RALPH LAUREN CORPRL
RALPH LAUREN CORP Income Taxes Disclosure
Income Taxes
Taxes on Income
Domestic and foreign pretax income are as follows:
| Fiscal Years Ended | ||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | March 30, 2024 | ||||||||||||||||||
| (millions) | ||||||||||||||||||||
| Domestic | $ | 230.0 | $ | 117.7 | $ | 84.6 | ||||||||||||||
| Foreign | 947.7 | 833.0 | 692.8 | |||||||||||||||||
| Total income before income taxes | $ | 1,177.7 | $ | 950.7 | $ | 777.4 | ||||||||||||||
Provisions for current and deferred income taxes are as follows:
| Fiscal Years Ended | ||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | March 30, 2024 | ||||||||||||||||||
| (millions) | ||||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | 26.5 | $ | 54.4 | $ | 17.6 | ||||||||||||||
| State and local | 26.3 | 5.2 | 15.9 | |||||||||||||||||
| Foreign | 175.4 | 198.2 | 138.7 | |||||||||||||||||
| 228.2 | 257.8 | 172.2 | ||||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | (31.2) | (37.0) | (2.8) | |||||||||||||||||
| State and local | (7.5) | 1.3 | (2.6) | |||||||||||||||||
| Foreign | 47.1 | (14.3) | (35.7) | |||||||||||||||||
| 8.4 | (50.0) | (41.1) | ||||||||||||||||||
| Total income tax provision | $ | 236.6 | $ | 207.8 | $ | 131.1 | ||||||||||||||
Tax Rate Reconciliation
In accordance with the Company's prospective adoption of ASU 2023-09 (see Note 4), the differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and income taxes provided are as follows:
| Fiscal Year Ended | ||||||||||||||
| March 28, 2026 | ||||||||||||||
| Amount | Rate | |||||||||||||
| (millions) | ||||||||||||||
| Provision for income taxes at the U.S. federal statutory rate | $ | 247.3 | 21.0 | % | ||||||||||
State and local income taxes(a) | 13.5 | 1.2 | % | |||||||||||
| Foreign tax effects | ||||||||||||||
| Switzerland | ||||||||||||||
| Cantonal taxes | 22.5 | 1.9 | % | |||||||||||
| Effect of rates different than U.S. federal statutory rate | (44.4) | (3.8 | %) | |||||||||||
| Other | (3.3) | (0.3 | %) | |||||||||||
| South Korea | 18.8 | 1.6 | % | |||||||||||
| Other foreign jurisdictions | 32.0 | 2.7 | % | |||||||||||
| Effect of cross-border tax laws | ||||||||||||||
| Foreign-derived intangible income | (18.1) | (1.5 | %) | |||||||||||
| Other | (9.0) | (0.8 | %) | |||||||||||
| Tax Credits | ||||||||||||||
| Foreign tax credits | (13.3) | (1.1 | %) | |||||||||||
| Other | (1.3) | (0.1 | %) | |||||||||||
| Non-taxable or non-deductible items | ||||||||||||||
| Non-deductible officers' compensation | 14.6 | 1.2 | % | |||||||||||
| Stock-based compensation | (19.5) | (1.7 | %) | |||||||||||
| Other | (3.8) | (0.3 | %) | |||||||||||
| Other adjustments | 0.6 | 0.1 | % | |||||||||||
Total income tax provision and effective tax rate(b) | $ | 236.6 | 20.1 | % | ||||||||||
(a)State and local taxes primarily relate to New York, New Jersey, California, and Illinois.
(b)Effective tax rate is calculated by dividing the income tax provision by income before income taxes.
In accordance with the disclosure requirements in effect prior to the adoption of ASU 2023-09, the differences between income taxes expected at the U.S. federal statutory income tax rate of 21% and income taxes provided are as follows:
| Fiscal Years Ended | ||||||||||||||
| March 29, 2025 | March 30, 2024 | |||||||||||||
| (millions) | ||||||||||||||
| Provision for income taxes at the U.S. federal statutory rate | $ | 199.6 | $ | 163.2 | ||||||||||
| Change due to: | ||||||||||||||
| State and local income taxes, net of federal benefit | 5.6 | 8.4 | ||||||||||||
| Foreign income taxed at different rates, net of U.S. foreign tax credits | (11.9) | (30.5) | ||||||||||||
| Deferred tax adjustments | — | (37.6) | ||||||||||||
| Non-creditable foreign taxes | (7.2) | 4.5 | ||||||||||||
| Changes in valuation allowance on deferred tax assets | (0.5) | (0.2) | ||||||||||||
| Unrecognized tax benefits and settlements of tax examinations | 22.0 | 21.1 | ||||||||||||
| Compensation-related adjustments | 9.9 | 7.1 | ||||||||||||
| Charitable contributions | (4.9) | (1.7) | ||||||||||||
| Other | (4.8) | (3.2) | ||||||||||||
| Total income tax provision | $ | 207.8 | $ | 131.1 | ||||||||||
Effective tax rate(a) | 21.9 | % | 16.9 | % | ||||||||||
(a)Effective tax rate is calculated by dividing the income tax provision by income before income taxes.
The Company's Fiscal 2026 effective tax rate was lower than the U.S. federal statutory income tax rate of 21% primarily due to the impact of compensation-related adjustments and foreign-derived intangible income deduction, partially offset by the unfavorable tax impact of state taxes, other permanent adjustments, and earnings generated in higher taxed foreign jurisdictions versus the U.S.
The Company's Fiscal 2025 effective tax rate was higher than the U.S. federal statutory income tax rate of 21% primarily due to uncertain tax positions and compensation-related adjustments, partially offset by a favorable tax adjustment related to the revaluation of a deferred tax liability on foreign earnings and the favorable tax impact of earnings generated in lower taxed foreign jurisdictions versus the U.S.
The Company's Fiscal 2024 effective tax rate was lower than the U.S. federal statutory income tax rate of 21% primarily due to deferred tax benefits recognized as a result of transactions entered into as part of a reorganization of the Company's legal entity structure, changes in tax legislation, and the favorable tax impact of earnings generated in lower taxed foreign jurisdictions versus the U.S., partially offset by an increase in income tax reserves. Additionally, the lower effective tax rate for Fiscal 2024 was also driven by favorable adjustments related to the revaluation of deferred tax assets arising from Swiss tax reform and favorable deferred tax adjustments related to the European Union's anti-tax avoidance directive.
Cash Paid for Taxes
Disclosure of disaggregated cash paid for income taxes (net of refunds received), in accordance with the Company's prospective adoption of ASU 2023-09 in Fiscal 2026, is as follows:
| Fiscal Year Ended | ||||||||
| March 28, 2026 | ||||||||
| (millions) | ||||||||
| U.S. Federal | $ | 71.2 | ||||||
| U.S. State and local | 20.1 | |||||||
| Foreign | ||||||||
| South Korea | 47.9 | |||||||
| Switzerland federal taxes | 43.5 | |||||||
| United Kingdom | 37.4 | |||||||
| Switzerland cantonal taxes | 29.0 | |||||||
| Japan | 19.6 | |||||||
| Hong Kong | 18.5 | |||||||
| Other | 69.4 | |||||||
| Cash paid for income taxes, net of refunds | $ | 356.6 | ||||||
Cash paid for income taxes (net of refunds received) was $151.6 million and $155.5 million in Fiscal 2025 and Fiscal 2024, respectively.
Deferred Taxes
Significant components of the Company's deferred tax assets and liabilities are as follows:
| March 28, 2026 | March 29, 2025 | |||||||||||||
| (millions) | ||||||||||||||
| Lease liabilities | $ | 310.2 | $ | 288.5 | ||||||||||
| Goodwill and other intangible assets | 87.7 | 95.9 | ||||||||||||
| Deferred compensation | 79.1 | 65.1 | ||||||||||||
| Deferred income | 71.7 | 30.8 | ||||||||||||
| Unrecognized tax benefits | 64.2 | 91.7 | ||||||||||||
| Inventory basis difference | 44.7 | 27.6 | ||||||||||||
| Property and equipment | 39.9 | 52.5 | ||||||||||||
| Receivable allowances and reserves | 35.3 | 33.3 | ||||||||||||
| Capitalized software | 29.6 | 31.3 | ||||||||||||
| Net operating loss carryforwards | 8.8 | 8.8 | ||||||||||||
| Lease ROU assets | (255.6) | (226.8) | ||||||||||||
| Cumulative translation adjustment and hedges | (15.4) | (21.4) | ||||||||||||
| Other | 5.2 | 13.9 | ||||||||||||
| Valuation allowance | (168.4) | (161.7) | ||||||||||||
Net deferred tax assets(a) | $ | 337.0 | $ | 329.5 | ||||||||||
(a)Net deferred tax balances as of March 28, 2026 and March 29, 2025 were comprised of non-current deferred tax assets of $345.1 million and $335.4 million, respectively, recorded within deferred tax assets, and non-current deferred tax liabilities of $8.1 million and $5.9 million, respectively, recorded within other non-current liabilities in the consolidated balance sheets.
The Company has available state net operating loss carryforwards of $2.0 million (net of tax), for tax purposes to offset future taxable income. There are no federal or foreign net operating loss carryforwards available to the Company. The net operating loss carryforwards expire beginning in the Company's fiscal year ending April 3, 2032.
The Company also has available state and foreign net operating loss carryforwards of $5.1 million and $1.9 million (both net of tax), respectively, for which no net deferred tax asset has been recognized. A full valuation allowance has been recorded against these carryforwards since the Company does not believe that it will more likely than not be able to utilize these carryforwards to offset future taxable income. Subsequent recognition of these deferred tax assets would result in an income tax benefit in the year of such recognition. The valuation allowances relating to state and foreign net operating loss carryforwards remained relatively unchanged from the prior year for jurisdictions where the Company is no longer able to utilize the carryforwards in the future.
In January 2018, U.S. tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "TCJA") became effective. The TCJA significantly revised U.S. tax law by, among other provisions, creating a territorial tax system that included a one-time mandatory transition tax on previously deferred foreign earnings. As a result of such taxation of undistributed foreign earnings, the Company reevaluated its permanent reinvestment assertion and determined that undistributed foreign earnings that were subject to the TCJA's one-time mandatory transition tax were no longer considered to be permanently reinvested, effective December 31, 2017. The mandatory transition tax did not apply to undistributed foreign earnings generated after December 31, 2017. Accordingly, provision has not been made for U.S. or additional foreign taxes on approximately $4.115 billion of undistributed earnings of foreign subsidiaries generated after December 31, 2017, as such earnings are expected to be permanently reinvested. These earnings could become subject to tax if they were remitted as dividends, if foreign earnings were lent to RLC, a subsidiary or a U.S. affiliate of RLC, 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 practicable.
Uncertain Income Tax Benefits
Fiscal 2026, Fiscal 2025, and Fiscal 2024 Activity
Reconciliations of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties, for Fiscal 2026, Fiscal 2025, and Fiscal 2024 are presented below:
| Fiscal Years Ended | ||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | March 30, 2024 | ||||||||||||||||||
| (millions) | ||||||||||||||||||||
| Unrecognized tax benefits beginning balance | $ | 169.1 | $ | 98.4 | $ | 77.1 | ||||||||||||||
| Additions related to current period tax positions | 3.9 | 32.5 | 21.7 | |||||||||||||||||
| Additions related to prior period tax positions | 16.9 | 41.8 | 2.4 | |||||||||||||||||
| Reductions related to prior period tax positions | (59.8) | (0.6) | (0.9) | |||||||||||||||||
| Reductions related to expiration of statutes of limitations | (1.1) | (2.6) | (1.0) | |||||||||||||||||
| Reductions related to settlements with taxing authorities | (1.7) | — | (0.1) | |||||||||||||||||
| Additions (reductions) related to foreign currency translation | 8.0 | (0.4) | (0.8) | |||||||||||||||||
| Unrecognized tax benefits ending balance | $ | 135.3 | $ | 169.1 | $ | 98.4 | ||||||||||||||
The Company classifies interest and penalties related to unrecognized tax benefits as part of its provision for income taxes. Reconciliations of the beginning and ending amounts of accrued interest and penalties related to unrecognized tax benefits for Fiscal 2026, Fiscal 2025, and Fiscal 2024 are presented below:
| Fiscal Years Ended | ||||||||||||||||||||
| March 28, 2026 | March 29, 2025 | March 30, 2024 | ||||||||||||||||||
| (millions) | ||||||||||||||||||||
| Accrued interest and penalties beginning balance | $ | 24.2 | $ | 20.3 | $ | 16.7 | ||||||||||||||
| Net additions charged to expense | 8.8 | 4.1 | 3.9 | |||||||||||||||||
| Reductions related to prior period tax positions | — | (0.1) | (0.2) | |||||||||||||||||
| Reductions related to settlements with taxing authorities | (0.1) | — | — | |||||||||||||||||
| Additions (reductions) related to foreign currency translation | 0.5 | (0.1) | (0.1) | |||||||||||||||||
| Accrued interest and penalties ending balance | $ | 33.4 | $ | 24.2 | $ | 20.3 | ||||||||||||||
The total amount of unrecognized tax benefits, including interest and penalties, was $168.7 million and $193.3 million as of March 28, 2026 and March 29, 2025, respectively, and was included within the non-current liability for unrecognized tax benefits in the consolidated balance sheets. The total amount of unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate was $104.4 million and $101.6 million as of March 28, 2026 and March 29, 2025, respectively.
On August 26, 2024, the U.S. Tax Court issued a decision in Varian Medical Systems, Inc. v. Commissioner related to the TCJA deduction for certain deemed foreign dividends otherwise subject to the transition tax on unrepatriated earnings of applicable foreign subsidiaries. Based on the Company's evaluation of the technical merits of this decision, during Fiscal 2025 it filed a protective refund claim with the Internal Revenue Service claiming a transition tax refund of $34.4 million for which the Company recorded a corresponding deferred tax asset. However, as the Company believes it is more likely than not that the intended refund claim will not be received, during Fiscal 2025 it also recorded an uncertain tax position reserve for the full refund claim of $34.4 million. Accordingly, on a net basis, this development had no resulting impact on the Company's effective tax rate or its consolidated statements of operations during Fiscal 2025.
Future Changes in Unrecognized Tax Benefits
The total amount of unrecognized tax benefits relating to the Company's tax positions is subject to change based on future events including, but not limited to, settlements of ongoing tax audits and assessments and the expiration of applicable statutes of limitations. The Company files a consolidated U.S. federal income tax return, as well as tax returns in various state, local, and foreign jurisdictions. The Company is generally no longer subject to examinations by the relevant tax authorities for years prior to its fiscal year ended March 28, 2015.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 21, 2026 | Showing above |
| 2025 | May 22, 2025 | |
| 2024 | May 23, 2024 | |
| 2023 | May 25, 2023 | |
| 2022 | May 24, 2022 | |
| 2021 | May 20, 2021 | |
| 2020 | May 27, 2020 | |
| 2019 | May 16, 2019 | |
| 2018 | May 23, 2018 | |
| 2017 | May 18, 2017 | |
| 2016 | May 19, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.