inventories assessing slow-turning, ongoing product as well as prior seasons'
fashion product. Estimates may differ from actual results due to quantity,
quality and mix of products in inventory, consumer and retailer preferences and
market conditions. The Company's historical estimates of these costs have not
differed materially from actual results.

GOODWILL, OTHER INTANGIBLES AND LONG-LIVED ASSETS

Effective March 31, 2002, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 requires that goodwill and intangible assets with
indefinite lives no longer are to be amortized, but rather be tested at least
annually for impairment. This pronouncement also requires that intangible assets
with definite lives continue to be amortized over their respective lives to
their estimated residual values, and reviewed for impairment in accordance with
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets."

Goodwill represents the excess of purchase cost over the fair value of net
assets of businesses acquired. Before adopting the provisions of SFAS No. 142,
we amortized goodwill on a straight-line basis over its estimated useful life,
ranging from 11 to 40 years. Beginning in fiscal 2003, consistent with the
requirements of SFAS No. 142, we no longer amortize goodwill. The Company
reviews goodwill annually for impairment. In addition, trademarks that are owned
that have been deemed to have indefinite lives are reviewed at least annually
for potential value impairment. Trademarks that are licensed by the Company from
third parties are amortized over the individual terms of the respective license
agreement, which approximates 10 years. Goodwill amortization expense was $9.1
million and $8.0 million in fiscal 2002 and 2001, respectively. Accumulated
goodwill amortization was $23.7 million at March 30, 2002.

We assess the carrying value of long-lived and intangible assets, with
finite lives, as current facts and circumstances indicate that they may be
impaired. In evaluating the fair value and future benefits of such assets, we
perform an analysis of the anticipated undiscounted future net cash flows of the
individual assets over the remaining amortization period and would recognize an
impairment loss if the carrying value exceeded the expected future cash flows.
The impairment loss would be measured based upon the difference between the fair
value of the asset and its recorded carrying value. See Note 9 for long-lived
and intangible asset writedowns recorded in connection with our fiscal 2001
Operational Plan and fiscal 1999 Restructuring Plan. During fiscal 2003, there
were no material impairment losses recorded in connection with this analysis.

F-10

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OTHER SIGNIFICANT ACCOUNTING POLICIES

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of cash and cash equivalents, receivables and accounts
payable approximates their carrying value due to their short-term maturities.
The fair value of the Euro debt is disclosed in Note 12. Considerable judgment
is required in interpreting certain market data to develop estimated fair values
for certain financial instruments. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that we could realize in a current
market exchange.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include all highly liquid investments with an
original maturity of three months or less, including investments in debt
securities. Our investments in debt securities are diversified among high-credit
quality securities in accordance with our risk management policy and primarily
include commercial paper and money market funds.

PROPERTY, EQUIPMENT, DEPRECIATION AND AMORTIZATION

Property and equipment are carried at cost less accumulated depreciation.
Depreciation is provided over the estimated useful lives of the related assets
on a straight-line basis. The range of useful lives is as follows:
buildings -- 37.5 years; furniture and fixtures and machinery and equipment -- 3
to 10 years. Leasehold improvements are amortized using the straight-line method
over the lesser of the term of the related lease or the estimated useful life.
Major additions and betterments are capitalized, and repairs and maintenance are
charged to operations in the period incurred. We capitalize our share of the
cost of outfitting shop-within-shops fixed assets within furniture and fixtures.
These assets are amortized using the straight-line method over their estimated
useful lives of 3 to 5 years.

OFFICERS' LIFE INSURANCE

We maintain key man life insurance policies on several of our senior
executives, the majority of which contain split dollar arrangements. The key man
policies are recorded at their cash surrender value, while the policies with
split dollar arrangements are recorded at the lesser of their cash surrender
value or premiums paid. Amounts recorded under these policies aggregated $48.8
million and $46.3 million at March 29, 2003 and March 30, 2002, and are included
in other assets in the accompanying consolidated balance sheets. During fiscal
2003, the Company ceased paying premiums on split dollar life insurance policies
related to officers and began the process of terminating certain split dollar
arrangements. As of March 29, 2003, $0.6 million of split dollar policies had
either been surrendered to the insurance company for cash or bought out by the
related employee.

INCOME TAXES

We account for income taxes under the liability method. Deferred tax assets
and liabilities are recognized based on differences between financial statement
and tax bases of assets and liabilities using presently enacted tax rates. A
valuation allowance is recorded to reduce the deferred tax asset to that portion
which is expected to more likely than not be realized.

F-11

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFERRED RENT OBLIGATIONS

We account for rent expense under noncancelable operating leases with
scheduled rent increases and landlord incentives on a straight-line basis over
the lease term. The excess of straight-line rent expense over scheduled payment
amounts and landlord incentives is recorded as a deferred liability. Unamortized
deferred rent obligations amounted to $57.5 million and $43.1 million at March
29, 2003 and March 30, 2002, and are included in accrued expenses and other, and
other noncurrent liabilities in the accompanying consolidated balance sheets.

OTHER COMPREHENSIVE INCOME

Other comprehensive income is recorded net of taxes and is reflected in the
consolidated statements of stockholders' equity. Other comprehensive income
consists of unrealized gains or losses on hedges and foreign currency
translation adjustments.

FINANCIAL INSTRUMENTS

From time to time, we use derivative financial instruments to reduce our
exposure to changes in foreign exchange and interest rates. While these
instruments are subject to risk of loss from changes in exchange or interest
rates, those losses generally would be offset by gains on the related exposure.
The accounting for changes in the fair value of a derivative is dependent upon
the intended use of the derivative. SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities, as Amended and Interpreted," requires that
every derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement also requires that changes
in the derivative's fair value be recognized currently in earnings in either
income (loss) from continuing operations or accumulated other comprehensive
income(loss), depending on the timing and designated purpose of the derivative.

Note 12 further describes the derivative instruments we are party to and
the related accounting treatment. Historically, we have entered into interest
rate swap agreements and forward foreign exchange contracts, which qualify as
cash flow hedges under SFAS No. 133. In accordance with SFAS No. 133, we have
recorded the fair value of these derivatives at April 1, 2001, and the resulting
net unrealized gain, after taxes, of approximately $4.0 million in other
comprehensive income as a cumulative transition adjustment. We have also
designated a portion of our Euro debt as a hedge of our net investment in a
foreign subsidiary and, as of June 2002, have hedged the remainder of the Euro
debt with a cross currency rate swap. During fiscal 2003, we have entered into
various forward exchange contracts that qualified as hedges on inventory
purchases and a series of forward exchange contracts on Japanese Yen that did
not qualify for hedge accounting.

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATIONS

The financial position and results of operations of our foreign
subsidiaries are measured using the local currency as the functional currency.
Assets and liabilities are translated at the exchange rate in effect at each
year end. Results of operations are translated at the average rate of exchange
prevailing throughout the period. Translation adjustments arising from
differences in exchange rates from period to period are included in other
comprehensive income, net of taxes, except for certain foreign-denominated debt.
Gains and losses on translation of intercompany loans with foreign subsidiaries
of a long-term investment nature are also included in this component of
stockholders' equity. We have designated a portion of our Euro debt as a hedge
of our net investment in a foreign subsidiary and, as of June 2002, have hedged
the remainder of
F-12

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the Euro debt with a cross currency rate swap. Transaction gains or losses on
the unhedged portion resulting from changes in the Eurodollar rate are recorded
in income and amounted to $3.2 million and $1.8 million in fiscal 2003 and 2002,
respectively. The gain of the Japanese Yen forward contracts, that did not
qualify for hedge accounting, amounted to $2.4 million in fiscal 2003. Gains and
losses from other foreign currency transactions are included in operating
results and were not material.

COST OF GOODS SOLD AND SELLING EXPENSES

Cost of goods sold includes the expenses incurred to acquire and produce
inventory for sale, including product costs, freight-in, import costs, as well
as reserves for shrinkage. The costs of selling the merchandise, including
preparing the merchandise for sale, such as picking, packing, warehousing and
order charges, are included in selling, general and administrative expenses
(SG&A).

SHIPPING AND HANDLING COSTS

We reflect shipping and handling costs as a component of SG&A expenses in
the consolidated statements of income. The shipping and handling costs
approximated $59.9 million, $57.4 million and $46.2 million in fiscal years
2003, 2002 and 2001, respectively. As a percent of revenues, they represented
2.7%, 2.7% and 2.3% in 2003, 2002 and 2001, respectively. We bill our wholesale
customers for shipping and handling costs and record such revenues in net sales
upon shipment.

ADVERTISING

We expense the production costs of advertising, marketing and public
relations expenses upon the first showing of the related advertisement. We
expense the costs of advertising paid to customers under cooperative advertising
programs when the related advertisements are run. Total advertising expenses,
including cooperative advertising, included within SG&A expenses amounted to
$92.8 million, $79.8 million and $88.8 million in fiscal 2003, 2002 and 2001,
respectively.

NET INCOME PER SHARE

Basic net income per share was calculated by dividing net income by the
weighted-average number of shares outstanding during the period, excluding any
potential dilution. Diluted net income per share was calculated similarly but
includes potential dilution from the exercise of stock options and awards. The
difference between the basic and diluted weighted-average shares outstanding is
due to the dilutive effect of stock options and restricted stock awards issued
under our stock option plans, which were 932,428; 1,052,376; and 673,200 shares
for fiscal 2003, 2002 and 2001, respectively.

STOCK OPTIONS

We use the intrinsic value method to account for stock-based compensation
in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees," and have adopted the disclosure-only provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation," as amended by SFAS
No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure."
Accordingly, no compensation cost has been recognized for its fixed stock option
grants. Had compensation costs for the Company's stock option grants been
determined based on the fair value at the grant dates for awards under these
F-13

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

plans in accordance with SFAS No. 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts as follows (Dollars in
thousands, except share data):

For this purpose, the fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 2003, 2002 and 2001,
respectively: expected volatility of 47.2%, 47.0% and 46.0%; risk-free interest
rates of 3.69%, 4.65% and 6.35%; expected lives of 5.2 years, 6.0 years and 6.0
years; and a dividend yield of 0% for all periods.

RECLASSIFICATIONS

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

2. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2003, the Financial Accounting Standards Board (FASB) issued SFAS
No. 150, "Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity." This statement requires that certain financial
instruments that, under previous guidance, issuers could account for as equity
be classified as liabilities in statements of financial position. Most of the
guidance in SFAS No. 150 is effective for all financial instruments entered into
or modified after May 31, 2003, and otherwise is effective at the beginning of
the first interim period beginning after June 15, 2003. The Company does not
expect the adoption of this pronouncement to have a material effect on the
consolidated results of operations or financial position.

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No.
133 on Derivative Instruments and Hedging Activities." This statement amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133. This statement is effective for contracts entered into or modified
after June 30, 2003, except as for the provisions that relate to SFAS No. 133
implementation issues that have been effective for fiscal quarters that began
prior to June 15, 2003, which should continue to be applied in accordance with
their respective effective dates. The Company does not expect the adoption of
this pronouncement to have a material effect on the consolidated results of
operations or financial position.

In December 2002, the FASB issued SFAS No. 148. This statement provides
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the disclosure requirements

F-14

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for SFAS No. 123 to require more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. SFAS No. 148
is effective for fiscal years ending after December 31, 2002. The Company does
not intend to expense stock options; therefore the adoption of this statement
did not have any impact on the consolidated financial position or results of
operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The statement required companies
to recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by SFAS No. 146 include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or exit or disposal activity. SFAS No.
146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. The Company has adopted the provisions of SFAS No. 146.

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

In November 2002, the FASB issued FIN 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others." FIN 45 requires certain guarantees to be recorded at
fair value and requires a guarantor to make significant new disclosures, even
when the likelihood of making any payments under the guarantee is remote.
Generally, FIN 45 applies to certain types of financial guarantees that
contingently require the guarantor to make payments to the guaranteed party
based on changes in an underlying that is related to an asset, liability or an
equity security of the guaranteed party; performance guarantees involving
contracts which require the guarantor to make payments to the guaranteed party
based on another entity's failure to perform under an obligating agreement;
indemnification agreements that contingently require the guarantor to make
payments to an indemnified party based on changes in an underlying that is
related to an asset, liability or an equity security of the indemnified party;
or indirect guarantees of the indebtedness of others. The initial recognition
and initial measurement provisions of FIN 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. Disclosure
requirements under FIN 45 are effective for financial statements ending after
December 15, 2002, and are applicable to all guarantees issued by the guarantor
subject to FIN 45's scope, including guarantees issued

F-15

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

prior to FIN 45. The Company adopted the accounting and disclosure provisions of
FIN 45 in its March 29, 2003 financial statements.

3. ACQUISITIONS AND JOINT VENTURE

During the fourth quarter of fiscal 2003, we entered into agreements for
approximately $24.1 million and $47.6 million, respectively, to acquire a 50%
interest in the Japanese master license and an 18% equity interest in the
company which holds the sublicenses for the Polo Ralph Lauren men's, women's and
jeans business in Japan. In May 2003, we acquired an additional 2% equity
interest in this company. Also, in the past year, we have acquired several
retail locations from certain of our licensees in Belgium, Germany and Argentina
for a total purchase price of approximately $4.6 million. Consistent with SFAS
No. 141, "Business Combinations," the acquisition of the 50% interest in the
Japanese master license and the several retail locations were accounted for
under purchase accounting.

In connection with the acquisition of the Japanese master license, the
Company recorded tangible assets of $11.0 million, an intangible license valued
at $9.9 million and liabilities assumed of $8.5 million based on estimated fair
values as determined by management utilizing information available at this time.
Goodwill of $13.0 million was recognized for the excess of the purchase price
over the preliminary estimate of fair market value of the net assets acquired.
In connection with the purchase accounting for the remaining acquisitions, the
Company is in the process of evaluating the tangible and intangible assets
acquired and liabilities assumed. At March 29, 2003, the Company's accounting
for the fiscal 2003 acquisitions was based on preliminary valuation information,
which is subject to revision. Unaudited pro forma information related to these
acquisitions is not included, since the impact of these transactions are not
material to the consolidated results of the Company.

In connection with our acquisition of a 50% interest in the Japanese master
license and the 18% equity interest in the company which holds the sublicenses
for the Polo Ralph Lauren men's, women's and jeans business in Japan, results
for these operations will be reflected in our consolidated financial statements
for the three months ended June 28, 2003.

On October 31, 2001, the Company completed the acquisition of substantially
all of the assets of PRL Fashions of Europe S.R.L. ("PRL Fashions" or "Italian
Licensee") which held licenses to sell our women's Ralph Lauren apparel in
Europe, our men's and boys' Polo Ralph Lauren apparel in Italy and men's and
women's Polo Jeans collections in Italy. The purchase price of this transaction
was approximately $22.0 million in cash plus the assumption of certain
liabilities and earn-out payments based on achieving profitability targets over
the first three years with a guaranteed minimum annual payment of $3.5 million
each year. The assets acquired of $15.1 million and liabilities assumed of $15.1
million were recorded at estimated fair values as determined by the Company's
management based on information available at that time. Goodwill of
approximately $33.5 million was initially recognized for the excess of the
purchase price over the preliminary estimate of fair market value of the net
assets acquired. During the quarter ended December 28, 2002, the Company
finalized the purchase accounting for the acquisition of the assets, the result
of which was an increase in goodwill of approximately $0.3 million. Also,
subsequent to the quarter ended March 29, 2003, an initial payment was made on
the first earn-out payment calculation, resulting in an additional increase in
goodwill of approximately $1.0 million. This adjustment and any other
adjustments to the contingent component of the remaining earn-out payments will
be accounted for as additional purchase price in future periods. Unaudited pro
forma information related to this acquisition is not included since the impact
of this transaction is not material to the consolidated results of the Company.

F-16

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On October 22, 2001, we acquired the Polo Brussels SA store from one of our
licensees. The purchase price of this transaction was approximately $3.0 million
in cash, which was primarily allocated to goodwill. Unaudited pro forma
information related to this acquisition is not included, as the impact of this
transaction is not material to the consolidated results of the Company.

On February 7, 2000, we announced the formation of Ralph Lauren Media, LLC
(RL Media), a joint venture between National Broadcasting Company, Inc. and
certain affiliated companies (NBC) and ourselves. RL Media was created to bring
our American lifestyle experience to consumers via multiple media platforms,
including the Internet, broadcast, cable and print. Under the 30-year joint
venture agreement, RL Media is owned 50% by us and 50% by NBC. In exchange for a
50% interest, we provide marketing through our annual print advertising
campaign, make our merchandise available at initial cost of inventory and sell
RL Media's excess inventory through our outlet stores, among other things. NBC
contributed $40.0 million in online distribution and promotion and a cash
funding commitment up to $50.0 million. NBC also initially committed to
contribute $110.0 million of television and online advertising. During fiscal
2003, RL Media entered into an agreement to sell its unused television and
advertising spots for $15.0 million. Under the terms of the joint venture
agreement, for tax purposes, we will not absorb any losses from the joint
venture up to the first $50.0 million incurred and will share proportionately in
the net income or losses thereafter. Additionally, we will receive a royalty on
the sale of our products by RL Media based on specified percentages of net sales
over a predetermined threshold, subject to certain limitations; to date, no such
royalty income has been recognized. RL Media's managing board has equal
representation from NBC and us. The joint venture has been accounted for under
the equity method from the effective date of its formation. Our financial basis
in RL Media is zero. Our equity in the net assets of RL Media is less than our
financial basis. We have not recognized any losses in excess of our financial
basis since there are no financial guarantees, commitments or obligations to
fund the operations of RL Media.

On January 6, 2000, we completed the acquisition of stock and certain
assets of Poloco S.A.S. and certain of its affiliates (Poloco), which hold
licenses to sell our men's and boys' apparel, our men's and women's jeans
apparel, and certain of our accessories in Europe. In addition to acquiring
Poloco's wholesale business, we acquired one flagship store in Paris and six
outlet stores located in France, the United Kingdom and Austria. We acquired
Poloco for an aggregate cash consideration of $209.7 million, plus the
assumption of $10.0 million in short-term debt. During the quarter ended July 1,
2000, the final 10% of the acquisition price for Poloco in the amount of $20.9
million was distributed in accordance with the terms of the agreement.

4. INVENTORIES

Inventories are summarized as follows (Dollars in thousands):

F-17

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following (Dollars in
thousands):

Depreciation and amortization expense of property and equipment was $78.6
million, $74.8 million and $70.6 million for fiscal years 2003, 2002 and 2001,
respectively.

6. GOODWILL AND OTHER INTANGIBLE ASSETS

Effective March 31, 2002, the Company adopted SFAS No. 142. This accounting
standard requires that goodwill and indefinite life intangible assets are no
longer amortized but are subject to annual impairment tests. Other intangible
assets with finite lives will continue to be amortized over their useful lives.
The transitional impairment tests were completed and did not result in an
impairment charge. The Company will perform the first annual impairment test
during 2004, but does not anticipate any resulting impairment.

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

F-18

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The carrying value of goodwill as of March 29, 2003 and March 30, 2002 by
operating segment is as follows (Dollars in millions):

The carrying value of indefinite life intangible assets as of March 29,
2003 was $1.5 million and relates to the Company's owned trademark. Finite life
intangible assets as of March 29, 2003, subject to amortization, are comprised
of the following (Dollars in millions):

No intangible amortization expense was recorded during fiscal 2003, 2002 or
2001. The estimated intangible amortization expense for each of the next five
years is expected to be approximately $1.0 million per year.

7. OTHER ASSETS

Other assets consisted of the following (Dollars in thousands):

8. ACCRUED EXPENSES AND OTHER

Accrued expenses consisted of the following (Dollars in thousands):

9. RESTRUCTURING CHARGE

2003 RESTRUCTURING PLAN

During the third quarter of fiscal 2003, we completed a strategic review of
our European businesses and formalized our plans to centralize and more
efficiently consolidate its business

F-19

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

operations. The major initiatives of the plan included the following:
consolidation of our headquarters from five cities in three countries to one
location; the consolidation of our European logistics operations to Italy; and
the migration of all European information systems to a standard global system.
In connection with the implementation of this plan, the Company has completed
the consultation process regarding the headquarters and has recorded a $14.4
million restructuring charge during fiscal 2003 for severance and contract
termination costs. The Company expects the remaining consolidation and migration
to be completed during fiscal 2004. The major components of the charge and the
activity through March 29, 2003 were as follows (Dollars in thousands):

Total severance and termination benefits as a result of this restructuring
related to approximately 150 employees. Total cash outlays related to this plan
of approximately $3.8 million have been paid through March 29, 2003. It is
expected that this plan will be completed, and the remaining liabilities will be
paid, in fiscal 2004.

2001 OPERATIONAL PLAN

During the second quarter of fiscal 2001, we completed an internal
operational review and formalized our plans to enhance the growth of our
worldwide luxury retail business, to better manage inventory and to increase our
overall profitability. The major initiatives of the 2001 Operational Plan
included: refining our retail strategy; developing efficiencies in our supply
chain; and consolidating corporate strategic business functions and internal
processes. Costs associated with this aspect of the 2001 Operational Plan
included lease and contract termination costs, store fixed asset writedowns and
severance and termination benefits.

In connection with the implementation of the 2001 Operational Plan, we
recorded a pre-tax restructuring charge of $128.6 million in our second quarter
of fiscal 2001. This charge was subsequently adjusted for a $5.0 million
reduction of liabilities in the fourth quarter of fiscal 2001 and a $16.0
million increase in the fourth quarter of fiscal 2002 for lease termination
costs associated with the closure of our retail stores due to market factors
that were less favorable

F-20

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

than originally estimated. The major components of the charge and the activity
through March 29, 2003, were as follows (Dollars in thousands):

Total severance and termination benefits as a result of the 2001
Operational Plan related to approximately 550 employees, all of whom have been
terminated. Total cash outlays related to the 2001 Operational Plan are expected
to be approximately $40.7 million, $35.5 million of which have been paid through
March 29, 2003, and subsequently in May 2003, an additional $4.6 million was
settled. We completed the implementation of the 2001 Operational Plan in fiscal
2002 and expect to settle the remaining liabilities in fiscal 2004 or in
accordance with contract terms.

1999 RESTRUCTURING PLAN

During the fourth quarter of fiscal 1999, we formalized our plans to
streamline operations within our wholesale and retail operations and reduce our
overall cost structure. The major initiatives of the 1999 Restructuring Plan
included the following: an evaluation of our retail operations and site
locations; the realignment and operational integration of our wholesale
operating units; and the realignment and consolidation of corporate strategic
business functions and internal processes.

In connection with the implementation of the 1999 Restructuring Plan, we
recorded a pre-tax restructuring charge of $58.6 million in our fourth quarter
of fiscal 1999. We completed the implementation of the 1999 Restructuring Plan
in fiscal 2000 and have settled the remaining liabilities during fiscal 2003.
The activity through March 29, 2003, was as follows (Dollars in thousands):

F-21

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Total cash outlays related to the 1999 Restructuring Plan were
approximately $39.5 million, all of which have been paid through March 29, 2003.

10. INCOME TAXES

The components of the provision for income taxes were as follows (Dollars
in thousands):

The foreign and domestic components of income before provision for income
taxes were as follows (Dollars in thousands):

The deferred tax assets reflect the net tax effect of temporary
differences, primarily net operating loss carryforwards, property and equipment
and accounts receivable, between the carrying amounts of assets and liabilities
for financial reporting and the amounts used for income tax purposes. The
components of the net deferred tax assets at March 29, 2003 and March 30, 2002
were as follows (Dollars in thousands):

F-22

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

We have available federal net operating loss carryforwards of approximately
$11.5 million and state net operating loss carryforwards of approximately $243.7
million for tax purposes to offset future taxable income. The net operating loss
carryforwards expire beginning in fiscal 2004. The utilization of the federal
net operating loss carryforwards is subject to the limitations of Internal
Revenue Code Section 382, which applies following certain changes in ownership
of the entity generating the loss carryforward. As a result of the limitation of
Section 382, we believe that approximately $3.3 million of the federal net
operating loss carryforwards will expire and not be utilized. A valuation
allowance has been recorded against such net operating losses.

Also, we have available additional state and foreign net operating loss
carryforwards of approximately $2.5 million and $151.1 million for which no net
deferred tax asset has been recognized. A full valuation allowance has been
recorded since we do not believe that we will more likely than not be able to
utilize these carryforwards to offset future taxable income. Subsequent
recognition of a substantial portion of the deferred tax asset relating to these
federal, state and foreign net operating loss carryforwards would result in a
reduction of goodwill recorded in connection with acquisitions. Additionally, we
have recorded a valuation allowance against certain other deferred tax assets
relating to our foreign operations. Subsequent recognition of these deferred tax
assets, as well as a portion of the foreign net operating loss carryforwards,
would result in an income tax benefit in the year of such recognition.

Provision has not been made for United States or additional foreign taxes
on approximately $103.0 million of undistributed earnings of foreign
subsidiaries. Those earnings have been and will continue to be reinvested. These
earnings could become subject to tax if they were remitted as dividends, if
foreign earnings were lent to PRLC, a subsidiary or a United States affiliate of
PRLC, or if the stock of the subsidiaries were sold. Determination of the amount
of unrecognized deferred tax liability with respect to such earnings is not
practical. We believe that the amount of the additional taxes that might be
payable on the earnings of foreign subsidiaries, if remitted, would be partially
offset by United States foreign tax credits.

F-23

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The historical provision for income taxes in fiscal 2003, 2002 and 2001
differs from the amounts computed by applying the statutory federal income tax
rate to income before provision for income taxes due to the following (Dollars
in thousands):

11. FINANCING AGREEMENTS

In November 2002, we terminated both our 1997 bank credit facility and our
1999 senior bank credit facility and entered into a new credit facility. The
1997 bank credit facility provided for a $225.0 million revolving line of credit
and matured on December 31, 2002, while the 1999 senior bank credit facility
consisted of a $20.0 million revolving line of credit and an $80.0 million term
loan, both of which were scheduled to mature on June 30, 2003. The new credit
facility is with a syndicate of banks and consists of a $300.0 million revolving
line of credit, subject to increase to $375.0 million, which is available for
direct borrowings and the issuance of letters of credit. It will mature on
November 18, 2005. As of March 29, 2003, we had $100.0 million outstanding under
the new facility, which was the aggregate amount outstanding under the old
facilities at the time of extinguishment; $50.0 million of which was repaid in
April 2003 and the remaining $50.0 million is expected to be repaid in June
2003. Borrowings under this facility bear interest, at our option, at a rate
equal to (i) the higher of the Federal Funds Effective Rate, as published by the
Federal Reserve Bank of New York, plus 1/2 of one percent, and the prime
commercial lending rate of JP Morgan Chase Bank in effect from time to time, or
(ii) the LIBO Rate (as defined) in effect from time to time, as adjusted for the
Federal Reserve Board's Eurocurrency Liabilities maximum reserve percentages,
and a margin based on our then current credit ratings. As of March 29, 2003, the
margin was 0.75%.

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

- a minimum consolidated tangible net worth, and

- a maximum Adjusted Debt to EBITDAR (as such terms are defined in the
credit facility) ratio.

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

- incur additional debt;

- incur liens and contingent liabilities;

- sell or dispose of our assets, including equity interests;

- merge with or acquire other companies, liquidate or dissolve;

- engage in businesses that are not a related line of business;

F-24

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

- make loans, advances or guarantees;

- engage in transactions with affiliates; and

- make investments.

Upon the occurrence of an event of default under the credit facility, the
lenders may cease making loans, terminate the credit facility, and declare all
amounts outstanding to be immediately due and payable. The credit facility
specifies a number of events of default, many of which are subject to applicable
grace or cure periods, including, among others, the failure to make timely
principal and interest payments, to satisfy the covenants, or to maintain the
required financial performance requirements described above. Additionally, the
agreement provides that an event of default will occur if Mr. Ralph Lauren and
related entities fail to maintain a specified minimum percentage of the voting
power of our common stock. As of March 29, 2003, the Company was in compliance
with all financial and non-financial debt covenants.

On November 22, 1999, we issued Euro 275.0 million of 6.125% Notes (Euro
debt) due November 2006. The Euro debt is listed on the London Stock Exchange.
The net proceeds from the Euro debt offering were $281.5 million based on the
Euro exchange rate on the issuance date. A portion of the net proceeds from the
issuance was used to finance the acquisition of stock and certain assets of
Poloco while the remaining net proceeds were retained for general corporate
purposes. Interest on the Euro debt is payable annually. During fiscal 2003 and
2002, we repurchased Euro 8.4 million and Euro 11.9 million of our outstanding
Euro debt, or $7.7 million and $10.6 million, respectively, based on Euro
exchange rates. The loss on this early extinguishment of debt was not material.

At March 29, 2003, we had $100.9 million outstanding in direct borrowings
and $248.5 million outstanding in Euro debt based on the year end Euro exchange
rate. We were also contingently liable for $19.1 million in outstanding letters
of credit related primarily to commitments for the purchase of inventory. At
March 30, 2002, we had $33.0 million outstanding in direct borrowings, $80.0
million outstanding under the term loan and $205.0 million outstanding in Euro
debt based on the year end Euro exchange rate. The credit facilities bore
interest primarily at the institution's prime rate. The weighted-average
interest rate on borrowings was 5.4%, 5.9% and 6.3% in fiscal 2003, 2002 and
2001, respectively.

The carrying amounts of financial instruments reported in the accompanying
consolidated balance sheets approximated their estimated fair values, except for
the Euro debt, primarily due to either the short-term maturity of the
instruments or their adjustable market rate of interest. The fair value of the
Euro debt, net of discounts, was $252.4 million and $205.4 million as of March
29, 2003 and March 30, 2002, based on its quoted market price as listed on the
London Stock Exchange.

12. FINANCIAL INSTRUMENTS

We enter into forward foreign exchange contracts as hedges relating to
identifiable currency positions to reduce our risk from exchange rate
fluctuations on inventory purchases. Gains and losses on these contracts are
deferred and recognized as adjustments to the basis of those assets. At March
29, 2003, we had foreign exchange contracts outstanding to deliver $92.5 million
in fiscal 2004 in exchange for Euro 87.1 million. The fair value of these
contracts resulted in an unrealized loss of approximately $0.66 million at March
29, 2003. At March 30, 2002, we had foreign exchange contracts outstanding (i)
to deliver Euro 39.3 million in fiscal 2003, in exchange for $34.6 million and
(ii) to deliver 12.7 million British Pounds in fiscal 2003 in

F-25

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

exchange for $18.0 million. The fair value of these contracts resulted in an
unrealized gain of approximately $0.4 million at March 30, 2002.

In November 2002, the Company entered into forward contracts on 6.2 billion
Japanese Yen that terminated in February 2003. These forward contracts were
entered into to minimize the impact of foreign exchange fluctuations on the
Japanese Yen purchase price in connection with the transactions described in
Note 3. The forward contracts did not qualify for hedge accounting under SFAS
No. 133 and as such the changes in the fair value of the contracts were
recognized currently in earnings. In connection with accounting for these
contracts during fiscal 2003, the Company recognized $2.4 million of foreign
exchange gain on these forward contracts, included as a component of foreign
currency losses (gains), in the accompanying consolidated statements of income.

In June 2002, we entered into a cross currency rate swap, which terminates
in November 2006. The cross currency rate swap is being used to convert Euro
105.2 million, 6.125% fixed rate borrowings into $100.0 million, LIBOR plus
1.24% variable rate borrowings. We entered into the cross currency rate swap to
minimize the impact of foreign exchange fluctuations in both principal and
interest payments resulting from Euro debt, and to minimize the impact of
changes in the fair value of the Euro debt due to changes in LIBOR, the
benchmark interest rate. The swap has been designated as a fair value hedge
under SFAS No. 133. Hedge ineffectiveness is measured as the difference between
the respective gains or losses recognized in earnings from the changes in the
fair value of the cross currency rate swap and the Euro debt, and was de minimis
for the year ended March 29, 2003. In addition, we have designated a portion of
our Euro debt as a hedge of our net investment in a foreign subsidiary. As a
result, changes in the fair value of the Euro debt resulting from changes in the
Eurodollar rate, which are attributable to the portion of debt that hedges our
net investment, are reported net of income taxes, in accumulated other
comprehensive loss (income) as an unrealized loss or gain on foreign currency
hedges.

In April 1999, we entered into interest rate swap agreements with
commercial banks which expire in 2003 to hedge against interest rate
fluctuations. The swap agreements effectively convert borrowings under the 2002
bank credit facility from variable rate to fixed rate obligations. Under the
terms of these agreements, we make payments at a fixed rate of 5.5% and receive
payments from the counterparty based on the notional amount of $100.0 million at
a variable rate based on LIBOR. The net interest paid or received on this
arrangement is included in interest expense. The fair value of these agreements
was based upon the estimated amount that we would have to pay to terminate the
agreements, as determined by the financial institutions. The fair value of these
agreements was an unrealized loss of $1.3 million at March 29, 2003, all of
which is expected to be reclassified into earnings during fiscal 2004; and an
unrealized loss of $2.6 million at March 30, 2002.

As of March 29, 2003 and March 30, 2002, the Company was party to the
following contracts (Dollars in millions):

F-26

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. COMMITMENTS AND CONTINGENCIES

LEASES

We lease office, warehouse and retail space and office equipment under
operating leases which expire through 2029. As of March 29, 2003, aggregate
minimum annual rental payments under noncancelable operating leases with lease
terms in excess of one year were payable as follows (Dollars in thousands):

Rent expense charged to operations was $98.2 million, $83.2 million and
$75.6 million in fiscal 2003, 2002 and 2001, respectively, net of sub-lease
income of $0.4 million and $2.2 million, in fiscal 2002 and 2001. Substantially
all outlet and retail store leases provide for contingent rentals based upon
sales and require us to pay taxes, insurance and occupancy costs. Certain
rentals are based solely on a percentage of sales, and one significant lease
requires a fair market value adjustment at January 1, 2004. Contingent rental
charges included in rent expense were $6.9 million, $6.2 million and $6.1
million in fiscal 2003, 2002 and 2001.

EMPLOYMENT AGREEMENTS

We are party to employment agreements with certain executives which provide
for compensation and certain other benefits. The agreements also provide for
severance payments under certain circumstances.

ACQUISITIONS

See Note 3 for information regarding contingent payments related to
acquisitions made by the Company.

CONCENTRATION OF CREDIT RISK

We sell our merchandise primarily to major upscale department stores across
the United States and extend credit based on an evaluation of the customer's
financial condition generally without requiring collateral. Credit risk is
driven by conditions or occurrences within the economy and the retail industry
and is principally dependent on each customer's financial condition. A decision
by the controlling owner of a group of stores or any substantial customer to
decrease the amount of merchandise purchased from us or to cease carrying our
products could have a material adverse effect. We had three customers who in
aggregate constituted approximately 30% and 35% of trade accounts receivable
outstanding at March 29, 2003 and March 30, 2002.

We had three significant customers who accounted for approximately 7%, 5%
and 5% each of net sales, in fiscal 2003. We had three significant customers who
accounted for approximately 10%, 9% and 9% each of net sales in fiscal 2002, and
for approximately 11%, 10% and 10% each

F-27

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of net sales in fiscal 2001. Additionally, we had four significant licensees who
in aggregate constituted approximately 51%, 55% and 53% of licensing revenue in
fiscal 2003, 2002 and 2001.

We monitor credit levels and the financial condition of our customers on a
continuing basis to minimize credit risk. We believe that adequate provision for
credit loss has been made in the accompanying consolidated financial statements.

We are also subject to concentrations of credit risk with respect to our
cash and cash equivalents, marketable securities, cross currency swap agreement,
interest rate swap agreements and forward foreign exchange contracts which we
attempt to minimize by entering into these arrangements with major banks and
financial institutions and investing in high-quality instruments. We do not
expect any counterparties to fail to meet their obligations.

DECLARATION OF DIVIDEND

On May 20, 2003, the Board of Directors declared a regular quarterly cash
dividend of $0.05 per share, or $0.20 per share on an annual basis, on Polo
Ralph Lauren common stock. The dividend is payable to shareholders of record at
the close of business on June 27, 2003 and will be paid on July 11, 2003.

LEGAL MATTERS

The Company is a party to several pending legal proceedings and claims.
Although the outcome of such actions cannot be determined with certainty,
management is of the opinion that the final outcome should not have a material
adverse effect on the Company's results of operations or financial position. See
Note 18 for discussion of significant legal proceedings.

LICENSING COMMITMENTS

As a result of the failure of Jones Apparel Group, including its
subsidiaries, (Jones) to meet the minimum sales volumes for the year ended
December 31, 2002, under the license agreements for the sale of products under
the "Ralph" trademark between us and Jones dated May 11, 1998, these license
agreements will terminate as of December 31, 2003. We have advised Jones that
the termination of these licenses will automatically result in the termination
of the licenses between us and Jones with respect to the "Lauren" trademark
pursuant to the Cross Default and Term Extension Agreement, between us and Jones
dated May 11, 1998. The Lauren license agreements would otherwise expire on
December 31, 2006. The royalties that we received pursuant to the "Lauren"
license agreements and "Ralph" license agreements represented revenues in fiscal
2003 of approximately $37.4 million and $5.3 million, respectively. Jones has
reported that net sales of Lauren and Ralph products for the year ended December
31, 2002 were $548.0 million and $37.0 million, respectively. See Note 20 for an
update on this matter.

OTHER COMMITMENTS

The Company is not party to any off-balance sheet transactions or
unconsolidated special purpose entities for any of the periods presented herein.

14. COMMON STOCK

All of our outstanding Class B common stock is owned by Mr. Ralph Lauren
and related entities and all of our outstanding Class C common stock is owned by
certain investment funds affiliated with The Goldman Sachs Group, Inc. (GS
Group). Shares of Class B common stock
F-28

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

are convertible at any time into shares of Class A common stock on a one-for-one
basis and may not be transferred to anyone other than affiliates of Mr. Lauren.
Shares of Class C common stock are convertible at any time into shares of Class
A common stock on a one-for-one basis and may not be transferred to anyone other
than members of the GS Group. During fiscal 2003, 11.0 million shares of Class C
common stock were converted into Class A common stock and sold in a secondary
stock offering. The holders of Class A common stock generally have rights
identical to holders of Class B common stock and Class C common stock, except
that holders of Class A common stock and Class C common stock are entitled to
one vote per share and holders of Class B common stock are entitled to 10 votes
per share. Holders of all classes of common stock entitled to vote will vote
together as a single class on all matters presented to the stockholders for
their vote or approval except for the election and the removal of directors and
as otherwise required by applicable law.

15. STOCK INCENTIVE PLANS

On June 9, 1997, our Board of Directors adopted the 1997 Long-Term Stock
Incentive Plan (Stock Incentive Plan). The Stock Incentive Plan authorizes the
grant of awards to any officer or other employee, consultant to, or director
with respect to a maximum of 10.0 million shares of our Class A common stock
(Shares), subject to adjustment to avoid dilution or enlargement of intended
benefits in the event of certain significant corporate events, which awards may
be made in the form of: (i) nonqualified stock options; (ii) stock options
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code; (iii) stock appreciation rights; (iv) restricted stock and/or
restricted stock units; (v) performance awards; and (vi) other stock-based
awards. On June 13, 2000, our Board of Directors increased the maximum number of
Shares that can be granted under the Stock Incentive Plan to 20.0 million
shares, which was approved by the stockholders on August 17, 2000. At March 29,
2003, we had 6.8 million Shares reserved for issuance under this plan.

On June 9, 1997, our Board of Directors adopted the 1997 Stock Option Plan
for Non-Employee Directors (Non-Employee Directors Plan). Under the Non-Employee
Directors Plan, grants of options to purchase up to 500,000 Shares may be
granted to non-employee directors. In fiscal 2003, 2002 and 2001, our Board of
Directors granted options to purchase 18,000, 27,000 and 12,250 Shares with
exercise prices equal to the stock's fair market value on the date of grant. At
March 29, 2003, we had 381,500 shares reserved for issuance under this plan.

Stock options were granted under the plans with an exercise price equal to
the stock's fair market value on the date of grant. These options vest in equal
installments primarily over two years for officers and other key employees and
over three years for all remaining employees and non-employee directors. The
options expire 10 years from the date of grant. Stock option activity for the
Stock Incentive Plan and Non-Employee Directors Plan in fiscal 2003, 2002 and
2001 was as follows (Shares in thousands):

F-29

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Additional information relating to options outstanding as of March 29,
2003, was as follows (Shares in thousands):

In July 2002, 300,000 Shares of restricted stock were granted under the
Stock Incentive Plan. These Shares are subject to restrictions on transfer and
the risk of forfeiture until earned, and vest as follows: 20% on each of the
first five anniversaries of the grant date. The unearned compensation is being
amortized over a period equal to the anticipated vesting.

In April 2000, 118,299 Shares of restricted stock were granted under the
Stock Incentive Plan. These shares are subject to restrictions on transfer and
the risk of forfeiture until earned, and vest as follows: 25% each on the
second, third, fourth and fifth anniversaries of the grant date. The unearned
compensation is being amortized over a period equal to the anticipated vesting.

In March 1998, our Board of Directors authorized the repurchase, subject to
market conditions, of up to $100.0 million of our Shares. Share repurchases were
made in the open market over the two-year period which commenced April 1, 1998.
The Board of Directors authorized the extension of the stock repurchase program
through March 31, 2004. Shares acquired under the repurchase program will be
used for stock option programs and for other corporate purposes. The repurchased
shares have been accounted for as treasury stock at cost. As of March 29, 2003,
we had repurchased 4,105,932 Shares at an aggregate cost of $77.9 million.

16. EMPLOYEE BENEFITS

PROFIT SHARING RETIREMENT SAVINGS PLANS

We sponsor two defined contribution benefit plans covering substantially
all eligible United States employees not covered by a collective bargaining
agreement. The plans include a savings plan feature under Section 401(k) of the
Internal Revenue Code. We make discretionary

F-30

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

contributions to the plans and contribute an amount equal to 50% of the first 6%
of an employee's contribution.

Under the terms of the plans, a participant is 100% vested in our matching
and discretionary contributions after five years of credited service.
Contributions under these plans approximated $3.1 million, $6.0 million and $7.4
million in fiscal 2003, 2002 and 2001, respectively.

SUPPLEMENTAL RETIREMENT PLAN

The Company has a non-qualified supplemental retirement plan for certain
highly compensated employees whose benefits under the 401(k) profit sharing
retirement savings plans are expected to be constrained by the operation of
certain Internal Revenue Code limitations. These supplemental benefits vest over
time and the compensation expense related to these benefits is recognized over
the vesting period. The amounts accrued under these plans were $16.0 million and
$14.1 million at March 29, 2003, and March 30, 2002, and are reflected in other
noncurrent liabilities in the accompanying consolidated balance sheets. Total
compensation expense related to these benefits was $1.4 million, $2.9 million
and $2.5 million in fiscal 2003, 2002 and 2001, respectively. This liability is
partially funded through whole-life policies, which had cash surrender values of
$11.8 million and $11.0 million at March 29, 2003, and March 30, 2002, and are
reflected in other assets in the accompanying balance sheets.

DEFERRED COMPENSATION

We have deferred compensation arrangements for certain key executives which
generally provide for payments upon retirement, death or termination of
employment. The amounts accrued under these plans were $4.6 million and $6.2
million at March 29, 2003, and March 30, 2002, and are reflected in other
noncurrent liabilities in the accompanying consolidated balance sheets. Total
compensation expense related to these compensation arrangements was $0.7 million
each for fiscal 2003, 2002 and 2001. We fund a portion of these obligations
through the establishment of trust accounts on behalf of the executives
participating in the plans. The trust accounts are reflected in other assets in
the accompanying consolidated balance sheets.

UNION PENSION

We participate in a multi-employer pension plan and are required to make
contributions to the Union of Needletrades Industrial and Textile Employees
(Union) for dues based on wages paid to union employees. A portion of these dues
is allocated by the Union to a retirement fund which provides defined benefits
to substantially all unionized workers. We do not participate in the management
of the plan and have not been furnished with information with respect to the
type of benefits provided, vested and nonvested benefits or assets.

Under the Employee Retirement Income Security Act of 1974, as amended, an
employer, upon withdrawal from or termination of a multi-employer plan, is
required to continue funding its proportionate share of the plan's unfunded
vested benefits. Such withdrawal liability was assumed in conjunction with the
acquisition of certain assets from a nonaffiliated licensee. We have no current
intention of withdrawing from the plan.

17. SEGMENT REPORTING

The Company operates in three business segments: wholesale, retail and
licensing. Our reportable segments are individual business units that either
offer different products and services, or are managed separately since each
segment requires different strategic initiatives,

F-31

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

promotional campaigns, marketing and advertising, based upon its own individual
positioning in the market. Additionally, these segments reflect the reporting
basis used internally by senior management to evaluate performance and the
allocation of resources.

Our wholesale segment consists of two operating units: Polo Brands and
Collection Brands. Each unit designs, sources, markets and distributes discrete
brands. Both units primarily sell products to major department and specialty
stores and to our owned and licensed retail stores.

The retail segment operates two types of stores: outlet and full-price
stores. The stores sell our products purchased from our wholesale segment, our
licensees and our suppliers.

The licensing segment, which consists of product, international and home,
generates revenues from royalties through its licensing alliances. The licensing
agreements grant the licensee rights to use our various trademarks in connection
with the manufacture and sale of designated products in specified geographical
areas.

The accounting policies of the segments are consistent with those described
in Note 1. Intersegment sales and transfers are recorded at cost and treated as
a transfer of inventory. All intercompany revenues and profits or losses are
eliminated in consolidation. We do not review these sales when evaluating
segment performance. We evaluate each segment's performance based upon income or
loss from operations before interest, foreign currency gains and losses,
restructuring charges and income taxes. Corporate overhead expenses are
allocated to each segment based upon each segment's usage of corporate
resources.

Our net revenues, income from operations, depreciation and amortization
expense and capital expenditures for fiscal 2003, 2002 and 2001, and total
assets as of March 29, 2003, March 30, 2002 and March 31, 2001, for each segment
were as follows (Dollars in thousands):

F-32

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Our net revenues for fiscal 2003, 2002 and 2001, and our long-lived assets
as of March 29, 2003 and March 30, 2002 by geographic location were as follows
(Dollars in thousands):

18. LEGAL PROCEEDINGS

On September 18, 2002, an employee at one of the Company's stores filed a
lawsuit against Polo Retail, LLC and the Company in the United States District
Court for the District of Northern California alleging violations of California
antitrust and labor laws. The plaintiff purports to represent a class of
employees who have allegedly been injured by a requirement that certain retail
employees purchase and wear Company apparel as a condition of their employment.
The complaint, as amended, seeks an unspecified amount of actual and punitive
damages, disgorgement of profits and injunctive and declaratory relief. The
Company answered the amended complaint on November 4, 2002. A hearing on cross
motions for summary judgment on

F-33

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the issue of whether the Company's policies violated California law has been
scheduled for August 14, 2003, and the motions are expected to be filed in June
or July.

On April 14, 2003, a second putative class action was filed in the San
Francisco Superior Court. This suit, brought by the same attorneys, alleges near
identical claims to these in the Federal class action. The class representatives
consist of former employees and the plaintiff in the Federal Court action.
Defendants in this class action include the Company, Polo Retail, LLC, Fashions
Outlet of America, Inc., Polo Retail, Inc., San Francisco Polo, Ltd. as well as
a non-Polo corporate defendant and two current managers. As in the Federal
action, the complaint seeks an unspecified amount of action and punitive,
restitution of monies spent, and declaratory relief. The Company intends to file
a motion to stay the state court class action pending resolution of the Federal
class action.

In January 1999, two actions were filed in California naming as defendants
more than a dozen United States-based companies that, at the time, sourced
apparel garments from Saipan (Commonwealth of the Northern Mariana Islands) and
a large number of Saipan-based factories. The actions asserted that the Saipan
factories engaged in unlawful practices relating to the recruitment and
employment of foreign workers, and that the apparel companies, by virtue of
their alleged relationships with the factories, had violated various federal and
state laws.

One action, filed in California Superior Court in San Francisco by a union
and three public interest groups, alleged unfair competition and false
advertising and equitable relief, unspecified amounts for restitution and
disgorgement of profits, interest and an award of attorneys' fees. The second,
filed in Federal Court for the Central District of California and subsequently
transferred first to the United States District Court for the District of Hawaii
and then to the United States District Court in Saipan, was brought on behalf of
a purported class consisting of the Saipan factory workers. It alleged claims
under the Federal civil RICO statute, Federal peonage and involuntary servitude
laws, the Alien Tort Claims Act, and state tort law, and sought equitable relief
and unspecified damages, including treble and punitive damages, interest and an
award of attorneys' fees.

Although we were not named as a defendant in these suits, we source
products in Saipan, and counsel for the plaintiffs in these actions informed us
that we were a potential defendant in these or similar actions. Together with
some other potential defendants, we entered into an agreement to settle any
claims for nonmaterial consideration.

As part of the settlement, we were named as a defendant, along with certain
other apparel companies, in a State Court action in California styled Union of
Needletrades Industrial and Textile Employees, et al. v. Brylane, L.P., et al.,
in the San Francisco County Superior Court, and in a Federal Court action styled
Doe I., et al. v. Brylane, L.P., et al. in the United States District Court for
the District of Hawaii, that mirrored portions of the larger State and Federal
Court actions but did not include RICO and certain of the other claims alleged
in those actions. The California action was subsequently dismissed as part of
the settlement, and the Federal Court action was transferred to the United
States District Court in Saipan. On April 23, 2003, the Federal Court gave final
approval of the settlement and dismissed the claims of the settlement class
members against the Company with prejudice.

On October 1, 1999, we filed a lawsuit against the United States Polo
Association Inc., Jordache, Ltd. and certain other entities affiliated with
them, alleging that the defendants were infringing on our famous trademarks.
This lawsuit continues to proceed as both sides are awaiting the court's
decision on various motions. In connection with this lawsuit, on July 19, 2001,
the United States Polo Association and Jordache filed a lawsuit against us in
the United

F-34

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

States District Court for the Southern District of New York. This suit, which is
effectively a counterclaim by them in connection with the original trademark
action, asserts claims related to our actions in connection with our pursuit of
claims against the United States Polo Association and Jordache for trademark
infringement and other unlawful conduct. Their claims stem from our contacts
with the United States Polo Association's and Jordache's retailers in which we
informed these retailers of our position in the original trademark action. The
United States Polo Association and Jordache seek $50.0 million in compensatory
damages and $50.0 million in punitive damages from us. This new suit has been
consolidated with the original trademark action for purposes of discovery and
trial. We believe that the United States Polo Association's and Jordache's
claims are substantially without merit and intend to pursue our claims and
defend against those of the United States Polo Association and Jordache
vigorously.

See Note 20 for update of Jones matter described in "Licensing Commitments"
within Note 13.

We are otherwise involved from time to time in legal claims involving
trademark and intellectual property, licensing, employee relations and other
matters incidental to our business. We believe that the resolution of these
other matters currently pending will not individually or in aggregate have a
material adverse effect on our financial condition or results of operations.

19. QUARTERLY INFORMATION (UNAUDITED)

The following is a summary of certain unaudited quarterly financial
information for fiscal 2003 and 2002 (Dollars in thousands). See Note 1
"Consolidation of European Entities -- Change in Reporting Period":

F-35

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

20. SUBSEQUENT EVENTS

On June 3, 2003, Jones filed a lawsuit against us in the Supreme Court of
the State of New York alleging among other things that we breached our
agreements with Jones with respect to the "Lauren" trademark by asserting our
rights pursuant to the Cross Default and Term Extension Agreement and that we
induced Ms. Jackwyn Nemerov, the former President of Jones, to breach the
non-compete and confidentiality clauses in Ms. Nemerov's employment agreement
with Jones. Jones has indicated that it will treat the Lauren license agreements
as terminated as of December 31, 2003. Jones is seeking compensatory damages of
$550.0 million as well as punitive damages and to enforce the provisions of Ms.
Nemerov's agreement. If Jones' lawsuit were to be determined adversely to us, it
could have a material adverse effect on our results of operations and financial
condition; however, we believe that the lawsuit is without merit and that we
will prevail. Also on June 3, 2003, we filed a lawsuit against Jones in the
Supreme Court of the State of New York seeking among other things an injunction
and a declaratory judgment that the Lauren license agreements terminate as of
December 31, 2003 pursuant to the terms of the Cross Default and Term Extension
Agreement. The Company is preparing to begin production and marketing of the
Lauren and Ralph lines with shipments beginning in January 2004.

F-36

POLO RALPH LAUREN CORPORATION

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

- ---------------

(a) Accounts written-off as uncollectible.

S-1