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Tapestry, Inc.

Tapestry, Inc.TPREarnings & Financial Report

NYSE · Consumer Discretionary · Apparel, Accessories & Luxury Goods

Tapestry is a form of textile art which was traditionally woven by hand on a loom. Normally it is used to create images rather than patterns. Tapestry is relatively fragile, and difficult to make, so most historical pieces are intended to hang vertically on a wall, or sometimes horizontally over a piece of furniture such as a table or bed. Some periods made smaller pieces, often long and narrow and used as borders for other textiles.

What changed in Tapestry, Inc.'s 10-K — 2022 vs 2023

Top changes in Tapestry, Inc.'s 2023 10-K

375 paragraphs added · 428 removed · 286 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

73 edited+18 added−28 removed46 unchanged
Also included in this category are novelty accessories (including address books, time management accessories, travel accessories, sketchbooks and portfolios), key rings and charms. Men’s — Men’s includes bag collections (including business cases, computer bags, messenger-style bags, backpacks and totes), small leather goods (including wallets, card cases, travel organizers and belts), footwear, watches, fragrances, sunglasses, novelty accessories and ready-to-wear items.
Also included in this category are novelty accessories (including address books, time management accessories, travel accessories, sketchbooks and portfolios), belts, key rings and charms. Men’s — Men’s includes bag collections (including business cases, computer bags, messenger-style bags, backpacks and totes), small leather goods (including wallets, card cases, travel organizers and belts), footwear, watches, fragrances, sunglasses, novelty accessories and ready-to-wear items.
The Board of Directors has ultimate oversight of the Company’s risk management policies and procedures, and has delegated primary responsibility for monitoring the risks and programs in this area to the Audit Committee, which receives quarterly updates on information security and privacy risk and compliance. The Board of Directors receives periodic updates on these topics as well.
The Board of Directors (the "Board") has ultimate oversight of the Company’s risk management policies and procedures, and has delegated primary responsibility for monitoring the risks and programs in this area to the Audit Committee, which receives quarterly updates on information security and privacy risk and compliance. The Board receives periodic updates on these topics as well.
The Company maintains an internal global trade, customs and product compliance organization to help manage its import/export and regulatory affairs activity. COMPETITION The product categories in which we operate are highly competitive. The Company competes primarily with European and American luxury and accessible luxury brands as well as private label retailers.
The Company maintains an internal global trade, customs and product compliance organization to help manage its import/export and regulatory affairs activity. 11 COMPETITION The product categories in which we operate are highly competitive. The Company competes primarily with European and American luxury and accessible luxury brands as well as private label retailers.
In addition, Kate Spade brand kids footwear items, housewares and home accessories, such as fashion bedding and tableware, and stationery and gifts are included in this category. DESIGN AND MERCHANDISING Our creative leaders are responsible for conceptualizing and implementing the design direction for our brands across the consumer touchpoints of product, stores and marketing.
In addition, Kate Spade brand kids items, housewares and home accessories, such as fashion bedding and tableware, and stationery and gifts are included in this category. DESIGN AND MERCHANDISING Our creative leaders are responsible for conceptualizing and implementing the design direction for our brands across the consumer touchpoints of product, stores and marketing.
Additionally, we continue to leverage various third-party digital platforms to sell our products to customers. Wholesale — We work closely with our wholesale partners to ensure a clear and consistent product presentation. We enhance our presentation of proprietary Coach brand fixtures within the department store environment in select locations.
Additionally, we continue to leverage various third-party digital platforms to sell our products to customers. Wholesale — We work closely with our wholesale partners to ensure a clear and consistent product presentation. We enhance our presentation with proprietary Coach brand fixtures within the department store environment in select locations.
The Board approves long-term sustainability goals, strategic moves or major plans of action and receives updates at least annually. Tapestry's Governance and Nominations Committee of the Board receives quarterly updates on sustainability strategy, including climate-related topics, progress towards the 2025 goals and other ESG related initiatives.
The Board approves long-term sustainability goals, strategic moves or major plans of action and receives updates at least annually. Tapestry's Governance and Nominations Committee of the Board receives quarterly updates on sustainability strategy, including climate-related topics, progress towards the ESG goals and other ESG related initiatives.
As a result, the Company is subject to stringent government regulations and restrictions with respect to its cross-border activity either by the various customs and border protection agencies or by other government 11 agencies which control the quality and safety of the Company’s products.
As a result, the Company is subject to stringent government regulations and restrictions with respect to its cross-border activity either by the various customs and border protection agencies or by other government agencies which control the quality and safety of the Company’s products.
Digital — We view our digital platforms as instruments to deliver Coach products to customers directly, with the benefit of added accessibility, so that consumers can purchase Coach products wherever they choose. For Coach, we have e-commerce sites in the U.S., Canada, Japan, mainland China, several throughout Europe, Australia and several throughout the rest of Asia.
Digital — We view our digital platforms as instruments to deliver Coach products to customers directly, with the benefit of added accessibility, so that consumers can purchase Coach products wherever they choose. For Coach, we have e-commerce sites in the U.S., Canada, Japan, Greater China, several throughout Europe, Australia and several throughout the rest of Asia.
Digital — We view our digital platform as an instrument to deliver Stuart Weitzman products to customers directly with the benefit of added accessibility as consumers can purchase Stuart Weitzman brand products wherever they choose. For Stuart Weitzman, we have e-commerce sites in the U.S, Canada and mainland China.
Digital — We view our digital platform as an instrument to deliver Stuart Weitzman products to customers directly with the benefit of added accessibility as consumers can purchase Stuart Weitzman brand products wherever they choose. For Stuart Weitzman, we have e-commerce sites in the U.S, Canada and Greater China.
OUR BRANDS The Company has three reportable segments: • Coach includes global sales of Coach products to customers through Coach operated stores, including e-commerce sites and concession shop-in-shops, and sales to wholesale customers and through independent third party distributors.
OUR BRANDS The Company has three reportable segments: • Coach - Includes global sales primarily of Coach brand products to customers through Coach operated stores, including e-commerce sites and concession shop-in-shops, sales to wholesale customers and through independent third-party distributors.
We have also committed to setting science-based emissions reduction targets in line with Science Based Targets initiative (SBTi's) criteria and 1.5⁰C. • Our Communities: ◦ We aim to support and empower the communities where our employees live and work, and provide the resources and investment needed to strengthen the regions where we operate, through volunteer efforts, philanthropic initiatives, product donations, and social impact programming. ◦ We have set 2025 goals focused on volunteerism programs, philanthropic initiatives and supply chain empowerment programs.
We have also set new science-based emissions reduction targets in line with Science Based Targets initiative ("SBTi's") criteria and 1.5⁰C. • Our Communities: ◦ We aim to support and empower the communities where our employees live and work, and provide the resources and investment needed to strengthen the regions where we operate, through volunteer efforts, philanthropic initiatives, product donations, and social impact programming. ◦ We have set goals focused on volunteerism programs, philanthropic initiatives and supply chain empowerment programs.
The Company’s corporate responsibility strategy, including oversight, management and identification of risks, is ultimately governed by Board of Directors and overseen by an Environmental, Social and Corporate Governance ("ESG") Steering Committee, which is comprised of members of our executive leadership team, and driven by an ESG Task Force, which is comprised of senior leaders and cross-functional members from major business functions.
The Company’s ESG and Corporate Responsibility Strategy, including oversight, management and identification of risks, is ultimately governed by the Board of Directors and overseen by an ESG Steering Committee, which is comprised of members of our executive leadership team, and driven by an ESG Task Force, which is comprised of senior leaders and cross-functional members from major business functions.
Of these employees, approximately 14,400 employees worked in retail locations, of which 5,500 were part-time employees. This total excludes seasonal and temporary employees that the Company employs, particularly during the second quarter due to the holiday season. The Company believes that its relations with its employees are good, and has never encountered a strike or work stoppage.
Of these employees, approximately 14,700 employees worked in retail locations, of which 5,900 were part-time employees. This total excludes seasonal and temporary employees that the Company employs, particularly during the second quarter due to the holiday season. The Company believes that its relations with its employees are good, and has never encountered a strike or work stoppage.
Later in fiscal 2018, the Company changed its name to Tapestry, Inc. Tapestry, Inc. is a leading New York-based house of accessible luxury accessories and lifestyle brands. Our global house of brands unites the magic of Coach, kate spade new york and Stuart Weitzman.
Later in fiscal 2018, the Company changed its name to Tapestry, Inc. Tapestry, Inc. (the "Company") is a leading New York-based house of iconic accessories and lifestyle brands. Our global house of brands unites the magic of Coach, kate spade new york and Stuart Weitzman.
In addition, it licenses trademarks and copyrights used in connection with the production, marketing and distribution of certain categories of goods and limited edition collaborative special projects. Tapestry also owns and maintains registrations in countries around the world for trademarks in relevant classes of products. Major trademarks include TAPESTRY, COACH, STUART WEITZMAN, KATE SPADE and kate spade new york.
In addition, it licenses trademarks and copyrights used in connection with the production, marketing and distribution of certain categories of goods and limited edition collaborations. Tapestry also owns and maintains registrations in countries around the world for trademarks in relevant classes of products. Major trademarks include TAPESTRY, COACH, STUART WEITZMAN, KATE SPADE and KATE SPADE NEW YORK.
Coach has developed relationships with a select group of distributors who sell Coach products through travel retail locations and in certain international countries where Coach does not have directly operated retail locations.
Stuart Weitzman has developed relationships with a select group of distributors who sell Stuart Weitzman products through travel retail locations and in certain international countries where Stuart Weitzman does not have directly operated retail locations.
Fluctuations in net sales, operating income and operating cash flows of the Company in any fiscal quarter may be affected by the timing of wholesale shipments and other events affecting retail sales, including macroeconomic events, such as Covid-19, or adverse weather conditions.
Fluctuations in net sales, operating income and operating cash flows of the Company in any fiscal quarter may be affected by the timing of wholesale shipments and other events affecting retail sales, including weather and macroeconomic events, and pandemics such as Covid-19.
The Company has included the Chief Executive Officer (“CEO”) and Chief Financial Officer certifications regarding its public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 as Exhibit 31.1 to this Form 10-K. 15
The Company has included the Chief Executive Officer (“CEO”) and Chief Financial Officer certifications regarding its public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1 and 31.2, respectively to this Form 10-K. 15
The Company continues to evaluate new manufacturing sources and geographies to deliver the finest quality products at the best cost and to mitigate the impact of manufacturing in inflationary markets. Our raw material suppliers, independent manufacturers and licensing partners must achieve and maintain high quality standards, which are an integral part of our brands' identity.
The Company continues to evaluate new manufacturing sources and geographies to deliver high quality products at competitive costs and to mitigate the impact of manufacturing in inflationary markets. Our raw material suppliers, independent manufacturers and licensing partners must achieve and maintain high quality standards, which are an integral part of our brands' identity.
Our key licensing relationships and their calendar year expirations as of July 2, 2022 are as follows: Brand Category Partner Calendar Year Expiration Coach Tech Accessories Vinci 2023 Coach Jewelry and Soft Accessories Centric 2024 Coach Watches Movado 2025 Coach Eyewear Luxottica 2026 Coach Fragrance Interparfums 2026 Kate Spade Tableware and Housewares Lenox 2022 Kate Spade Fashion Bedding HTA 2023 Kate Spade Tech Accessories Vinci 2025 Kate Spade Watches Fossil 2025 Kate Spade Sleepwear Komar 2025 Kate Spade Eyewear Safilo 2026 Kate Spade Stationery and Gift Lifeguard Press 2026 Kate Spade Fragrance Interparfums 2030 Products made under license are, in most cases, sold through stores and wholesale channels and, with the Company's approval, the licensees have the right to distribute products selectively through other venues, which provide additional, yet controlled, exposure of our brands.
Our key licensing relationships and their fiscal year expirations as of July 1, 2023 are as follows: Brand Category Partner Fiscal Year Expiration Coach Jewelry and Soft Accessories Centric 2024 Coach Watches Movado 2025 Coach Eyewear Luxottica 2026 Coach Fragrance Interparfums 2026 Kate Spade Tableware and Housewares Lenox 2024 Kate Spade Fashion Bedding Himatsingka 2024 Kate Spade Watches Fossil 2025 Kate Spade Sleepwear Komar 2025 Kate Spade Stationery and Gift Lifeguard Press 2026 Kate Spade Fragrance Interparfums 2030 Kate Spade Eyewear Safilo 2031 Products made under license are, in most cases, sold through stores and wholesale channels and, with the Company's approval, the licensees have the right to distribute products selectively through other venues, which provide additional, yet controlled, exposure of our brands.
This segment represented 21.6% of total net sales in fiscal 2022. • Stuart Weitzman includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, sales to wholesale customers, through e-commerce sites and through independent third party distributors.
This segment represented 21.3% of total net sales in fiscal 2023. • Stuart Weitzman - Includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, sales to wholesale customers, through e-commerce sites and through independent third-party distributors.
Unlocking the power of our people is a key strategic focus area for the Company, supported by significant engagement from the Company’s senior leadership on talent development and human capital management, as reflected in the key programs and focus areas described below. Employees As of July 2, 2022, the Company employed approximately 18,100 employees globally.
Unlocking the power of our people is a key strategic focus area for the Company, supported by significant engagement from the Company’s senior leadership on talent development and human capital management, as reflected in the key programs and focus areas described below. Employees As of July 1, 2023, the Company employed approximately 18,500 employees globally.
Total expenses attributable to the Company's marketing-related activities in fiscal 2022 were $551.6 million, or approximately 8% of net sales, compared to $395.2 million in fiscal 2021, or approximately 7% of net sales. Our wide range of marketing activities utilize a variety of media, including digital, social, print and out-of-home.
Total expenses attributable to the Company's marketing-related activities in fiscal 2023 were $570.7 million, or approximately 9% of net sales, compared to $551.6 million in fiscal 2022, or approximately 8% of net sales. Our wide range of marketing activities utilize a variety of media, including digital, social, print and out-of-home.
Today, it is a global lifestyle brand synonymous with joy, delivering seasonal collections of handbags, ready-to-wear, jewelry, footwear, gifts, home décor and more. Known for its rich heritage and unique brand DNA, kate spade new york offers a distinctive point of view, and celebrates communities of women around the globe who live their perfectly imperfect lifestyles.
Today, it is a global lifestyle brand that designs extraordinary things for the everyday, delivering seasonal collections of handbags, ready-to-wear, jewelry, footwear, gifts, home décor and more. Known for its rich heritage and unique brand DNA, kate spade new york offers a distinctive point of view, and celebrates communities of women around the globe who live their perfectly imperfect lifestyles.
This segment represented 73.6% of total net sales in fiscal 2022. • Kate Spade includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including e-commerce sites and concession shop-in-shops, sales to wholesale customers and through independent third party distributors.
This segment represented 74.5% of total net sales in fiscal 2023. • Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including e-commerce sites and concession shop-in-shops, sales to wholesale customers and through independent third-party distributors.
It also owns brand-specific trademarks such as COACH and Horse & Carriage Design, COACH and Story Patch Design, COACH and Lozenge Design, COACH and Tag Design, Signature C Design for the COACH brand; kate spade new york and Spade Design, and spade flower monogram for the kate spade new york brand; and the stacked Stuart Weitzman Logo for the Stuart Weitzman brand.
It also owns brand-specific trademarks such as COACH and Horse & Carriage Design, COACH and Story Patch Design, COACH and Lozenge Design, COACH and Tag Design, Signature C Design and COACHTOPIA for the COACH brand; kate spade new york and Spade Design, and spade flower monogram for the kate spade new york brand; and NUDIST and 5050 for the Stuart Weitzman brand.
Our Social Fabric focuses on three pillars: Our People, Our Planet and Our Communities. • Our People: ◦ We aim to bolster Tapestry’s purpose and culture by embedding equity, inclusion and diversity throughout our organization, holding our leaders accountable for our equity, inclusion and diversity ("EI&D") goals and attracting and retaining talent with a compelling and fulfilling employee experience. ◦ We have set 2025 goals focused on building diversity in our leadership team, reducing differences in our employee survey results based on gender and ethnicity, focusing on progression and establishing core wellness standards to enable our employees to manage their work and personal lives. ◦ We tie 10% of leadership annual incentive compensation to EI&D goals on a global level. • Our Planet: ◦ We aim to sustain and restore our planet through continuous innovation in solutions that improve biodiversity and reduce our impact on climate change with a focus on renewable energy, increased use of environmentally preferred materials and production methods, and circular business models that design out waste and pollution, keep products in use, and restore natural systems. ◦ We have set 2025 goals focused on utilizing 100% renewable energy in our own operations; tracing and mapping our raw materials, environmentally responsible sourcing of leather, increasing the recycled content of our packaging, reducing waste in our corporate and distribution centers and water across our company and supply chain.
Our equity, inclusion and diversity ("EI&D") goals focus on attracting and retaining talent and building a compelling and fulfilling employee experience. ◦ We have set goals focused on building diversity in our leadership team, reducing differences in our employee survey results based on gender and ethnicity, focusing on progression and establishing core wellness standards to enable our employees to manage their work and personal lives. ◦ We tie 10% of leadership annual incentive compensation to EI&D goals on a global basis level. • Our Planet: ◦ We aim to sustain and restore our planet through continuous innovation in solutions that improve biodiversity and reduce our impact on climate change with a focus on renewable energy, increased use of environmentally preferred materials and production methods, and circular business models that design out waste and pollution, keep products in use, and restore natural systems. ◦ We have set ESG goals focused on utilizing 100% renewable energy in our own operations; tracing and mapping our raw materials, environmentally responsible sourcing of leather, increasing the recycled content of our packaging, reducing waste in our corporate and distribution centers and water across our company and supply chain.
These collections are designed to meet the fashion and functional requirements of our broad and diverse consumer base. Women’s Accessories — Women’s accessories include small leather goods which complement our handbags, including wallets, money pieces, wristlets and cosmetic cases.
These collections are designed to meet the fashion and functional requirements of our broad and diverse consumer base. Women’s Accessories — Women’s accessories include small leather goods which includes mini and micro handbags, money pieces, wristlets, pouches and cosmetic cases.
SEASONALITY The Company's results are typically affected by seasonal trends. During the first fiscal quarter, we typically build inventory for the winter and holiday season. In the second fiscal quarter, working capital requirements are reduced substantially as we generate higher net sales and operating income, especially during the holiday season.
During the first fiscal quarter, we typically build inventory for the winter and holiday season. In the second fiscal quarter, working capital requirements are reduced substantially as we generate higher net sales and operating income, especially during the holiday season.
Our goal is to create a culture that is equitable, inclusive and diverse - where all of our employees, customers and stakeholders thrive. Our EI&D strategy is grounded in our purpose and values and will be a core element to unlocking the power of our people. There are four pillars under this strategy: • Talent.
Our goal is to create a culture that is equitable, inclusive and diverse - where all of our employees, customers and stakeholders thrive. Our EI&D strategy is grounded in our purpose and values and is a core element to unlocking the power of our people.
Tapestry is not dependent on any one particular trademark or design patent although Tapestry believes that the Coach, Stuart Weitzman and Kate Spade names are important for its business. In addition, Tapestry owns a number of design patents and utility patents for its brands' product designs. Tapestry aggressively polices its trademarks, and pursues infringers both domestically and internationally.
Tapestry is not dependent on any one particular trademark or design patent although Tapestry believes that the Coach, Stuart Weitzman and Kate Spade New York trademarks are important for its business. In addition, Tapestry owns a number of copyrights, design patents and utility patents for its brands' product designs.
As of July 2, 2022 and July 3, 2021, Coach did not have any customers who individually accounted for more than 10% of the segment's total net sales. 4 Kate Spade Since its launch in 1993 with a collection of six essential handbags, kate spade new york has always stood for color, wit, optimism and femininity.
As of July 1, 2023 and July 2, 2022, Coach did not have any customers who individually accounted for more than 10% of the segment's total net sales. 4 Kate Spade Since its launch in 1993 with a collection of six essential handbags, kate spade new york has always been colorful, bold and optimistic.
Through outlet stores, we target value-oriented customers in established outlet centers that are close to major markets. 6 The following table shows the number of Stuart Weitzman directly-operated locations and their total and average square footage: Stuart Weitzman North America International Total Store Count Fiscal 2022 39 61 100 Net change vs. prior year (9) 5 (4) % change vs. prior year (18.8) % 8.9 % (3.8) % Fiscal 2021 (1) 48 56 104 Net change vs. prior year (10) (17) (27) % change vs. prior year (17.2) % (23.3) % (20.6) % Fiscal 2020 58 73 131 Net change vs. prior year (13) (3) (16) % change vs. prior year (18.3) % (3.9) % (10.9) % Square Footage Fiscal 2022 74,836 84,070 158,906 Net change vs. prior year (13,558) 3,620 (9,938) % change vs. prior year (15.3) % 4.5 % (5.9) % Fiscal 2021 (1) 88,394 80,450 168,844 Net change vs. prior year (14,390) (8,732) (23,122) % change vs. prior year (14.0) % (9.8) % (12.0) % Fiscal 2020 102,784 89,182 191,966 Net change vs. prior year (22,552) (1,118) (23,670) % change vs. prior year (18.0) % (1.2) % (11.0) % Average Square Footage Fiscal 2022 1,919 1,378 1,589 Fiscal 2021 (1) 1,842 1,437 1,624 Fiscal 2020 1,772 1,222 1,465 (1) During fiscal 2021, we exited certain regions previously operated in to optimize our fleet under the Acceleration Program.
Through outlet stores, we target value-oriented customers in established outlet centers that are close to major markets. 6 The following table shows the number of Stuart Weitzman directly operated locations and their total and average square footage: Stuart Weitzman North America International Total Store Count Fiscal 2023 36 57 93 Net change vs. prior year (3) (4) (7) % change vs. prior year (7.7) % (6.6) % (7.0) % Fiscal 2022 39 61 100 Net change vs. prior year (9) 5 (4) % change vs. prior year (18.8) % 8.9 % (3.8) % Fiscal 2021 (1) 48 56 104 Net change vs. prior year (10) (17) (27) % change vs. prior year (17.2) % (23.3) % (20.6) % Square Footage Fiscal 2023 68,592 78,171 146,763 Net change vs. prior year (6,244) (5,899) (12,143) % change vs. prior year (8.3) % (7.0) % (7.6) % Fiscal 2022 74,836 84,070 158,906 Net change vs. prior year (13,558) 3,620 (9,938) % change vs. prior year (15.3) % 4.5 % (5.9) % Fiscal 2021 (1) 88,394 80,450 168,844 Net change vs. prior year (14,390) (8,732) (23,122) % change vs. prior year (14.0) % (9.8) % (12.0) % Average Square Footage Fiscal 2023 1,905 1,371 1,578 Fiscal 2022 1,919 1,378 1,589 Fiscal 2021 (1) 1,842 1,437 1,624 (1) During fiscal 2021, we exited certain regions previously operated in to optimize our fleet under the Acceleration Program.
PRODUCTS The following table shows net sales for each of our product categories by segment: Fiscal Year Ended July 2, 2022 July 3, 2021 June 27, 2020 (millions) Amount % of total net sales Amount % of total net sales Amount % of total net sales Coach Women's Handbags $ 2,574.8 38 % $ 2,302.3 40 % $ 1,852.0 37 % Women's Accessories 942.5 14 776.7 14 645.4 13 Men's 904.8 14 769.3 13 688.0 14 Other Products 499.2 7 404.8 7 340.3 7 Total Coach $ 4,921.3 73 % $ 4,253.1 74 % $ 3,525.7 71 % Kate Spade Women's Handbags $ 819.5 12 % $ 681.5 12 % $ 648.9 13 % Other Products 319.0 5 269.3 5 260.0 5 Women's Accessories 307.0 5 259.2 4 240.6 5 Total Kate Spade $ 1,445.5 22 % $ 1,210.0 21 % $ 1,149.5 23 % Stuart Weitzman (1) $ 317.7 5 % $ 283.2 5 % $ 286.2 6 % Total Net sales $ 6,684.5 100 % $ 5,746.3 100 % $ 4,961.4 100 % (1) The significant majority of sales for Stuart Weitzman is attributable to women's footwear. 8 Women’s Handbags — Women’s handbag collections feature classically inspired as well as fashion designs.
PRODUCTS The following table shows net sales for each of our product categories by segment: Fiscal Year Ended July 1, 2023 July 2, 2022 July 3, 2021 (millions) Amount % of total net sales Amount % of total net sales Amount % of total net sales Coach Women's Handbags $ 2,450.7 36.8 % $ 2,574.8 38.5 % $ 2,302.3 40.1% Women's Accessories 1,024.8 15.4 942.5 14.1 776.7 13.5 Men's 947.1 14.2 904.8 13.5 769.3 13.4 Other Products 537.8 8.1 499.2 7.5 404.8 7.0 Total Coach $ 4,960.4 74.5 % $ 4,921.3 73.6 % $ 4,253.1 74.0% Kate Spade Women's Handbags $ 779.6 11.7 % $ 819.5 12.2 % $ 681.5 11.9% Other Products 332.4 5.0 319.0 4.8 269.3 4.7 Women's Accessories 306.9 4.6 307.0 4.6 259.2 4.5 Total Kate Spade $ 1,418.9 21.3 % $ 1,445.5 21.6 % $ 1,210.0 21.1% Stuart Weitzman (1) $ 281.6 4.2 % $ 317.7 4.8 % $ 283.2 4.9% Total Net sales $ 6,660.9 100.0 % $ 6,684.5 100.0 % $ 5,746.3 100.0% (1) The significant majority of sales for Stuart Weitzman is attributable to women's footwear. 8 Women’s Handbags — Women’s handbag collections feature classically inspired as well as fashion designs.
Through these outlet stores, we target value-oriented customers in established outlet centers that are close to major markets. 3 The following table shows the number of Coach directly-operated locations and their total and average square footage: Coach North America International Total Store Count Fiscal 2022 343 602 945 Net change vs. prior year (11) 17 6 % change vs. prior year (3.1) % 2.9 % 0.6 % Fiscal 2021 354 585 939 Net change vs. prior year (21) 2 (19) % change vs. prior year (5.6) % 0.3 % (2.0) % Fiscal 2020 375 583 958 Net change vs. prior year (16) (12) (28) % change vs. prior year (4.1) % (2.0) % (2.8) % Square Footage Fiscal 2022 1,659,813 1,358,981 3,018,794 Net change vs. prior year (34,903) 62,978 28,075 % change vs. prior year (2.1) % 4.9 % 0.9 % Fiscal 2021 1,694,716 1,296,003 2,990,719 Net change vs. prior year (63,952) 10,674 (53,278) % change vs. prior year (3.6) % 0.8 % (1.8) % Fiscal 2020 1,758,668 1,285,329 3,043,997 Net change vs. prior year (43,742) (19,289) (63,031) % change vs. prior year (2.4) % (1.5) % (2.0) % Average Square Footage Fiscal 2022 4,839 2,257 3,194 Fiscal 2021 4,787 2,215 3,185 Fiscal 2020 4,690 2,205 3,177 In fiscal 2023, we expect minimal change in overall store count with a reduction in store count primarily in North America and Japan, partially offset by increases in store locations and square footage in Greater China.
Through these outlet stores, we target value-oriented customers in established outlet centers that are close to major markets. 3 The following table shows the number of Coach directly operated locations and their total and average square footage: Coach North America International Total Store Count Fiscal 2023 330 609 939 Net change vs. prior year (13) 7 (6) % change vs. prior year (3.8) % 1.2 % (0.6) % Fiscal 2022 343 602 945 Net change vs. prior year (11) 17 6 % change vs. prior year (3.1) % 2.9 % 0.6 % Fiscal 2021 354 585 939 Net change vs. prior year (21) 2 (19) % change vs. prior year (5.6) % 0.3 % (2.0) % Square Footage Fiscal 2023 1,618,310 1,396,898 3,015,208 Net change vs. prior year (41,503) 37,917 (3,586) % change vs. prior year (2.5) % 2.8 % (0.1) % Fiscal 2022 1,659,813 1,358,981 3,018,794 Net change vs. prior year (34,903) 62,978 28,075 % change vs. prior year (2.1) % 4.9 % 0.9 % Fiscal 2021 1,694,716 1,296,003 2,990,719 Net change vs. prior year (63,952) 10,674 (53,278) % change vs. prior year (3.6) % 0.8 % (1.8) % Average Square Footage Fiscal 2023 4,904 2,294 3,211 Fiscal 2022 4,839 2,257 3,194 Fiscal 2021 4,787 2,215 3,185 In fiscal 2024, we expect minimal change in overall store count with a reduction in store count primarily in Japan and North America, partially offset by an increase in store count in Greater China.
We feel hosting bold conversations about our values provides an opportunity for us to be inspired, discover ideas, and ignite personal passions. 13 Tapestry is committed to the support of underrepresented groups through our corporate efforts. We are a member of the CEO Action for Diversity and Inclusion, the largest business coalition committed to advancing Diversity and Inclusion.
We feel hosting bold conversations about our values provides an opportunity for us to be inspired, discover ideas, and ignite personal passions. 13 Tapestry is committed to the support of historically underrepresented and marginalized groups through our corporate efforts.
This segment represented 4.8% of total net sales in fiscal 2022. 2 Corporate, which is not a reportable segment, represents certain costs that are not directly attributable to a brand. These costs primarily include administrative and information systems expense.
This segment represented 4.2% of total net sales in fiscal 2023. 2 Corporate, which is not a reportable segment, represents certain costs that are not directly attributable to a brand. These costs primarily include administrative and information systems expense. Coach Coach is a global fashion house of accessories and lifestyle collections, founded in New York in 1941.
Although our products are manufactured by independent manufacturers, we maintain a strong level of oversight in the selection of the raw materials and compliance with quality control standards is monitored through on-site quality inspections at independent manufacturing facilities. We maintain strong oversight of the supply chain process for each of our brands from design through manufacturing.
We have longstanding relationships with purveyors of fine leathers and hardware. Although our products are manufactured by independent manufacturers, we maintain a strong level of oversight in the selection of key raw materials and compliance with quality control standards is monitored through on-site quality inspections at independent manufacturing facilities.
Approximately 2,000 of our employees, including nearly all of our store managers, received an annual long term equity award in 2022, which align employee interests with those of our stockholders, rewards employees for enhancing stock holder value and supports retention of key employees.
Approximately 2,500 of our employees, including nearly all of our store managers, received an annual long-term equity award in 2023, which align employee interests with those of our stockholders, rewards employees for enhancing stock holder value and supports retention of key employees. Our benefits package is designed to be competitive and comprehensive, which varies by location and jurisdiction.
We strive to pay each employee fairly and competitively across our brands. Tapestry's primary compensation principle is to "pay for performance." Tapestry's practice is to pay a competitive base salary and to provide employees with the opportunity to earn an annual bonus tied to Tapestry's and its brands' financial performance.
Tapestry's primary compensation principle is to "pay for performance." Tapestry's practice is to pay a competitive base salary and to provide corporate employees with the opportunity to earn an annual bonus tied to Tapestry's and its brands' financial performance, and store employees with the opportunity to earn sales incentives.
We provide our employees with supplemental resources to achieve wellness such as access to our Employee Assistance Program, regular employee programming and subscriptions to Headspace, a smartphone application dedicated to meditation and mindfulness. 14 At Tapestry, we believe in encouraging and empowering our employees to take part in building a welcoming and inclusive community.
We provide our employees with supplemental resources to achieve wellness such as access to our Employee Assistance Program, regular employee programming and subscriptions to Headspace, a smartphone application dedicated to meditation and mindfulness.
CORPORATE RESPONSIBILITY As a people-centered and purpose led Company, Tapestry’s corporate responsibility framework, Our Social Fabric, unites teams across the Company’s business to work to meet our 2025 Corporate Responsibility Goals ("2025 Goals") and a shared objective: to create the accessible luxury company of the future that balances true fashion authority with meaningful, positive change.
Our Environmental, Social and Corporate Governance (“ESG”) strategy, the Fabric of Change , aims to unite teams across the Company’s business to work to meet our Corporate Responsibility Goals ("ESG Goals") and a shared objective: to create the accessible luxury company of the future that balances true fashion authority with meaningful, positive change.
The Company also offers retirement benefits for its employees, which are managed in accordance with local jurisdictions. To support employees in achieving their career and financial goals, the Company also provides access to learning opportunities on personal finances as well as physical and mental wellness through various platforms as available based on location.
To support employees in achieving their career and financial goals, the Company also provides access to learning opportunities on personal finances as well as physical and mental wellness through various platforms based on the location of the employee.
The following table shows the number of Kate Spade directly-operated locations and their total and average square footage: Kate Spade North America International Total Store Count Fiscal 2022 207 191 398 Net change vs. prior year (3) (6) (9) % change vs. prior year (1.4) % (3.0) % (2.2) % Fiscal 2021 210 197 407 Net change vs. prior year (3) (10) (13) % change vs. prior year (1.4) % (4.8) % (3.1) % Fiscal 2020 213 207 420 Net change vs. prior year — 13 13 % change vs. prior year — % 6.7 % 3.2 % Square Footage Fiscal 2022 592,649 275,287 867,936 Net change vs. prior year (4,537) (6,692) (11,229) % change vs. prior year (0.8) % (2.4) % (1.3) % Fiscal 2021 597,186 281,979 879,165 Net change vs. prior year (6,301) (9,343) (15,644) % change vs. prior year (1.0) % (3.2) % (1.7) % Fiscal 2020 603,487 291,322 894,809 Net change vs. prior year 24,838 23,973 48,811 % change vs. prior year 4.3 % 9.0 % 5.8 % Average Square Footage Fiscal 2022 2,863 1,441 2,181 Fiscal 2021 2,844 1,431 2,160 Fiscal 2020 2,833 1,407 2,130 We expect to modestly reduce our store count in North America and Japan in fiscal 2023 as the Company looks to drive increased profitability and shift our focus with greater emphasis on digital channels. 5 Digital — We view our digital platforms as instruments to deliver Kate Spade products to customers directly with the benefit of added accessibility as consumers can purchase Kate Spade products wherever they choose.
The following table shows the number of Kate Spade directly operated locations and their total and average square footage: Kate Spade North America International Total Store Count Fiscal 2023 205 192 397 Net change vs. prior year (2) 1 (1) % change vs. prior year (1.0) % 0.5 % (0.3) % Fiscal 2022 207 191 398 Net change vs. prior year (3) (6) (9) % change vs. prior year (1.4) % (3.0) % (2.2) % Fiscal 2021 210 197 407 Net change vs. prior year (3) (10) (13) % change vs. prior year (1.4) % (4.8) % (3.1) % Square Footage Fiscal 2023 589,561 277,710 867,271 Net change vs. prior year (3,088) 2,423 (665) % change vs. prior year (0.5) % 0.9 % (0.1) % Fiscal 2022 592,649 275,287 867,936 Net change vs. prior year (4,537) (6,692) (11,229) % change vs. prior year (0.8) % (2.4) % (1.3) % Fiscal 2021 597,186 281,979 879,165 Net change vs. prior year (6,301) (9,343) (15,644) % change vs. prior year (1.0) % (3.2) % (1.7) % Average Square Footage Fiscal 2023 2,876 1,446 2,185 Fiscal 2022 2,863 1,441 2,181 Fiscal 2021 2,844 1,431 2,160 In fiscal 2024, we expect minimal change in overall store count with an increase in store count in Greater China, partially offset by a reduction in store count in Japan and North America. 5 Digital — We view our digital platforms as instruments to deliver Kate Spade products to customers directly with the benefit of added accessibility as consumers can purchase Kate Spade products wherever they choose.
These independent manufacturers each or in aggregate support a broad mix of product types, materials and a seasonal influx of new, fashion-oriented styles, which allows us to meet shifts in marketplace demand and changes in consumer preferences. We have longstanding relationships with purveyors of fine leathers and hardware.
We believe that our manufacturing partners are in material compliance with the Company’s integrity standards. These independent manufacturers each or in aggregate support a broad mix of product types, materials and a seasonal influx of new, fashion-oriented styles, which allows us to meet shifts in marketplace demand and changes in consumer preferences.
We continue to closely monitor inventories held by our wholesale customers in an effort to optimize inventory levels across wholesale doors. The wholesale business for Kate Spade comprised approximately 11% of total segment net sales for fiscal 2022.
Additionally, we continue to leverage a third-party digital platform to sell our products to customers. Wholesale — The wholesale business for Stuart Weitzman comprised approximately 34% of total segment net sales for fiscal 2023. We continue to closely monitor inventories held by our wholesale customers in an effort to optimize inventory levels across wholesale doors.
Our focus on fostering an equitable work environment has led to continued recognition from Forbes on the list of “Best Employers for Diversity” and Human Rights Campaign’s list of “Best Place to Work for LGBTQ Equality”. Additionally, we have been certified as a "Great Place to Work" for 2022.
We are a member of the CEO Action for Diversity and Inclusion, the largest business coalition committed to advancing Diversity and Inclusion. Our focus on fostering an equitable work environment has led to continued recognition from Forbes on the list of “Best Employers for Diversity” and Human Rights Campaign’s list of “Best Place to Work for LGBTQ Equality”.
As of July 2, 2022 and July 3, 2021, Stuart Weitzman did not have any customers who individually accounted for more than 10% of the segment's total net sales. 7 Refer to Note 17, "Segment Information," for further information about the Company's segments.
As of July 1, 2023 and July 2, 2022, Stuart Weitzman did not have any customers who individually accounted for more than 10% of the segment's total net sales.
INFORMATION SYSTEMS The Company’s information systems are integral in supporting the Company’s long-term strategies. Our information technology platform is a key capability used to support digital growth and drive consumer centricity and data-driven decision making.
INFORMATION SYSTEMS The Company’s information systems are integral in supporting the Company’s long-term strategies. Our information technology platform is a key capability used to support digital growth and drive consumer centricity and data-driven decision making. We are continually enhancing our digital technology platforms to elevate our e-commerce capabilities direct-to-consumer functionalities, and overall omni-channel experience, by utilizing cloud-based technology infrastructure.
LICENSING Our brands take an active role in the design process and control the marketing and distribution of products in our worldwide licensing relationships.
Refer to Note 17, "Segment Information," for further information about the Company's segments. 7 LICENSING Our brands take an active role in the design process and control the marketing and distribution of products in our worldwide licensing relationships.
For Kate Spade, we have e-commerce sites in the U.S., Canada, mainland China, Japan and several throughout Europe. Additionally, we continue to leverage various third-party digital platforms to sell our products to customers. Wholesale — As of July 2, 2022, Kate Spade's products are sold in approximately 1,000 wholesale and distributor locations, primarily in the U.S, Canada and Europe.
For Kate Spade, we have e-commerce sites in the U.S., Canada, Greater China, Japan and several throughout Europe. Additionally, we continue to leverage various third-party digital platforms to sell our products to customers. Wholesale — The wholesale business for Kate Spade comprised approximately 11% of total segment net sales for fiscal 2023.
This increased competition drives interest in these brand loyal categories. We believe, however, that we have significant competitive advantages because of the recognition of our brands and the acceptance of our brands by consumers.
This increased competition drives interest in these brand loyal categories. We believe, however, that we have significant competitive advantages because of the recognition of our brands and the acceptance of our brands by consumers. CORPORATE RESPONSIBILITY As a people-centered and purpose led Company, Tapestry believes that a better-made future is one that is both beautiful and responsible.
Kate Spade had one vendor, located in Indonesia, who individually provided over 10% of the brand's total purchases (or approximately 11%). Stuart Weitzman products were primarily manufactured in Spain. During fiscal 2022, Stuart Weitzman had four vendors, all located in Spain, who individually provided over 10% of the brand's total units (or approximately 44% in the aggregate).
During fiscal 2023, Kate Spade products were manufactured primarily in Vietnam, Cambodia, the Philippines and mainland China. Kate Spade had one vendor, located in Vietnam, who individually provided approximately 10% of the brand's total purchases. Stuart Weitzman products were primarily manufactured in Spain.
Our facilities use bar code scanning warehouse management systems, where our fulfillment center employees use handheld scanners to read product bar codes. This allows for accurate storage and order processing, and allows us to provide excellent service to our customers. Our products are primarily shipped to retail stores, wholesale customers and e-commerce customers.
These fulfillment centers are either directly operated by the Company or by independent third parties, with some supporting multiple brands. Our facilities use bar code scanning warehouse management systems, where our fulfillment center employees use handheld scanners to read product bar codes. This allows for accurate storage and order processing and allows us to provide excellent service to our customers.
In fiscal 2023, we expect a modest increase in store count and square footage in mainland China and a slight reduction in store count and square footage in North America.
In fiscal 2024, we expect minimal change in overall store count with a modest reduction in store count in North America and a modest increase in store count in Greater China.
We also utilize local fulfillment centers, through third-parties in Japan, parts of Greater China (mainland China, Hong Kong SAR, Macao SAR, and Taiwan), South Korea, Singapore, Malaysia, Spain, the U.K., Canada, Australia, and starting in fiscal 2023 in Mexico which will support the market in the United States.
Globally, we utilize regional fulfillment centers in mainland China, the Netherlands, the United Kingdom, and Spain, owned and operated by third parties, that support multiple countries. We also utilize local fulfillment centers, through third-parties in Japan, parts of Greater China, South Korea, Singapore, Malaysia, Spain, the U.K., Canada, and Australia.
All over the world, the Coach name is synonymous with effortless New York style. Stores — Coach operates freestanding retail stores, including flagships, and outlet stores as well as concession shop-in-shop locations. These stores are located in regional shopping centers, metropolitan areas throughout the world and established outlet centers.
Stores — Coach operates freestanding retail stores, including flagships, and outlet stores as well as concession shop-in-shop locations. These stores are located in regional shopping centers, metropolitan areas throughout the world and established outlet centers. Retail stores carry an assortment of products depending on their size, location and customer preferences.
Our benefits, along with competitive pay, includes medical benefits and paid wellness days and parental leave, in accordance with local policies and regulations, for directly hired full-time and part-time employees. In fiscal 2022 we transitioned from sick days to wellness days to better reflect the purpose of this paid time off.
Our benefits, along with competitive pay, includes medical benefits and paid wellness days and parental leave, in accordance with local policies and regulations, for directly hired full-time and part-time employees. The Company also offers retirement benefits for its employees, which are managed in accordance with local jurisdictions.
We are able to do this by maintaining sourcing management offices in Vietnam, mainland China, the Philippines, Cambodia and Spain that work closely with our independent manufacturers. This broad-based, global manufacturing strategy is designed to optimize the mix of cost, lead times and construction capabilities.
We maintain strong oversight of the supply chain process for each of our brands from design through manufacturing. We are able to do this by maintaining sourcing management offices in Vietnam, mainland China, the Philippines, Cambodia and Spain that work closely with our independent manufacturers.
As of July 2, 2022 and July 3, 2021, Kate Spade did not have any customers who individually accounted for more than 10% of the segment's total net sales. Stuart Weitzman Founded in 1986, Stuart Weitzman is a leading accessories brand that is synonymous with strength in femininity.
As of July 1, 2023 and July 2, 2022, Kate Spade did not have any customers who individually accounted for more than 10% of the segment's total net sales. Stuart Weitzman Founded in 1986, Stuart Weitzman has been inspired by women who are confident, sexy, bold – and, above all, strong.
Before partnering with a new manufacturing vendor for finished goods, the Company evaluates each facility by conducting a quality and business practice standards review. In addition, for manufacturers of finished goods we request a social compliance report that was conducted within six months of the date of submission.
Before directly partnering with a new manufacturing vendor for finished goods, the Company evaluates each facility by conducting a quality, business practice standards and social compliance review. We expect finished good manufacturers to undergo a social compliance audit before being approved as a Tapestry supplier.
To accomplish this goal, we strive to appropriately align our total compensation with the pay, benefits and rewards offered by companies that compete with us for talent in the marketplace. Our Total Compensation Program includes cash pay, annual and long term incentives, benefits and other special programs that our employees value.
Maintaining a competitive program helps us attract, motivate and retain the key talent we need to achieve outstanding business and financial results. To accomplish this goal, we strive to appropriately align our total compensation with the pay, benefits and rewards offered by companies that compete with us for talent in the marketplace.
During fiscal 2022, manufacturers of Coach products were primarily located in Vietnam, Cambodia, the Philippines and Indonesia and no individual vendor provided 10% or more of the brand's total purchases. During fiscal 2022, Kate Spade products were manufactured primarily in Vietnam, Cambodia, Indonesia and China.
This broad-based, global manufacturing strategy is designed to optimize the mix of cost, lead times and construction capabilities. During fiscal 2023, manufacturers of Coach products were primarily located in Vietnam, Cambodia, and the Philippines and no individual vendor provided 10% or more of the brand's total purchases.
Retail stores carry an assortment of products depending on their size, location and customer preferences. Coach operates a limited number of flagship stores that offer the fullest expression of the Coach brand and are located in tourist-heavy, densely populated cities globally.
Coach operates a limited number of flagship stores that offer the fullest expression of the Coach brand and are located in tourist-heavy, densely populated cities globally. Coach outlet stores serve as an efficient means to sell manufactured-for-outlet product and discontinued retail inventory outside the retail channel.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS Refer to Note 4, "Revenue," and Note 17, "Segment Information," presented in the Notes to the Consolidated Financial Statements for geographic information.
Additionally, on an annual basis, our foundations match up to $10,000 in donations to eligible non-profits per employee in North America. FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS Refer to Note 4, "Revenue," and Note 17, "Segment Information," presented in the Notes to the Consolidated Financial Statements for geographic information.
The Company is dedicated to building a workforce with leadership teams better reflecting our general corporate population in North America. The Company monitors the representation of women and ethnic minorities at different levels throughout the company, and discloses this information in our website at www.tapestry.com/responsibility/our-people.
The Company monitors the representation of women and ethnic minorities at different levels throughout the company, and discloses this information in our website at www.tapestry.com/responsibility/our-people. Total Rewards Tapestry is dedicated to being a place where our employees love to work, where they feel recognized and rewarded for all that they do.
Suppliers that fail to meet our standards are not approved until an acceptable report is provided. Periodic evaluations of existing, previously approved facilities are conducted on a recurring basis. We believe that our manufacturing partners are in material compliance with the Company’s integrity standards.
Manufacturers working with our licensed partners must have had an acceptable social compliance audit conducted within the prior six months of their onboarding date. Suppliers that fail to meet our standards are not approved until an acceptable report is provided. We also conduct periodic evaluations of existing, previously approved finished good suppliers.
Coach outlet stores serve as an efficient means to sell manufactured-for-outlet product and discontinued retail inventory outside the retail channel. The outlet store design, visual presentations and customer service levels support and reinforce the brand's image.
The outlet store design, visual presentations and customer service levels support and reinforce the brand's image.
The wholesale business for Coach comprised approximately 10% of total segment net sales for fiscal 2022. As of July 2, 2022, Coach's products are sold in over approximately 1,700 wholesale and distributor locations globally.
The wholesale business for Coach comprised approximately 10% of total segment net sales for fiscal 2023.
TRADEMARKS AND PATENTS Tapestry owns all of the material trademark rights around the world used in connection with the production, marketing, distribution and sale of all branded products for Coach, Stuart Weitzman and Kate Spade.
INTELLECTUAL PROPERTY Tapestry owns COACH, KATE SPADE and STUART WEITZMAN, as well as all of the material trademark, design and patent-rights related to the production, marketing, distribution and sale of our products in the United States and other countries in which our products are principally sold.
It pursues counterfeiters through leads generated internally, as well as through its network of investigators, the respective online reporting form for each brand, the Tapestry hotline and business partners around the world. The Company expects that its material trademarks will remain in full force and effect for as long as it continues to use and renew them.
Tapestry aggressively polices its intellectual property, and pursues infringers both domestically and internationally. It pursues counterfeiters through leads generated internally, as well as through its network of investigators, law enforcement and customs officials, the respective online reporting form for each brand, the Tapestry hotline and business partners around the world. SEASONALITY The Company's results are typically affected by seasonal trends.
The Company is a signatory to the United Nations ("UN") Global Compact, and as such, our corporate responsibility strategy is aligned with the UN Sustainable Development Goals. Additional information on Our Social Fabric and 2025 Corporate Responsibility Goals can be found at www.tapestry.com/responsibility.
Additional information on the Fabric of Change and Corporate Responsibility Goals can be found at www.tapestry.com/responsibility.
Individually, our brands are iconic. Together, we can stretch what’s possible. OUR STRATEGY In fiscal 2020, the Company announced and embarked on a strategic multi-year growth plan (the "Acceleration Program").
Individually, our brands are iconic. Together, we can stretch what’s possible.
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The guiding principle under the Acceleration Program is to better meet the needs of each of its brands' unique customers by: • Sharpening our Focus on the Consumer: Operating with a clearly defined purpose and strategy for each brand and an unwavering focus on the consumer at the core of everything we do. • Leveraging Data and Leading with a Digital-First Mindset: Building significant data and analytics capabilities to drive decision-making and increase efficiency; Offering immersive customer experiences across our e-commerce and social channels to meet the needs of consumers who are increasingly utilizing digital platforms to engage with brands; Rethinking the role of stores with an intent to optimize our fleet. • Transforming into a Leaner and More Responsive Organization: Moving with greater agility, simplifying internal processes and empowering teams to act quickly to meet the rapidly changing needs of the consumer.
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OUR STRATEGY Building on the success of the strategic growth plan from fiscal 2020 through fiscal 2022 (the “Acceleration Program”), in the first quarter of fiscal 2023, the Company introduced the 2025 growth strategy (“ future speed”), designed to amplify and extend the competitive advantages of its brands, with a focus on four strategic priorities: • Building Lasting Customer Relationships: The Company aims to leverage Tapestry’s transformed business model to drive customer lifetime value through a combination of increased customer acquisition, retention and reactivation. • Fueling Fashion Innovation & Product Excellence: The Company aims to drive sustained growth in core handbags and small leathergoods, while accelerating gains in footwear and lifestyle products. • Delivering Compelling Omni-Channel Experiences: The Company aims to extend its omni-channel leadership to meet the customer wherever they shop, delivering growth online and in stores. • Powering Global Growth: The Company aims to support balanced growth across regions, prioritizing North America and China, its largest markets, while capitalizing on opportunities in under-penetrated geographies such as Southeast Asia and Europe.
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The Company achieved approximately $200 million and $300 million of annual gross run rate expense savings in fiscal 2021 and fiscal 2022, respectively. The Company does not expect to incur expenses related to the Acceleration Program in the fiscal year ending July 1, 2023 ("fiscal 2023").
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Covid-19 Impact The Covid-19 pandemic has resulted in varying degrees of business disruption for the Company since it began in fiscal 2020 and has impacted all regions around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities.
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Covid-19 Impact The outbreak of Covid-19 has continued to impact a significant majority of the regions in which we operate, resulting in significant global business disruptions. In response, the Company took strategic actions to reinforce its liquidity and financial flexibility, as well as to comply with local regulations to protect employees and customers.
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Such disruptions continued during the first half of fiscal 2023, and the Company's results in Greater China (mainland China, Hong Kong SAR, Macao SAR, and Taiwan) were adversely impacted as a result of the Covid-19 pandemic. Starting in December 2022, certain government restrictions were lifted in the region and business trends have improved.
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While the ongoing pandemic continues to present challenges, such as the supply chain related pressures facing the industry, increased freight costs, temporary closures and other additional necessary actions to protect our stakeholders, the Company has been adapting to the current environment by remaining flexible in the short-term while continuing to focus on its long-term strategy and multi-year growth agenda.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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This may continue and could further decrease the number of, or concentrate the ownership of, wholesale stores that carry our licensees’ products.
This may continue and could further decrease the number of, or concentrate the ownership of, wholesale stores that carry our or our licensees’ products.
As a Company engaged in sourcing on a global scale, we are subject to the risks inherent in such activities, including, but not limited to: • continued disruptions or delays in shipments whether due to port congestion, logistics carrier disruption, other shipping capacity constraints or other factors, which has and may continue to result in significantly increased inbound freight costs and increased in-transit times; • loss or disruption of key manufacturing or fulfillment sites or extended closure of such sites due to the Covid-19 pandemic or other unexpected factors; • imposition of additional duties, taxes and other charges or restrictions on imports or exports; • unavailability, or significant fluctuations in the cost, of raw materials; • compliance by us and our independent manufacturers and suppliers with labor laws and other foreign governmental regulations; • increases in the cost of labor, fuel (including volatility in the price of oil), travel and transportation; • compliance with our Global Business Integrity Program; • compliance by our independent manufacturers and suppliers with our Supplier Code of Conduct, social auditing procedures and requirements and other applicable compliance policies; • compliance with applicable laws and regulations, including U.S. laws regarding the identification and reporting on the use of “conflict minerals” sourced from the Democratic Republic of the Congo in the Company’s products, other laws and regulations regarding the sourcing of materials in the Company’s products, the FCPA, U.K.
As a Company engaged in sourcing on a global scale, we are subject to the risks inherent in such activities, including, but not limited to: • continued disruptions or delays in shipments whether due to port congestion, logistics carrier disruption (including as a result of labor disputes), other shipping capacity constraints or other factors, which has and may continue to result in significantly increased inbound freight costs and increased in-transit times; • loss or disruption of key manufacturing or fulfillment sites or extended closure of such sites due to the Covid-19 pandemic or other unexpected factors; • imposition of additional duties, taxes and other charges or restrictions on imports or exports; • unavailability, or significant fluctuations in the cost, of raw materials; • compliance by us and our independent manufacturers and suppliers with labor laws and other foreign governmental regulations; • increases in the cost of labor, fuel (including volatility in the price of oil), travel and transportation; • compliance with our Global Business Integrity Program; • compliance by our independent manufacturers and suppliers with our Supplier Code of Conduct, social auditing procedures and requirements and other applicable compliance policies; • compliance with applicable laws and regulations, including U.S. laws regarding the identification and reporting on the use of “conflict minerals” sourced from the Democratic Republic of the Congo in the Company’s products, other laws and regulations regarding the sourcing of materials in the Company’s products, the FCPA, U.K.
Also, under Maryland law, business combinations, including mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities, between the Company and any interested stockholder, generally defined as any person who beneficially owns, directly or indirectly, 10% or more of the Company's common stock, or any affiliate of an interested stockholder are prohibited for a five-year period, beginning on the most recent date such person became an interested stockholder.
Under Maryland law, business combinations, including mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities, between the Company and any interested stockholder, generally defined as any person who beneficially owns, directly or indirectly, 10% or more of the Company’s common stock, or any affiliate of an interested stockholder are prohibited for a five-year period, beginning on the most recent date such person became an interested stockholder.
The potential difficulties of integrating the operations of an acquired business and realizing our expectations for an acquisition, including the benefits that may be realized, include, among other things: • failure of the business to perform as planned following the acquisition or achieve anticipated revenue or profitability targets; • delays, unexpected costs or difficulties in completing the integration of acquired companies or assets; • higher than expected costs, lower than expected cost savings or synergies and/or a need to allocate resources to manage unexpected operating difficulties; • difficulties assimilating the operations and personnel of acquired companies into our operations; • diversion of the attention and resources of management or other disruptions to current operations; • the impact on our or an acquired business’ internal controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002; • unanticipated changes in applicable laws and regulations; • unanticipated changes in the combined business due to potential divestitures or other requirements imposed by antitrust regulators; • retaining key customers, suppliers and employees; • retaining and obtaining required regulatory approvals, licenses and permits; • operating risks inherent in the acquired business and our business; • lower than anticipated demand for product offerings by us or our licensees; • assumption of liabilities not identified in due diligence; and • other unanticipated issues, expenses and liabilities.
The potential difficulties of integrating the operations of an acquired business and realizing our expectations for an acquisition, including the benefits that may be realized, include, among other things: • failure of the business to perform as planned following the acquisition or achieve anticipated revenue or profitability targets; • delays, unexpected costs or difficulties in completing the integration of acquired companies or assets; • higher than expected costs, lower than expected cost savings or synergies and/or a need to allocate resources to manage unexpected operating difficulties; • difficulties assimilating the operations and personnel of acquired companies into our operations; • diversion of the attention and resources of management or other disruptions to current operations; • the impact on our or an acquired business’ internal controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002; • changes in applicable laws and regulations or the application of new laws and regulations; • changes in the combined business due to potential divestitures or other requirements imposed by antitrust regulators; • retaining key customers, suppliers and employees; • retaining and obtaining required regulatory approvals, licenses and permits; • operating risks inherent in the acquired business and our business; • lower than anticipated demand for product offerings by us or our licensees; • assumption of liabilities not identified in due diligence; and • other unanticipated issues, expenses and liabilities.
We depend on digital technologies for the successful operation of our business, including corporate email communications to and from employees, customers, stores and vendors, the design, manufacture and distribution of our finished goods, digital and local marketing efforts, data analytics, collection, use and retention of customer data, employee, vendor and partner information, the processing of credit card transactions, online e-commerce activities and our interaction with the public in the social media space.
We depend on digital technologies for the successful operation of our business, including corporate email communications to and from employees, customers, stores and vendors, the design, manufacture and distribution of our finished goods, digital and local marketing and clienteling efforts, data analytics, collection, use and retention of customer data, employee, vendor and partner information, the processing of credit card transactions, online e-commerce activities and our interaction with the public in the social media space.
Further, expanding in certain markets may have upfront investment costs that may not be accompanied by sufficient 19 revenues to achieve typical or expected operational and financial performance and therefore may be dilutive to our brands in the short-term. We may also have to compete for talent in international regions as we expand our omni-channel presence.
Further, expanding in certain markets may have upfront investment costs that may not be accompanied by sufficient revenues to achieve typical or expected operational and financial performance and therefore may be dilutive to our brands in the short-term. We may also have to compete for talent in international regions as we expand our omni-channel presence.
Refer to Note 12, "Debt", for a summary of these terms and additional information on the terms of our $1.25 Billion Revolving Credit Facility, Term Loan and outstanding Senior Notes. The consequences and limitations under our $1.25 Billion Revolving Credit Facility and our other outstanding indebtedness could impede our ability to engage in future business opportunities or strategic acquisitions.
Refer to Note 12, "Debt", for a summary of these terms and additional information on the terms of our $1.25 Billion Revolving Credit Facility, Term Loan and outstanding Senior Notes. 27 The consequences and limitations under our $1.25 Billion Revolving Credit Facility and our other outstanding indebtedness could impede our ability to engage in future business opportunities or strategic acquisitions.
Labor costs at many of our manufacturers have been increasing significantly and, as the middle class in developing countries continues to 21 grow, it is unlikely that such cost pressure will abate. Furthermore, the cost of transportation has fluctuated and may continue to fluctuate significantly if oil prices continue to rise.
Labor costs at many of our manufacturers have been increasing significantly and, as the middle class in developing countries continues to grow, it is unlikely that such cost pressure will abate. Furthermore, the cost of transportation has fluctuated and may continue to fluctuate significantly if oil prices continue to rise.
Further, proposed tax changes that may be enacted in the future could impact our current or future tax structure and effective tax rates. Over the past year there has been significant discussion with regards to tax legislation by both the Biden Administration and the Organization for Economic Cooperation and Development (“OECD”).
Further, proposed tax changes that may be enacted in the future could impact our current or future tax structure and effective tax rates. 26 Over the past year, there has been significant discussion with regards to tax legislation by both the Biden Administration and the Organization for Economic Cooperation and Development (“OECD”).
However, there is no assurance that we will be able to sustain such efforts in accordance with our plans, that such 20 efforts will result in the intended or otherwise desirable outcomes or that such efforts, even if successfully sustained, will be effective in achieving long-term growth or increased profitability.
However, there is no assurance that we will be able to sustain such efforts in accordance with our plans, that such efforts will result in the intended or otherwise desirable outcomes or that such efforts, even if successfully sustained, will be effective in achieving long-term growth or increased profitability.
Further, while we believe that we 23 could replace our existing licensing partners if required, any delay in doing so could adversely affect our revenues and harm our business. We also may decide not to renew our agreements with our licensing partners and bring certain categories in-house.
Further, while we believe that we could replace our existing licensing partners if required, any delay in doing so could adversely affect our revenues and harm our business. We also may decide not to renew our agreements with our licensing partners and bring certain categories in-house.
We also store all designs, goods specifications, projected sales and distribution plans for our finished products 24 digitally. We have enterprise class and industry comparable security measures in place to protect both our physical facilities and digital systems from attacks.
We also store all designs, goods specifications, projected sales and distribution plans for our finished products digitally. We have enterprise class and industry comparable security measures in place to protect both our physical facilities and digital systems from attacks.
An assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, will be fraught with uncertainty given the wide scope of potential 25 regulatory change in the countries in which we operate.
An assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, will be fraught with uncertainty given the wide scope of potential regulatory change in the countries in which we operate.
The dividend program and the stock repurchase program each require the use of a portion of our cash flow. Our ability to pay dividends and conduct stock repurchases will depend on our ability to generate sufficient cash flows from operations in the future.
The dividend program and the stock repurchase program each require the use of a significant portion of our cash flow. Our ability to pay dividends and conduct stock repurchases will depend on our ability to generate sufficient cash flows from operations in the future.
While geographic diversity helps to reduce the Company’s exposure to risks in any one country, we are subject to risks associated with international operations, including, but not limited to: • political or economic instability or changing macroeconomic conditions in our major markets, including the potential impact of (1) new policies that may be implemented by the U.S. or other jurisdictions, particularly with respect to tax and trade policies or (2) sanctions and related activities by the United States, European Union (“E.U.”) and others; • public health crises, such as pandemics and epidemic diseases (including the ongoing Covid-19 pandemic); • changes to the U.S.'s participation in, withdrawal out of, renegotiation of certain international trade agreements or other major trade related issues including the non-renewal of expiring favorable tariffs granted to developing countries, tariff quotas, and retaliatory tariffs, trade sanctions, new or onerous trade restrictions, embargoes and other stringent government controls; • changes in exchange rates for foreign currencies, which may adversely affect the retail prices of our products, result in decreased international consumer demand, or increase our supply costs in those markets, with a corresponding negative impact on our gross margin rates; • compliance with laws relating to foreign operations, including the Foreign Corrupt Practices Act (FCPA) and the U.K.
While geographic diversity helps to reduce the Company’s exposure to risks in any one country, we are subject to risks associated with international operations, including, but not limited to: • political or economic instability or changing macroeconomic conditions in our major markets, including the potential impact of (1) new policies that may be implemented by the U.S. or other jurisdictions, particularly with respect to tax and trade policies or (2) sanctions and related activities by the United States, European Union (“E.U.”) and others; • public health crises, such as pandemics and epidemic diseases; 16 • changes to the U.S.'s participation in, withdrawal out of, renegotiation of certain international trade agreements or other major trade related issues including the non-renewal of expiring favorable tariffs granted to developing countries, tariff quotas, and retaliatory tariffs, trade sanctions, new or onerous trade restrictions, embargoes and other stringent government controls; • changes in exchange rates for foreign currencies, which may adversely affect the retail prices of our products, result in decreased international consumer demand, or increase our supply costs in those markets, with a corresponding negative impact on our gross margin rates; • compliance with laws relating to foreign operations, including the Foreign Corrupt Practices Act ("FCPA") and the U.K.
Furthermore, failure of our computer systems due to inadequate system capacity, computer viruses, human error, changes in programming, security and personal data breaches, system upgrades or migration of these services, as well as employee and consumer privacy concerns and new global government regulations, individually or in accumulation, could have a material effect on our business, financial condition or results of operations and cash flow.
Furthermore, failure of our computer systems due to inadequate system capacity, computer viruses, human error, changes in programming, security and personal data breaches, system upgrades or migration of these services, as well as employee, vendor and consumer privacy concerns and new privacy and security laws and global government regulations, individually or in accumulation, could have a material effect on our business, financial condition or results of operations and cash flow.
Furthermore, we may be unable to provide these services or implement substitute arrangements on a timely and cost-effective basis on terms favorable to us. Our wholesale business could suffer as a result of consolidations, liquidations, restructurings and other ownership changes in the wholesale industry. Our wholesale business comprised approximately 11% of total net sales for fiscal 2022.
Furthermore, we may be unable to provide these services or implement substitute arrangements on a timely and cost-effective basis on terms favorable to us. Our wholesale business could suffer as a result of consolidations, liquidations, restructurings and other ownership changes in the wholesale industry. Our wholesale business comprised approximately 11% of total net sales for fiscal 2023.
Any corporate responsibility report that we publish or other sustainability disclosure we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management and workforce inclusion and diversity.
Any ESG report that we publish or other sustainability disclosure we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management and workforce inclusion and diversity.
After this period, a combination of this type must be approved by two super-majority stockholder votes, unless common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.
After this period, a business combination must be approved by two super-majority stockholder votes, unless common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.
Our success and growth also depends on the continued development of our omni-channel presence for each of our brands globally, leaning into global digital opportunities for each brand, along with continued bricks and mortar expansion in select international regions, notably mainland China.
Our success and growth also depends on the continued development of our omni-channel presence for each of our brands globally, leaning into global digital opportunities for each brand, along with continued bricks and mortar expansion in select international regions, notably Greater China.
In addition, ongoing impacts of the pandemic, political instability, trade relations, sanctions, price inflationary pressure, or other geopolitical or economic conditions could cause raw material costs to increase and have an adverse effect on our future margins.
In addition, the remaining impacts of the pandemic, political instability, trade relations, sanctions, price inflationary pressure, or other geopolitical or economic conditions could cause raw material costs to increase and have an adverse effect on our future margins.
Although we believe the exclusive forum provision benefits us by providing increased consistency in the application of Maryland law for the specified types of actions and proceedings, this provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company and its directors, officers, or other employees and may discourage lawsuits with respect to such claims.
Although we believe the exclusive forum provision benefits us by providing increased consistency in the application of Maryland law for the specified types of actions and proceedings, this provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company and its directors, officers, or other employees and may discourage lawsuits with respect to such claims. 29 ITEM 1B.
Historically, competition for talent in these positions has been intense and turnover is generally high, both of which have been exacerbated by the ongoing Covid-19 pandemic. If we are unable to attract and retain such employees with the necessary skills and experience, we may not achieve our objectives and our results of operations could be adversely impacted.
Historically, competition for talent in these positions has been intense and turnover is generally high, both of which were exacerbated by the Covid-19 pandemic. If we are unable to attract and retain such employees with the necessary skills and experience, we may not achieve our objectives and our results of operations could be adversely impacted.
Our failure to successfully complete the integration of any acquired business and any adverse consequences associated with future acquisition activities, could have an adverse effect on our business, financial condition and operating results. Completed acquisitions may result in additional goodwill and/or an increase in other intangible assets on our Balance Sheet.
Our failure to successfully complete the integration of any acquired business and any adverse consequences associated with future acquisition activities, could have an adverse effect on our business, financial condition and operating results. Completed acquisitions may result in additional goodwill and/or an increase in other intangible assets on our Consolidated Balance Sheets.
If we misjudge the market for our products or demand for our products are impacted by other factors, such as inflationary pressures, political instability or the ongoing Covid-19 pandemic, we may be faced with significant excess inventories for some products and missed opportunities for other products.
If we misjudge the market for our products or demand for our products are impacted by other factors, such as inflationary pressures, political instability or effects of the Covid-19 pandemic, we may be faced with significant excess inventories for some products and missed opportunities for other products.
The Company's bylaws provide that nominations of persons for election to the Company's Board and the proposal of business to be considered at an annual meeting of stockholders may be made only in the notice of the meeting, by the Company's Board or by a stockholder who is a stockholder of record as of the record date set by the Company's Board for purposes of determining stockholders entitled to vote at the meeting, at the time of the giving of the notice by the stockholder pursuant to the Company's bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and has complied with the advance notice procedures of the Company's bylaws.
The Company's bylaws provide that nominations of persons for election to the Company's Board and the proposal of business to be considered at an annual meeting of stockholders may be made only in the notice of the meeting, by the Company's Board, by a stockholder who is a stockholder of record as of the record date set by the Company's Board for purposes of determining stockholders entitled to vote at the meeting, at the time of the giving of the notice by the stockholder pursuant to the Company's bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and has complied with the advance notice procedures of the Company's bylaws or by qualifying stockholders that satisfy the proxy access provisions of the Company’s bylaws.
See “ Our business is subject to the risks inherent in global sourcing activities” for additional risks related to our distribution and fulfillment networks.
See “ Our business is subject to the risks inherent in global sourcing activities” for additional risks related to our fulfillment networks.
Computer system disruption and cyber security threats, including a personal data or security breach, could damage our relationships with our customers, harm our reputation, expose us to litigation and adversely affect our business.
Risks Related to Information Security and Technology Computer system disruption and cyber security threats, including a personal data or security breach, could damage our relationships with our customers, harm our reputation, expose us to litigation and adversely affect our business.
Economic conditions, such as an economic recession, downturn, periods of inflation or uncertainty, could materially adversely affect our financial condition, results of operations and consumer purchases of luxury items.
Risks Related to Macroeconomic Conditions Economic conditions, such as an economic recession, downturn, periods of inflation or uncertainty, could materially adversely affect our financial condition, results of operations and consumer purchases of luxury items.
Competition is based on a number of factors, including, without limitation, the following: • our competitors may develop new products or product categories that are more popular with our customers; • anticipating and responding in a timely fashion to changing consumer demands and shopping preferences, including the ever-increasing shift to digital brand engagement, social media communications, and online and cross-channel shopping; • maintaining strong brand recognition, loyalty, and a reputation for quality, including through digital brand engagement and online and social media presence; • recruiting and retaining key talent; • developing and producing innovative, high-quality products in sizes, colors, and styles that appeal to consumers of varying age group; • competitively pricing our products and creating an acceptable value proposition for consumers, including price increases to mitigate inflationary pressures while simultaneously balancing the risk of lower consumer demand in response to any such price increases; • providing strong and effective marketing support in several diverse demographic markets, including through digital and social media platforms in order to stay better connected to consumers; • providing attractive, reliable, secure, and user-friendly digital commerce sites; • sourcing sustainable raw materials at cost-effective prices; • ensuring product availability and optimizing supply chain efficiencies with third party suppliers and retailers; • protecting our trademarks and design patents; and • the ability to withstand prolonged periods of adverse economic conditions or business disruptions.
Competition is based on a number of factors, including, without limitation, the following: • our competitors may develop new products or product categories that are more popular with our customers; • anticipating and responding in a timely fashion to changing consumer demands and shopping preferences, including the ever-increasing shift to digital brand engagement, social media communications, and online and cross-channel shopping; • maintaining strong brand recognition, loyalty, and a reputation for quality, including through digital brand engagement and online and social media presence; • recruiting and retaining key talent; • developing and producing innovative, high-quality products in sizes, colors, and styles that appeal to consumers of varying age group; • competitively pricing our products and creating an acceptable value proposition for consumers, including price increases to mitigate inflationary pressures while simultaneously balancing the risk of lower consumer demand in response to any such price increases; • providing strong and effective marketing support in several diverse demographic markets, including through digital and social media platforms in order to stay better connected to consumers; • providing attractive, reliable, secure, and user-friendly digital commerce sites; • sourcing sustainable raw materials at cost-effective prices; • ensuring product availability and optimizing supply chain efficiencies with third-party suppliers and retailers; • protecting our trademarks and design patents; • adapting to changes in technology, including the successful utilization of data analytics, artificial intelligence, and machine learning; and • the ability to withstand prolonged periods of adverse economic conditions or business disruptions. 19 A failure to compete effectively or to keep pace with rapidly changing consumer preferences and technology and product trends could adversely affect our growth and profitability.
Given the robust nature of our e-commerce presence and digital strategy, it is imperative that we and our e-commerce partners maintain uninterrupted operation of our: (i) computer hardware, (ii) software systems, (iii) customer databases, and (iv) ability to email or otherwise keep in contact with our current and potential customers.
Additionally, Tapestry has informational websites in various countries. Given the robust nature of our e-commerce presence and digital strategy, it is imperative that we and our e-commerce partners maintain uninterrupted operation of our: (i) computer hardware, (ii) software systems, (iii) customer databases, and (iv) ability to email or otherwise keep in contact with our current and potential customers.
This ability may be subject to certain economic, financial, competitive and other factors that are beyond our control. Our Board of Directors (“Board”) may, at its discretion, decrease or entirely discontinue these programs at any time.
This ability may be subject to certain economic, financial, competitive and other factors that are beyond our control. Our Board may, at its discretion, decrease or entirely discontinue these Shareholder Return Programs at any time.
We resumed providing guidance for fiscal year 2022 and while we generally expect to provide updates to our financial guidance when we report our results each fiscal quarter, we do not have any responsibility to provide guidance going forward or to update any of our forward-looking statements at such times or otherwise.
While we generally expect to provide updates to our financial guidance when we report our results each fiscal quarter, we do not have any responsibility to provide guidance going forward or to update any of our forward-looking statements at such times or otherwise.
Significant competition in our industry could adversely affect our business. We face intense competition in the product lines and markets in which we operate. Our competitors are European and American luxury brands, as well as private label retailers, including some of the Company's wholesale customers.
We face intense competition in the product lines and markets in which we operate. Our competitors are European and American luxury brands, as well as private label retailers, including some of the Company's wholesale customers.
Due to persistent Covid-19 risks, our company decided to implement a hybrid working model. Recently many of our corporate employees and independent contractors returned to offices several days a week but continued to work remotely the other days. Continued remote working due to the Covid-19 pandemic has increased our dependence on digital technology during this period.
Due to persistent Covid-19 risks, our company implemented a hybrid working model. Many of our corporate employees and independent contractors returned to offices several days a week but continued to work remotely the other days. Continued remote working has increased our dependence on digital technology.
Demand for our products, and consumer spending in the premium handbag, footwear and accessories categories generally, is significantly impacted by trends in consumer confidence, general economic and business conditions, high levels of unemployment, periods of inflation, health pandemics (such as the ongoing Covid-19 pandemic), interest rates, foreign currency exchange rates, the availability of consumer credit, and taxation.
Demand for our products, and consumer spending in the premium handbag, footwear and accessories categories generally, is or may be significantly impacted by trends in consumer confidence, general economic and business conditions, high levels of unemployment, periods of inflation, health pandemics, interest rates, foreign currency exchange rates, the availability of consumer credit, and taxation.
Our results can be impacted by a number of macroeconomic factors, including but not limited to: consumer confidence and spending levels, tax rates, levels of unemployment, consumer credit availability, raw materials costs, pandemics (such as the ongoing Covid-19 pandemic) and natural disasters, fuel and energy costs (including oil prices), global factory production, supply chain operations, commercial real estate market conditions, credit market conditions and the level of customer traffic in malls and shopping centers.
Our results can be impacted by a number of macroeconomic factors, including but not limited to: consumer confidence and spending levels, tax rates, levels of unemployment, consumer credit availability, pandemics, natural disasters, raw material costs, fuel and energy costs (including oil prices), bank failures, market volatility, global factory production, supply chain operations, commercial real estate market conditions, credit market conditions and the level of customer traffic in malls, shopping centers and online.
We also utilize local fulfillment centers, through third-parties, in Japan, parts of Greater China (mainland China, Hong Kong SAR, Macao SAR and Taiwan), South Korea, Singapore, Malaysia, Spain, the U.K., Canada, Australia, and starting in fiscal 2023 in Mexico.
We also utilize local fulfillment centers, through third-parties, in Japan, parts of Greater China, South Korea, Singapore, Malaysia, Spain, the U.K., Canada, Australia, and, starting during fiscal 2023, in Mexico.
Our business and future success depends heavily on attracting, developing and retaining qualified employees, including our senior management team.
Our success depends, in part, on attracting, developing and retaining qualified employees, including key personnel. Our business and future success depends heavily on attracting, developing and retaining qualified employees, including our senior management team.
Department of the Treasury’s Office of Foreign Assets Control and the issuance of Withhold Release Orders by the U.S.
Department of the Treasury’s Office of Foreign Assets Control and the issuance of Withhold Release Orders or other detentions of product by the U.S.
We have been incurring and expect that we will continue to incur significant costs implementing additional security measures to protect against new or enhanced data security or privacy threats, or to comply with current and new international, federal and state laws governing the unauthorized disclosure or exfiltration of confidential and personal information which are continuously being enacted and proposed such as the General Data Protection Regulation (GDPR) in the E.U. the UK GDPR, the American Data Privacy and Protection Act, the California Consumer Privacy Act (CCPA), the California Privacy Rights Act (CPRA), the Virginia Consumer Data Protection Act (VCDPA), the Colorado Privacy Act (CPA) and the Utah Consumer Privacy Act, and the Connecticut Data Privacy Act (CTDPA) in the U.S.A., as well as increased cyber security and privacy protection costs such as organizational changes, Covid-19 employee and visitor health checks, copies of vaccination cards, deploying additional personnel and protection technologies, training employees, engaging outside counsel, third party experts and consultants.
We have been incurring and expect that we will continue to incur significant costs implementing additional security measures to protect against new or enhanced data security or privacy threats, or to comply with current and new international, federal and state laws governing the unauthorized disclosure or exfiltration of confidential and personal information which are continuously being enacted and proposed such as the General Data Protection Regulation ("GDPR") in the E.U. the UK GDPR, the American Data Privacy and Protection Act, the California Consumer Privacy Act ("CCPA") as amended by the California Privacy Rights Act ("CPRA"), the Virginia Consumer Data Protection Act ("VCDPA"), the Colorado Privacy Act ("CPA"), the Utah Consumer Privacy Act ("UCPA"), the Connecticut Data Privacy Act ("CTDPA"), the Montana Consumer Data Privacy Act ("MCDPA"), the Washington My Health My Data Act ("WMHMDA"), the Florida Digital Bill of Rights ("FDBR"), the Texas Data Privacy and Security Act ("TDPSA") in the U.S.A., as well as increased cyber security and privacy protection costs such as organizational changes, deploying additional personnel and protection technologies, training employees and contractors, engaging outside counsel, third-party experts and consultants.
We rely heavily on various information and other business systems to manage our operations, including management of our supply chain, point-of-sale processing in our brands’ stores, our online businesses associated with each brand and various other processes. We are continually evaluating and implementing upgrades and changes to our systems. In addition, from time to time, we implement new systems.
We rely heavily on various information and other business systems, including data analytics and machine learning, to manage our operations, including management of our supply chain, point-of-sale processing in our brands’ stores, our online businesses associated with each brand and various other processes and metrics. We are continually evaluating and implementing upgrades and changes to our systems.
The warehousing of the Company's merchandise, store replenishment and processing direct-to-customer orders is handled by these centers and a prolonged disruption in any center’s operation could materially adversely affect our business and operations. In addition, increases in the Company’s e-commerce sales has required additional fulfillment and fulfillment capacity.
The warehousing of the Company’s merchandise, store replenishment and processing direct-to-customer orders is handled by these centers and a prolonged disruption in any center’s operation could materially adversely affect our business and operations.
We cannot accurately predict the amount and timing of any potential future impairment of assets. Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our financial condition and results of operations.
We cannot accurately predict the amount and timing of any potential future impairment of assets. Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our financial condition and results of operations. We may not complete our acquisition of Capri within the time frame we anticipate or at all.
At the same time, however, we recognize that, when possible, it is helpful to provide investors with guidance as to our forecast of net sales, operating income, net interest expense, earnings per diluted share and other financial metrics or projections.
We believe that this longer-term focus is in the best interests of the Company and our stockholders. At the same time, however, we recognize that, when possible, it is helpful to provide investors with guidance as to our forecast of net sales, operating income, net interest expense, tax rate, earnings per diluted share and other financial metrics or projections.
Customs and Border Patrol; • inability to engage new independent manufacturers that meet the Company’s cost-effective sourcing model; • product quality issues; • political unrest, including the ongoing crisis in Ukraine, protests and other civil disruption; • public health crises, such as pandemic and epidemic diseases, and other unforeseen outbreaks; • natural disasters or other extreme weather events, whether as a result of climate change or otherwise; • acts of war or terrorism and other external factors over which we have no control.
Customs and Border Patrol; • inability to engage new independent manufacturers that meet the Company’s cost-effective sourcing model; • product quality issues; • political unrest, protests and other civil disruption; • public health crises, such as pandemic and epidemic diseases, and other unforeseen outbreaks; • natural disasters or other extreme weather events, whether as a result of climate change or otherwise; and • acts of war or terrorism and other external factors over which we have no control. 17 We are subject to labor laws governing relationships with employees, including minimum wage requirements, overtime, working conditions, and citizenship requirements.
We may face unexpected difficulties or costs in connection with any action to bring currently licensed categories in-house. We are subject to risks associated with leasing retail space subject to long-term and non-cancelable leases. We may be unable to renew leases at the end of their terms.
We may face unexpected difficulties or costs in connection with any action to bring currently licensed categories in-house. We are subject to risks associated with leasing retail space subject to non-cancelable leases. We may be unable to renew leases at the end of their terms. If we close a leased retail space, we remain obligated under the applicable lease.
If we are unable to effectively execute our e-commerce and digital strategies and provide reliable experiences for our customers across all channels, our reputation and ability to compete with other brands could suffer, which could adversely impact our business, results of operations and financial condition. Our success depends, in part, on attracting, developing and retaining qualified employees, including key personnel.
If we are unable to effectively execute our e-commerce and digital strategies and provide reliable experiences for our customers across all channels, our reputation and ability to compete with other brands could suffer, which could adversely impact our business, results of operations and financial condition.
The retail industry, including wholesale customers, has experienced financial difficulty leading to consolidations, reorganizations, restructuring, bankruptcies and ownership changes. In addition, the Covid-19 pandemic has resulted in reduced operations or the closure, temporarily or permanently, of many of our wholesale partners.
The retail industry, including wholesale customers, has experienced financial difficulty leading to consolidations, reorganizations, restructuring, bankruptcies and ownership changes. Our wholesale customers have also experienced significant business disruptions as a result of the Covid-19 pandemic, including reduced operations or the closure, temporarily or permanently, of many of our wholesale partners.
Implementing new systems carries substantial risk, including failure to operate as designed, failure to properly integrate with other systems, potential loss of confidential and personal information, cost overruns, implementation delays and disruption of operations.
Implementing new systems and upgrading existing systems and data analytics models carries substantial risk, including failure to operate as designed, failure to properly integrate with other systems, failure to accurately capture or report data or metrics, potential loss of confidential and personal information, cost overruns, implementation delays and disruption of operations.
Bribery Act, and other global anti-corruption laws, which in general concern the bribery of foreign public officials, and other regulations and requirements; • changes in tourist shopping patterns, particularly that of the Chinese consumer and as a result of the Covid-19 pandemic; • natural and other disasters; • political, civil and social unrest, such as the ongoing crisis in Ukraine; and • changes in legal and regulatory requirements, including, but not limited to safeguard measures, anti-dumping duties, cargo restrictions to prevent terrorism, restrictions on the transfer of currency, climate change and other environmental legislation, product safety regulations or other charges or restrictions. 17 Our business is subject to the risks inherent in global sourcing activities.
Bribery Act, and other global anti-corruption laws, which in general concern the bribery of foreign public officials, and other regulations and requirements; • changes in tourist shopping patterns, particularly that of the Chinese consumer; • geopolitical instability (such as the uncertainty in U.S.-China relations); • natural and other disasters; • political, civil and social unrest; and • changes in legal and regulatory requirements, including, but not limited to safeguard measures, anti-dumping duties, cargo restrictions to prevent terrorism, restrictions on the transfer of currency, climate change and other environmental legislation, product safety regulations or other charges or restrictions.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases. The Inflation Reduction Act of 2022 will become effective beginning in fiscal 2024.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law by the Biden Administration, with tax provisions primarily focused on implementing a 15% corporate alternative minimum tax on global adjusted financial statement income ("CAMT") and a 1% excise tax on share repurchases.
These requirements resulted in temporary closures of the majority of the Company's directly operated stores globally for some period of time to help reduce the spread of Covid-19 during fiscal 2020. Throughout fiscal years 2021 and 2022, the vast majority of the Company’s stores were opened and have continued to operate.
These requirements resulted in temporary closures of the majority of the Company's directly operated stores globally for some period of time to help reduce the spread of Covid-19 during fiscal 2020.
Refer to “ If we are unable to pay quarterly dividends or conduct stock repurchases at intended levels, our reputation and stock price may be negatively impacted. ” for additional discussion of our quarterly dividend. If we are unable to pay quarterly dividends or conduct stock repurchases at intended levels, our reputation and stock price may be negatively impacted.
Risks Related to Ownership of our Common Stock If we are unable to pay quarterly dividends or conduct stock repurchases at intended levels, our reputation and stock price may be negatively impacted.
While we have business continuity and contingency plans for our sourcing and fulfillment center sites, significant disruption of manufacturing or fulfillment for any of the above reasons could interrupt product supply, result in a substantial loss of inventory, increase our costs, disrupt deliveries to our customers and our retail stores, and, if not remedied in a timely manner, could have a material adverse impact on our business.
While we have business continuity and contingency plans for our sourcing and fulfillment center sites, significant disruption of manufacturing or fulfillment for any of the above reasons could interrupt product supply, result in a substantial loss of inventory, increase our costs, disrupt deliveries to our customers and our retail stores, and, if not remedied in a timely manner, could have a material adverse impact on our business. 20 Because our fulfillment centers include automated and computer-controlled equipment, they are susceptible to risks including power interruptions, hardware and system failures, software viruses, and security breaches.
Business underperformance in the Company's second fiscal quarter would have a material adverse effect on its full year operating results and result in higher inventories.
We have historically realized, and expect to continue to realize, higher sales and operating income in the second quarter of our fiscal year. Business underperformance in the Company's second fiscal quarter would have a material adverse effect on its full year operating results and result in higher inventories.
We believe that the majority of the leases we enter into in the future will likely be non-cancelable. Generally, our leases are “net” leases, which require us to pay our proportionate share of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases at our option.
Generally, our leases are “net” leases, which require us to pay our proportionate share of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases at our option.
The impacts of Covid-19 continue to materially adversely impact our operations, cash flow and liquidity. The virus has impacted all regions around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities.
The Covid-19 pandemic has had, and may continue to have, a significant impact on our operations, cash flow and liquidity. The virus has impacted all regions that we operate in around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities.
We believe our trademarks, copyrights, patents, and other intellectual property rights are extremely important to our success and our competitive position. We devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts worldwide.
We believe our trademarks, copyrights, patents, and other intellectual property rights are extremely important to our success and our competitive position. We devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts worldwide. We pursue entities involved in the trafficking and sale of counterfeit merchandise through legal action or other appropriate measures.
Our continued international expansion will increase our exposure to foreign currency fluctuations. The majority of the Company's purchases and sales involving international parties, excluding international consumer sales, are denominated in U.S. dollars. Failure to adequately protect our intellectual property and curb the sale of counterfeit merchandise could injure our brands and negatively affect sales.
Our continued international expansion will increase our exposure to foreign currency fluctuations. The majority of the Company's purchases and sales involving international parties, excluding international consumer sales, are denominated in U.S. dollars. We may be unable to protect our intellectual property and curb the sale of counterfeit merchandise, which can cause harm to our reputation and business.
We operate on a global basis, with approximately 37.6% of our net sales coming from operations outside of United States as of the end of fiscal year 2022.
We operate on a global basis, with approximately 39.3% of our net sales coming from operations outside of United States for fiscal year 2023.
Any delay in the construction or our failure to execute our operational plans for this fulfillment center could result in the Company not being able to meet customer demand for its products and could materially adversely affect our business and operations. A decline in the volume of traffic to our stores could have a negative impact on our net sales.
Any failure to execute our operational plans for this fulfillment center could result in the Company not being able to meet customer demand for its products and could materially adversely affect our business and operations.
Risks Related to Information Security and Technology A delay, disruption in, failure of, or inability to upgrade our information technology systems precisely and efficiently could materially adversely affect our business, financial condition or results of operations and cash flow.
Any material disruptions in our e-commerce presence or information technology systems and applications could have a material adverse effect on our business, financial condition and results of operations. A delay, disruption in, failure of, or inability to upgrade our information technology systems precisely and efficiently could materially adversely affect our business, financial condition or results of operations and cash flow.
The success of our retail stores located within malls and shopping centers may be impacted by (1) closures, operating restrictions, store capacity restrictions and changes in consumer shopping behavior as a result of the Covid-19 pandemic; (2) the location of the store within the mall or shopping center; (3) surrounding tenants or vacancies; (4) increased competition in areas where malls or shopping centers are located; (5) the amount spent on advertising and promotion to attract consumers to the mall; and (6) a shift towards online shopping resulting in a decrease in mall traffic.
The success of our retail stores located within malls and shopping centers may be impacted by (i) changes in consumer shopping behavior, closures, operating restrictions and store capacity restrictions; (ii) reduced travel resulting from economic conditions (including a recession or inflationary pressures); (iii) the location of the store within the mall or shopping center; (iv) surrounding tenants or vacancies; (v) increased competition in areas where malls or shopping centers are located; (vi) the amount spent on advertising and promotion to attract consumers to the mall; and (vii) a shift towards online shopping resulting in a decrease in mall traffic.
Although we have announced our corporate responsibility strategy and 2025 Corporate Responsibility Goals, there can be no assurance that our stakeholders will agree with our strategy or that we will be successful in achieving our goals.
Stakeholders, including consumers, employees and investors, have increasingly focused on corporate responsibility practices of companies. Although we have announced our ESG strategy and related goals, there can be no assurance that our stakeholders will agree with our strategy or that we will be successful in achieving our goals.
Any failure to pay dividends or conduct stock repurchases, or conduct either program at expected levels, after we have announced our intention to do so may negatively impact our reputation, investor confidence in us and negatively impact our stock price. 28 Provisions in the Company's charter, bylaws and Maryland law may delay or prevent an acquisition of the Company by a third party.
Any failure to pay dividends or conduct stock repurchases, or conduct either program at expected levels, after we have announced our intention to do so may negatively impact our reputation, investor confidence in us and negatively impact our stock price.
A failure to compete effectively or to keep pace with rapidly changing consumer preferences and technology and product trends could adversely affect our growth and profitability. Our business may be subject to increased costs due to excess inventories and a decline in profitability as a result of increasing pressure on margins if we misjudge the demand for our products.
Our business may be subject to increased costs due to excess inventories and a decline in profitability as a result of increasing pressure on margins if we misjudge the demand for our products.
We take no responsibility for any losses suffered as a result of such changes in our stock price. We periodically return value to investors through payment of quarterly dividends and common stock repurchases.
We take no responsibility for any losses suffered as a result of such changes in our stock price. We periodically return value to investors through payment of quarterly dividends and common stock repurchases. The market price of our securities could be adversely affected if our cash dividend rate or common stock repurchase activity differs from investors’ expectations.
In the event of an acceleration of payment to the lenders, this would result in a cross default of the Company’s Senior Notes, causing the Company’s outstanding borrowings to also become due and payable on demand. 27 Our ability to make payments on and to refinance our debt obligations and to fund planned capital expenditures depends on our ability to generate cash from our operations.
In the event of an acceleration of payment to the lenders, this would result in a cross default of the Company’s Senior Notes, causing the Company’s outstanding borrowings to also become due and payable on demand.
As we outsource functions, we will become more dependent on the third parties performing these functions. As part of our long-term strategy, we look for opportunities to cost effectively enhance capability of business services.
We may not be able to offset such increases in raw materials, labor or transportation costs through pricing measures or other means. As we outsource functions, we will become more dependent on the third parties performing these functions. As part of our long-term strategy, we look for opportunities to cost effectively enhance capability of business services.
Finally, many countries’ laws do not protect intellectual property rights to the same degree as U.S. laws. Risks Related to our Indebtedness We have incurred a substantial amount of indebtedness, which could restrict our ability to engage in additional transactions or incur additional indebtedness. As of July 2, 2022, our consolidated indebtedness was approximately $1.70 billion.
Risks Related to our Indebtedness We have incurred a substantial amount of indebtedness, which could restrict our ability to engage in additional transactions or incur additional indebtedness. As of July 1, 2023, our consolidated indebtedness was approximately $1.67 billion.
Furthermore, 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 or eliminate the amount of merchandise purchased from us or our licensing partners could result in an adverse effect on the sales and profitability within this channel.
Furthermore, 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 or eliminate the amount of merchandise purchased from us or our licensing partners could result in an adverse effect on the sales and profitability within this channel. 21 Additionally, certain of our wholesale customers, particularly those located in the U.S., have in the past been highly promotional and have aggressively marked down their merchandise and may do so again in the future, which could negatively impact our brands or could affect our business, results of operations, and financial condition.
If any of these centers were to shut down or otherwise become inoperable or inaccessible for any reason, including as a result of the ongoing Covid-19 pandemic, we could suffer a substantial loss of inventory and/or disruptions of deliveries to our retail and wholesale customers. Depending on the duration of these closures, our results may be materially impacted.
Our ability to meet the needs of our customers and our retail stores and e-commerce sites depends on the proper operation of these centers. If any of these centers were to shut down or otherwise become inoperable or inaccessible for any reason, we could suffer a substantial loss of inventory and/or disruptions of deliveries to our retail and wholesale customers.
We are subject to labor laws governing relationships with employees, including minimum wage requirements, overtime, working conditions, and citizenship requirements. Compliance with these laws may lead to increased costs and operational complexity and may increase our exposure to governmental investigations or litigation.
Compliance with these laws may lead to increased costs and operational complexity and may increase our exposure to governmental investigations or litigation.
Consumer purchases of discretionary luxury items, such as the Company's products, tend to decline during recessionary periods or periods of sustained high unemployment, when disposable income is lower.
Consumer purchases of discretionary luxury items, such as the Company's products, tend to decline during recessionary periods or periods of sustained high unemployment, when disposable income is lower. Unfavorable economic conditions may also reduce consumers’ willingness and ability to travel to major cities and vacation destinations in which our stores are located.
Any misstep in product quality or design, executive leadership, customer service, marketing, unfavorable publicity or excessive product discounting could negatively affect the image of our brands with our customers.
Each of our brands are unique and independent, while sharing a commitment to innovation and authenticity defined by distinctive products and differentiated customer experiences across channels and geographies. Any misstep in product quality or design, executive leadership, customer service, marketing, unfavorable publicity or excessive product discounting could negatively affect the image of our brands with our customers.
Risks Related to Macroeconomic Conditions The Covid-19 pandemic and resulting adverse economic conditions may continue to have a material adverse impact on our business, financial condition, results of operations and cash flows. The ongoing Covid-19 pandemic continues to impact a significant majority of the regions in which we operate, resulting in significant global business disruptions.
Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition. The Covid-19 pandemic and resulting adverse economic conditions may continue to adversely affect our business, financial condition, results of operations and cash flows.
Any failure on our part to comply with such climate change-related regulations could lead to adverse consumer actions and/or investment decisions by investors, as well as expose us to legal risk.
Any failure on our part to comply with such climate change-related regulations could lead to adverse consumer actions and/or investment decisions by investors, as well as expose us to legal risk. 25 Increased scrutiny from investors and others regarding our environmental, social and governance ("ESG") initiatives, including matters of significance relating to sustainability, could result in additional costs or risks and adversely impact our reputation.
Consequently, if our global omni-channel expansion plans are unsuccessful, or we are unable to retain and/or attract key personnel, our business, financial condition and results of operation could be materially adversely affected.
Consequently, if our global omni-channel expansion plans are unsuccessful, or we are unable to retain and/or attract key personnel, our business, financial condition and results of operation could be materially adversely affected. 18 We aim to provide a seamless omni-channel experience to our customers regardless of whether they are shopping in stores or engaging with our brands through digital technology, such as computers, mobile phones, tablets or other devices.
There can be no assurance that these individuals will remain with us or that we will be able to identify and attract suitable successors for these individuals.
We depend on the guidance of our senior management team and other key employees who have significant experience and expertise in our industry and our operations. There can be no assurance that these individuals will remain with us or that we will be able to identify and attract suitable successors for these individuals.

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Item 2. Properties

Properties — owned and leased real estate

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These leases expire at various times through fiscal 2034. The Company considers these properties to be in generally good condition, and believes that its facilities are adequate for its operations and provide sufficient capacity to meet its anticipated requirements. Refer to Item 1. "Business," for further information. ITEM 3.
These leases expire at various times through fiscal 2034. The Company considers these properties to be in generally good condition, and believes that its facilities are adequate for its operations and provide sufficient capacity to meet its anticipated requirements. Refer to Item 1. "Business," for further information.
ITEM 2. PROPERTIES The following table sets forth the location, use and size of the Company's key fulfillment, corporate and product development facilities as of July 2, 2022. The majority of the properties are leased, with the leases expiring at various times through fiscal 2037, subject to renewal options.
ITEM 2. PROPERTIES The following table sets forth the location, use and size of the Company's key fulfillment, corporate and product development facilities as of July 1, 2023. All of the properties are leased, with the leases expiring at various times through fiscal 2037, subject to renewal options.
Location Use Approximate Square Footage Jacksonville, Florida Coach North America fulfillment and customer service 1,050,000 Westchester, Ohio Kate Spade North America fulfillment 601,000 New York, New York Corporate, design, sourcing and product development 546,000 Chiba, Japan Japan regional fulfillment 278,000 Shanghai, China Asia regional fulfillment 179,000 New York, New York Kate Spade corporate management 135,000 North Bergen, New Jersey Corporate office and customer service 106,000 Tokyo, Japan Corporate and regional management 24,900 Shanghai, China Coach Greater China regional management 23,000 Elda, Spain Stuart Weitzman regional management, sourcing and quality control 19,000 Seoul, South Korea Corporate regional management 18,000 Dongguan, China Corporate sourcing, quality control and product development 17,000 London, England International regional management 16,500 Ho Chi Minh City, Vietnam Coach sourcing and quality control 12,600 Shanghai, China Asia regional management 10,200 Singapore Coach Singapore regional management, sourcing and quality control 8,700 Hong Kong SAR, China Coach sourcing and quality control 8,500 In addition to the above properties, the Company occupies leased retail and outlet store locations located in North America and internationally for each of our brands.
Location Use Approximate Square Footage Jacksonville, Florida Coach North America fulfillment and customer service 1,050,000 Las Vegas, Nevada Coach North America fulfillment 789,000 Westchester, Ohio Kate Spade and Stuart Weitzman North America fulfillment 601,000 New York, New York Corporate global headquarters 546,000 Chiba, Japan Coach and Kate Spade Japan regional fulfillment 278,000 Shanghai, China Coach Asia regional fulfillment 179,000 New York, New York Kate Spade corporate management 135,000 North Bergen, New Jersey Corporate office and customer service 106,000 Taiwan, China Coach Taiwan regional fulfillment 36,100 Tokyo, Japan Corporate regional management 24,900 Shanghai, China Coach Greater China regional management 21,200 Shanghai, China Corporate regional management 21,200 Elda, Spain Stuart Weitzman regional management, sourcing and quality control 19,000 Dongguan, China Corporate sourcing, quality control and product development 17,000 London, England Corporate regional management 16,500 Ho Chi Minh City, Vietnam Coach sourcing and quality control 12,600 Seoul, South Korea Corporate regional management 11,400 Singapore Coach Singapore regional management, sourcing and quality control 8,700 Hong Kong SAR, China Corporate sourcing and quality control 8,500 In addition to the above properties, the Company occupies leased retail and outlet store locations located in North America and internationally for each of our brands.
Removed
LEGAL PROCEEDINGS Information regarding legal proceedings is set forth in Note 13, Commitments and Contingencies, of the "Notes to Consolidated Financial Statements" and is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market and Dividend Information Tapestry, Inc.’s common stock is listed on the New York Stock Exchange and is traded under the symbol “TPR.” As of August 5, 2022, there were 1,971 holders of record of Tapestry’s common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market and Dividend Information Tapestry, Inc.’s common stock is listed on the New York Stock Exchange and is traded under the symbol “TPR.” As of August 4, 2023, there were 1,899 holders of record of Tapestry’s common stock.
Performance Graph The following graph compares the cumulative total stockholder return (assuming reinvestment of dividends) of the Company's common stock with the cumulative total return of the Standard & Poor's ("S&P") 500 Stock Index and the S&P 500 Apparel, Accessories & Luxury Goods Index over the five-fiscal-year period ending July 2, 2022, the last day of Tapestry’s most recent fiscal year.
Performance Graph The following graph compares the cumulative total stockholder return (assuming reinvestment of dividends) of the Company's common stock with the cumulative total return of the Standard & Poor's ("S&P") 500 Stock Index and the S&P 1500 Apparel, Accessories & Luxury Goods Index over the five-fiscal-year period ending July 1, 2023, the last day of Tapestry’s most recent fiscal year.
The graph assumes that $100 was invested on July 1, 2017 at the per share closing price in each of Tapestry’s common stock, the S&P 500 Stock Index and the S&P 500 Apparel, Accessories & Luxury Goods Index, and that all dividends were reinvested.
The graph assumes that $100 was invested on June 30, 2018 at the per share closing price in each of Tapestry’s common stock, the S&P 500 Stock Index and the S&P 1500 Apparel, Accessories & Luxury Goods Index, and that all dividends were reinvested.
The stock performance shown in the graph is not intended to forecast or be indicative of future performance. During fiscal 2022, the Company moved to using the S&P 500 Apparel, Accessories & Luxury Goods Index. The Company's old peer group consisted of: • L Brands, Inc.
The stock performance shown in the graph is not intended to forecast or be indicative of future performance. During fiscal 2023, the Company moved to using the S&P 1500 Apparel, Accessories & Luxury Goods Index from the S&P 500 Apparel, Accessories & Luxury Groups Index.
Corporation • Estee Lauder, Inc. • Capri Holdings Limited Tapestry management selected the S&P 500 Apparel, Accessories & Luxury Goods Index on an industry/line-of-business basis and believes this updated index represents good faith comparables based on their history, size, and business models in relation to Tapestry, Inc. 31 Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 TPR $100.00 $101.68 $71.66 $29.59 $100.57 $74.54 S&P 500 Apparel, Accessories & Luxury Goods $100.00 $128.77 $113.77 $62.77 $120.39 $70.14 Former Set $100.00 $138.05 $147.52 $120.08 $227.37 $162.44 S&P 500 $100.00 $114.37 $126.29 $131.74 $193.63 $172.67 Stock Repurchase Program The Company's share repurchases during the fourth quarter of fiscal 2022 were as follows: Fiscal Period Total Number of Shares Repurchased Average Price per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) (in millions, except share data and per share data) April 3, 2022 - May 7, 2022 — $ — — $ — May 8, 2022 - June 4, 2022 6,429,521 32.69 6,429,521 1,640.0 June 5, 2022 - July 2, 2022 4,254,968 32.90 4,254,968 1,500.0 Total 10,684,489 10,684,489 (1) On November 11, 2021, the Company announced the Board of Directors authorized a common stock repurchase program to repurchase up to $1.00 billion of its outstanding common stock (the "2021 Share Repurchase Program").
Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023 TPR $100.00 $70.48 $29.10 $98.91 $73.31 $105.00 S&P 500 Apparel, Accessories & Luxury Goods $100.00 $88.35 $48.75 $93.49 $54.47 $48.10 S&P 1500 Apparel, Accessories & Luxury Goods $100.00 $86.78 $49.34 $98.73 $60.46 $56.95 S&P 500 $100.00 $110.42 $115.19 $169.29 $150.97 $178.66 31 Stock Repurchase Program The Company's share repurchases during the fourth quarter of fiscal 2023 were as follows: Fiscal Period Total Number of Shares Repurchased Average Price per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) (in millions, except share data and per share data) April 2, 2023 - May 6, 2023 — $ — — $ 1,000 May 7, 2023 - June 3, 2023 2,092,052 41.78 2,092,052 913.0 June 4, 2023 - July 1, 2023 2,614,466 43.03 2,614,466 800.0 Total 4,706,518 4,706,518 (1) On May 12, 2022, the Company announced that its Board of Directors authorized a common stock repurchase program to repurchase up to $1.50 billion of its outstanding common stock (the "2022 Share Repurchase Program").
On May 12, 2022, the Company announced that its Board of Directors authorized the additional repurchase of up to $1.50 billion of its outstanding common stock (the "2022 Share Repurchase Program"). This authorization is incremental to the Company's existing authorization. Purchases of the Company's common stock were executed through open market purchases, including through purchase agreements under Rule 10b5-1.
Purchases of the Company's common stock were executed through open market purchases, including through purchase agreements under Rule 10b5-1. The authorized value of shares available to be repurchased under this program excludes the cost of commissions and excise taxes. ITEM 6. RESERVED 32
Removed
The information under the principal heading “Securities Authorized For Issuance Under Equity Compensation Plans” in the Company’s definitive Proxy Statement for the Annual Meeting of Stockholders to be held on November 15, 2022, to be filed with the Securities and Exchange Commission (the “Proxy Statement”), is incorporated herein by reference.
Added
Tapestry management selected the S&P 1500 Apparel, Accessories & Luxury Goods Index on an industry/line-of-business basis and believes this updated index represents good faith comparables based on their history, size, and business models in relation to Tapestry, Inc.
Removed
(subsequent to August 2, 2021, Bath and Body Works, Inc.) • PVH Corp. • Ralph Lauren Corporation • V.F.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

95 edited+31 added−63 removed63 unchanged
Since the determination of future cash flows is an estimate of future performance, there may be future impairments in the event that future cash flows do not meet expectations. Share-Based Compensation The Company recognizes the cost of equity awards to employees and the non-employee Directors based on the grant-date fair value of those awards.
Since the determination of future cash flows is an estimate of future performance, there may be future impairments in the event that future cash flows do not meet expectations. 47 Share-Based Compensation The Company recognizes the cost of equity awards to employees and the non-employee Directors based on the grant-date fair value of those awards.
The Company has three reportable segments: • Coach - Includes global sales of Coach products to customers through Coach operated stores, including e-commerce sites and concession shop-in-shops, and sales to wholesale customers and through independent third party distributors. • Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including e-commerce sites and concession shop-in-shops, sales to wholesale customers and through independent third party distributors. • Stuart Weitzman - Includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, including e-commerce sites, sales to wholesale customers and through numerous independent third party distributors.
The Company has three reportable segments: • Coach - Includes global sales of primarily Coach brand products to customers through Coach operated stores, including e-commerce sites and concession shop-in-shops, sales to wholesale customers and through independent third-party distributors. • Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including e-commerce sites and concession shop-in-shops, sales to wholesale customers and through independent third-party distributors. • Stuart Weitzman - Includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, sales to wholesale customers, through e-commerce sites and through independent third-party distributors.
On May 12, 2022, the Company announced the Board of Directors authorized the additional repurchase of up to $1.50 billion of its common stock (the "2022 Share Repurchase Program"). Pursuant to this program, purchases of the Company's common stock will be made subject to market conditions and at prevailing market prices, through open market purchases.
Stock Repurchase Plan On May 12, 2022, the Company announced the Board of Directors authorized the additional repurchase of up to $1.50 billion of its common stock (the "2022 Share Repurchase Program"). Pursuant to this program, purchases of the Company's common stock will be made subject to market conditions and at prevailing market prices, through open market purchases.
In determining future cash flows, the Company takes various factors into account, including the effects of macroeconomic trends such as consumer spending, in-store capital investments, promotional cadence, the level of advertising and changes in 50 merchandising strategy.
In determining future cash flows, the Company takes various factors into account, including the effects of macroeconomic trends such as consumer spending, in-store capital investments, promotional cadence, the level of advertising and changes in merchandising strategy.
Refer to Note 13, "Commitments and Contingencies," for further information. 48 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect our results of operations, financial condition and cash flows as well as the disclosure of contingent assets and liabilities as of the date of the Company's financial statements.
Refer to Note 13, "Commitments and Contingencies," for further information. 45 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect our results of operations, financial condition and cash flows as well as the disclosure of contingent assets and liabilities as of the date of the Company's financial statements.
A hypothetical 10% change in our stock-based compensation expense would not have a material impact to our fiscal 2022 net income. Income Taxes The Company’s effective tax rate is based on pre-tax income, statutory tax rates, tax laws and regulations, and tax planning strategies available in the various jurisdictions in which the Company operates.
A hypothetical 10% change in our stock-based compensation expense would not have a material impact to our fiscal 2023 net income. Income Taxes The Company’s effective tax rate is based on pre-tax income, statutory tax rates, tax laws and regulations, and tax planning strategies available in the various jurisdictions in which the Company operates.
The Company does not have directly operated stores in Russia or Ukraine and has a minimal distributor and wholesale business which was less than 0.1% of the Company’s total Net sales for fiscal 2022 and fiscal 2021. Starting in the third quarter of fiscal 2022 the Company paused all wholesale shipments to Russia and Ukraine.
The Company does not have directly operated stores in Russia or Ukraine and has a minimal distributor and wholesale business which was less than 0.1% of the Company’s total Net sales for fiscal 2023 and fiscal 2022. Starting in the third quarter of fiscal 2022 the Company paused all wholesale shipments to Russia.
Refer to Note 15, “Income Taxes,” for further information. Recent Accounting Pronouncements Refer to Note 3, "Significant Accounting Policies," to the accompanying audited consolidated financial statements for a description of certain recently adopted, issued or proposed accounting standards which may impact our consolidated financial statements in future reporting periods. 51
Refer to Note 15, “Income Taxes,” for further information. Recent Accounting Pronouncements Refer to Note 3, "Significant Accounting Policies," to the accompanying audited consolidated financial statements for a description of certain recently adopted, issued or proposed accounting standards which may impact our consolidated financial statements in future reporting periods. 48
Given the relatively small excess of fair value over carrying value as noted above, if profitability trends decline during fiscal 2023 from those that are expected, it is possible that an interim test, or our annual impairment test, could result in an impairment of these assets.
Given the relatively small excess of fair value over carrying value as noted above, if profitability trends decline during fiscal 2024 from those that are expected, it is possible that an interim test, or our annual impairment test, could result in an impairment of these assets.
We will continue to monitor these trends and evaluate and adjust our operating strategies and cost management opportunities to mitigate the related impact on our results of operations, while remaining focused on the long-term growth of our business and protecting the value of our brands.
We will continue to monitor the below trends and evaluate and adjust our operating strategies and cost management opportunities to mitigate the related impact on our results of operations, while remaining focused on the long-term growth of our business and protecting the value of our brands.
The $1.25 Billion Revolving Credit Facility may be used to finance the working capital needs, capital expenditures, permitted investments, share purchases, dividends and other general corporate purposes of the Company and its subsidiaries (which may include commercial paper backup). There were no outstanding borrowings on the $1.25 Billion Revolving Credit Facility as of July 2, 2022.
The $1.25 Billion Revolving Credit Facility may be used to finance the working capital needs, capital expenditures, permitted investments, share purchases, dividends and other general corporate purposes of the Company and its subsidiaries (which may include commercial paper backup). There were no outstanding borrowings on the $1.25 Billion Revolving Credit Facility as of July 1, 2023.
At July 2, 2022, a 10% change in the allowances for estimated uncollectible accounts, markdowns and returns would not have resulted in a material change in the Company's reserves and net sales. Inventories The Company holds inventory that is sold through retail and wholesale distribution channels, including e-commerce sites.
At July 1, 2023, a 10% change in the allowances for estimated uncollectible accounts, markdowns and returns would not have resulted in a material change in the Company's reserves and net sales. Inventories The Company holds inventory that is sold through retail and wholesale distribution channels, including e-commerce sites.
As of July 2, 2022, no known events of default have occurred. Refer to Note 12, "Debt," for further information on our existing debt instruments. We believe that our Revolving Credit Facility is adequately diversified with no undue concentrations in any one financial institution.
As of July 1, 2023, no known events of default have occurred. Refer to Note 12, "Debt," for further information on our existing debt instruments. We believe that our Revolving Credit Facility is adequately diversified with no undue concentrations in any one financial institution.
Off-Balance Sheet Arrangements In addition to the commitments included in the table above, we have outstanding letters of credit, surety bonds and bank guarantees of $37.8 million as of July 2, 2022, primarily serving to collateralize our obligation to third parties for duty, leases, insurance claims and materials used in product manufacturing.
Off-Balance Sheet Arrangements In addition to the commitments included in the table above, we have outstanding letters of credit, surety bonds and bank guarantees of $37.1 million as of July 1, 2023, primarily serving to collateralize our obligation to third parties for duty, leases, insurance claims and materials used in product manufacturing.
Fluctuations in net sales, operating income and operating cash flows of the Company in any fiscal quarter may be affected by the timing of wholesale shipments and other events affecting retail sales, including macroeconomic events, such as Covid-19, or adverse weather conditions.
Fluctuations in net sales, operating income and operating cash flows of the Company in any fiscal quarter may be affected by the timing of wholesale shipments and other events affecting retail sales, including weather and macroeconomic events, and pandemics such as Covid-19.
The $253.6 million use of cash in fiscal 2022 is primarily due to purchases of investments of $540.4 million and capital expenditures of $93.9 million, partially offset by proceeds from maturities and sales of investments of $380.7 million. The $91.0 million use of cash in fiscal 2021 is primarily due to capital expenditures of $116.0 million.
The $253.6 million use of cash in fiscal 2022 is primarily due to purchases of investments of $540.4 million and capital expenditures of $93.9 million, partially offset by proceeds from maturities and sales of investments of $380.7 million.
As of July 2, 2022, there were 14 financial institutions participating in the Revolving Credit Facility and Term Loans, with no one participant maintaining a combined maximum commitment percentage in excess of 14%.
As of July 1, 2023, there were 14 financial institutions participating in the Revolving Credit Facility and Term Loans, with no one participant maintaining a combined maximum commitment percentage in excess of 14%.
Total capital expenditures and cloud computing implementation costs were $161.6 million in fiscal 2022 as the Company continues to prioritize investing in digital capabilities. Certain cloud computing implementation costs are recognized within Prepaid expenses and Other assets on the Consolidated Balance Sheets. Seasonality The Company's results are typically affected by seasonal trends.
Total capital expenditures and cloud computing implementation costs were $260.8 million in fiscal 2023 as the Company continues to prioritize investing in digital capabilities. Certain cloud computing implementation costs are recognized within Prepaid expenses and Other assets on the Consolidated Balance Sheets. Seasonality The Company's results are typically affected by seasonal trends.
At July 2, 2022, a 10% change in the inventory reserve, would not have resulted in material change in inventory and cost of sales. 49 Goodwill and Other Intangible Assets Upon acquisition, the Company estimates and records the fair value of purchased intangible assets, which primarily consists of brands, customer relationships, right-of-use assets and order backlog.
At July 1, 2023, a 10% change in the inventory reserve, would not have resulted in material change in inventory and cost of sales. 46 Goodwill and Other Intangible Assets Upon acquisition, the Company estimates and records the fair value of purchased intangible assets, which primarily consists of brands, customer relationships, right-of-use assets and order backlog.
To improve our working capital efficiency, starting in fiscal 2021 we made available to certain suppliers a voluntary supply chain finance (“SCF”) program that enables our suppliers to sell their receivables from the Company to a global financial institution on a non-recourse basis at a rate that leverages our credit rating.
To improve our working capital efficiency, we make available to certain suppliers a voluntary supply chain finance (“SCF”) program that enables our suppliers to sell their receivables from the Company to a global financial institution on a non-recourse basis at a rate that leverages our credit rating.
Besides the firm commitments noted above, the above table excludes other amounts included in current liabilities in the Consolidated Balance Sheet at July 2, 2022 as these items will be paid within one year and certain long-term liabilities not requiring cash payments.
Besides the firm commitments noted above, the above table excludes other amounts included in current liabilities in the Consolidated Balance Sheets at July 1, 2023 as these items will be paid within one year and certain long-term liabilities not requiring cash payments.
Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $101.1 million as of July 2, 2022, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever.
Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $100.6 million as of July 1, 2023, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever.
As of July 2, 2022, the Company had $1.50 billion of additional shares available to be repurchased as authorized under the 2021 Share Repurchase Program and 2022 Share Repurchase Program. Refer to Part II, Item 5. "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities," for further information.
As of July 1, 2023 the Company had $800 million of additional shares available to be repurchased as authorized under the 2022 Share Repurchase Program. Refer to Part II, Item 5. "Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities," for further information.
In March 2015, the Company issued $600.0 million aggregate principal amount of 2025 Senior Notes.
In June 2017, the Company issued $600.0 million aggregate principal amount of 2027 Senior Notes. In March 2015, the Company issued $600.0 million aggregate principal amount of 2025 Senior Notes.
As of July 2, 2022, $31.2 million of the Term Loan is included in Current debt on the Consolidated Balance Sheet. Borrowings under the Term Loan bear interest at a rate per annum equal to, at the Company’s option, either (i) an alternate base rate or (ii) a term secured overnight financing rate plus, in each case, an applicable margin.
As of July 1, 2023, $25.0 million of the Term Loan is included in Current debt on the Consolidated Balance Sheets. Borrowings under the Term Loan bear interest at a rate per annum equal to, at the Company’s option, either (i) an alternate base rate or (ii) a term secured overnight financing rate plus, in each case, an applicable margin.
Comparable store sales are not adjusted for store expansions. Due to extensive full and partial store closures resulting from the Covid-19 pandemic, comparable store sales are not reported for fiscal year ended July 2, 2022 as the Company does not believe this metric is currently meaningful to the readers of its financial statements for this period.
Comparable store sales are not adjusted for store expansions. Due to extensive temporary store closures resulting from the impact of the Covid-19 pandemic, comparable store sales are not reported for the fiscal year ended July 1, 2023 as the Company does not believe this metric is currently meaningful to the readers of its financial statements for this period.
Additionally, we believe presenting certain increases and decreases in constant currency provides a framework for assessing the performance of the Company’s business outside the United States and helps investors and analysts understand the effect of significant year-over-year currency fluctuations.
Additionally, we believe presenting certain increases and decreases in constant currency provides a framework for assessing the performance of the Company's business outside the United States and helps investors and analysts understand the effect of significant year-over-year currency fluctuations. We believe excluding these items assists investors and others in developing expectations of future performance.
We expect to fund these firm commitments with operating cash flows generated in the normal course of business and, if necessary, through availability under our credit facilities or other accessible sources of financing.
Refer to Note 15, "Income Taxes," for further information. We expect to fund these firm commitments with operating cash flows generated in the normal course of business and, if necessary, through availability under our credit facilities or other accessible sources of financing.
EXECUTIVE OVERVIEW The fiscal year ended July 2, 2022 was a 52-week period, July 3, 2021 was a 53-week period, and June 27, 2020 was a 52-week period. Tapestry, Inc. is a leading New York-based house of accessible luxury accessories and lifestyle brands. Our global house of brands unites the magic of Coach, kate spade new york and Stuart Weitzman.
OVERVIEW The fiscal year ended July 1, 2023 was a 52-week period, July 2, 2022 was a 52-week period, and July 3, 2021 was a 53-week period. Tapestry, Inc. (the "Company") is a leading New York-based house of iconic accessories and lifestyle brands. Our global house of brands unites the magic of Coach, kate spade new york and Stuart Weitzman.
In response, the Company took deliberate actions such as shifting production to other countries, adjusting its merchandising strategies, where possible, and increasing the use of air freight to expedite delivery. Based on these actions, and the improved production levels since the first quarter, the Company has been able to meet anticipated levels of demand.
In response, the Company took deliberate actions such as shifting production to other countries, adjusting its merchandising strategies, where possible, and increasing the use of air freight to expedite delivery. Based on these actions and improved production levels, the Company has and expects that it will continue to be able to meet anticipated levels of demand.
Refer to "Non-GAAP Measures" herein for further discussion on the Non-GAAP measures. 36 Fiscal 2022 Items Fiscal Year Ended July 2, 2022 Items affecting comparability GAAP Basis (As Reported) Acceleration Program Debt Extinguishment Non-GAAP Basis (Excluding Items) (millions, except per share data) Coach 3,553.8 — — 3,553.8 Kate Spade 912.0 — — 912.0 Stuart Weitzman 184.6 — — 184.6 Gross profit (1) $ 4,650.4 $ — $ — $ 4,650.4 Coach 2,079.9 6.7 — 2,073.2 Kate Spade 754.6 5.9 — 748.7 Stuart Weitzman 182.8 3.6 — 179.2 Corporate 457.3 26.6 — 430.7 SG&A expenses $ 3,474.6 $ 42.8 $ — $ 3,431.8 Coach 1,473.9 (6.7) — 1,480.6 Kate Spade 157.4 (5.9) — 163.3 Stuart Weitzman 1.8 (3.6) — 5.4 Corporate (457.3) (26.6) — (430.7) Operating income (loss) $ 1,175.8 $ (42.8) $ — $ 1,218.6 Loss on extinguishment of debt 53.7 — 53.7 — Provision for income taxes 190.7 (3.4) (12.9) 207.0 Net income (loss) $ 856.3 $ (39.4) $ (40.8) $ 936.5 Net income (loss) per diluted common share $ 3.17 $ (0.15) $ (0.15) $ 3.47 (1) Adjustments within Gross profit are recorded within Cost of sales.
Refer to "Non-GAAP Measures" herein for further discussion on the Non-GAAP measures. 36 Fiscal 2022 Items Fiscal Year Ended July 2, 2022 Items affecting comparability GAAP Basis (As Reported) Acceleration Program Debt Extinguishment Non-GAAP Basis (Excluding Items) (millions, except per share data) Coach 3,553.8 — — 3,553.8 Kate Spade 912.0 — — 912.0 Stuart Weitzman 184.6 — — 184.6 Gross profit $ 4,650.4 $ — $ — $ 4,650.4 Coach 2,079.9 6.7 — 2,073.2 Kate Spade 754.6 5.9 — 748.7 Stuart Weitzman 182.8 3.6 — 179.2 Corporate 457.3 26.6 — 430.7 SG&A expenses $ 3,474.6 $ 42.8 $ — $ 3,431.8 Coach 1,473.9 (6.7) — 1,480.6 Kate Spade 157.4 (5.9) — 163.3 Stuart Weitzman 1.8 (3.6) — 5.4 Corporate (457.3) (26.6) — (430.7) Operating income (loss) $ 1,175.8 $ (42.8) $ — $ 1,218.6 Loss on extinguishment of debt 53.7 — 53.7 — Provision for income taxes 190.7 (3.4) (12.9) 207.0 Net income (loss) $ 856.3 $ (39.4) $ (40.8) $ 936.5 Net income (loss) per diluted common share $ 3.17 $ (0.15) $ (0.15) $ 3.47 In fiscal 2022 the Company incurred adjustments as follows: • Debt Extinguishment - Debt extinguishment charges relate to the premiums, amortization and fees associated with the $500 million cash tender of the Company's 2027 Senior Notes and 2025 Senior Notes in the second quarter of fiscal 2022.
This future operating performance and cash flow are subject to prevailing economic conditions, which is uncertain as a result of Covid-19, and to financial, business and other factors, some of which are beyond the Company's control.
This future operating performance and cash flow are subject to prevailing economic conditions, and to financial, business and other factors, some of which are beyond the Company's control.
(3) In December 2021, the Company issued $500.0 million aggregate principal amount of 3.050% senior unsecured notes due March 15, 2032 at 99.705% of par (the "2032 Senior Notes") and completed cash tender offers for $203.4 million and 46 $296.6 million of the outstanding aggregate principal amount under its 2027 Senior Notes and 2025 Senior Notes, respectively.
Refer to Note 12, "Debt," for further information on our existing debt instruments. 43 (3) In December 2021, the Company issued $500.0 million aggregate principal amount of 3.050% senior unsecured notes due March 15, 2032 at 99.705% of par (the "2032 Senior Notes") and completed cash tender offers for $203.4 million and $296.6 million of the outstanding aggregate principal amount under its 2027 Senior Notes and 2025 Senior Notes, respectively.
Working Capital and Capital Expenditures As of July 2, 2022, in addition to our cash flows from operations, our sources of liquidity and capital resources were comprised of the following: Sources of Liquidity Outstanding Indebtedness Total Available Liquidity (1) (millions) Cash and cash equivalents (1) $ 789.8 $ — $ 789.8 Short-term investments (1) 163.4 — 163.4 Term Loans (2) 500.0 500.0 — Revolving Credit Facility (2) 1,250.0 — 1,250.0 3.050% Senior Notes due 2032 (3) 500.0 500.0 — 4.125% Senior Notes due 2027 (3) 396.6 396.6 — 4.250% Senior Notes due 2025 (3) 303.4 303.4 — Total $ 3,903.2 $ 1,700.0 $ 2,203.2 (1) As of July 2, 2022, approximately 34.7% of our Cash and cash equivalents and Short-term investments were held outside the United States.
Working Capital and Capital Expenditures As of July 1, 2023, in addition to our cash flows from operations, our sources of liquidity and capital resources were comprised of the following: Sources of Liquidity Outstanding Indebtedness Total Available Liquidity (1) (millions) Cash and cash equivalents (1) $ 726.1 $ — $ 726.1 Short-term investments (1) 15.4 — 15.4 Revolving Credit Facility (2) 1,250.0 — 1,250.0 Term Loan (2) 468.8 468.8 — 3.050% Senior Notes due 2032 (3) 500.0 500.0 — 4.125% Senior Notes due 2027 (3) 396.6 396.6 — 4.250% Senior Notes due 2025 (3) 303.4 303.4 — Total $ 3,660.3 $ 1,668.8 $ 1,991.5 (1) As of July 1, 2023, approximately 47.0% of our Cash and cash equivalents and Short-term investments were held outside the United States.
The applicable margin will be adjusted by reference to a pricing grid based on the Gross Leverage Ratio. Additionally, the Company will pay a ticking fee on the undrawn amount of the Term Loan. Refer to Note 12, "Debt," for further information on our existing debt instruments.
The applicable margin will be adjusted by reference to a pricing grid based on the Gross Leverage Ratio. Additionally, the Company will pay a ticking fee on the undrawn amount of the Term Loan.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases. The Inflation Reduction Act of 2022 will become effective beginning in fiscal 2024.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law by the Biden Administration, with tax provisions primarily focused on implementing a 15% corporate alternative minimum tax on global adjusted financial statement income ("CAMT") and a 1% excise tax on share repurchases.
Fiscal Year Ended July 2, 2022 July 3, 2021 Variance (millions, except per share data) Amount % of net sales Amount % of net sales Amount % Net sales $ 6,684.5 100.0 % $ 5,746.3 100.0 % $ 938.2 16.3 % Gross profit 4,650.4 69.6 4,081.9 71.0 568.5 13.9 SG&A expenses 3,474.6 52.0 3,113.9 54.2 360.7 11.6 Operating income (loss) 1,175.8 17.6 968.0 16.8 207.8 21.5 Loss on extinguishment of debt 53.7 0.8 — — 53.7 NM Interest expense, net 58.7 0.9 71.4 1.2 (12.7) (17.7) Other expense (income) 16.4 0.2 (0.7) — 17.1 NM Income (Loss) before provision for income taxes 1,047.0 15.7 897.3 15.6 149.7 16.7 Provision for income taxes 190.7 2.9 63.1 1.1 127.6 NM Net income (loss) 856.3 12.8 834.2 14.5 22.1 2.7 Net income (loss) per share: Basic $ 3.24 $ 3.00 $ 0.24 8.0 Diluted $ 3.17 $ 2.95 $ 0.22 7.5 NM - Not meaningful GAAP to Non-GAAP Reconciliation The Company’s reported results are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Fiscal Year Ended July 1, 2023 July 2, 2022 Variance (millions, except per share data) Amount % of net sales Amount % of net sales Amount % Net sales $ 6,660.9 100.0 % $ 6,684.5 100.0 % $ (23.6) (0.4) % Gross profit 4,714.9 70.8 4,650.4 69.6 64.5 1.4 SG&A expenses 3,542.5 53.1 3,474.6 52.0 67.9 2.0 Operating income (loss) 1,172.4 17.6 1,175.8 17.6 (3.4) (0.3) Loss on extinguishment of debt — — 53.7 0.8 (53.7) NM Interest expense, net 27.6 0.4 58.7 0.9 (31.1) (53.0) Other expense (income) 1.7 — 16.4 0.2 (14.7) (89.5) Income (Loss) before provision for income taxes 1,143.1 17.2 1,047.0 15.7 96.1 9.2 Provision for income taxes 207.1 3.1 190.7 2.9 16.4 8.6 Net income (loss) 936.0 14.1 856.3 12.8 79.7 9.3 Net income (loss) per share: Basic $ 3.96 $ 3.24 $ 0.72 22.2 Diluted $ 3.88 $ 3.17 $ 0.71 22.3 NM - Not meaningful GAAP to Non-GAAP Reconciliation The Company’s reported results are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
"Management’s Discussion and Analysis of Financial Condition and Results of Operations". 44 FINANCIAL CONDITION Cash Flows - Fiscal 2022 Compared to Fiscal 2021 Fiscal Year Ended July 2, 2022 July 3, 2021 Change (millions) Net cash provided by (used in) operating activities $ 853.2 $ 1,323.7 $ (470.5) Net cash provided by (used in) investing activities (253.6) (91.0) (162.6) Net cash provided by (used in) financing activities (1,778.1) (666.0) (1,112.1) Effect of exchange rate changes on cash and cash equivalents (39.4) 14.7 (54.1) Net increase (decrease) in cash and cash equivalents $ (1,217.9) $ 581.4 $ (1,799.3) The Company’s cash and cash equivalents decreased by $1.22 billion in fiscal 2022 compared to an increase of $581.4 million in fiscal 2021, as discussed below.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations." 41 FINANCIAL CONDITION Cash Flows - Fiscal 2023 Compared to Fiscal 2022 Fiscal Year Ended July 1, 2023 July 2, 2022 Change (millions) Net cash provided by (used in) operating activities $ 975.2 $ 853.2 $ 122.0 Net cash provided by (used in) investing activities 5.7 (253.6) 259.3 Net cash provided by (used in) financing activities (1,035.9) (1,778.1) 742.2 Effect of exchange rate changes on cash and cash equivalents (8.7) (39.4) 30.7 Net increase (decrease) in cash and cash equivalents $ (63.7) $ (1,217.9) $ 1,154.2 The Company’s cash and cash equivalents decreased by $63.7 million in fiscal 2023 compared to a decrease of $1.22 billion in fiscal 2022, as discussed below.
The reported results during fiscal 2022 and fiscal 2021 reflect certain items which affect the comparability of our results, as noted in the following tables.
There were no charges affecting comparability during fiscal 2023. The reported results during fiscal 2022 reflect certain items which affect the comparability of our results, as noted in the following tables.
Net cash provided by (used in) investing activities Net cash used in investing activities was $253.6 million in fiscal 2022 compared to a use of cash of $91.0 million in fiscal 2021, resulting in a $162.6 million increase in net cash used in investing activities.
Net cash provided by (used in) investing activities Net cash provided by investing activities was $5.7 million in fiscal 2023 compared to a use of cash of $253.6 million in fiscal 2022, resulting in a $259.3 million increase in net cash provided by investing activities.
Net cash provided by (used in) financing activities Net cash used in financing activities was $1.78 billion in fiscal 2022 as compared to a use of cash of $666.0 million in fiscal 2021, resulting in a $1.11 billion increase in net cash used in financing activities.
Net cash provided by (used in) financing activities Net cash used in financing activities was $1.04 billion in fiscal 2023 as compared to a use of cash of $1.78 billion in fiscal 2022, resulting in a $742.2 million decrease in net cash used in financing activities.
During the first quarter of fiscal 2022, certain of the Company’s third-party manufacturers, primarily located in Vietnam, experienced ongoing and longer-than-expected government mandated restrictions, which resulted in a significant decrease in production capacity for these third-party manufacturers.
Supply Chain and Logistics Challenges Covid-19 has and may cause disruptions in the Company’s supply chain within our third-party manufacturers and logistics providers. During fiscal 2022, certain of the Company’s third-party manufacturers, primarily located in Vietnam, experienced ongoing and longer-than-expected government mandated restrictions, which resulted in a significant decrease in production capacity for these third-party manufacturers.
The non-GAAP financial measures are limited in their usefulness and should be considered in addition to, and not in lieu of, GAAP financial measures. Further, these non-GAAP measures may be unique to the Company, as they may be different from non-GAAP measures used by other companies. For a detailed discussion on these non-GAAP measures, see Item 7.
Further, these non-GAAP measures may be unique to the Company, as they may be different from non-GAAP measures used by other companies. For a detailed discussion on these non-GAAP measures, see Item 7.
Excluding items affecting comparability, Stuart Weitzman operating loss decreased $10.4 million to an operating income of $5.4 million from an operating loss of $5.0 million in fiscal 2021; and operating margin was 1.7% in fiscal 2022 as compared to (1.8)% in fiscal 2021.
Excluding items affecting comparability, Stuart Weitzman operating loss increased $12.1 million to an operating loss of $6.7 million from operating income of $5.4 million in fiscal 2022; and operating margin decreased 410 basis points to (2.4)% in fiscal 2023 as compared to 1.7% in fiscal 2022.
Each of our brands is unique and independent, while sharing a commitment to innovation and authenticity defined by distinctive products and differentiated customer experiences across channels and geographies. Our success does not depend solely on the performance of a single channel, geographic area or brand.
Each of our brands is unique and independent, while sharing a commitment to innovation and authenticity defined by distinctive products and differentiated customer experiences across channels and geographies.
Excluding items affecting comparability, Coach operating income increased $134.3 million to $1.48 billion from $1.35 billion in fiscal 2021; and operating margin was 30.1% in fiscal 2022 as compared to 31.7% in fiscal 2021.
Excluding items affecting comparability, Coach operating income increased $49.3 million to $1.53 billion from $1.48 billion in fiscal 2022; and operating margin increased 70 basis points to 30.8% in fiscal 2023 as compared to 30.1% in fiscal 2022.
Since fiscal 2019, the U.S. and China have both imposed tariffs on the importation of certain product categories into the respective country, with limited progress in negotiations to reduce or remove the tariffs. Additionally, the Company has historically benefited from duty-free imports on certain products from certain countries pursuant to the U.S. Generalized System of Preferences (“GSP”) program.
Since fiscal 2019, the U.S. and China have both imposed tariffs on the importation of certain product categories into the respective country, with limited progress in negotiations to reduce or remove the tariffs.
Excluding items affecting comparability, net income per diluted share increased $0.50 to $3.47 in fiscal 2022 from $2.97 in fiscal 2021, primarily due to higher net income and a decrease in shares outstanding. The impact of the 53rd week in fiscal 2021 contributed approximately $0.09 to net income per diluted share.
Excluding items affecting comparability, net income per diluted share increased $0.41 to $3.88 in fiscal 2023 from $3.47 in fiscal 2022, primarily due to higher net income and a decrease in shares outstanding.
As a percentage of net sales, SG&A expenses decreased to 42.3% in fiscal 2022 as compared to 43.2% in fiscal 2021. Excluding items affecting comparability of $6.7 million and $42.3 million in fiscal 2022 and fiscal 2021, respectively, SG&A expenses increased 15.5% or $278.6 million to $2.07 billion in fiscal 2022 from $1.79 billion in fiscal 2021.
As a percentage of net sales, SG&A expenses increased to 53.1% during fiscal 2023 as compared to 52.0% during fiscal 2022. Excluding items affecting comparability of $42.8 million in fiscal 2022, SG&A expenses increased 3.2% or $110.7 million to $3.54 billion from $3.43 billion in fiscal 2022.
Consumer preferences, macroeconomic conditions, foreign currency fluctuations and geopolitical events continue to impact overall levels of consumer travel and spending on discretionary items, with inconsistent patterns across channels and geographies. The outbreak of a novel strain of Covid-19 continues to impact a significant majority of the regions in which we operate, resulting in significant global business disruptions.
GLOBAL ECONOMIC CONDITIONS AND INDUSTRY TRENDS The environment in which we operate is subject to a number of different factors driving global consumer spending. Consumer preferences, macroeconomic conditions, foreign currency fluctuations and geopolitical events continue to impact overall levels of consumer travel and spending on discretionary items, with inconsistent patterns across channels and geographies.
The Company also made an endowment of the Tapestry foundation in fiscal 2021. 41 Operating Income (Loss) Fiscal Year Ended July 2, 2022 July 3, 2021 Variance (millions) Amount % of Net Sales Amount % of Net Sales Amount % Coach $ 1,473.9 29.9 % $ 1,312.1 30.9 % $ 161.8 12.3 % Kate Spade 157.4 10.9 108.5 9.0 48.9 45.1 Stuart Weitzman 1.8 0.6 (8.6) (3.1) 10.4 NM Corporate (457.3) NA (444.0) NA (13.3) (3.0) Tapestry 1,175.8 17.6 $ 968.0 16.8 $ 207.8 21.5 Operating income increased $207.8 million to $1.18 billion during fiscal 2022 as compared to $968.0 million in fiscal 2021.
Operating Income (Loss) Fiscal Year Ended July 1, 2023 July 2, 2022 Variance (millions) Amount % of Net Sales Amount % of Net Sales Amount % Coach $ 1,529.9 30.8 % $ 1,473.9 29.9 % $ 56.0 3.8 % Kate Spade 115.0 8.1 157.4 10.9 (42.4) (27.0) Stuart Weitzman (6.7) (2.4) 1.8 0.6 (8.5) NM Corporate (465.8) — (457.3) NA (8.5) (1.9) Tapestry $ 1,172.4 17.6 $ 1,175.8 17.6 $ (3.4) (0.3) Operating income decreased $3.4 million to $1.17 billion during fiscal 2023 as compared to $1.18 billion in fiscal 2022.
As a supplement to the Company's reported results, these metrics are also reported on a non-GAAP basis to exclude the impact of these items, along with a reconciliation to the most directly comparable GAAP measures. Furthermore, the Company has disclosed the impact of the 53rd week in fiscal 2021 on net sales, operating income and earnings per diluted share results.
As a supplement to the Company's reported results, these metrics are also reported on a non-GAAP basis to exclude the impact of these items along with a reconciliation to the most directly comparable GAAP measures.
Summary - Fiscal 2022 Currency Fluctuation Effects The change in net sales and gross margin in fiscal 2022 compared to fiscal 2021 has been presented both including and excluding currency fluctuation effects.
Summary - Fiscal 2023 Currency Fluctuation Effects The change in net sales and gross margin in fiscal 2023 compared to fiscal 2022 has been presented both including and excluding currency fluctuation effects. All percentages shown in the tables below and the discussion that follows have been calculated using unrounded numbers.
Operating margin was 17.6% in fiscal 2022 as compared to 16.8% in fiscal 2021. Excluding items affecting comparability of $42.8 million in fiscal 2022 and $127.3 million in fiscal 2021, operating income increased $123.3 million to $1.22 billion from $1.10 billion in fiscal 2021; and operating margin was 18.2% in fiscal 2022 as compared to 19.1% in fiscal 2021.
Operating margin remained even at 17.6% in fiscal 2023 as compared to 17.6% in fiscal 2022. Excluding items affecting comparability of $42.8 million in fiscal 2022, operating income decreased $46.2 million to $1.17 billion from $1.22 billion in fiscal 2022; and operating margin decreased 60 basis points to 17.6% in fiscal 2023 as compared to 18.2% in fiscal 2022.
The $1.78 billion use of cash in fiscal 2022 was primarily due to repurchase of common stock of $1.60 billion, repayment of debt of $900.0 million, payment of dividends of $264.4 million and the payment of debt extinguishment costs of $50.7 million, partially offset by proceeds from debt, net of discount of $998.5 million.
The $1.78 billion use of cash in fiscal 2022 was primarily due to repurchase of common stock of $1.60 billion, repayment of debt of $900.0 million, payment of dividends of $264.4 million and the payment of debt extinguishment costs of $50.7 million, partially offset by proceeds from debt, net of discount of $998.5 million. 42 Cash Flows - Fiscal 2022 Compared to Fiscal 2021 The comparison of fiscal 2022 to 2021 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended July 2, 2022, filed on August 18, 2022 within Part II.
Based on the annual assessment in fiscal 2022, the fair values of our Coach brand reporting units significantly exceeded their respective carrying values. The fair values of the Kate Spade brand reporting unit and indefinite-lived brand as of the fiscal 2022 testing date exceeded their carrying values by approximately 50% and 90%, respectively.
The fair values of the Kate Spade brand reporting unit and indefinite-lived brand as of the fiscal 2023 testing date exceeded their carrying values by approximately 20% and 40%, respectively.
Excluding items affecting comparability, Kate Spade operating income increased $31.1 million to $163.3 million from $132.2 million in fiscal 2021; and operating margin was 11.3% in fiscal 2022 as compared to 10.9% in fiscal 2021.
Excluding items affecting comparability, Kate Spade operating income decreased $48.3 million to $115.0 million from $163.3 million in fiscal 2022; and operating margin decreased 320 basis points to 8.1% in fiscal 2023 as compared to 11.3% in fiscal 2022.
The reported Gross profit, SG&A expenses, Operating income, Provision for income taxes, Net income and Earnings per diluted share in fiscal 2022 and fiscal 2021 and the reported Loss on extinguishment of debt in fiscal 2022 reflect certain items, including the impact of Debt Extinguishment costs in fiscal 2022, Acceleration Program costs in fiscal 2022 and 2021, and the CARES Act Tax Impact and Impairment costs in fiscal 2021.
NON-GAAP MEASURES The Company’s reported results are presented in accordance with GAAP. There were no items affecting comparability during fiscal 2023. The reported SG&A expenses, operating income, loss on extinguishment of debt, provision for income taxes, net income and earnings per diluted share in fiscal 2022 reflect certain items, including Acceleration Program costs and debt extinguishment costs.
This increase in net sales was also partially attributed to a $101.5 million increase in wholesale sales. • Kate Spade Net Sales increased 19.5% or $235.5 million to $1.45 billion in fiscal 2022. Excluding the impact of foreign currency, net sales increased 20.1% or $242.9 million.
The increase in net sales was also attributed to a $30.5 million increase in wholesale sales. • Kate Spade Net Sales decreased 1.8% or $26.6 million to $1.42 billion in fiscal 2023. Excluding the impact of foreign currency, net sales increased 0.2% or $3.0 million.
Furthermore, refer to Part I, Item 1 - "Business" for additional discussion on our expected store openings and closures within each of our segments.
Furthermore, refer to Part I, Item 1 - "Business" for additional discussion on our expected store openings and closures within each of our segments. For a detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, see Part I, Item 1A. "Risk Factors".
Fiscal Year Ended Variance July 2, 2022 July 3, 2021 Amount % Constant Currency Change % Change versus FY19 (millions) Coach $ 4,921.3 $ 4,253.1 $ 668.2 15.7 % 16.2 % 15.2 % Kate Spade 1,445.5 1,210.0 235.5 19.5 20.1 5.8 Stuart Weitzman 317.7 283.2 34.5 12.2 10.8 (18.4) Total Tapestry $ 6,684.5 $ 5,746.3 $ 938.2 16.3 16.8 10.9 Net sales in fiscal 2022 increased 16.3% or $938.2 million to $6.68 billion.
Net Sales Fiscal Year Ended Variance July 1, 2023 July 2, 2022 Amount % Constant Currency Change (millions) Coach $ 4,960.4 $ 4,921.3 $ 39.1 0.8 % 4.5 % Kate Spade 1,418.9 1,445.5 (26.6) (1.8) 0.2 Stuart Weitzman 281.6 317.7 (36.1) (11.4) (9.1) Total Tapestry $ 6,660.9 $ 6,684.5 $ (23.6) (0.4) 2.9 Net sales in fiscal 2023 decreased 0.4% or $23.6 million to $6.66 billion.
Given its recent pronouncement, it is unclear at this time what, if any, impact the Inflation Reduction Act of 2022 will have on the Company's tax rate and financial results. We will continue to evaluate its impact as further information becomes available.
The US Treasury and the OECD continue to seek input and release guidance on the CAMT and GloBE legislation and how the two will interact, so it is unclear at this time what, if any, impact either will have on the Company’s tax rate and financial results. We will continue to evaluate their impact as further information becomes available.
We believe excluding these items assists investors and others in developing expectations of future performance. 43 By providing the non-GAAP measures, as a supplement to GAAP information, we believe we are enhancing investors’ understanding of our business and our results of operations.
By providing the non-GAAP measures, as a supplement to GAAP information, we believe we are enhancing investors’ understanding of our business and our results of operations. The non-GAAP financial measures are limited in their usefulness and should be considered in addition to, and not in lieu of, GAAP financial measures.
Provision for Income Taxes The effective tax rate was 18.2% in fiscal 2022 as compared to 7.0% in fiscal 2021. Excluding items affecting comparability, the effective tax rate was 18.1% in fiscal 2022 as compared to 17.9% in fiscal 2021.
Excluding items affecting comparability, the effective tax rate was 18.1% in fiscal 2022. Net Income (Loss) Net income increased $79.7 million to a net income of $936.0 million in fiscal 2023 as compared to a net income of $856.3 million in fiscal 2022.
If these trends continue or worsen, it could potentially affect the Company's ability to attract and retain employees for its retail and fulfillment locations in the future. Furthermore, currency volatility, political instability and potential changes to trade agreements or duty rates may contribute to a worsening of the macroeconomic environment or adversely impact our business.
Currency volatility, political instability and potential changes to trade agreements or duty rates may also contribute to a worsening of the macroeconomic environment or adversely impact our business.
FISCAL 2021 COMPARED TO FISCAL 2020 The comparison of fiscal 2021 to 2020 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended July 3, 2021, filed on August 19, 2021. NON-GAAP MEASURES The Company’s reported results are presented in accordance with GAAP.
FISCAL 2022 COMPARED TO FISCAL 2021 The comparison of fiscal 2022 to 2021 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended July 2, 2022, filed on August 18, 2022 within Part II. Item 7. "Management's Discussion and Analysis of Financial Conditions and Results of Operations".
The increase is primarily due to a net increase of $221.3 million in net retail sales driven by higher store and e-commerce sales in North America and store sales in Europe partially offset by a decrease in store sales in Greater China due to Covid-19 related disruptions.
This increase in net sales was primarily due to an increase of $161.3 million in net retail sales driven by an increase of store sales globally, partially offset by a decrease in e-commerce sales.
The GSP program expired in the third quarter of fiscal 2021, resulting in additional duties that have negatively impacting gross profit. Over the past year there has been significant discussion with regards to tax legislation by both the Biden Administration and the Organization for Economic Cooperation and Development (“OECD”).
The Company's total business in Europe represented less than 5% of fiscal 2023 and fiscal 2022 total Net sales. Tax Legislation Over the past year, there has been significant discussion with regards to tax legislation by both the Biden Administration and the Organization for Economic Cooperation and Development (“OECD”).
In fiscal 2022 the Company incurred charges as follows: • Debt Extinguishment - Debt extinguishment charges relate to the premiums, amortization and fees associated with the $500 million cash tender of the Company's 2027 Senior Notes and 2025 Senior Notes in the second quarter of fiscal 2022.
Loss on Extinguishment of Debt There was no loss on extinguishment of debt in fiscal 2023 as compared to $53.7 million in fiscal 2022. This was primarily related to the premiums, amortization and fees associated with the partial tender of the company's 2027 senior notes and 2025 senior notes.
Excluding items affecting comparability of $42.8 million in fiscal 2022 and $135.4 million in fiscal 2021, SG&A expenses increased 15.2% or $453.3 million to $3.43 billion from $2.98 billion in fiscal 2021; and SG&A expenses as a percentage of net sales decreased to 51.3% in fiscal 2022 from 51.8% in fiscal 2021. • Coach SG&A Expenses increased 13.2% or $243.0 million to $2.08 billion in fiscal 2022 as compared to $1.84 billion in fiscal 2021.
Excluding those items affecting comparability: • Coach: SG&A expenses increased 2.1% or $44.0 million to $2.12 billion from $2.07 billion in fiscal 2022; and SG&A expenses as a percentage of net sales increased to 42.7% in fiscal 2023 from 42.1% in fiscal 2022. • Kate Spade: SG&A expenses increased 4.9% or $36.4 million to $785.1 million from $748.7 million in fiscal 2022; and SG&A expenses as a percentage of net sales increased to 55.3% in fiscal 2023 from 51.8% in fiscal 2022. • Stuart Weitzman: SG&A expenses decreased 2.7% or $4.8 million to $174.4 million from $179.2 million in fiscal 2022; and SG&A expenses as a percentage of net sales increased to 62.0% in fiscal 2023 from 56.4% in fiscal 2022. • Corporate: SG&A expenses increased 8.2% or $35.1 million to $465.8 in fiscal 2023 as compared to $430.7 million in fiscal 2022.
Net Income (Loss) per Share Net income per diluted share was $3.17 in fiscal 2022 as compared to net income per diluted share of $2.95 in fiscal 2021.
Excluding items affecting comparability, net income decreased $0.5 million to $936.0 million in fiscal 2023 from $936.5 million in fiscal 2022. 40 Net Income (Loss) per Share Net income per diluted share was $3.88 in fiscal 2023 as compared to net income per diluted share of $3.17 in fiscal 2022.
Net cash provided by (used in) operating activities Net cash provided by operating activities decreased $470.5 million primarily due to changes in operating assets and liabilities of $597.1 million, partially offset by the loss on extinguishment of debt of $53.7 million, the impact of non-cash charges of $50.8 million and higher net income of $22.1 million.
Net cash provided by (used in) operating activities Net cash provided by operating activities increased $122.0 million primarily due to changes in operating assets and liabilities of $149.9 million and higher net income of $79.7 million, partially offset by lower impact of non-cash adjustments of $107.6 million.
This increase in operating income is due to an increase in gross profit, partially offset by higher SG&A expenses and the favorable impact of the 53rd week in fiscal 2021 of $4.7 million. • Stuart Weitzman Operating Income increased $10.4 million to $1.8 million in fiscal 2022, resulting in an operating margin of 0.6%, as compared to an operating loss of $8.6 million in fiscal 2021 and operating margin of (3.1)%.
This increase in SG&A expenses as a percentage of net sales was mainly due to an increase in selling and distribution costs, higher information technology costs and increased occupancy costs, partially offset by a 30 basis points increase in gross margin, mainly due to lower freight costs and favorable geography mix, partially offset by unfavorable currency translation, increased promotional activity and unfavorable channel mix. • Stuart Weitzman Operating Loss increased $8.5 million to a loss of $6.7 million in fiscal 2023, resulting in an operating margin decrease of 300 basis points to (2.4)%, as compared to operating income of $1.8 million in fiscal 2022 and operating margin of 0.6%.
The Company has been experiencing other global logistics challenges, such as delays as a result of port congestion, vessel availability, container shortages for imported products and rising freight costs. To mitigate delays, the Company strategically used air freight with greater frequency than in the past, primarily in the second and third fiscal quarter of 2022.
The Company has experienced other global logistical challenges, such as delays as a result of port congestion, vessel availability, container shortages for imported products and rising freight costs. During fiscal 2023, freight costs on inbound shipments have started to moderate and the Company has significantly reduced the use of air freight when compared to fiscal 2022.
Refer to Note 15, "Income Taxes," for further information. Interest on outstanding debt includes fixed interest expenses for unsecured notes and variable interest expenses for the term loan. The estimated interest expenses associated with our term loan is based on the current interest rate as of July 2, 2022. Refer to Note 12, "Debt," for further information.
The estimated interest expenses associated with our term loan is based on the current interest rate as of July 1, 2023. Refer to Note 12, "Debt," for further information. (2) Mandatory transition tax payments represent our tax obligation incurred in connection with the deemed repatriation of previously deferred foreign earnings pursuant to the Tax Legislation.
Refer to the "Executive Overview" herein and Note 11, "Fair Value Measurements," for further information. These actions taken together increased the Company's SG&A expenses by $135.4 million, decreased Cost of sales by $8.1 million and Provision for income taxes by $120.4 million, negatively impacting net income by $6.9 million, or $0.02 per diluted share. 38 Tapestry, Inc.
These actions taken together increased the Company's SG&A expenses by $42.8 million, increased Loss on extinguishment of debt by $53.7 million and decreased Provision for income taxes by 16.3 million, negatively impacting net income by 80.2 million, or 0.30 per diluted share. 37 Tapestry, Inc.
This increase in net sales was also attributed to a $6.4 million increase in retail sales, primarily driven by higher e-commerce and store sales in North America, partially offset by a decrease in store sales in Greater China due to Covid-19 related disruptions. 39 Gross Profit Fiscal Year Ended July 2, 2022 July 3, 2021 Variance (millions) Amount % of Net Sales Amount % of Net Sales Amount % Coach $ 3,553.8 72.2 % $ 3,149.0 74.0 % $ 404.8 12.9 % Kate Spade 912.0 63.1 768.4 63.5 143.6 18.7 Stuart Weitzman 184.6 58.1 164.5 58.1 20.1 12.2 Tapestry $ 4,650.4 69.6 $ 4,081.9 71.0 $ 568.5 13.9 Gross profit increased 13.9% or $568.5 million to $4.65 billion in fiscal 2022 from $4.08 billion in fiscal 2021.
Gross Profit Fiscal Year Ended July 1, 2023 July 2, 2022 Variance (millions) Amount % of Net Sales Amount % of Net Sales Amount % Coach $ 3,647.1 73.5 % $ 3,553.8 72.2 % $ 93.3 2.6 % Kate Spade 900.1 63.4 912.0 63.1 (11.9) (1.3) Stuart Weitzman 167.7 59.6 184.6 58.1 (16.9) (9.1) Tapestry $ 4,714.9 70.8 $ 4,650.4 69.6 $ 64.5 1.4 Gross profit increased 1.4% or $64.5 million to $4.71 billion in fiscal 2023 from $4.65 billion in fiscal 2022.
Excluding the impact of foreign currency, net sales increased by 16.8% or $964.5 million. Included in net sales of $5.75 billion in fiscal 2021 is the favorable impact of the 53rd week, which resulted in incremental net revenues of $92.7 million. • Coach Net Sales increased 15.7% or $668.2 million to $4.92 billion in fiscal 2022.
Excluding the impact of foreign currency, net sales increased by 2.9% or $193.9 million. • Coach Net Sales increased 0.8% or $39.1 million to $4.96 billion in fiscal 2023. Excluding the impact of foreign currency, net sales increased 4.5% or $219.9 million.
The $597.1 million change in our operating asset and liability balances was primarily driven by: • Inventories were a use of cash of $311.7 million in fiscal 2022 as compared to a source of cash of $32.2 million in fiscal 2021, primarily driven by higher receipts, increased in-transit levels due to longer lead times and increased inbound freight costs compared to prior year. • Accounts payable were a source of cash of $86.4 million in fiscal 2022 as compared to a source of cash of $307.3 million in fiscal 2021, primarily due to the extension of payment terms with certain vendors in fiscal 2021 and higher inventory in-transit in fiscal 2022. • Other assets were a use of cash of $20.2 million in fiscal 2022 as compared to a use of cash of $223.1 million in fiscal 2021, primarily attributed to income tax receivables including the NOL carryback claim under the CARES Act filed in fiscal 2021 and the timing of payments and other refunds in the U.S. • Accrued liabilities were a use of cash of $16.1 million in fiscal 2022 as compared to a source of cash of $140.3 million in fiscal 2021, primarily attributed to the Annual Incentive Plan payment as the Company did not pay out during fiscal 2021 (for performance during fiscal year 2020) offset by increased distribution costs driven by higher sales and inbound freight.
The $149.9 million change in our operating asset and liability balances was primarily driven by: • Inventories were a source of cash of $49.9 million in fiscal 2023 as compared to a use of cash of $311.7 million in fiscal 2022, primarily driven by lower in-transits and receipts due to the strategic decision to pull back on receipts as well as normalization of lead times. • Trade accounts receivable were a source of cash of $44.1 million in fiscal 2023 as compared to a use of cash of $96.0 million in fiscal 2022, primarily driven by higher wholesale sales in fiscal 2022 compared to fiscal 2021. • Accounts payable were a use of cash of $98.1 million in fiscal 2023 as compared to a source of cash of $86.4 million in fiscal 2022, primarily driven by lower in-transit inventory and receipts compared to prior year due to the strategic decision to pull back on receipts. • Accrued liabilities were a use of cash of $93.0 million in fiscal 2023 as compared to a use of cash of $16.1 million in fiscal 2022, primarily driven by a decrease in accruals for the Annual Incentive Plan, a decrease in accrued freight and duty, partially offset by an increase in accrued interest due to the net investment hedge and the timing of income tax payments. • Other liabilities were a use of cash of $61.1 million in fiscal 2023 as compared to a use of cash of $9.2 million in fiscal 2022, primarily driven by lower long-term transition tax due to timing of payment schedule.
Excluding items affecting comparability of $26.6 million and $65.8 million in fiscal 2022 and fiscal 2021, respectively, SG&A expenses increased 13.9% or $52.5 million to $430.7 million in fiscal 2022 as compared to $378.2 million in fiscal 2021. This increase in SG&A expenses is primarily due to higher compensation costs.
Excluding items affecting comparability, Corporate operating loss increased $35.1 million to $465.8 million from $430.7 million in fiscal 2022. This increase in operating loss was attributed to an increase in SG&A expenses primarily due to higher information technology costs, higher professional fees, increased compensation costs and increased occupancy costs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+5 added−9 removed14 unchanged
As a result of the above considerations, we do not believe that we are exposed to any undue concentration of counterparty credit risk associated with our derivative contracts as of July 2, 2022. The Company is also exposed to transaction risk from foreign currency exchange rate fluctuations with respect to various cross-currency intercompany loans, payables and receivables.
As a result of the above considerations, we do not believe that we are exposed to any undue concentration of counterparty credit risk associated with our derivative contracts as of July 1, 2023. The Company is also exposed to transaction risk from foreign currency exchange rate fluctuations with respect to various cross-currency intercompany loans, payables and receivables.
This primarily includes exposure to exchange rate fluctuations in the Chinese Renminbi, the Japanese Yen and the Euro. To manage the exchange rate risk related to these balances, the Company enters into forward currency contracts.
This primarily includes exposure to exchange rate fluctuations in the Chinese Renminbi, the British Pound Sterling and the Japanese Yen. To manage the exchange rate risk related to these balances, the Company enters into forward currency contracts.
To mitigate such risk, certain subsidiaries enter into forward currency contracts. As of July 2, 2022 and July 3, 2021, forward currency contracts designated as cash flow hedges with a notional amount of $41.5 million and $61.4 million, respectively, were outstanding.
To mitigate such risk, certain subsidiaries enter into forward currency contracts. As of July 1, 2023 and July 2, 2022, forward currency contracts designated as cash flow hedges with a notional amount of $842.3 million and $41.5 million, respectively, were outstanding.
Interest Rate Risk The Company is exposed to interest rate risk in relation to its $1.25 Billion Revolving Credit Facility and $500.0 Million Term Loan entered into under the credit agreement dated May 11, 2022, the Term Loan, the 2032 Senior Notes, 2027 Senior Notes, and 2025 Senior Notes (collectively the "Senior Notes") and investments.
Interest Rate Risk The Company is exposed to interest rate risk in relation to its $1.25 Billion Revolving Credit Facility and $500.0 Million Term Loan entered into under the credit agreement dated May 11, 2022, the Term Loan, the 2032 Senior Notes, 2027 Senior Notes, and 2025 Senior Notes (collectively the "Senior Notes") and investments. 49 Our exposure to changes in interest rates is primarily attributable to debt outstanding under the $1.25 Billion Revolving Credit Facility and $500.0 Million Term Loan (collectively, the "Credit Facilities").
Under the term of these contracts, we will exchange the semi-annual fixed rate payments on United States denominated debt for fixed rate payments of 2.4% to 2.7% in Euros and 0.6% to 1.3% in Japanese Yen.
Under the terms of our cross-currency swaps, we will exchange the semi-annual fixed rate payments on United States denominated debt for fixed rate payments of 2.4% to 2.7% in Euros and 0.1% to (0.3)% in Japanese Yen.
As of July 2, 2022 and July 3, 2021, the total notional values of outstanding forward foreign currency contracts related to these loans, payables and receivables were $274.1 million and $248.2 million, respectively. The fair value of outstanding forward currency contracts included in current assets at July 2, 2022 and July 3, 2021 was $0.4 million and $0.3 million, respectively.
As of July 1, 2023 and July 2, 2022, the total notional values of outstanding forward foreign currency contracts related to these loans, payables and receivables were $272.3 million and $274.1 million, respectively.
The Company is exposed to changes in interest rates related to the fair value of the Senior Notes. At July 2, 2022, the fair value of the 2032 Senior Notes, 2027 Senior Notes and 2025 Senior Notes was approximately $409 million, $383 million and $304 million, respectively.
At July 1, 2023, the fair value of the 2032 Senior Notes, 2027 Senior Notes and 2025 Senior Notes was approximately $399 million, $372 million and $295 million, respectively. At July 2, 2022, the fair value of the 2032 Senior Notes, 2027 Senior Notes and 2025 Senior Notes was approximately $409 million, $383 million and $304 million, respectively.
Our exposure to changes in interest rates is primarily attributable to debt outstanding under the $1.25 Billion Revolving Credit Facility and $500.0 Million Term Loan (collectively, the "Credit Facilities"). Borrowings under the $1.25 Billion 52 Revolving Credit Facility bear interest at a rate per annum equal to, at the Company’s option, (i) for borrowings in U.S.
Borrowings under the $1.25 Billion Revolving Credit Facility bear interest at a rate per annum equal to, at the Company’s option, (i) for borrowings in U.S.
Removed
The fair value of outstanding foreign currency contracts included in current liabilities at July 2, 2022 and July 3, 2021 was $3.2 million and $1.2 million, respectively. The fair value of these contracts is sensitive to changes in foreign currency exchange rates.
Added
We perform a sensitivity analysis to determine the effects that market risk exposures may have on the fair values of our forward foreign currency exchange and cross-currency swap contracts.
Removed
A sensitivity analysis of the effects of foreign exchange rate fluctuations on the fair values of our derivative contracts was performed to assess the risk of loss. As of July 2, 2022, a 10% change in the value of the U.S.
Added
We assess the risk of loss in the fair values of these contracts that would result from hypothetical changes in foreign currency exchange rates. This analysis assumes a like movement by the foreign currencies in our hedge portfolio against the U.S. Dollar. As of July 1, 2023, a 10% appreciation or depreciation of the U.S.
Removed
Dollar against the exchange rates for foreign currencies under contract would result in an immaterial impact on derivative contract fair values. The Company is also exposed to foreign currency exchange rate fluctuations with respects to net investment hedges.
Added
Dollar against the foreign currencies under contract would result in a net increase or decrease, respectively, in the fair value of our derivative portfolio of approximately $185 million. This hypothetical net change in fair value should ultimately be largely offset by the net change in the related underlying hedged items.
Removed
As of July 2, 2022, we have multiple fixed to fixed cross currency swap agreements with aggregate notional amounts of $1.20 billion to hedge our net investment in Euro-denominated subsidiaries and Japanese Yen-denominated subsidiaries against future volatility in the exchange rates between the United States dollar and their local currencies.
Added
Refer to Note 10, "Derivative Investments and Hedging Activities," for additional information.
Removed
The fair values of outstanding derivative contracts related to net investment hedges included in long-term assets and long-term liabilities at July 2, 2022 are $47.8 million and $44.0 million, respectively.
Added
Borrowings under the Credit Facilities are subject to interest rate risk due to changes in SOFR. A hypothetical 10% change in the Credit Facilities' interest rates would have resulted in an immaterial change in interest expense in fiscal 2023. The Company is exposed to changes in interest rates related to the fair value of the Senior Notes.
Removed
A 10% change in the value of the U.S. dollar against the exchange rates for currencies under contract as of July 2, 2022, would result in an immaterial impact on the net investment hedge derivative contract fair values. Refer to Note 10, "Derivative Investments and Hedging Activities," for additional information.
Removed
A hypothetical 10% change in the Credit Facilities interest rate would have resulted in an immaterial change in interest expense in fiscal 2022. Furthermore, a prolonged disruption on our business resulting from the Covid-19 pandemic may impact our ability to satisfy the terms of our Credit Facilities, including our liquidity covenant.
Removed
The fair value of the 2027 Senior Notes and 2025 Senior Notes at July 2, 2022 reflects the impact of the $500 million cash tender offer completed during the second quarter of fiscal 2022.
Removed
At July 3, 2021, the fair value of the 2027 Senior Notes, 2022 Senior Notes and 2025 Senior Notes was approximately $659 million, $407 million and $652 million, respectively. The 2022 Senior Notes were fully redeemed as of July 2, 2022.

Other TPR 10-K year-over-year comparisons