Polo Ralph Lauren Reports Third Quarter Fiscal 2006 Results; Third Quarter Revenues Up 10%; Operating Income Increased 24%

Net revenues for the third quarter of Fiscal 2006 increased 10% to$995 million compared to $902 million in the third quarter last year.Operating income increased 24% to $144 million compared to $116million in the third quarter last year. Operating income as a percentof revenue improved 150 basis points to 14.4%.

For the first nine months of Fiscal 2006, net income was $246million, or $2.30 per diluted share, compared to net income of $167million, or $1.61 per diluted share for the comparable period lastyear. Net revenues for the first nine months increased 15% to $2.775billion, compared to $2.403 billion for the same period last year.Operating income for the first nine months increased 55% to $401million compared to $258 million in the same period last year.Operating income as a percent of revenue improved 370 basis points to14.4%.

"This is an exciting time for our company as we continue tointroduce new product categories and take more direct control of ourbrand. The Ralph Lauren brand has never been stronger as the demandfor our luxury products around the world is accelerating," said RalphLauren, Chairman and Chief Executive Officer. "We look forward tolaunching our footwear line this year and developing our denimbusiness now that we have bought back Polo Jeans. We remain committedto opening new retail stores around the world and are excited aboutour newest flagship store opening in Tokyo next month. We believe thesound fundamentals of our business will allow us to take advantage ofthe growing global appeal of the Ralph Lauren brand."

"We have achieved tremendous results in the first nine months ofour fiscal year, including high quality sales and outstandingoperating profit flow-through. We are very pleased with our doubledigit retail and wholesale sales growth and continuing strong marginimprovement in these businesses," said Roger Farah, President andChief Operating Officer. "Our continued success is attributed to theconsistent execution of our long-term strategy and the investment ofour strong cash flow back into our company. As we look to 2007 andbeyond, we believe that the long-term initiatives we have undertakenthis year, particularly in expanding control over our brand, willenable us to continue to capitalize on the demand for our productaround the world."

Recent Developments

Acquisition of Polo Jeans License and Litigation Settlement

On February 3, 2006, we completed the purchase of the Polo Jeansbusiness for men's and women's casual apparel and sportswear in theUnited States from Jones Apparel for a purchase price of approximately$255 million from cash on hand. In Fiscal 2006 the transaction isexpected to be dilutive to earnings per share by approximately $0.05.In Fiscal 2007 the transaction is expected to be neutral to earningsdue to the transition service agreement costs and investments in thepositioning of this business to drive future years' growth. Alloutstanding litigation and claims between the two companies have beensettled for $100 million from cash on hand. In Fiscal 2005, Polo RalphLauren recorded a $100 million charge associated with these claims andlitigation.

Disposition of Club Monaco Caban Home Stores and Club MonacoOutlet Stores

As we continue to focus Club Monaco on its core apparel andaccessories business, we intend to dispose of its eight Caban homestores. In addition, with better managed inventory, the company nolonger needs the outlet stores as a means of disposing of excessmerchandise and plans to close all five Club Monaco outlet stores. InFiscal 2006, these two actions are expected to be dilutive to earningsper share by approximately $0.10.

Third Quarter and First Nine Months Fiscal 2006 Income StatementReview

Net Revenues

Net revenues for the third quarter of Fiscal 2006 increased 10% to$995 million compared to $902 million in the third quarter last year,with a 15% increase in retail sales and a 6% increase in wholesalesales. Net revenues for the first nine months increased 15% to $2.775billion compared to $2.403 billion in the same period last year,reflecting strength in all business units with a 16% increase inretail sales and a 17% increase in wholesale sales.

Gross Profit

Gross Profit for the third quarter increased 19% to $531 millioncompared to $446 million in the third quarter of Fiscal 2005. Grossmargin rate improved 390 basis points in the third quarter to 53.4% ofrevenues compared to 49.5% of revenues during the same period lastyear. Gross Profit for the first nine months increased 24% to $1.497billion compared to $1.208 billion in the first nine months of Fiscal2005. Gross margin rate improved 370 basis points in the first ninemonths to 54.0% of revenues compared to 50.3% of revenues during thesame period last year. Improvements in gross margin for the thirdquarter and the first nine months reflect improvements in both ourwholesale and retail segments from increases in full-pricesell-throughs and sourcing efficiencies.

SG&A Expenses

SG&A expenses were $388 million in the third quarter compared to$330 million in the third quarter of Fiscal 2005. The expenses were tosupport our growing retail business, for ongoing investment in talent,increased branding support in Europe, the closing of Club Monacooutlet stores and the planned disposition of the Caban home stores, aswell as the inclusion of footwear expenses. SG&A expenses as a percentof revenues were 39.0% in the third quarter compared to 36.6% for thethird quarter last year. SG&A expenses in the first nine months were$1.097 billion compared to $949 million during the same period lastyear. SG&A expenses as a percent of revenues were 39.5% in the firstnine months of Fiscal 2006 and flat to 2005.

Operating Income

Operating income for the third quarter increased 24% to $144million compared to $116 million in the third quarter last year.Operating margin was 14.4% compared to 12.9% in the third quarter lastyear, an increase of 150 basis points. For the first nine months,operating income increased 55% to $401 million compared to $258million during the same period last year. Operating margin for thefirst nine months was 14.4%, an increase of 370 basis points comparedto 10.7% last year.

Third Quarter and First Nine Months Fiscal 2006 Segment Review

Wholesale

Wholesale sales in the third quarter were $454 million, up 6%,compared to $427 million in the third quarter last year. The increasecame primarily from the inclusion of our footwear business andimproved performance in womenswear, our European business,childrenswear and our full-price menswear business. Wholesaleoperating income in the third quarter increased 33% to $82 millioncompared to $62 million in the third quarter last year. Wholesaleoperating margin improved 370 basis points to 18.1% in the thirdquarter compared to 14.4% in the third quarter last year.

Wholesale sales in the first nine months were $1.369 billion, up17%, compared to $1.169 billion during the same period last year. Theincrease came primarily from childrenswear, footwear, menswear, ourEuropean business and womenswear. We acquired childrenswear in thesecond quarter of Fiscal 2005, therefore the first nine months ofFiscal 2006 reflect the inclusion of childrenswear sales in all threequarters. We acquired footwear in the second quarter of Fiscal 2006,therefore the first nine months of Fiscal 2006 reflect the inclusionof footwear in the second and third quarters. Wholesale operatingincome in the first nine months increased 71% to $272 million comparedto $159 million in the same period last year with improvement in allproduct categories. Wholesale operating margin improved 620 basispoints to 19.8% in the first nine months compared to 13.6% in the sameperiod last year.

Retail

Retail sales were $479 million in the third quarter, up 15%,compared to $416 million in the third quarter last year, reflectingincreases in all our retail formats. Total company comparable storesales increased 7.4%, reflecting an increase of 10.2% at Ralph Laurenstores, 7.1% at Club Monaco stores and 6.3% in our factory stores.Ralph Lauren Media revenues increased 27%. Retail operating incomeincreased 30% to $64 million compared to $49 million in the thirdquarter last year. Retail operating margin improved 150 basis pointsto 13.3% in the third quarter compared to 11.8% in the third quarterlast year.

Retail sales in the first nine months were $1.224 billion, up 16%,compared to $1.057 billion in the same period last year, reflectingincreases in all our retail formats. Total company comparable storesales increased 7.0%, reflecting an increase of 7.4% at Ralph Laurenstores, 7.3% at Club Monaco stores and 6.8% in our factory stores.Ralph Lauren Media revenues increased 33%. Retail operating income inthe first nine months increased 50% to $139 million compared to $93million in the same period last year. Retail operating marginsimproved 250 basis points to 11.3% in the first nine months comparedto 8.8% in the comparable period last year.

At the end of the third quarter, we operated 297 stores, with2.325 million square feet, compared to 278 stores, with 2.155 millionsquare feet, at the end of the third quarter last year. Our retailgroup consists of 67 Ralph Lauren stores, five Rugby stores, 74 ClubMonaco stores, 134 Polo factory stores, 12 Polo Jeans Co. factorystores, and five Club Monaco factory stores.

Licensing

Licensing revenues in the third quarter were $62 million, up 8%from the third quarter last year, primarily from the strengthdomestically in our Chaps for men lines. Operating income was $38million compared to $37 million in the third quarter last year.Licensing revenues in the first nine months were $182 million, up 3%from the same period last year, and operating income was $114 million,up from $112 million in the same period last year.

Third Quarter Fiscal 2006 Balance Sheet Review

We ended the quarter with $644 million in cash, or $383 millioncash net of debt, prior to our payment for Polo Jeans. We continue tocarefully manage our inventory and generated an 11% sales increase inour wholesale and retail businesses in the third quarter withrelatively flat inventory levels compared to last year.

Full Year Fiscal 2006 Outlook Compared to Fiscal 2005 GAAP Results

-- After adjusting for the closing of the Club Monaco outlet stores, the disposition of the Caban home stores and the effect of the Polo Jeans acquisition, earnings per share are expected to be in the range of $2.80 to $2.85 as opposed to $2.85 to $2.92 as we indicated last quarter. The Club Monaco strategy is expected to be dilutive by approximately $0.10 for the year and Polo Jeans is expected to be dilutive by approximately $0.05 in the fourth quarter. These initiatives are consistent with our effort to reduce off-price sales, rationalize the distribution channels and focus on Club Monaco's core apparel and accessories business, and we believe they are the right long-term decisions for the business.

Initial Full Year Fiscal 2007 Outlook Compared to Fiscal 2006 GAAPResults

-- Consolidated revenue growth is projected to be low double digit percent.

-- Including the effect of stock compensation expense, operating margins are expected to be flat compared to Fiscal 2006.

-- Earnings per share are expected to be in the range of $3.00 to $3.10. This earnings projection includes the effect of accounting for stock compensation expense of approximately $0.15 per share. As required under the new accounting rules, the Company will record stock compensation expense beginning in the first quarter of Fiscal 2007. Excluding stock compensation expense, earnings per share are expected to be in the range of $3.15 to $3.25.

-- This outlook includes the impact of the Polo Jeans acquisition completed on February 3, 2006. We expect sales of approximately $200 million in Fiscal 2007 as we focus on quality sales and reduce off-price sales. We expect it to be neutral to earnings due to transition service agreement costs and our investments in the future positioning of a global denim business.

-- Capital expenditures are expected to be comparable to Fiscal 2006 levels, at approximately $210 million.

Conference Call

As previously announced, we will host a conference call and liveonline broadcast today at 9:00 A.M. Eastern. The dial-in number is(719) 457-2680. The online broadcast is accessible athttp://investor.polo.com

Polo Ralph Lauren Corporation is a leader in the design, marketingand distribution of premium lifestyle products in four categories:apparel, home, accessories and fragrances. For more than 38 years,Polo's reputation and distinctive image have been consistentlydeveloped across an expanding number of products, brands andinternational markets. The Company's brand names, which include "Poloby Ralph Lauren", "Ralph Lauren Purple Label", "Ralph Lauren", "BlackLabel", "Blue Label", "Lauren by Ralph Lauren", "Polo Jeans Co.","RRL", "RLX", "Rugby", "RL Childrenswear", "Chaps", and "Club Monaco"among others, constitute one of the world's most widely recognizedfamilies of consumer brands. For more information, go tohttp://investor.polo.com.

This press release and oral statements made from time to time byrepresentatives of the Company contain certain "forward-lookingstatements" concerning current expectations about the Company's futureresults and condition, including sales, store openings, gross margins,expenses and earnings. Actual results might differ materially fromthose projected in the forward-looking statements. Among the factorsthat could cause actual results to materially differ include, amongothers, changes in the competitive marketplace, including theintroduction of new products or pricing changes by our competitors,changes in the economy and other events leading to a reduction indiscretionary consumer spending; risks associated with the Company'sdependence on sales to a limited number of large department storecustomers, including risks related to extending credit to customers;risks associated with the Company's dependence on its licensingpartners for a substantial portion of its net income and risksassociated with a lack of operational and financial control overlicensed businesses; risks associated with changes in social,political, economic and other conditions affecting foreign operationsor sourcing (including foreign exchange fluctuations) and the possibleadverse impact of changes in import restrictions; risks associatedwith uncertainty relating to the Company's ability to implement itsgrowth strategies or its ability to successfully integrate acquiredbusinesses; risks arising out of litigation or trademark conflicts,and other risk factors identified in the Company's Form 10-K, 10-Q and8-K Reports filed with the Securities and Exchange Commission. TheCompany undertakes no obligation to update or revise anyforward-looking statements to reflect subsequent events orcircumstances.
POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Prepared in accordance with Generally
Accepted Accounting Principles (GAAP)
(In thousands, except per share data)
(Unaudited)

Three Months Ended
----------------------------
December 31, January 1,
2005 2005
----------- ----------
(As Restated,
See Note A)

Wholesale Net Sales $ 454,008 $ 427,445
Retail Net Sales 479,174 416,194
----------- ----------
Net Sales 933,182 843,639

Licensing Revenue 62,300 57,935
----------- ----------
Net Revenues 995,482 901,574

Cost of Goods Sold (464,017) (455,498)
----------- ----------
Gross Profit 531,465 446,076

Depreciation and Amortization Expense (36,329) (26,998)
Other SG&A Expenses (351,494) (302,670)
Restructuring Charges - (218)
----------- ----------
Total SG&A Expenses (387,823) (329,886)

Operating Income 143,642 116,190

Foreign Currency Gains (Losses) (577) 400

Interest Income (Expense), net 460 (1,989)
----------- ----------
Income Before Income Taxes and
Other Income 143,525 114,601

Provision for Income Taxes (52,368) (40,280)
----------- ----------

Income after Tax 91,157 74,321
Other Income (Expense), net (B) (484) 715
----------- ----------
Net Income $ 90,673 $ 75,036
=========== ==========
Net Income Per Share - Basic $ 0.87 $ 0.74
=========== ==========
Net Income Per Share - Diluted $ 0.84 $ 0.72
=========== ==========
Weighted Average Shares Outstanding
- Basic 104,688 101,896
=========== ==========
Weighted Average Shares & Share
Equivalents Outstanding - Diluted 107,780 104,325
=========== ==========
Dividends declared per share $ 0.05 $ 0.05
=========== ==========

(A) Restated for change in lease accounting and the consolidation of
RL Media.

(B) FY 06 includes Minority Interest Expense of $1,983, partially
offset by Equity Investment Income of $1,499. FY05 (as restated)
includes Equity Investment Income of $2,607, partially offset by
Minority Interest Expense of $1,892.

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Prepared in accordance with Generally
Accepted Accounting Principles (GAAP)
(In thousands, except per share data)
(Unaudited)

Nine Months Ended
----------------------------
December 31, January 1,
2005 2005
----------- ------------
(As Restated,
See Note A)

Wholesale Net Sales $ 1,368,768 $ 1,169,032
Retail Net Sales 1,223,765 1,057,146
----------- -----------
Net Sales 2,592,533 2,226,178

Licensing Revenue 182,275 177,016
----------- -----------
Net Revenues 2,774,808 2,403,194

Cost of Goods Sold (1,277,370) (1,195,556)
----------- -----------
Gross Profit 1,497,438 1,207,638

Depreciation and Amortization
Expense (94,561) (73,919)
Other SG&A Expenses (1,002,031) (873,660)
Restructuring Charges - (1,846)
----------- -----------
Total SG&A Expenses (1,096,592) (949,425)

Operating Income 400,846 258,213

Foreign Currency Gains (Losses) (6,561) 3,334

Interest Income (Expense), net 1,008 (5,658)
----------- -----------
Income Before Income Taxes and
Other Income 395,293 255,889

Provision for Income Taxes (146,992) (89,987)
----------- -----------
Income after Tax 248,301 165,902

Other Income (Expense), net (B) (2,716) 1,127
----------- -----------
Net Income $ 245,585 $ 167,029
=========== ===========
Net Income Per Share - Basic $ 2.36 $ 1.65
=========== ===========
Net Income Per Share - Diluted $ 2.30 $ 1.61
=========== ===========
Weighted Average Shares Outstanding
- Basic 103,976 101,190
=========== ===========
Weighted Average Shares & Share
Equivalents Outstanding - Diluted 106,893 103,566
=========== ===========
Dividends declared per share $ 0.15 $ 0.15
=========== ===========

(A) Restated for change in lease accounting and the consolidation of
RL Media.

(B) FY 06 includes Minority Interest Expense of $7,270, partially
offset by Equity Investment Income of $4,554. FY05 (as restated)
includes Equity Investment Income of $5,783, partially offset by
Minority Interest Expense of $4,656.

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

December 31, January 1,
2005 2005
----------- -----------
(As Restated,
See Note A)

ASSETS
Current assets
Cash and cash equivalents $ 643,874 $ 369,523
Accounts receivable, net of allowances 356,677 335,171
Inventories 443,267 440,741
Deferred tax assets 70,392 36,008
Prepaid expenses and other 79,295 104,868
----------- -----------
1,593,505 1,286,311

Property and equipment, net 517,860 477,385
Deferred tax assets 32,932 58,688
Goodwill, net 568,435 597,987
Intangibles, net 103,653 18,377
Other assets 201,074 182,389
----------- -----------
$ 3,017,459 $ 2,621,137
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 158,795 $ 156,257
Income tax payable 55,374 71,828
Accrued expenses and other 397,216 309,166
Current maturities of long-term debt 260,778 -
----------- -----------
872,163 537,251

Long-term debt - 307,981
Other noncurrent liabilities 169,899 131,964
----------- -----------
Total liabilities 1,042,062 977,196
----------- -----------
Stockholders' equity
Common Stock 1,092 1,068
Additional paid-in-capital 761,737 647,733
Retained earnings 1,317,457 1,072,056
Treasury Stock, Class A, at cost
(4,249,230 and 4,177,600 shares) (83,280) (80,027)
Accumulated other comprehensive
income 24,593 37,704
Unearned compensation (46,202) (34,593)
----------- -----------
Total stockholders' equity 1,975,397 1,643,941
----------- -----------
$ 3,017,459 $ 2,621,137

(A) Restated for change in lease accounting, the consolidation of RL
Media and certain other reclassifications.

POLO RALPH LAUREN CORPORATION AND SUBSIDIARIES
NET REVENUES AND OPERATING INCOME
(In thousands)
(Unaudited)

The net revenues and operating income for the periods ended December
31, 2005 and January 1, 2005 for each segment were as follows:

Three Months Ended Nine Months Ended
------------------------ --------------------
Dec. 31, Jan. 1, Dec. 31, Jan. 1,
2005 2005 2005 2005
--------- --------- ----------- ----------
As Restate, (As Restate,
See Note A) See Note A)
Net revenues:
Wholesale $ 454,008 $ 427,445 $ 1,368,768 $ 1,169,032
Retail 479,174 416,194 1,223,765 1,057,146
Licensing 62,300 57,935 182,275 177,016
--------- --------- ----------- -----------
$ 995,482 $ 901,574 $ 2,774,808 $ 2,403,194
========= ========= =========== ===========
Operating Income
(Loss):
Wholesale $ 82,227 $ 61,741 $ 271,615 $ 158,982
Retail 63,855 49,175 138,846 92,870
Licensing 38,125 37,079 113,592 111,563
Corporate (40,565) (31,587) (123,207) (103,356)
--------- --------- ----------- -----------
$ 143,642 $ 116,408 $ 400,846 $ 260,059
Less: Unallocated
Restructuring Charges - (218) - (1,846)
--------- --------- ----------- -----------
$ 143,642 $ 116,190 $ 400,846 $ 258,213
========= ========= =========== ===========

(A) Restated for change in lease accounting and the consolidation of
RL Media.