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What changed in Tapestry, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Tapestry, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+351 added−389 removedSource: 10-K (2024-08-15) vs 10-K (2023-08-17)

Top changes in Tapestry, Inc.'s 2024 10-K

351 paragraphs added · 389 removed · 273 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

75 edited+16 added−38 removed24 unchanged
Biggest changePRODUCTS 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.
Biggest changeThe licensing agreements generally give our brands the right to terminate the license if specified sales targets are not achieved. 5 PRODUCTS The following table shows Net sales for each of our product categories by segment: Fiscal Year Ended June 29, 2024 July 1, 2023 July 2, 2022 Amount % of total net sales Amount % of total net sales Amount % of total net sales (millions) Coach Women's Handbags $ 2,495.7 37.5 % $ 2,450.7 36.8 % $ 2,574.8 38.5 % Women's Accessories 1,079.6 16.2 1,024.8 15.4 942.5 14.1 Men's 983.9 14.7 947.1 14.2 904.8 13.5 Other Products 536.1 8.0 537.8 8.1 499.2 7.5 Total Coach $ 5,095.3 76.4 % $ 4,960.4 74.5 % $ 4,921.3 73.6 % Kate Spade Women's Handbags $ 721.0 10.9 % $ 779.6 11.7 % $ 819.5 12.2 % Women's Accessories 316.8 4.7 306.9 4.6 307.0 4.6 Other Products 296.6 4.4 332.4 5.0 319.0 4.8 Total Kate Spade $ 1,334.4 20.0 % $ 1,418.9 21.3 % $ 1,445.5 21.6 % Stuart Weitzman (1) $ 241.5 3.6 % $ 281.6 4.2 % $ 317.7 4.8 % Total Net sales $ 6,671.2 100.0 % $ 6,660.9 100.0 % $ 6,684.5 100.0 % (1) The significant majority of sales for Stuart Weitzman is attributable to women's footwear. • Women’s Handbags — Women’s handbag collections feature classically inspired as well as fashion designs.
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.
The Company’s ESG and corporate responsibility strategy, including oversight, management and identification of risks, is ultimately governed by the Board of Directors (the "Board") and overseen by an ESG Steering Committee, which is comprised of members of our executive leadership team, and driven by an ESG Task Force, comprised of senior leaders and cross-functional members from major business functions.
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.
Maintaining a competitive total compensation 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.
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.
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 to provide store employees with the opportunity to earn sales incentives.
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.
Additionally, on an annual basis, our foundations match up to $10,000, per eligible employee, in donations to eligible non-profits 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.
To support these actions, we are guided by four interconnected principles: • Talent: Attracting, retaining and growing top talent - making us an employer of choice in a rapidly evolving talent marketplace. • Culture: Fostering a culture of inclusion, where people and ideas from everywhere are welcomed. • Community: Nurturing the vibrancy of the communities in which we live and work to advance equity, opportunity and dignity for all. • Marketplace: Embracing our responsibility in the marketplace as a global fashion company.
To support these actions, we are guided by four interconnected principles: • Talent: Attracting, retaining and growing top talent - making us an employer of choice in a rapidly evolving talent marketplace. • Culture: Fostering a culture of inclusion and belonging, where people and ideas from everywhere are welcomed. • Community: Nurturing the vibrancy of the communities in which we live and work to advance equity, opportunity and dignity for all. • Marketplace: Embracing our responsibility in the marketplace as a global fashion company.
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. We use our collective strengths to move our customers and empower our communities, to make the fashion industry more sustainable, and to build a company that’s equitable, inclusive, and diverse.
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 business channels and geographies. We use our collective strengths to move our customers and empower our communities, to make the fashion industry more sustainable and to build a company that’s equitable, inclusive and diverse.
MARKETING We use a 360-degree approach to marketing for each of our brands, synchronizing our efforts across all channels to ensure consistency at every touchpoint. Our global marketing strategy is to deliver a consistent, relevant and multi-layered message every time the consumer comes in contact with our brands through our communications and visual merchandising.
MARKETING We use a 360-degree approach to marketing for each of our brands, synchronizing our efforts across all business channels to ensure consistency at every touchpoint. Our global marketing strategy is to deliver a consistent, relevant and multi-layered message every time the consumer comes in contact with our brands through our communications and visual merchandising.
At Tapestry, each brand has a dedicated design and merchandising team; this ensures that Coach, Kate Spade and Stuart Weitzman speak to their customers with a voice and positioning unique to their brand. Designers have access to the brands' extensive archives of product designs, which are a valuable resource for new product concepts.
At Tapestry, each brand has a dedicated design and merchandising team; this ensures that Coach, Kate Spade and Stuart Weitzman speak to their customers with a voice and positioning unique to their brand. Designers have access to the brands' extensive archives of product designs, which are a valuable resource for product concepts.
So we cultivate a place for people who are both warm and rigorous, work that is both challenging and fun, a culture led by both head and heart. Most of all, we bring together the unique spirits of our people and our brands and give them a place to move their work and our industry forward.
We cultivate a place for people who are both warm and rigorous, work that is both challenging and fun and a culture led by both head and heart. Most of all, we bring together the unique spirits of our people and our brands and give them a place to move their work and our industry forward.
Well-being and Safety At Tapestry, we are committed to providing a safe working environment for our people, as well as supporting our people in achieving and maintaining their health and well-being goals. Work-life integration is top of mind, and we provide resources and benefits to help achieve this balance.
Well-being At Tapestry, we are committed to providing a safe working environment for our people, as well as supporting our people in achieving and maintaining their health and well-being goals. Work-life integration is top of mind, and we provide resources and benefits to help achieve this balance.
We believe that difference sparks brilliance, so we welcome people and ideas from everywhere to join us in stretching what’s possible. Governance and Oversight Our Board of Directors and its committees provide governance and oversight of the Company's strategy, including over issues of human capital management.
We believe that difference sparks brilliance, so we welcome people and ideas from everywhere to join us in stretching what’s possible. Governance and Oversight Our Board and its committees provide governance and oversight of the Company's strategy, including over issues of human capital management.
Our development programs enable individual and team success through targeted initiatives and resources, offering a wide-ranging curriculum focused on professional and leadership development for leaders, managers, and individual contributors, including through our Common Thread people management program, Emerging Leaders High-Potential Program, Leader Transition Acceleration Program, and third-party learning platforms in addition to other trainings and education facilitated through the Company for all employees.
Our development programs enable individual and team success through targeted initiatives and resources, offering a wide-ranging curriculum focused on professional and leadership development for leaders, managers and individual contributors, including through our People Management Program, Emerging Leaders High-Potential Program, Leader Transition Acceleration Program and third-party learning platforms, in addition to other trainings and education facilitated through the Company for all employees.
In varying degrees, depending on the product category involved, we compete on the basis of style, price, customer service, quality, brand prestige and recognition, among others. Over the last decade, these luxury and accessible luxury brands have grown and are expected to continue to grow, encouraging the entry of new competitors as well as increasing the competition from existing competitors.
In varying degrees, depending on the product category involved, we compete on the basis of style, price, customer service, quality, brand prestige and recognition, among others. Over the last decade, these brands have grown and are expected to continue to grow, encouraging the entry of new competitors as well as increasing the competition from existing competitors.
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.
In addition, Kate Spade brand 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.
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.
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 a company of the future that balances true fashion authority with meaningful, positive change.
Inspired by the vision of Expressive Luxury and the inclusive and courageous spirit of its hometown, the brand makes beautiful things, crafted to last – for you to be yourself in. Coach has built a legacy of craft and a community that champions the courage to be real.
Inspired by the vision of Expressive Luxury and the inclusive and courageous spirit of its hometown, the brand makes beautiful things, crafted to last – for you to be yourself in. Coach has built a legacy of craftsmanship and a community that champions the courage to be real.
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.
Of these employees, approximately 14,700 employees worked in retail locations, of which 6,100 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.
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.
The Company monitors the representation of women and racial or ethnic minorities at different levels throughout the Company, and discloses this information on 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.
Equity, Inclusion and Diversity Our company name Tapestry, represents the diversity of our brands and the diversity of our people. We know that having a diverse range of perspectives, backgrounds and experiences makes us more innovative and successful and it brings us closer to our consumer.
Equity, Inclusion and Diversity Our company name Tapestry, represents the diversity of our brands and the diversity of our people. We believe that having a diverse range of perspectives, backgrounds and experiences makes us more innovative and successful and brings us closer to our consumer.
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 has included the Chief Executive Officer (“CEO”) and Chief Financial Officer ("CFO") certifications regarding its public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1 and 32.1 and Exhibits 31.2 and 32.2, respectively to this Form 10-K. 13
We are committed to affecting positive change for our industry and deliver on our value proposition to stakeholders - consumers, investors and future talent. Our global EI&D Champion Network supports and engages our professional community by creating an environment where all are welcomed.
We are committed to affecting positive change for our industry and deliver on our value proposition to stakeholders - consumers, investors and vendor partners. Our global EI&D Champion Network supports and engages our professional community by creating an environment where all are welcomed.
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.
We feel hosting bold conversations about our values provides an opportunity for us to be inspired, discover ideas, and ignite personal passions. 11 Tapestry is committed to the support of historically excluded and marginalized groups through our corporate efforts.
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.
OUR STRATEGY 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's brands aim 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. 2 • 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.
Leveraging our strategic investments in data and analytics tools across Tapestry's platform, merchandisers are able to gain a deeper understanding of customer behavior that empowers our teams to respond to changes in consumer preferences and demand as well as scale opportunities across brands with greater speed and efficiency.
Leveraging our strategic investments that we have made in data and analytics tools, merchandisers are able to gain a deeper understanding of customer behavior which empowers our teams to respond to changes in consumer preferences and demand as well as scale opportunities across brands with greater speed and efficiency.
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.
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 June 29, 2024, the Company employed approximately 18,600 employees globally.
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.
Approximately 2,400 of our employees, including nearly all of our store managers, received an annual long-term equity award in 2024, which aligns employee interests with those of our stockholders, rewards employees for enhancing stockholder value and supports retention of key employees. Our benefits package is designed to be competitive and comprehensive, which varies by location and jurisdiction.
During fiscal 2023, Stuart Weitzman had three vendors, all located in Spain, who individually provided over 10% of the brand's total units (approximately 37% across the three, in the aggregate). FULFILLMENT The Company’s distribution network is designed to support the movement of each brand's products from our manufacturers to fulfillment centers around the world.
During fiscal 2024, Stuart Weitzman had two vendors, both located in Spain, who individually provided over 10% of the brand's total units (approximately 23% across both, in the aggregate). FULFILLMENT The Company’s distribution network is designed to support the movement of each brand's products from our manufacturers to fulfillment centers around the world.
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.
Our key licensing relationships and their fiscal year expirations as of June 29, 2024 are as follows: Brand Category Partner Fiscal Year Expiration Coach Watches Movado 2025 Coach Eyewear Luxottica 2026 Coach Fragrance Interparfums 2026 Kate Spade Tableware and Housewares Lenox 2025 Kate Spade Sleepwear Komar 2025 Kate Spade Stationery and Gift Lifeguard Press 2026 Kate Spade Tech Accessories Case-Mate 2027 Kate Spade Fragrance Interparfums 2030 Kate Spade Eyewear Safilo 2031 Products made under license are, in most cases, sold through stores and wholesale business 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.
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 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 Board has designated the Human Resources Committee of the Board of Directors (the “HR Committee”) as the primary committee responsible for the Company’s human capital strategy, overseeing executive compensation programs, performance and talent development, succession planning, engagement and regular review of employee benefits and well-being strategies.
The Board has designated the Human Resources Committee of the Board (the “HR Committee”) as the primary committee responsible for the Company’s human capital strategy, overseeing executive compensation programs, performance and talent development, succession planning, engagement and regular review of employee benefits and well-being strategies. Together with the Board, the HR Committee also provides oversight of the Company’s EI&D strategies.
The Company announced the establishment of an Associate Relief Fund, beginning in fiscal year 2024, which will provide emergency assistance for events considered a disaster or hardship. 14 At Tapestry, we believe in encouraging and empowering our employees to take part in building a welcoming and inclusive community.
In fiscal year 2024, the Company established an Associate Relief Fund, which provides emergency assistance for events considered a disaster or hardship. 12 At Tapestry, we believe in encouraging and empowering our employees to take part in building a welcoming and inclusive community.
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.
Such disruptions persisted into the beginning 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. Towards the end of the first half of fiscal 2023, certain government restrictions were lifted in the region and business trends improved.
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.
Total expenses attributable to the Company's marketing-related activities in fiscal 2024 were $616.8 million, representing over 9% of net sales, compared to $570.7 million in fiscal 2023, representing less than 9% of net sales. Our wide range of marketing activities utilize a variety of media, including digital, social, print and out-of-home.
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.
The Fabric of Change focuses on four pillars: Power of Our People, Sustain the Planet, Uplift Our Communities and Create Products with Care. • Power of Our People: ◦ We aim to foster a culture of purpose and fulfillment at Tapestry by embedding Equity, Inclusion and Diversity (“EI&D") throughout our organization and attracting and retaining talent with a compelling and engaging 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 plan compensation to EI&D goals on a global basis level. • Sustain the 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 goals focused on utilizing 100% renewable energy in our own operations globally, reducing waste in our corporate and fulfillment centers and minimizing water use across our company and supply chain.
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.
In addition, the Company 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 and services.
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.
Additionally, the Company operates a direct import business in many countries worldwide. As a result, the Company is subject to stringent government regulations and restrictions, adding significant complexity 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, safety and sustainability of the Company’s products.
The Company continues to monitor the latest developments regarding the Covid-19 pandemic and potential impacts on our business, operating results and outlook.
During fiscal 2024, the Covid-19 pandemic did not materially impact our business or operating results. The Company continues to monitor the latest developments regarding the Covid-19 pandemic and potential impacts on our business, operating results and outlook.
When each of us brings our individuality to our collective ambition, our creativity is unleashed. This global house of brands was built by unconventional entrepreneurs and unexpected solutions, so when we say we believe in dreams, we mean we believe in making them happen. Where differences intersect, new thinking emerges.
This global house of brands was built by unconventional entrepreneurs and unexpected solutions, so when we say we believe in dreams, we mean we believe in making them happen. 10 Where differences intersect, new thinking emerges.
In 2023, we were recognized by Civic 50 as one of the 50 Most Community-Minded Companies. Additionally, we have been certified as a "Great Place to Work" for 2023. The Company is dedicated to building a workforce with leadership teams better reflecting our general corporate population in North America.
In 2024, we were recognized by Civic 50 as one of the 50 Most Community-Minded Companies. Additionally, we have been certified as a "Great Place to Work" for 2024. The Company is dedicated to building a workforce with leadership teams better reflecting the customers we serve and the communities in which we operate.
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.
We believe, however, that we have significant competitive advantages because of the recognition and the acceptance of our brands by consumers and the power of our information technology platform. 9 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.
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.
We expect finished good manufacturers to undergo a social compliance audit before being approved as a Tapestry supplier. Manufacturers working with our licensed partners are expected to 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 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.
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. We maintain strong oversight of the supply chain process for each of our brands from design through manufacturing.
This network includes our five employee business resource groups (“EBRGs”), two task forces and regional inclusion councils to support and engage our employees. Additionally, we believe educating our employees is crucial in achieving our EI&D goals. We have established a global multi-year EI&D learning road map, including bespoke skill-building programs to accommodate our dynamic employee population.
This network includes our six employee business resource groups, three task forces and regional inclusion councils to support and engage our employees. Additionally, we believe educating our employees is crucial in achieving our EI&D goals. We have curated a catalogue of learning and development content, tools and resources, including bespoke skill-building programs to accommodate our dynamic employee population.
Our design and merchandising teams also work in close collaboration with all of our licensing partners to ensure that the licensed products are conceptualized and designed to address the intended market opportunity and convey the distinctive perspective and lifestyle associated with our brands.
The product category teams, each comprised of design, merchandising, product development and sourcing specialists, help each brand execute design concepts that are consistent with the brand's strategic direction. 6 Our design and merchandising teams also work in close collaboration with all of our licensing partners to ensure that the licensed products are conceptualized and designed to address the intended market opportunity and convey the distinctive perspective and lifestyle associated with our brands.
Together with the Board, the HR Committee also provides oversight of the Company’s EI&D strategies. The full Board of Directors and the HR Committee receive at least quarterly updates on the Company’s talent development strategies and other applicable areas of human capital management.
The full Board and the HR Committee receive quarterly updates on the Company’s talent development strategies and other applicable areas of human capital management.
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.
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. • Other Products — These products primarily include women's footwear, eyewear (such as sunglasses), jewelry (including bracelets, necklaces, rings and earrings), women's fragrances, watches, certain women's seasonal lifestyle apparel collections, including outerwear, ready-to-wear and cold weather accessories, such as gloves, scarves and hats.
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.
These fulfillment centers are either directly operated by the Company or by independent third parties, some of which support multiple brands. Our facilities use bar code scanning warehouse management systems, where our fulfillment center employees use handheld scanners to read product bar codes.
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.
During fiscal 2024, Kate Spade products were manufactured primarily in Vietnam, Cambodia, mainland China, and the Philippines and no individual vendor provided 10% or more of the brand's total inventory purchases. Stuart Weitzman products were primarily manufactured in 7 Spain.
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.
ITEM 1. BUSINESS Tapestry, Inc. (the "Company") is a house of iconic accessories and lifestyle brands. Our global house of brands unites the magic of Coach, kate spade new york and Stuart Weitzman.
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.
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 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”.
Our focus on fostering an equitable work environment has led to continued recognition from Forbes on the list of “Best Employers for Diversity”, a top scoring company on the Disability:IN Disability Equality Index and the Human Rights Campaign’s list of “Best Place to Work for LGBTQ Equality”.
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.
Our benefits, along with competitive pay, include medical benefits and paid wellness days for directly hired full-time and part-time employees. Additionally, we offer parental leave for directly hired full-time employees. The Company also offers retirement benefits for all employees.
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.
LICENSING BUSINESS Our brands take an active role in the design process and control the marketing and distribution of products in our worldwide licensing relationships.
The content on this website and the content in our Corporate Responsibility Reports are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC. 12 HUMAN CAPITAL At Tapestry, being true to yourself is core to who we are.
Additional information on the Fabric of Change and ESG Goals can be found at www.tapestry.com/responsibility. The content on this website and the content in our corporate responsibility reports are not incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file with the SEC.
Our licensing partners generally pay royalties on their net sales of our branded products. Such royalties currently comprise approximately 1% of Tapestry's total net sales. The licensing agreements generally give our brands the right to terminate the license if specified sales targets are not achieved.
Our licensing partners generally pay royalties on their net sales of our branded products. Such royalties currently comprise approximately 1% of Tapestry's total net sales.
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.
We have e-commerce sites in our major markets in the U.S., Canada, Japan, Greater China, several throughout Europe, Australia, and several throughout the rest of Asia. Additionally, we continue to leverage various third-party digital platforms to sell our products to customers. 4 WHOLESALE BUSINESS Our wholesale business primarily includes major department stores, specialty stores, and third-party digital partners.
ITEM 1. BUSINESS Founded in 1941, Coach, Inc., the predecessor to Tapestry, Inc. (the "Company"), was incorporated in the state of Maryland in 2000. During fiscal 2015, the Company acquired Stuart Weitzman Holdings LLC, a luxury women's footwear company. During fiscal 2018, the Company acquired Kate Spade & Company, a lifestyle accessories and ready-to-wear company.
Individually, our brands are iconic. Together, we can stretch what’s possible. Founded in 1941, Coach, Inc., the predecessor to Tapestry, Inc., was incorporated in the state of Maryland in 2000. During fiscal 2015, the Company acquired Stuart Weitzman Holdings LLC, a luxury women's footwear company.
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.
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, such as pandemic diseases. 8 COVID-19 PANDEMIC 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.
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.
During fiscal 2024, manufacturers of Coach products were primarily located in Vietnam, Cambodia, the Philippines and India and no individual vendor provided 10% or more of the brand's total inventory purchases.
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.
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.
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.
In North America, we maintain fulfillment centers in Florida, Nevada and Ohio, operated by Tapestry. The Company also has third-party facilities in Canada and Mexico. Globally, we utilize regional fulfillment centers in mainland China, the Netherlands, the United Kingdom, Singapore and Spain, owned and operated by third parties, that support multiple countries.
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.
We work closely with our wholesale partners to ensure a clear and consistent product presentation. We enhance our presentation with proprietary brand fixtures within the department store environment in select locations. We custom tailor our assortments through wholesale product planning and allocation processes to match the attributes to the consumers of our wholesale partners in each local market.
These facilities are also integrated into our Enterprise Resource Planning ("ERP") system, ensuring accurate inventory reporting. Our products are primarily shipped to retail stores, wholesale customers and e-commerce customers. In North America we maintain fulfillment centers in Jacksonville, Florida, and West Chester, Ohio, operated by Tapestry.
This allows for accurate storage and order processing and allows us to provide excellent service to our customers. These facilities are also integrated into our Enterprise Resource Planning system, ensuring accurate inventory reporting. Our products are primarily shipped to retail stores, wholesale customers and e-commerce customers.
The Company utilizes and continues to explore digital technologies such as social media websites as a cost effective consumer communication opportunity to increase on-line and store sales, acquire new customers and build brand awareness. 9 MANUFACTURING Tapestry carefully balances its commitments to a limited number of “better brand” partners that have demonstrated integrity, quality and reliable delivery.
The Company has several regional informational websites for locations where we have not established an e-commerce presence. The Company utilizes and continues to explore digital technologies such as social media websites as a cost-effective consumer communication opportunity to increase on-line and store sales, acquire new customers and build brand awareness.
Our merchandising teams are committed to managing the product life cycle to maximize sales and profitability across all channels. The product category teams, each comprised of design, merchandising, product development and sourcing specialists help each brand execute design concepts that are consistent with the brand's strategic direction.
Our merchandising teams are committed to managing the product life cycle to maximize sales and profitability across all business channels.
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.
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. 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.
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.
The Company maintains an internal global trade, customs and product compliance organization to help manage its import/export and regulatory affairs activity. COMPETITION The Company faces intense competition from many other brands in the product lines and markets that we participate.
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.
We also utilize local fulfillment centers, through third-parties in Japan, parts of Greater China, South Korea, Malaysia, Spain, the U.K., Canada and Australia. 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.
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.
Direct-to-consumer revenues were approximately 87% of total net sales in fiscal 2024. • Stores - Our brands operate freestanding retail stores, 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.
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.
We continue to closely monitor inventories held by our wholesale customers in an effort to optimize inventory levels across wholesale doors. Wholesale represented approximately 12% of our total net sales for fiscal 2024. As of June 29, 2024, there were no customers who individually accounted for more than 10% of each segment’s total net sales.
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.
Coach includes global sales of primarily Coach brand products to customers through our direct-to-consumer ("DTC"), wholesale and licensing businesses. This segment represented 76.4% of total net sales in fiscal 2024. • 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.
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.
MANUFACTURING Tapestry carefully balances its commitments to a limited number of “better brand” partners that have demonstrated integrity, quality and reliable delivery. 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.
For example, we will continue to enhance certain of our machine learning models to improve our customer capture and segmentation capabilities. 10 In fiscal 2021, the Company began implementing a cloud-based digital platform to enhance our omnichannel capabilities, across all brands in North America, Europe and Japan.
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. For example, we will continue to enhance certain of our machine learning models to improve our customer capture and segmentation capabilities.
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.
Kate Spade includes global sales of primarily kate spade new york brand products to customers through our DTC, wholesale and licensing businesses.
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Individually, our brands are iconic. Together, we can stretch what’s possible.
Added
During fiscal 2018, the Company acquired Kate Spade & Company, a lifestyle accessories and ready-to-wear company. Later in fiscal 2018, the Company changed its name to Tapestry, Inc. OUR BRANDS The Company has three reportable segments: • Coach - Coach is a global fashion house of accessories and lifestyle collections, founded in New York City in 1941.
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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.
Added
This segment represented 20.0% of total net sales in fiscal 2024. • Stuart Weitzman - Since 1986, New York City based global luxury footwear brand Stuart Weitzman has combined its signature artisanal craftsmanship and precise engineering to empower women to stand strong.
Removed
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWhile 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.
Biggest changePresidential, congressional, and state elections and policy shifts resulting from those elections, and (3) sanctions and related activities by the United States, European Union (“E.U.”) and others; • public health crises, such as pandemics and epidemic diseases; • 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"), the U.K.
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.
If we are unable to effectively execute our e-commerce and digital strategies and provide reliable experiences for our customers across all business channels, our reputation and ability to compete with other brands could suffer, which could adversely impact our business, results of operations and financial condition.
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.
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 business 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.
We may also experience loss of revenues resulting from unauthorized use of proprietary information including our intellectual property. Lastly, we could face sizable fines, significant breach containment and notification costs to supervisory authorities and the affected data subjects, and increased litigation and customer claims, as a result of cyber security or personal data breaches.
We may also experience loss of revenues resulting from unauthorized use of proprietary information including our intellectual property. Lastly, we could face sizable fines, significant breach containment and notification costs to supervisory authorities 22 and the affected data subjects, and increased litigation and customer claims, as a result of cyber security or personal data breaches.
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.
Consumer purchases of discretionary 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.
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.
Demand for our products, and consumer spending in the 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.
It is possible that stakeholders may not be satisfied with our ESG practices or the speed of our adoption of these practices. We could also incur additional costs and require additional resources to monitor, report and comply with various ESG practices and various legal, legislative and regulatory requirements.
It is possible that stakeholders may not be satisfied with our ESG practices or the speed of our adoption of these practices. We could 24 also incur additional costs and require additional resources to monitor, report and comply with various ESG practices and various legal, legislative and regulatory requirements.
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.
In addition, the remaining impacts of the pandemic, political instability, trade relations, sanctions, price inflationary pressure, or other 20 geopolitical or economic conditions could cause raw material costs to increase and have an adverse effect on our future margins.
Furthermore, the product lines we have historically marketed and those that we plan to market in the future are becoming increasingly subject to rapidly changing fashion trends and consumer preferences, including the increasing shift to digital brand engagement and social media communication.
Furthermore, the product lines we have historically marketed and those that we plan to market in the future are becoming increasingly subject to rapidly changing fashion trends 17 and consumer preferences, including the increasing shift to digital brand engagement and social media communication.
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.
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 and consumer behavior, 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 14 • 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.
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.
Any failure to pay dividends or conduct stock repurchases, or conduct either program at all or 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.
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.
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, 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.
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, 21 maintenance and utilities. We generally cannot cancel these leases at our option.
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.
The success of our retail stores located within malls and shopping centers may be impacted by (i) changes in consumer shopping behavior and store closures; (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 store traffic.
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 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, access to, loss, alteration 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 Privacy Rights Act (bill), 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") and other comprehensive and sectoral state privacy laws in the U.S., 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.
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.
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 discretionary items.
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.
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), militant attacks on commercial shipping vessels in the Red Sea, 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 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.
Such proposed measures include expanded disclosure requirements regarding greenhouse gas emissions and other climate-related information, as well as independent auditors providing some level of attestation to the accuracy of such disclosures. Inconsistency of legislation and regulations among jurisdictions may also affect our compliance costs with such laws and regulations.
Such proposed measures include expanded disclosure requirements regarding GHG emissions and other climate-related information, as well as independent auditors providing some level of attestation to the accuracy of such disclosures. Inconsistency of legislation and regulations among jurisdictions may also affect our compliance costs with such laws and regulations.
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.
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. Increased scrutiny from investors and others regarding our ESG initiatives, including matters of significance relating to sustainability, could result in additional costs or risks and adversely impact our reputation.
Any misappropriation of confidential or personal information gathered, stored or used by us, be it intentional or accidental, could have a material impact on the operation of our business, including severely damaging our reputation and our relationships with our customers, employees, vendors and investors.
Any misappropriation or unauthorized access to confidential or personal information gathered, stored or used by us, be it intentional or accidental, could have a material impact on the operation of our business, including severely damaging our reputation and our relationships with our customers, employees, vendors and investors.
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.
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, cash flow or profitability targets; • delays, unexpected costs or difficulties in completing the acquisition or integration of acquired companies or assets, including as a result of regulatory challenges; • 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; • failures or delays in receiving the necessary approvals by the relevant regulators and authorities; • 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; 19 • 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.
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.
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 12% of total net sales for 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.
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% CAMT on global adjusted financial statement income and a 1% excise tax on share repurchases.
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.
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.
In addition, many of the countries where we and our suppliers operate continue to enact legislation and regulatory rules that address climate change and other sustainability issues, including expanded disclosure requirements on greenhouse gas emissions and other climate related information.
In addition, many of the countries where we and our suppliers operate continue to enact legislation and regulatory rules that address climate change and other sustainability issues, including expanded disclosure requirements on GHG emissions and other climate related information.
The integration process of any newly acquired company, such as our proposed acquisition of Capri Holdings Limited ("Capri"), may be complex, costly and time-consuming.
The integration process of any newly acquired company, such as our proposed Capri Acquisition, may be complex, costly and time-consuming.
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.
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 a diverse group of consumers; • 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.
Our efforts to enforce our intellectual property rights are often met with defenses and counterclaims attacking the validity and enforceability of our intellectual property rights. In the ordinary course of business, we become involved in trademark oppositions and cancellation actions.
Our efforts to enforce our intellectual property rights are from time to time met with defenses and counterclaims attacking the validity and enforceability of our intellectual property rights. In the ordinary course of business, we become involved in trademark oppositions and cancellation actions.
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.
In the event of an acceleration of payment to the lenders, this would result in a cross default of the Company’s senior notes (including the Capri Acquisition Senior Notes), causing the Company’s outstanding borrowings to also become due and payable on demand.
In order to minimize the impact on earnings related to foreign currency rate movements, we hedge certain cross currency intercompany inventory transactions and foreign currency balance sheet exposures, as well as the Company’s cross currency intercompany loan portfolio. We cannot ensure, however, that these hedges will fully offset the impact of foreign currency rate movements.
In order to minimize the impact on earnings related to foreign currency rate movements, we hedge certain cross currency intercompany inventory transactions and foreign currency balance sheet exposures which includes the Company’s cross currency intercompany loan portfolio. We cannot ensure, however, that these hedges will fully offset the impact of foreign currency rate movements.
In addition, 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 adverse weather conditions or other macroeconomic events, including the impact of the Covid-19 pandemic.
In addition, 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 adverse weather conditions or other macroeconomic events.
The imposition of taxes, duties and quotas, the withdrawal from or material modification to trade agreements, and/or if CBP detains shipments of our goods pursuant to a withhold release order could have a material adverse effect on our business, results of operations and financial condition.
The imposition of taxes, duties and quotas, the withdrawal from or material modification to trade agreements, and/or if CBP detains shipments of our goods pursuant to the UFLPA, could have a material adverse effect on our business, results of operations and financial condition.
Building on the success of the Company’s strategic growth plan from fiscal 2020 through fiscal 2022, the Company introduced its 2025 growth strategy, future speed, in the first quarter of fiscal 2023, which is designed to amplify and extend the competitive advantages of the brands, with a focus on four strategic priorities: (i) Building Lasting Customer Relationships; (ii) Fueling Fashion Innovation & Product Excellence; (iii) Delivering Compelling Omni-Channel Experiences; and (iv) Powering Global Growth.
The Company introduced its 2025 growth strategy, future speed, in the first quarter of fiscal 2023, which is designed to amplify and extend the competitive advantages of the brands, with a focus on four strategic priorities: (i) Building Lasting Customer Relationships; (ii) Fueling Fashion Innovation & Product Excellence; (iii) Delivering Compelling Omni-Channel Experiences; and (iv) Powering Global Growth.
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.
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.
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.
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.
Many of our products may be considered discretionary items for consumers.
Many of our products can be considered discretionary items for consumers.
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.
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 other macroeconomic events, we may be faced with significant excess inventories for some products and missed opportunities for other products.
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.
Refer to Note 12, "Debt", for a summary of these terms and additional information on the terms of our Revolving Credit Facility, Capri Acquisition Term Loan Facilities and outstanding senior notes, including the Capri Acquisition Senior Notes. 23 The consequences and limitations under our Revolving Credit Facility, our Capri Acquisition Term Loan Facilities and our other outstanding indebtedness could impede our ability to engage in future business opportunities or strategic acquisitions.
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.
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 the dividend program at any time.
We do not own any of our retail store locations. The majority of our stores are under non-cancelable, multi-year leases, often with renewal options. We believe that the majority of the leases we enter into in the future will likely be non-cancelable.
If we close a leased retail space, we remain obligated under the applicable lease. We do not own any of our retail store locations. The majority of our stores are under non-cancelable, multi-year leases, often with renewal options. We believe that the majority of the leases we enter into in the future will likely be non-cancelable.
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.
We operate on a global basis, with approximately 40.8% of our net sales coming from operations outside of United States for fiscal year 2024.
The Company's charter, bylaws and Maryland law contain provisions that could make it more difficult for a third-party to acquire the Company without the consent of our Board.
Certain provisions of the Company's charter, bylaws and Maryland law may delay or prevent an acquisition of the Company by a third-party. The Company's charter, bylaws and Maryland law contain provisions that could make it more difficult for a third-party to acquire the Company without the consent of our Board.
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.
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.
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.
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 June 29, 2024, our consolidated debt was approximately $7.24 billion.
On December 12, 2022, the European Union member states also reached agreement to implement the OECD’s reform of international taxation known as Pillar Two Global Anti-Base Erosion ("GloBE") Rules, which broadly mirror the Inflation Reduction Act by imposing a 15% global minimum tax on multinational companies.
On December 12, 2022, the E.U. member states also reached an agreement to implement the OECD’s reform of international taxation known as GloBE, which broadly mirrors the Inflation Reduction Act by imposing a 15% global minimum tax on multinational companies.
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.
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.
We do not maintain key-person or similar life insurance policies on any of senior management team or other key personnel. We must also attract, motivate and retain a sufficient number of qualified retail and fulfillment center employees.
We do not maintain key-person or similar life insurance policies on any of senior management team or other key personnel. We must also attract, motivate and retain a sufficient number of qualified retail and fulfillment center employees. Historically, competition for talent in these positions has been intense and turnover is generally high.
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.
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.
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.
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.
Risks Related to Environmental, Social, and Governance Issues The risks associated with climate change and other environmental impacts and increased focus by stakeholders on climate change, could negatively affect our business and operations.
Substantial changes in foreign currency exchange rates could cause our sales and profitability to be negatively impacted. Risks Related to Environmental, Social, and Governance Issues The risks associated with climate change and other environmental impacts and increased focus by stakeholders on climate change, could negatively affect our business and operations.
Globally we utilize fulfillment centers in mainland China, the Netherlands, the U.K. and Spain, owned and operated by third parties, allowing us to better manage the logistics in these regions while reducing costs.
Globally we utilize fulfillment centers in mainland China, the Netherlands, the U.K. and Spain, owned and operated by third parties, allowing us to better manage the logistics in these regions while reducing costs. 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 Mexico.
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.
Department of the Treasury’s Office of Foreign Assets Control and Uyghur Forced Labor Prevention Act (“UFLPA”); • 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.
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.
This exclusive forum provision is intended to apply to claims arising under Maryland state law and would not apply to claims brought pursuant to the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or any other claim for which the federal courts have exclusive jurisdiction. 27 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.
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.
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. Our business may be materially impacted if our fulfillment centers face significant interruptions and operations.
In addition to our own databases, we use third-party service providers to store, process and transmit this information on our behalf.
As part of our business model, we collect, retain and transmit confidential information and personal data over public networks. In addition to our own databases, we use third-party service providers to store, process and transmit this information on our behalf.
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.
Our failure to successfully complete the integration of any acquired business, including as a result of regulatory challenges, and any adverse consequences associated with future acquisition activities, could have an adverse effect on our business, financial condition and operating results.
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.
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 business channel.
In addition, a prolonged disruption in our business may impact our ability to satisfy the leverage ratio covenant under our $1.25 Billion Revolving Credit Facility. Non-compliance with these terms would constitute an event of default under our $1.25 Billion Revolving Credit Facility, which may result in acceleration of payment to the lenders.
Non-compliance with these terms would constitute an event of default under our credit facilities, which may result in acceleration of payment to the lenders.
This may continue and could further decrease the number of, or concentrate the ownership of, wholesale stores that carry our or our licensees’ products.
The retail industry, including wholesale customers, has experienced financial difficulty leading to consolidations, reorganizations, restructuring, bankruptcies and ownership changes. This may continue and could further decrease the number of, or concentrate the ownership of, wholesale stores that carry our or our licensees’ products.
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.
Our continued international expansion will increase our exposure to foreign currency fluctuations. 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 believe our trademarks, copyrights, patents and other intellectual property rights are extremely important to our success and our competitive position.
The occurrence of any of these events could materially adversely affect our business, financial condition and results of operations. A decline in the volume of traffic to our stores could have a negative impact on our net sales.
A decline in the volume of traffic to our stores could have a negative impact on our net sales.
Compliance with these laws may lead to increased costs and operational complexity and may increase our exposure to governmental investigations or litigation.
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.
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.
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.
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.
We take no responsibility for any losses suffered as a result of such changes in our stock price. 26 We periodically return value to investors through payment of quarterly dividends and common stock repurchases. In August 2023, the Company suspended its share repurchase activity in connection with the Merger Agreement with Capri.
As a result of having operations outside of the U.S., we are also exposed to market risk from fluctuations in foreign currency exchange rates. Substantial changes in foreign currency exchange rates could cause our sales and profitability to be negatively impacted.
In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. As a result of having operations outside of the U.S., we are also exposed to market risk from fluctuations in foreign currency exchange rates.
If our employment proposition is not perceived as favorable compared to other companies, it could negatively impact our ability to attract and retain our employees. Our business may be materially impacted if our fulfillment centers face significant interruptions and operations. We are dependent on a limited number of fulfillment centers.
If our employment proposition is not perceived as favorable compared to other companies, it could negatively impact our ability to attract and retain our employees.
Additionally, our international subsidiaries primarily use local currencies as the functional currency and translate their financial results from the local currency to U.S. dollars. If the U.S. dollar strengthens against these subsidiaries’ foreign currencies, the translation of their foreign currency denominated transactions may decrease consolidated net sales and profitability.
If the U.S. dollar strengthens against these subsidiaries’ foreign currencies, the translation of their foreign currency denominated transactions may decrease consolidated net sales and profitability. Furthermore, majority of the Company's purchases and sales involving international parties, excluding international consumer sales, are denominated in U.S. dollars.
Likewise, our obligation to continue making lease payments in respect of leases for closed retail spaces could have a material adverse effect on our business, financial condition and results of operations. 23 Additionally, due to the uncertain economic environment, it may be difficult to determine the fair market value of real estate properties when we are deciding whether to enter into leases or renew expiring leases.
Additionally, due to the uncertain economic environment, it may be difficult to determine the fair market value of real estate properties when we are deciding whether to enter into leases or renew expiring leases.
In addition, the terms of our $1.25 Billion Revolving Credit Facility contain affirmative and negative covenants, including a maximum net leverage ratio of 4.0 to 1.0, as well as limitations on our ability to incur debt, grant liens, engage in mergers and dispose of assets.
In addition, the terms of our $2.00 billion Revolving Credit Facility (the "Revolving Credit Facility") contain certain affirmative and negative covenants, including limits on our ability to incur debt, grant liens, engage in mergers and dispose of assets, make certain investments, engage in certain transactions with its affiliates and make certain dividends and other distributions.
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.
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 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.
In fiscal 2023, the Company returned capital to its shareholders through (i) a quarterly cash dividend of $0.30 per common share, for an annual dividend rate of $1.20 per share, or approximately $280 million and (ii) the repurchase of 17.8 million shares of common stock for $700 million (the “Shareholder Return Programs”).
In fiscal 2024, the Company returned capital to its shareholders through a quarterly cash dividend of $0.35 per common share, for an annual dividend rate of $1.40 per share, or $321 million. In August 2023, the Company suspended its share repurchase activity in connection with the Merger Agreement with Capri.
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.
If any of these centers were to shut down or otherwise become inoperable or inaccessible for any reason, including as a result of accidents, economic and weather conditions, natural disasters, pandemic diseases, labor shortages and other unforeseen events and circumstances, we could suffer a substantial loss of inventory and/or disruptions of deliveries to our retail and wholesale customers.
The possibility of a successful cyber-attack on any one or all of these systems is a serious threat. The retail industry, in particular, has been the target of many cyber-attacks. As part of our business model, we collect, retain, and transmit confidential information and personal data over public networks.
Despite the security measures we have in place, including those described in Item 1C “Cybersecurity”, the possibility of a successful cyber-attack on any one or all of these systems is a serious threat. The retail industry, in particular, has been the target of many cyber-attacks.
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. 28 Certain provisions of the Company's charter, bylaws and Maryland law may delay or prevent an acquisition of the Company by a third-party.
The market price of our securities could be adversely affected if our cash dividend rate or common stock repurchase activity differs from investors’ expectations. 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.
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. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
The amount of cash required to service our increased indebtedness is greater than the amount of cash flows required prior to the announcement of the Capri Acquisition. Our ability to generate cash flows from our operations is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
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.
Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition. Risks Related to our Business and our Industry We face risks associated with operating in international markets.
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.
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. This requires investment in new technologies and reliance on third-party digital partners, over which we may have limited control.
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”).
Further, proposed tax changes that may be enacted in the future could impact our current or future tax structure and effective tax rates.
While we carry cyber liability insurance, such insurance may not cover us with respect to any or all claims or costs associated with such a breach. 24 In addition, we have e-commerce sites in certain countries throughout the world, including the U.S., Canada, Japan, Greater China, several throughout Europe, Australia and several throughout the rest of Asia and have plans for additional e-commerce sites in other parts of the world.
In addition, we have e-commerce sites in certain countries throughout the world, including the U.S., Canada, Japan, South Korea, Greater China, Europe, Middle East, Australia and Southeast Asia and have plans for additional e-commerce sites in other parts of the world. Additionally, Tapestry has informational websites in various countries.
If dismissals are not obtained or a settlement is not reached, these lawsuits could prevent or delay completion of the acquisition and/or result in substantial costs to us. Our operating results are subject to seasonal and quarterly fluctuations, which could adversely affect the market price of the Company's common stock. The Company's results are typically affected by seasonal trends.
Our operating results are subject to seasonal and quarterly fluctuations, which could adversely affect the market price of the Company's common stock. The Company's results are typically affected by seasonal trends. We have historically realized, and expect to continue to realize, higher sales and operating income in the second quarter of our fiscal year.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeLocation 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.
Biggest changeLocation 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 (1) 135,000 North Bergen, New Jersey Corporate office and customer service 106,000 Tokyo, Japan Corporate regional management 27,100 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 (1) In the beginning of fiscal 2025, the Kate Spade corporate management office relocated to the Corporate global headquarters in New York.
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.
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 June 29, 2024. All of the properties are leased, with the leases expiring at various times through fiscal 2037, subject to renewal options.
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.
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. 29
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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. These leases expire at various times through fiscal 2036.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAlthough the Company's litigation can result in large monetary awards, such as when a civil jury is allowed to determine compensatory and/or punitive damages, the Company believes that the outcome of all pending legal proceedings in the aggregate will not have a material effect on the Company's business or consolidated financial statements. ITEM 4.
Biggest changeAlthough the Company's litigation can result in large monetary awards, such as when a civil jury is allowed to determine compensatory and/or punitive damages, the Company believes that the outcome of all pending legal proceedings in the aggregate will not have a material effect on the Company's business or consolidated financial statements.
Removed
MINE SAFETY DISCLOSURES Not applicable. 30 PART II
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There have been no material developments with respect to any previously reported proceedings.
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However, as previously disclosed, on August 10, 2023, the Company entered into a Merger Agreement by and among the Company, Merger Sub and Capri, pursuant to which, among other things, Merger Sub will merge with and into Capri (the “Merger”) with Capri surviving the Merger and continuing as a wholly owned subsidiary of the Company.
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In connection with the Company’s proposed acquisition of Capri, we have been named as a defendant in legal proceedings by the FTC.
Added
On April 22, 2024, the FTC filed a lawsuit in the United States District Court for the Southern District of New York against us and Capri seeking to block the proposed acquisition of Capri, claiming that the proposed acquisition would violate Section 7 of the Clayton Act and that the Merger Agreement and the Merger constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act and should be enjoined.
Added
We believe the FTC’s claims are without merit, and we intend to defend the lawsuit vigorously. 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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Biggest changeThe 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.
Biggest changeThe stock performance shown in the graph is not intended to forecast or be indicative of future performance.
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 graph assumes that $100 was invested on June 29, 2019 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.
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
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 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.
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 2, 2024, there were 1,844 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 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.
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 June 29, 2024, the last day of Tapestry’s most recent fiscal year.
Removed
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.
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Fiscal 2019 Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023 Fiscal 2024 TPR $100.00 $41.28 $140.34 $104.01 $148.98 $154.55 S&P 1500 Apparel, Accessories & Luxury Goods $100.00 $56.86 $113.76 $69.66 $65.62 $57.55 S&P 500 $100.00 $104.32 $153.32 $136.72 $161.80 $201.53 Stock Repurchase Program On May 12, 2022, the Company announced that its Board authorized a common stock repurchase program to repurchase up to $1.50 billion of its outstanding common stock (the "2022 Share Repurchase Program").
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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").
Added
As of June 29, 2024 the Company had $800 million of additional shares available to be repurchased as authorized under the 2022 Share Repurchase Program. In August 2023, the company suspended its share repurchase activity in connection with the Merger Agreement with Capri. Refer to Note 5 "Acquisitions," for further information.
Added
There were no shares repurchased during fiscal 2024. 31 ITEM 6. RESERVED 32

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe $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.
Biggest changeThe $426.8 million increase in changes in operating asset and liability balances was primarily driven by the following: • Accrued liabilities were a source of cash of $91.6 million in fiscal 2024 as compared to a use of cash of $93.0 million in fiscal 2023, primarily driven by accrued incentive compensation and an increase in accrued interest due to issuance of the Capri Acquisition Senior Notes. • Accounts payable were a source of cash of $49.1 million in fiscal 2024 as compared to a use of cash of $98.1 million in fiscal 2023, primarily driven by a reduction of in-transit inventory in the prior year. • Other Assets were a use of cash of $0.1 million in fiscal 2024 as compared to a use of cash of $100.7 million in fiscal 2023, primarily driven by an increase in other receivables due to the net investment hedge, tax refunds in the current year and lower cloud computing project spend.
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.
Supply Chain Finance 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.
Several factors could impact the Kate Spade brand's ability to achieve expected future cash flows, including the optimization of the store fleet productivity, the success of international expansion strategies, the impact of promotional activity, continued economic volatility and potential operational challenges related to the macroeconomic factors, the reception of new collections in all channels, and other initiatives aimed at increasing profitability of the business.
Several factors could impact the Kate Spade brand's ability to achieve expected future cash flows, including the optimization of the store fleet productivity, the success of international expansion strategies, the impact of promotional activity, continued economic volatility and potential operational challenges related to the macroeconomic factors, the reception of new collections in all business channels and other initiatives aimed at increasing profitability of the business.
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.
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 business channels and geographies.
Tax authorities periodically audit the Company’s income tax returns and the tax authorities may take a contrary position that could result in a significant impact on the Company's results of operations. Significant management judgment is required in determining the effective tax rate, in evaluating tax positions and in determining the net realizable value of deferred tax assets.
Tax authorities periodically audit the Company’s income tax returns, these tax authorities may take a contrary position that could result in a significant impact on the Company's results of operations. Significant management judgment is required in determining the effective tax rate, in evaluating tax positions and in determining the net realizable value of deferred tax assets.
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.
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 business channels and geographies.
These letters of credit expire at various dates through calendar 2028. We do not maintain any other off-balance sheet arrangements, transactions, obligations, or other relationships with unconsolidated entities that would be expected to have a material current or future effect on our consolidated financial statements.
These letters of credit expire at various dates through calendar 2039. We do not maintain any other off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect on our consolidated financial statements.
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.
A hypothetical 10% change in our stock-based compensation expense would not have a material impact to our fiscal 2024 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.
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.
Given the relatively small excess of fair value over carrying value as noted above, if profitability trends decline during fiscal 2025 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.
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.
Stock Repurchase Plan On May 12, 2022, the Company announced the Board authorized the additional repurchase of up to $1.50 billion of its common stock. 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.
Payment is due at the point of sale. The Company recognizes revenue within the wholesale channel at the time title passes and risk of loss is transferred to customers, which is generally at the point of shipment of products but may occur upon receipt of the shipment by the customer in certain cases.
Payment is due at the point of sale. The Company recognizes revenue within the wholesale business at the time title passes and risk of loss is transferred to customers, which is generally at the point of shipment of products but may occur upon receipt of the shipment by the customer in certain cases.
This section includes a discussion on global economic conditions and industry trends that affect comparability that are important in understanding results of operations and financial conditions, and in anticipating future trends. • Results of operations . An analysis of our results of operations in fiscal 2023 compared to fiscal 2022. • Non-GAAP measures.
This section includes a discussion on global economic conditions and industry trends that affect comparability that are important in understanding results of operations and financial conditions, and in anticipating future trends. • Results of operations . An analysis of our results of operations in fiscal 2024 compared to fiscal 2023 . • Non-GAAP measures.
The $5.7 million source of cash in fiscal 2023 is primarily due to proceeds from maturities and sales of investments of $148.0 million, settlement of net investment hedge of $41.9 million, partially offset by capital expenditures of $184.2 million.
The $5.7 million source of cash in fiscal 2023 was primarily due to proceeds from maturities and sales of investments of $148.0 million, settlement of net investment hedge of $41.9 million, partially offset by capital expenditures of $184.2 million.
Management believes that cash flows from operations, access to the credit and capital markets and our credit lines, on-hand cash and cash equivalents and our investments will provide adequate funds to support our operating, capital, and debt service requirements for fiscal 2023 and beyond.
Management believes that cash flows from operations, access to the credit and capital markets and our credit lines, on-hand cash and cash equivalents and our investments will provide adequate funds to support our operating, capital and debt service requirements for fiscal 2025 and beyond.
The Company determined that there was no impairment in fiscal 2023, fiscal 2022 and fiscal 2021. Based on the annual assessment in fiscal 2023, the fair values of our Coach brand reporting units significantly exceeded their respective carrying values.
The Company determined that there was no impairment in fiscal 2024, fiscal 2023 and fiscal 2022. Based on the annual assessment in fiscal 2024, the fair values of our Coach brand reporting units significantly exceeded their respective carrying values.
The Company’s internal management reporting excluded these items. In addition, the human resources committee of the Company’s Board uses these non-GAAP measures when setting and assessing achievement of incentive compensation goals. The Company operates on a global basis and reports financial results in U.S. dollars in accordance with GAAP.
The Company’s internal management reporting excluded these items. In addition, the HR Committee uses these non-GAAP measures when setting and assessing achievement of incentive compensation goals. The Company operates on a global basis and reports financial results in U.S. dollars in accordance with GAAP.
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.
Tax Legislation 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% CAMT on global adjusted financial statement income and a 1% excise tax on share repurchases.
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.
Summary - Fiscal 2024 Currency Fluctuation Effects The change in net sales in fiscal 2024 compared to fiscal 2023 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.
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.
At June 29, 2024, 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.
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.
At June 29, 2024, 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.
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.
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, such as pandemic diseases.
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.
Besides the firm commitments noted above, the above table excludes other amounts included in current liabilities in the Consolidated Balance Sheets at June 29, 2024 as these items will be paid within one year and certain long-term liabilities not requiring cash payments.
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.
The reported results during fiscal 2024 reflect certain items which affect the comparability of our results, as noted in the following table. There were no charges affecting comparability during fiscal 2023.
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.
The fair values of the Kate Spade brand reporting unit and indefinite-lived brand as of the fiscal 2024 testing date exceeded their carrying values by approximately 20% and 55%, respectively.
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 the GAAP to Non-GAAP Reconciliation discussions above in this Item 7.
Such disruptions continued during the first half of fiscal 2023, and the Company's results in Greater China 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.
Such disruptions continued during the first half of fiscal 2023, and the Company's results in Greater China 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. During fiscal 2024, the Covid-19 pandemic did not materially impact our business or operating results.
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.
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 totaling $28.4 million as of June 29, 2024, primarily serving to collateralize our obligation to third parties for duty, leases, insurance claims and materials used in product manufacturing.
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.
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.
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.
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.
This section includes a discussion on liquidity and capital resources including an analysis of changes in cash flow as well as working capital and capital expenditures. • Critical Accounting policies and estimates. This section includes any critical accounting policies or estimates that impact the Company.
This section includes a discussion on liquidity and capital resources including an analysis of changes in cash flow as well as working capital and capital expenditures. • Critical Accounting policies and estimates. This section includes any critical accounting policies or estimates that impact the Company. OVERVIEW Fiscal 2024, fiscal 2023 and fiscal 2022 were 52-week periods.
The development and selection of the Company’s critical accounting policies and estimates are periodically reviewed with the Audit Committee of the Board. The accounting policies discussed below are considered critical because changes to certain judgments and assumptions inherent in these policies could affect the financial statements.
The development and selection of the Company’s critical accounting policies and estimates are periodically reviewed with the Audit Committee. The accounting policies discussed below are considered critical because changes to certain judgments and assumptions inherent in these policies could affect the financial statements. For more information on the Company's accounting policies, please refer to the Notes to Consolidated Financial Statements.
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.
Excluding items affecting comparability, net income per diluted share increased $0.41 to $4.29 in fiscal 2024 from $3.88 in fiscal 2023. This change was primarily due to higher net income and a decrease in shares outstanding.
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.
There were no items affecting comparability in fiscal 2023. 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.
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.
Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $134.8 million as of June 29, 2024, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever.
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.
Excluding items affecting comparability, Corporate operating expenses increased $46.7 million to $512.5 million from $465.8 million in fiscal 2023. This increase in operating expenses was attributed to an increase in SG&A expenses primarily due to increased compensation costs, higher professional fees and increased occupancy costs.
We do not have the ability to refinance or modify payment terms to the global financial institution through the SCF program. No guarantees are provided by the Company or any of our subsidiaries under the SCF program.
We do not have the ability to refinance or modify payment terms to the global financial institution through the SCF program. No guarantees are provided by the Company or any of our subsidiaries under the SCF program. Refer to Note 2, "Basis of Presentation and Organization," for additional information.
The Company, similar to some companies, includes certain transportation-related costs due to our distribution network in SG&A expenses rather than in Cost of sales; for this reason, our gross margins may not be comparable to that of entities that include all costs related to their distribution network in Cost of sales. 38 Selling, General and Administrative Expenses Fiscal Year Ended July 1, 2023 July 2, 2022 Variance (millions) Amount % of Net Sales Amount % of Net Sales Amount % Coach (1) $ 2,117.2 42.7 % $ 2,079.9 42.3 % $ 37.3 1.8 % Kate Spade (1) 785.1 55.3 754.6 52.2 30.5 4.0 Stuart Weitzman (1) 174.4 62.0 182.8 57.5 (8.4) (4.6) Corporate (1)(2) 465.8 NA 457.3 NA 8.5 1.9 Tapestry $ 3,542.5 53.1 $ 3,474.6 52.0 $ 67.9 2.0 SG&A expenses increased 2.0% or $67.9 million to $3.54 billion in fiscal 2023 as compared to $3.47 billion in fiscal 2022.
The Company, similar to some companies, includes certain transportation-related costs due to our distribution network in SG&A expenses rather than in Cost of sales; for this reason, our gross margins may not be comparable to that of entities that include all costs related to their distribution network in Cost of sales. 38 Selling, General and Administrative Expenses Fiscal Year Ended June 29, 2024 July 1, 2023 Variance (millions) Amount % of Net Sales Amount % of Net Sales Amount % Coach $ 2,224.3 43.7 % $ 2,117.2 42.7 % $ 107.1 5.1 % Kate Spade 738.6 55.3 785.1 55.3 (46.5) (5.9) Stuart Weitzman 164.1 68.0 174.4 62.0 (10.3) (5.9) Corporate (1)(2) 622.4 NA 465.8 NA 156.6 33.6 Tapestry $ 3,749.4 56.2 $ 3,542.5 53.1 $ 206.9 5.8 SG&A expenses increased 5.8% or $206.9 million to $3.75 billion in fiscal 2024 as compared to $3.54 billion in fiscal 2023.
Our success does not depend solely on the performance of a single channel, geographic area or brand. 33 2025 Growth 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’s brands aim 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.
The Company believes the FTC’s claims are without merit and intends to defend the lawsuit vigorously.Refer to Note 5, "Acquisitions" for further information. 2025 Growth Strategy 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’s brands aim 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.
On December 12, 2022, the European Union member states also reached agreement to implement the OECD’s reform of international taxation known as Pillar Two Global Anti-Base Erosion ("GloBE") Rules, which broadly mirror the Inflation Reduction Act by imposing a 15% global minimum tax on multinational companies.
On December 12, 2022, the E.U. member states also reached an agreement to implement the OECD’s reform of international taxation known as GloBE, which broadly mirrors the Inflation Reduction Act by imposing a 15% global minimum tax on multinational companies.
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.
As a percentage of net sales, SG&A expenses increased to 56.2% during fiscal 2024 as compared to 53.1% during fiscal 2023. Excluding items affecting comparability of 109.9 million in fiscal 2024, SG&A expenses increased 2.7% or $97.0 million to $3.64 billion from $3.54 billion in fiscal 2023.
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".
FISCAL 2023 COMPARED TO FISCAL 2022 The comparison of fiscal 2023 to 2022 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended July 1, 2023, filed on August 17, 2023 within Part II. Item 7.
For more information on the Company's accounting policies, please refer to the Notes to Consolidated Financial Statements. Revenue Recognition Revenue is recognized when the Company satisfies its performance obligations by transferring control of promised products or services to its customers, which may be at a point of time or over time.
Revenue Recognition Revenue is recognized when the Company satisfies its performance obligations by transferring control of promised products or services to its customers, which may be at a point of time or over time.
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.
Operating Income (Loss) Fiscal Year Ended June 29, 2024 July 1, 2023 Variance (millions) Amount % of Net Sales Amount % of Net Sales Amount % Coach $ 1,651.1 32.4 % $ 1,529.9 30.8 % $ 121.2 7.9 % Kate Spade 132.6 9.9 115.0 8.1 17.6 15.3 Stuart Weitzman (21.2) (8.8) (6.7) (2.4) (14.5) NM Corporate (622.4) NA (465.8) NA (156.6) (33.6) Tapestry $ 1,140.1 17.1 $ 1,172.4 17.6 $ (32.3) (2.8) Operating income decreased $32.3 million to $1.14 billion during fiscal 2024 as compared to $1.17 billion in fiscal 2023.
"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.
"Management’s Discussion and Analysis of Financial Condition and Results of Operations." 41 FINANCIAL CONDITION Cash Flows - Fiscal 2024 Compared to Fiscal 2023 Fiscal Year Ended June 29, 2024 July 1, 2023 Change (millions) Net cash provided by (used in) operating activities $ 1,255.6 $ 975.2 $ 280.4 Net cash provided by (used in) investing activities (1,041.9) 5.7 (1,047.6) Net cash provided by (used in) financing activities 5,214.4 (1,035.9) 6,250.3 Effect of exchange rate changes on cash and cash equivalents (12.2) (8.7) (3.5) Net increase (decrease) in cash and cash equivalents $ 5,415.9 $ (63.7) $ 5,479.6 The Company’s cash and cash equivalents increased by $5.42 billion in fiscal 2024 compared to a decrease of $63.7 million in fiscal 2023, as discussed below.
In response to the current environment, the Company continues to take strategic actions considering near-term exigencies and remains committed to maintaining the health of the brands and business. 34 Covid-19 Pandemic 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.
Covid-19 Pandemic 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.
This increase in operating margin was primarily attributed to a 130 basis points increase in gross margin, mainly due to lower freight costs and net pricing improvements, partially offset by unfavorable currency translation, and a 60 basis point increase in SG&A expenses as a percentage of net sales, mainly due to higher information technology costs and higher marketing spend, partially offset by a decrease in selling costs. • Kate Spade Operating Income decreased $42.4 million to $115.0 million in fiscal 2023, resulting in an operating margin decrease of 280 basis points to 8.1%, as compared to 157.4 million and 10.9%, respectively in fiscal 2022.
This increase in operating margin was primarily attributed to: ◦ Gross Margin , increased 260 basis points mainly due to lower freight costs, net pricing improvements and favorable currency impacts; ◦ SG&A expenses as a percentage of net sales , increased 100 basis points mainly due to higher marketing spend and higher compensation costs, partially offset by a decrease in distribution costs. • Kate Spade Operating Income increased $17.6 million to $132.6 million in fiscal 2024, resulting in an operating margin increase of 180 basis points to 9.9%, as compared to 115.0 million and 8.1%, respectively in fiscal 2023.
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.
Net cash provided by (used in) operating activities Net cash provided by operating activities increased $280.4 million primarily due to changes in operating assets and liabilities of $426.8 million partially offset by lower net income of $120.0 million and lower impact of non-cash adjustments of $26.4 million.
This decrease in operating margin was primarily attributed to a increase of 180 basis points in SG&A as a percentage of sales partially offset by a 120 basis points increase in gross margin. 39 • Coach Operating Income increased $56.0 million to $1.53 billion in fiscal 2023, resulting in an operating margin increase of 90 basis points to 30.8%, as compared to $1.47 billion and 29.9%, respectively in fiscal 2022.
This increase in operating margin was primarily attributed to an increase of 250 basis points in gross margin partially offset by a 140 basis points increase in SG&A as a percentage of sales. • Coach Operating Income increased $121.2 million to $1.65 billion in fiscal 2024, resulting in an operating margin increase of 160 basis points to 32.4%, as compared to $1.53 billion and 30.8%, respectively in fiscal 2023.
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.
Net cash provided by (used in) financing activities Net cash provided by financing activities was $5.21 billion in fiscal 2024 as compared to a use of cash of $1.04 billion in fiscal 2023, resulting in a $6.25 billion increase in net cash provided by financing activities.
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.
Gross Profit Fiscal Year Ended June 29, 2024 July 1, 2023 Variance (millions) Amount % of Net Sales Amount % of Net Sales Amount % Coach $ 3,875.4 76.1 % $ 3,647.1 73.5 % $ 228.3 6.3 % Kate Spade 871.2 65.2 900.1 63.4 (28.9) (3.2) Stuart Weitzman 142.9 59.2 167.7 59.6 (24.8) (14.8) Tapestry $ 4,889.5 73.3 $ 4,714.9 70.8 $ 174.6 3.7 Gross profit increased 3.7% or $174.6 million to $4.89 billion in fiscal 2024 from $4.71 billion in fiscal 2023.
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) investing activities Net cash used in investing activities was $1.04 billion in fiscal 2024 compared to a source of cash of $5.7 million in fiscal 2023, resulting in a $1.05 billion increase in net cash used in investing activities.
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%.
As of June 29, 2024, there were 18 financial institutions participating in the Revolving Credit Facility and 24 financial institutions participating in the Capri Acquisition Term Loan Facilities with no one participant maintaining a combined maximum commitment percentage in excess of 10%.
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”).
Fiscal Year Ended June 29, 2024 July 1, 2023 Variance (millions, except per share data) Amount % of net sales Amount % of net sales Amount % Net sales $ 6,671.2 100.0 % $ 6,660.9 100.0 % $ 10.3 0.2 % Gross profit 4,889.5 73.3 4,714.9 70.8 174.6 3.7 SG&A expenses 3,749.4 56.2 3,542.5 53.1 206.9 5.8 Operating income (loss) 1,140.1 17.1 1,172.4 17.6 (32.3) (2.8) Interest expense, net 125.0 1.9 27.6 0.4 97.4 NM Other expense (income) 3.2 — 1.7 — 1.5 84.1 Income (loss) before provision for income taxes 1,011.9 15.2 1,143.1 17.2 (131.2) (11.5) Provision for income taxes 195.9 2.9 207.1 3.1 (11.2) (5.4) Net income (loss) 816.0 12.2 936.0 14.1 (120.0) (12.8) Net income (loss) per share: Basic $ 3.56 $ 3.96 $ (0.40) (10.1) Diluted $ 3.50 $ 3.88 $ (0.38) (9.8) 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”).
Other Expense (Income) Other expense decreased $14.7 million to $1.7 million in fiscal 2023 as compared to an expense of $16.4 million in fiscal 2022. This decrease in other expense was related to a decrease in foreign exchange losses. Provision for Income Taxes The effective tax rate was 18.1% in fiscal 2023 as compared to 18.2% in fiscal 2022.
This increase in other expense was related to an increase in foreign exchange losses. Provision (Benefit) for Income Taxes The effective tax rate was 19.4% in fiscal 2024 as compared to 18.1% in fiscal 2023. Excluding items affecting comparability, the effective tax rate was 19.2% in fiscal 2024 as compared to 18.1% in fiscal 2023.
SG&A as a percentage of net sales increased 180 basis points to 53.1% compared to 51.3% in fiscal 2022. This increase in SG&A as a percentage of net sales was primarily due to higher information technology costs, increased occupancy costs, and higher marketing spend.
SG&A as a percentage of net sales increased 140 basis points to 54.5% as compared to 53.1% in fiscal 2023. This increase in SG&A as a percentage of net sales was primarily due to higher marketing spend, higher compensation costs, increased occupancy costs and higher professional fees, partially offset by a decrease in distribution costs.
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.
Excluding items affecting comparability, net income increased 6.9% or $64.2 million to $1.00 billion in fiscal 2024 from $936.0 million in fiscal 2023. Net Income (Loss) per Share Net income per diluted share was $3.50 in fiscal 2024 as compared to net income per diluted share of $3.88 in fiscal 2023.
Gross margin increased 120 basis points to 70.8% in fiscal 2023 from 69.6% in fiscal 2022. This increase in Gross margin was primarily attributed to lower freight costs, net pricing improvements and favorable geography mix, partially offset by unfavorable currency translation. Refer to "Current Macroeconomic Conditions and Outlook" and "Supply Chain and Logistics Challenges" herein, for further information.
Gross margin in fiscal 2024 increased 250 basis points to 73.3% as compared to 70.8% in fiscal 2023. This increase in Gross margin was primarily attributed to lower freight costs, net pricing improvements and favorable currency impacts. Refer to "Current Macroeconomic Conditions and Outlook" herein, for further information.
This increase in SG&A expenses as a percentage of net sales was mainly due to higher marketing spend, increased compensation costs, higher information technology costs and higher depreciation, partially offset by a 150 basis points increase in gross margin, primarily attributed to net pricing improvements and lower freight costs, partially offset by unfavorable currency translation. • Corporate Operating Loss increased (1.9)% or $8.5 million to $465.8 million in fiscal 2023.
This increase in operating margin was primarily attributed to: 39 ◦ Gross Margin , increased 180 basis points mainly due to lower freight costs and net pricing improvements; ◦ SG&A expenses as a percentage of net sales , remained even to prior year mainly driven by increased occupancy costs and higher information technology costs, partially offset by lower marketing spend, depreciation and lower compensation costs. • Stuart Weitzman Operating Loss increased $14.5 million to a loss of $21.2 million in fiscal 2024, resulting in an operating margin decrease of 640 basis points to (8.8)%, as compared to an operating loss of $6.7 million and operating margin of (2.4)% in fiscal 2023. • Corporate Operating Expenses increased (33.6)% or $156.6 million to $622.4 million in fiscal 2024.
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.
Excluding the impact of foreign currency, net sales increased by 1.3% or $87.6 million. • Coach Net Sales increased 2.7% or $134.9 million to $5.10 billion in fiscal 2024. Excluding the impact of foreign currency, net sales increased 4.1% or $202.4 million.
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.
"Management's Discussion and Analysis of Financial Conditions and Results of Operations". 40 NON-GAAP MEASURES The Company’s reported results are presented in accordance with GAAP. The reported SG&A expenses, operating income, interest expense, provision for income taxes, net income and earnings per diluted share in fiscal 2024 reflect certain items affecting comparability, including the impact of Acquisition costs.
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.
The Company has three reportable segments: • Coach - Includes global sales of primarily Coach brand products to customers through our DTC, wholesale and licensing businesses. • Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through our DTC, wholesale and licensing businesses. • Stuart Weitzman - Includes global sales of Stuart Weitzman brand products primarily through our DTC and wholesale businesses.
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.
This increase in net sales was primarily due to an increase of $110.7 million in DTC sales driven by an increase in store and to a lesser extent, e-commerce sales.
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.
Capital Expenditures Total capital expenditures and cloud computing implementation costs were $144.1 million in fiscal 2024. 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. During the first fiscal quarter, we typically build inventory for the winter and holiday season.
This excise tax is recorded in Retained earnings as part of Stockholders' Equity. 35 RESULTS OF OPERATIONS FISCAL 2023 COMPARED TO FISCAL 2022 The following table summarizes results of operations for fiscal 2023 compared to fiscal 2022. All percentages shown in the tables below and the related discussion that follows have been calculated using unrounded numbers.
We continue to closely monitor regulatory developments to assess potential impacts. 35 RESULTS OF OPERATIONS FISCAL 2024 COMPARED TO FISCAL 2023 The following table summarizes results of operations for fiscal 2024 compared to fiscal 2023. All percentages shown in the tables below and the related discussion that follows have been calculated using unrounded numbers.
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.
Net Sales Fiscal Year Ended Variance June 29, 2024 July 1, 2023 Amount % Constant Currency Change (millions) Coach $ 5,095.3 $ 4,960.4 $ 134.9 2.7 % 4.1 % Kate Spade 1,334.4 1,418.9 (84.5) (6.0) (5.4) Stuart Weitzman 241.5 281.6 (40.1) (14.2) (13.4) Tapestry $ 6,671.2 $ 6,660.9 $ 10.3 0.2 1.3 Net sales in fiscal 2024 increased 0.2% or $10.3 million to $6.67 billion.
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.
(3) 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 Note 15, "Income Taxes," for further information.
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.
Operating margin was 17.1% in fiscal 2024 as compared to 17.6% in fiscal 2023. Excluding items affecting comparability of $109.9 million in fiscal 2024, operating income increased $77.6 million to $1.25 billion from $1.17 billion in fiscal 2023; and operating margin increased 110 basis points to 18.7% in fiscal 2024 as compared to 17.6% in fiscal 2023.
Current Macroeconomic Conditions and Outlook During fiscal 2023, the macroeconomic environment remained challenging and volatile. Several organizations that monitor the world’s economy, including the International Monetary Fund, continue to forecast growth in the global economy. Some of these organizations have recently revised the forecast slightly upwards since the third quarter of fiscal 2023.
Several organizations that monitor the world’s economy, including the International Monetary Fund, continue to forecast growth in the global economy, and remains unchanged since the third quarter of fiscal 2024.
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".
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". Current Macroeconomic Conditions and Outlook During fiscal 2024, the macroeconomic environment remained challenging and volatile.
During fiscal 2023, this trend has resulted in adverse impacts to our business as compared to prior year, including, but not limited to, decreased Net sales of $217.5 million, negative impact to gross margin of approximately 90 basis points, and negative impact to operating margin of approximately 120 basis point.
During fiscal 2024, this trend has resulted in impacts to our business including, but not limited to, decreased Net 34 sales of $77.3 million, a positive impact to gross margin of approximately 30 basis points which benefited from the Company's hedging activity and approximately 10 basis point positive impact to operating margin.
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.
The increase in net sales was also attributed to an $81.4 million increase in wholesale sales primarily driven by international, which included growth in the digital wholesale channel. • Kate Spade Net Sales decreased 6.0% or $84.5 million to $1.33 billion in fiscal 2024. Excluding the impact of foreign currency, net sales decreased 5.4% or $77.1 million.
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. We use our collective strengths to move our customers and empower our communities, to make the fashion industry more sustainable, and to build a company that’s equitable, inclusive, and diverse.
We use our collective strengths to move our customers and empower our communities, to make the fashion industry more sustainable and to build a company that’s equitable, inclusive and diverse. Individually, our brands are iconic. Together, we can stretch what’s possible.
Nevertheless, the updated forecast is still below the historical average, which is reflective of the current volatile environment, including higher than anticipated inflation, tighter monetary and fiscal policies aiming to lower inflation, financial market volatility, and the negative economic impacts due to the crisis in Ukraine.
The forecast is below the historical growth average and is reflective of the current volatile environment, including tighter monetary and fiscal policies which have started to moderate inflation, financial market volatility and the negative economic impacts of geopolitical instability in certain regions of the world. In fiscal 2024, freight costs have continued to moderate as compared to prior year.
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.
Effect of exchange rate changes on cash and cash equivalents Effect of exchange rate changes on cash and cash equivalents was a decrease of $12.2 million as compared to a decrease of $8.7 million in fiscal 2023. 42 Cash Flows - Fiscal 2023 Compared to Fiscal 2022 The comparison of fiscal 2023 to 2022 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended July 1, 2023, filed on August 17, 2023 within Part II.
As a result, during fiscal 2023, the Company incurred lower freight expense of $84.8 million when compared to the prior year, positively impacting gross margin by approximately 140 basis points. Generalized System of Preferences (“GSP”) program 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.
As a result, during fiscal 2024, the Company incurred lower freight expense of $84.2 million when compared to the prior year, positively impacting gross margin by approximately 130 basis points. In fiscal 2024, the U.S. Dollar has continued to fluctuate as compared to foreign currencies in regions where we conduct our business.
This decrease in Interest expense, net was mainly due to the favorable impact of the net investment hedges, lower bond interest expense on senior notes, as well as higher interest income offset by higher interest on the term loan.
This decrease in Interest expense, net, was mainly due to higher interest income partially offset by higher interest on the term loan due 2027 (the "Term Loan due 2027"). Other Expense (Income) Other expense increased $1.5 million to $3.2 million in fiscal 2024 as compared to an expense of $1.7 million in fiscal 2023.
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.
As of June 29, 2024 the Company had $800 million of additional shares available to be repurchased as authorized under the 2022 Share Repurchase Program. In August 2023, the Company suspended its share repurchase activity in connection with the Capri Acquisition. Refer to Note 5, "Acquisitions," for further information.
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.
These actions taken together negatively impacted Operating income by $109.9 million, increased Interest expense, net by $116.7 million and reduced the Provision for income taxes by $42.4 million, resulting in a net decrease in Net income by $184.2 million, or $0.79 per diluted share.
Excluding the impact of foreign currency, net sales decreased 9.1% or $29.0 million. This decrease in net sales was primarily due to a decrease of $15.3 million in net retail sales driven by a decrease in stores globally, partially offset by a increase in e-commerce sales.
This decrease in net sales was primarily due a decrease of $76.9 million in DTC sales as a result of lower store and to a lesser extent, e-commerce sales. • Stuart Weitzman Net Sales decreased by 14.2% or $40.1 million to $241.5 million in fiscal 2024. Excluding the impact of foreign currency, net sales decreased 13.4% or $37.7 million.
We have the ability to draw on our credit facilities or access other sources of financing options available to us in the credit and capital markets for, among other things, acquisition or integration-related costs, our restructuring initiatives, settlement of a material contingency, or a material adverse business or macroeconomic development, as well as for other general corporate business purposes.
We have the ability to draw on our credit facilities or access other sources of financing options available to us in the credit and capital markets for, among other things, acquisition or integration-related costs, our restructuring initiatives, settlement of a material contingency or a material adverse business or macroeconomic development, as well as for other general corporate business purposes. 43 If (i) the Capri Acquisition has not been completed by February 10, 2025 (or such later date mutually agreed between the Company and Capri) (such date, the “special mandatory redemption end date”), (ii) prior to the special mandatory redemption end date, the Merger Agreement is terminated in accordance with its terms or (iii) the Company otherwise notifies the trustee that it will not pursue the consummation of the Capri Acquisition, all of the Capri Acquisition Senior Notes will be redeemed at a redemption price equal to 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the special mandatory redemption date.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

15 edited+10 added−4 removed8 unchanged
Biggest changeInterest 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").
Biggest changeOur exposure to changes in interest rates is primarily attributable to debt outstanding under the $1.05 Billion Three-Year Term Loan Facility and the $350.0 million Five-Year Term Loan Facility (collectively, the "Capri Acquisition Term Loan Facilities") and the $2.00 Billion Revolving Credit Facility.
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.
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 June 29, 2024. 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.
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.
Borrowings under the 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 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.
A hypothetical 10% change in the Credit Facilities' interest rates would have resulted in an immaterial change in interest expense in fiscal 2024. The Company is exposed to changes in interest rates related to the fair value of the senior unsecured notes.
The interest rate payable on the 2027 Senior Notes will be subject to adjustments from time to time if either Moody’s or S&P or a substitute rating agency (as defined in the Prospectus Supplement furnished with the SEC on June 7, 2017) downgrades (or downgrades and subsequently upgrades) the credit rating assigned to the respective Senior Notes of such series.
The interest rate payable on the 4.125% Senior Notes due 2027 and the Capri Acquisition Senior Notes will be subject to adjustments from time to time if either Moody’s or S&P or a substitute rating agency downgrades (or downgrades and subsequently upgrades) the credit rating assigned to the respective senior notes of such series.
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.
Under the term of the cross currency swap contracts, we will exchange the semi-annual fixed rate payments on United States denominated debt for fixed rate payments of 6.0% to 6.3% in Euros and fixed rate payments of 3.1% to 7.9% in USD.
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.
To mitigate such risk, certain subsidiaries enter into forward currency contracts. As of June 29, 2024 and July 1, 2023, the total notional values of outstanding forward currency contracts designated as cash flow hedges were $764.6 million and $842.3 million, respectively.
Dollars, either (a) an alternate base rate or (b) a term secured overnight financing rate, (ii) for borrowings in Euros, the Euro Interbank Offered Rate, (iii) for borrowings in Pounds Sterling, the Sterling Overnight Index Average Reference Rate and (iv) for borrowings in Japanese Yen, the Tokyo Interbank Offer Rate, plus, in each case, an applicable margin.
Dollars, either (a) an alternate base rate or (b) a rate based on the forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited (or any successor administrator satisfactory to the administrative agent), (ii) for borrowings in Euros, the Euro Interbank Offered Rate, (iii) for borrowings in Pounds Sterling, the Sterling Overnight Index Average Reference Rate and (iv) for borrowings in Japanese Yen, the Tokyo Interbank Offer Rate, plus, in each case, an applicable margin.
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.
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 contracts and net investment hedges. We assess the risk of loss in the fair values of these contracts that would result from hypothetical changes in foreign currency exchange rates.
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.
As of June 29, 2024 and July 1, 2023, the total notional values of outstanding forward foreign currency contracts related to these loans, payables and receivables were $348.2 million and $272.3 million, respectively. The fair value of outstanding forward currency contracts included in current assets at June 29, 2024 and July 1, 2023 was $58.3 million and $39.0 million, respectively.
The applicable margin will be adjusted by reference to a grid (the “Pricing Grid”) based on the ratio of (a) consolidated debt to (b) consolidated EBITDAR (the “Gross Leverage Ratio”).
The applicable margin will be adjusted by reference to a grid based on the ratio of (a) consolidated debt (with certain customary deductions for unrestricted cash and permitted investments) to (b) consolidated EBITDAR.
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. The applicable margin will be adjusted by reference to a pricing grid based on the Gross Leverage Ratio.
Borrowings under the Capri Acquisition Term Loan Facilities bear interest at a rate per annum equal to, at the Company’s option, either (a) an alternate base rate or (b) a rate based on the forward-looking SOFR term rate administered by CME Group Benchmark Administration Limited (or any successor administrator) plus, in each case, an applicable margin.
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.
This analysis assumes a like movement by the foreign currencies in our hedge portfolio against the U.S. Dollar. As of June 29, 2024, a 10% appreciation or depreciation of the U.S. 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 $55.0 million.
The Company’s investment portfolio is maintained in accordance with the Company’s investment policy, which defines our investment principles including credit quality standards and limits the credit exposure of any single issuer. The primary objective of our investment activities is the preservation of principal while maximizing interest income and minimizing risk. We do not hold any investments for trading purposes.
Refer to Note 12, "Debt" for further information on these instruments. 50 The Company’s investment portfolio is maintained in accordance with the Company’s investment policy, which defines our investment principles including credit quality standards and limits the credit exposure of any single issuer.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Refer to “Index to Financial Statements,” appearing at the end of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
The primary objective of our investment activities is the preservation of principal while maximizing interest income and minimizing risk. We do not hold any investments for trading purposes. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Refer to “Index to Financial Statements,” appearing at the end of this Annual Report on Form 10-K. ITEM 9.
Removed
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.
Added
The fair value of outstanding foreign currency contracts included in current liabilities at June 29, 2024 and July 1, 2023 was $4.8 million and $0.3 million, respectively. The fair value of these contracts is sensitive to changes in foreign currency exchange rates. The Company is also exposed to foreign currency exchange rate fluctuations with respect to net investment hedges.
Removed
Refer to Note 10, "Derivative Investments and Hedging Activities," for additional information.
Added
As of June 29, 2024 and July 1, 2023, we have multiple fixed to fixed cross currency swap foreign exchange and forward foreign exchange agreements with aggregate notional amounts of $1.45 billion and $1.20 billion, respectively, 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.
Removed
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.
Added
The fair values of outstanding derivative contracts related to net investment hedges included in current assets and long-term assets at June 29, 2024 and July 1, 2023 was $32.2 million and $13.1 million, respectively.
Removed
These fair values are based on external pricing data, including available quoted market prices of these instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and are classified as Level 2 measurements within the fair value hierarchy.
Added
The fair values of outstanding derivative contracts related to net investment hedges included in current and long-term liabilities at June 29, 2024 and July 1, 2023 was $139.4 million and $90.5 million, respectively.
Added
This hypothetical net change in fair value should ultimately be largely offset by the net change in the related underlying hedged items. Refer to Note 10, "Derivative Investments and Hedging Activities," for additional information. 49 Interest Rate Risk The Company is exposed to interest rate risk in relation to its indebtedness and investments.
Added
Our exposure to changes in interest rates is primarily attributable to debt outstanding under the Revolving Credit Facility. Refer to Note 12, "Debt," for additional information.
Added
The applicable margin will initially be (x) in the case of the Three-Year Term Loan Facility, 0.250% for base rate loans and 1.250% for SOFR loans and (y) in the case of the Five-Year Term Loan Facility, 0.375% for base rate loans and 1.375% for SOFR loans.
Added
The applicable margin will be adjusted by reference to a grid (the “Pricing Grid”) based on the ratio of (a) consolidated debt to (b) consolidated EBITDAR. Borrowings under the Capri Acquisition Term Loan Facilities and Revolving Credit Facility (collectively, the "Credit Facilities") are subject to interest rate risk due to changes in SOFR.
Added
The following table shows the estimated fair values of the senior unsecured notes at June 29, 2024 and July 1, 2023 based on external pricing data, including available quoted market prices of the instruments, and consideration of comparable debt instruments with similar interest rates and trading frequency, among other factors, and are classified as Level 2 measurements within the fair value hierarchy: June 29, 2024 July 1, 2023 (millions) USD Senior Notes: 4.250% Senior Notes due 2025 $ 300.2 $ 295.1 7.050% Senior Notes due 2025 508.1 — 7.000% Senior Notes due 2026 770.7 — 4.125% Senior Notes due 2027 378.2 371.7 7.350% Senior Notes due 2028 1,036.5 — 7.700% Senior Notes due 2030 1,042.9 — 3.050% Senior Notes due 2032 402.9 399.5 7.850% Senior Notes due 2033 1,311.3 — EUR Senior Notes: 5.350% EUR Senior Notes due 2025 (1) 543.8 — 5.375% EUR Senior Notes due 2027 (1) 550.8 — 5.875% EUR Senior Notes due 2031 (1) 556.4 — (1) The fair values of the Capri Acquisition EUR Senior Notes include the impact of changes in the exchange rate of the United States Dollar against the Euro.
Added
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.

Other TPR 10-K year-over-year comparisons