What changed in this filing

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Item 1A. Risk Factors

2022-06-01 compared with 2021-05-26 · 236 added, 225 removed, 246 unchanged (65% of the section changed)

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Risks are listed in the categories where they primarily apply, but other categories may also apply.

Risk Relating to Our Business

Risks Related to Macroeconomic Conditions

The COVID-19 pandemic may continue to have a material adverse effect on our business and results of operations.

The COVID-19 pandemic has caused significant disruption to the global economy, consumer spending and behavior, tourism and to financial markets.

While the overall COVID-19 situation appears to be improving, we have not recovered to pre-COVID performance levels and our business and operating results may be negatively impacted if the virus worsens or mutates, if vaccination efforts are unsuccessful and/or if regions or countries take further actions to contain the virus (including additional extended lock-downs and travel restrictions), among others.

The full extent of the impact of COVID-19 on our business and operating results will depend largely on future events outside of our control, including the duration and severity of the pandemic and the success of vaccination efforts, new information concerning the virus or variants of the virus, and actions different states, regions or countries may take to contain the virus (including extended lock-downs and travel restrictions), among others.

As a result of the COVID-19 pandemic, and in response to government orders and proactive decisions we have made to protect the health and safety of our employees, consumers and communities, at various points during the course of the pandemic we temporarily closed almost all of our retail stores globally and furloughed all of our retail store employees in North America and many of our retail personnel elsewhere for an extended time.

We may face longer term store closure requirements and other operational restrictions with respect to some or all of our retail stores in the future, and government restrictions and health and safety measures (including social distancing protocols) may prevent us from opening or limit our ability to fully operate in the ordinary course, which could materially impact our financial results.

We have also closed many of our corporate offices globally and have implemented a work-from-home policy for many of our corporate employees, which may also negatively affect productivity in, or otherwise result in disruptions to, parts of our business.

As a result of store closures and reduced consumer traffic caused by COVID-19, many of our wholesale customers have experienced, and may continue to experience, liquidity constraints or other financial difficulties, causing a reduction in the amount of merchandise purchased from us and our product licensing partners, an increase in order cancellations and/or the need to extend payment terms.

The ongoing COVID-19 pandemic has caused significant disruption to the global economy, consumer spending and behavior, tourism and to financial markets.

While the overall COVID-19 situation appears to be improving, our business and operating results may be negatively impacted if the virus worsens or mutates, if vaccination efforts are unsuccessful and/or if regions or countries take further actions to contain the virus (including additional extended lock-downs and travel restrictions), among others.

We continue to monitor the latest developments regarding the pandemic and have made certain assumptions about the pandemic for purposes of our business and operating results, including assumptions regarding the duration, severity and global macroeconomic impacts of the pandemic;

however, the full extent of the impact of COVID-19 on our business and operating results will depend largely on future events outside of our control, including the duration and severity of the pandemic and the success of vaccination efforts, new information concerning the virus or variants of the virus, actions different states, regions or countries may take to contain the virus (including extended lock-downs and travel restrictions) and the economic impacts of the pandemic, including recent inflationary pressures, among others.

As a result of the COVID-19 pandemic, and in response to government orders and proactive decisions we have made to protect the health and safety of our employees, consumers and communities, at various points during the course of the pandemic, we temporarily closed almost all of our retail stores globally and furloughed all of our retail store employees in North America and many of our retail personnel elsewhere for an extended period of time.

While most of our stores have reopened, we may face new, longer term store closure requirements and other operational restrictions with respect to some or all of our retail stores in the future.

In addition, government restrictions and health and safety measures (including social distancing protocols) may prevent us from opening or limit our ability to fully operate in the ordinary course, which could materially impact our financial results.

In addition, we have experienced scattered temporary store closings due to increased levels of retail associate absences and/or labor shortages.

We also recently reopened our corporate offices and have implemented a hybrid work policy for many of our corporate employees and determined that some corporate functions may remain fully remote, which may also negatively affect productivity in, or otherwise result in disruptions to, parts of our business.

As a result of the impact of the ongoing COVID-19 pandemic, many of our wholesale customers have experienced, and may continue to experience, liquidity constraints or other financial difficulties, causing a reduction in the amount of merchandise purchased from us and our product licensing partners, an increase in order cancellations and/or the need to extend payment terms.

Any or all of these measures could substantially reduce our revenue and have a material adverse effect on our profitability.

In addition, these actions could lead to larger outstanding accounts receivable balances, delays in collection of accounts receivable, increased expenses associated with collection efforts, increases in credit losses and reduced cash flows.

Furthermore, our supply chain may also be significantly negatively affected if the factories that produce our product, the distribution centers that manage and ship our inventory, or the operations of our third-party logistics and other service providers

are disrupted, closed or experience worker shortages, which may result in disruptions and delays in product shipments and potentially higher costs.

In light of our retail store closures in response to government orders, mandates, guidelines and recommendations limiting business operations due to the COVID-19 pandemic, as well as decisions by many of the retail centers in which we operate to close shopping centers, we took certain actions and may continue to take certain actions with respect to our lease obligations, including discontinuing rent payments, negotiating with landlords for rent abatement or other rent relief and terminating certain leases, which may subject us to legal, reputational and financial risks.

We may also take further actions with respect to our lease obligations in the future, which may not be successful.

In addition, we expect that traffic to our retail stores (and department stores and other third-party retailers that sell our products) as they reopen will be adversely affected by the COVID-19 pandemic.

We further expect that consumer spending will be negatively affected by macroeconomic conditions resulting from the COVID-19 pandemic, including a continued high unemployment rate and an economic recession, which may impact our physical retail stores, our e-commerce business and third-party wholesale accounts.

Furthermore, the pandemic has impacted and continues to impact our supply chain partners, including factories that produce our product, the distribution centers that manage and ship our inventory, logistics providers and other service providers as well as the supply chains of our licensees.

The current vessel container and other transportation shortages, labor shortages and port congestion globally, as well as disruptions in factory production in certain countries where we source our products has delayed, and is expected to continue to delay, inventory orders and impact product availability in our retail stores and through our e-commerce businesses as well as to our wholesale customers.

As a result of these supply chain disruptions, our inventory levels and net revenue have been impacted and could continue to be impacted in future periods.

We have also incurred, and expect to continue to incur, higher freight and other logistics costs, including increased carrier rates for ocean and air shipments, and the supply chain disruptions have caused us to increase our use of air freight with greater frequency than in the past.

We are also experiencing negative impacts to the pricing of certain components of our products as a result of the ongoing COVID-19 pandemic.

These higher costs have caused us to increase prices and we may need to increase prices further in the future.

There can be no assurance that consumers will accept these price increases or that the price increases will be sufficient to offset our higher costs.

In addition, traffic to our retail stores (and department stores and other third-party retailers that sell our products) may be adversely affected by the ongoing COVID-19 pandemic.

General macroeconomic conditions resulting from the COVID-19 pandemic, including impacts of a recession or inflationary pressures may negatively impact sales in our physical retail stores, through our e-commerce business and to third-party wholesale accounts.

Any significant disruption in consumer traffic, consumer behavior and/or consumer spending at our retail stores, on our e-commerce sites and/or at third-party wholesale accounts following the pandemic would result in a decrease in sales and profits and otherwise materially impact our business and financial performance.

COVID-19 may also have a material adverse effect on our liquidity and cash flows.

If our business does not generate sufficient cash flows from operating activities, and sufficient funds are not otherwise available to us from borrowings under our credit facility or other sources, we may not be able to cover our expenses, fund our other liquidity and working capital needs, or execute on our strategic initiatives which could significantly harm our business.

Our insurance costs may also increase substantially in the future as a result of the COVID-19 pandemic.

Any or all of the foregoing could have a material adverse effect on our business results and operations.

The accessories, footwear and apparel industries are heavily influenced by general macroeconomic cycles that affect consumer spending and a prolonged period of depressed consumer spending could have a material adverse effect on our business, results of operations and financial condition.

Our business is affected by global economic conditions and the related impact on levels of consumer spending worldwide.

Factors that may negatively influence consumer spending include, but are not limited to, high levels of unemployment, pandemics (such as the ongoing COVID-19 pandemic), extreme weather conditions and natural disasters, high consumer debt levels, inflationary pressures, war and global geopolitical instability (including the current war in Ukraine and related economic and other sanctions levied by the United States, European Union and others), reductions in net worth based on market declines and uncertainty, home prices, fluctuating interest and foreign currency rates and credit availability, higher fuel and energy costs, fluctuating commodity prices, taxation, political conditions and general uncertainty regarding the overall future economic environment.

Purchases of discretionary luxury items, such as the accessories, footwear and apparel that we produce, tend to decline when disposable income is lower or when there are recessions, inflationary pressures or other economic uncertainty.

Reduced consumer confidence and adversely impacted consumer spending patterns due to deteriorating economic conditions or geopolitical instability in any of the regions in which we operate could reduce consumer confidence, negatively impact consumer spending patterns and adversely affect our sales and results of operations.

Risks Related to Our Business

We face risks associated with operating globally and our strategy to continue to expand internationally.

We operate on a global basis, with approximately 47% of our total revenue from operations outside of the United States during Fiscal 2022.

As a result, we are subject to the risks of doing business internationally, including:

• political or civil unrest, including protests and other civil disruption;

• unforeseen public health crises, such as pandemic and epidemic diseases, including the ongoing COVID-19 pandemic and any variants thereof;

• economic instability and unsettled regional and global conflicts (such as the current war in Ukraine), which may negatively affect consumer spending by foreign tourists and local consumers in the various regions where we operate;

• laws, regulations and policies of foreign governments (including sanctions and retaliatory actions by the United States, European Union and others);

• potential negative consequences from changes in taxation policies;

• natural disasters or other extreme weather events, including those attributed to climate change;

• acts of terrorism, military actions or other conditions over which we have no control.

In addition, our current business strategies include pursuing selective international expansion in a number of countries around the world and through a number of channels.

If our international expansion plans are unsuccessful, it could have a material adverse effect on our business, results of operations and financial condition.

There are also some countries where we do not yet have significant operating experience, and in most of these countries we face established competitors with significantly more operating experience in those locations.

We also sell our products at varying retail price points based on geographic location that yield different gross profit margins and we achieve different operating profit margins, depending on geographic region, due to a variety of factors including product mix, store size, occupancy costs, labor costs and retail pricing.

Changes in any one or more of these factors could result in lower revenues, increased costs, and negatively impact our business, results of operations and financial condition.

Furthermore, consumer demand and behavior, as well as tastes and purchasing trends may differ in these countries

and, as a result, sales of our product may not be successful, or the gross margins on those sales may not be in line with those we currently anticipate.

There can be no assurance that any or all of these events will not have a material adverse effect on our business, results of operations and financial condition.

Our business is subject to risks inherent in global sourcing activities, including disruptions or delays in manufacturing or shipments.

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:

• disease pandemics, epidemics and health-related concerns, including related to COVID-19 or variants thereof;

• political or labor instability, labor shortages (stemming from labor disputes or otherwise), or increases in costs of labor or production in countries where manufacturing contractors and suppliers are located;

• labor disputes or strikes at the location of the source of our goods and/or at ports of entry;

• disruptions, delays or reductions in shipments, including port delays and congestion, and/or capacity constraints on transportation of goods or at our factories due to COVID-19 or otherwise;

• significant increase in freight, shipping and other logistics costs, including as a result of disruptions at ports of entry;

• political or military conflict (such as the current war in Ukraine);

• heightened terrorism security concerns;

• a significant decrease in availability or an increase in the cost of raw materials or other limitations on our ability to use raw materials or goods produced in a country that is a major provider due to political, human rights, labor, environmental or other concerns;

• the migration and development of manufacturing contractors;

• product quality issues;

• imposition of regulations, quotas and safeguards relating to imports and our ability to adjust in a timely manner to changes in trade regulations;

• increases in the costs of fuel (including volatility in the price of oil), travel and transportation (including vessel and freight);

• imposition of duties, taxes and other charges on imports;

• significant fluctuation of the value of the United States dollar against foreign currencies;

• restrictions on transfers of funds out of countries where our foreign licensees are located;

• compliance by our independent manufacturers and suppliers with our Supplier Code of Conduct and other applicable compliance policies;

• compliance with United States 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 and the United States Foreign Corrupt Practices Act, U.K.

Bribery Act and other global anti-corruption laws, as applicable;

• regulation or prohibition of the transaction of business with specific individuals or entities and their affiliates or goods manufactured in certain regions, such as the listing of a person or entity as a SDN (Specially Designated Nationals and Blocked Persons) by the United States Department of the Treasury’s Office of Foreign Assets Control and the issuance of withhold release orders by CBP .

Any of the foregoing could materially and adversely affect our ability to produce or deliver our products and, as a result, have a material adverse effect on our business, financial condition and results of operations.

Our retail stores are heavily dependent on the ability and desire of consumers to travel and shop and a decline in consumer traffic could have a negative effect on our comparable store sales and store profitability resulting in impairment charges, which could have a material adverse effect on our business, results of operations and financial condition.

Reduced travel resulting from economic conditions, fuel shortages, increased fuel prices, travel restrictions, travel concerns and other circumstances, including adverse weather conditions, disease pandemics (including COVID-19), epidemics and other health-related concerns, war, terrorist attacks or the perceived threat of war or terrorist attacks could have a material adverse effect on us, particularly if such events impact our customers’ desire to travel to our retail stores.

For example, social distancing measures and other restrictions imposed by governments as a result of the COVID-19 pandemic, which have had and may continue to affect our customers’ ability and desire to travel to our stores, which in turn has had and may continue to have a material adverse impact on our store revenue.

and global conflicts (such as the current war in Ukraine) could have a material adverse effect on us, particularly if such events impact our customers’ desire to travel to our retail stores.

In addition, other factors that could impact the success of our retail stores include:

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(ii) the other tenants occupying space at the mall;

(iii) vacancies within the mall (including retailers that may not reopen post-COVID-19);

(iii) vacancies within the mall;

(iv) stores and malls having to re-close due to personnel or customer illness or further government restrictions;

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(vi) the amount of advertising and promotional dollars spent on attracting consumers to the malls;

and (vii) a shift toward online shopping which may be exacerbated in light of COVID-19 even when stores reopen.

and (vii) a shift toward online shopping.

A decline in consumer traffic could have a negative effect on our comparable store sales and/or average sales per square foot and store profitability.

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A decline in future comparable store sales and/or store profitability or failure to meet market expectations or the occurrence of impairment charges relating to our retail store fleet could have a material adverse effect on our business, results of operations and financial condition.

Recent changes in our executive management team, the departure of key employees or our failure to attract and retain qualified personnel could have a material adverse effect on our business.

As we announced on March 7, 2022, Mr.

Joshua Schulman, Chief Executive Officer of Michael Kors and expected successor Chief Executive Officer to Mr.

John Idol at Capri Holdings, left the Company and Mr.

Idol agreed to remain as Chairman and Chief Executive Officer.

We depend on the services and management experience of executive officers who have substantial experience and expertise in our business as well as key employees involved in our design and marketing operations, including our creative officers for each of our brands, Ms.

Donatella Versace, Ms.

Sandra Choi and Mr.

Michael Kors.

Although we have entered into employment agreements with our executive officers and other key employees, we may not be able to retain the services of such individuals in the future, which may be disruptive to, or cause uncertainty in, our business and future strategic direction, particularly if we fail to ensure a smooth transition and effective transfer of knowledge.

Any such disruption or uncertainty could generate a negative public perception and/or have a material adverse impact on our results of operations, financial condition, and the market price of our ordinary shares.

Competition for qualified personnel in the fashion industry is intense and turnover in the industry for retail associates is generally high and has only been exacerbated by the ongoing COVID-19 pandemic.

Competitors may use aggressive tactics to recruit our employees.

Our ability to attract, develop, motivate and retain employees is influenced by our ability to offer competitive compensation and benefits, employee morale, our reputation, recruitment by other employers, perceived internal opportunities, non-competition and non-solicitation agreements and macro unemployment rates.

Additionally, our ability to meet our labor needs while also controlling costs is subject to external factors such as unemployment levels, prevailing wage rates, minimum wage legislation and overtime regulations.

If we are unable to attract, develop, motivate and retain talented employees with the necessary skills and experience, or if changes to our organizational structure, operating results, or business model, including as a result of the ongoing COVID-19 pandemic, adversely affect morale, hiring and/or retention, we may not achieve our objectives and our results of operations could be adversely impacted.

The long-term growth of our business depends on the successful execution of our strategic initiatives.

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We cannot guarantee that we will be able to successfully execute on these strategic initiatives.

If we are unable to execute on our strategic initiatives, including for reasons due to the challenges we face as a result of the COVID-19 pandemic, our business, results of operations and financial condition could be materially adversely affected.

If we are unable to execute on our strategic initiatives, our business, results of operations and financial condition could be materially adversely affected.

If we are unable to effectively execute our e-commerce business and provide a reliable digital experience for our customers, our reputation and operating results may be harmed.

While e-commerce still comprises a small portion of our net revenues, it has been our fastest growing business over the last several years, particularly in light of COVID-19 and retail store closures.

E-commerce is approximately 17% of our net revenues and has been our fastest growing business over the last several years, particularly in light of the ongoing COVID-19 pandemic.

The success of our e-commerce business depends, in part, on third parties and factors over which we have limited control, including changing consumer preferences and buying trends relating to e-commerce usage, both domestically and abroad, and promotional or other advertising initiatives employed by our wholesale customers or other third parties on their e-commerce sites.

Any failure on our part, or on the part of our third-party digital partners, to provide attractive, reliable, secure and user-friendly e-commerce platforms could negatively impact our consumers’ shopping experience, resulting in reduced website traffic, diminished loyalty to our brands and lost sales.

In addition, if due to COVID-19 or otherwise there is a shift in consumer behavior such that customers utilize e-commerce over traditional brick-and-mortar stores, sales from our retail stores and wholesale channels of distribution may decline.

Any failure on our part, or on the part of our third-party digital partners, to provide attractive, reliable, secure, efficient and user-friendly e-commerce platforms could negatively impact our consumers’ shopping experience, resulting in reduced website traffic, reduced conversion, diminished loyalty to our brands and lost sales.

In addition, if due to COVID-19, or otherwise, there is a change in consumer behavior such that customers shift to utilizing e-commerce more than, or even instead, of traditional brick-and-mortar stores, and we or our wholesale partners are unable to attract consumers who previously made in-store purchases to our digital commerce channels, our financial and operating results may be negatively affected.

The success of our business also depends on our ability to continue to develop and maintain a reliable digital experience for our customers.

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Our inability to develop and continuously improve our digital brand engagement could negatively affect our ability to compete with other brands, which could adversely impact our business, results of operations and financial condition.

In addition, we must keep up to date with competitive technology trends, including the use of new or improved technology, creative user interfaces and other e-commerce marketing tools such as paid search and mobile applications, among others, which may increase our costs and which may not succeed in increasing sales or attracting consumers.

For example, it is possible that consumers may not sign up for our loyalty program at anticipated rates if they do not find the features and benefits compelling, and that we may not realize the benefits that we anticipate from these programs.

In addition, we must keep current with competitive technology trends, including the use of new or improved technology and services, creative user interfaces and other e-commerce marketing tools such as paid search and mobile applications, among others.

Since e-commerce growth is critical to our overall growth strategy, we plan to accelerate Versace’s and Jimmy Choo’s e-commerce and omni-channel development and we are also in the process of re-platforming our brands’ e-commerce sites to expand our global capabilities.

Implementing new or improved digital systems, services or technologies, such as new or improved e-commerce platforms, may increase our costs, cause delays in or hinder our ability to continually deliver a reliable or seamless digital experience for our customers, or cause us not to succeed in increasing sales or attracting consumers.

For example, it is possible that consumers may not sign up for our loyalty program at anticipated rates if they do not find the features and benefits compelling or if they are unable to seamlessly navigate the digital experience we offer, which, in turn, may cause us not to realize the benefits that we anticipate from these programs.

Our failure to successfully respond to these risks and uncertainties might adversely affect the sales in our e-commerce business, as well as damage our reputation and brands.

Additionally, the success of our e-commerce business and the satisfaction of our consumers depend on their timely receipt of our products.

The efficient flow of our products requires that our company-operated and third-party operated distribution facilities have adequate capacity to support the current level of e-commerce operations and any anticipated increased levels that may follow from the growth of our e-commerce business.

If we encounter difficulties with our distribution facilities or in our relationships with the third parties who operate the facilities, or if any such facilities were to shut down or be limited in capacity for any reason, including as a result of fire, other natural disaster, labor disruption, or pandemic (including as a consequence of public health directives, quarantine policies or social distancing measures resulting from the COVID-19 pandemic), we could face shortages of inventory, and we could experience disruption or delay, or incur significantly higher costs and longer lead times for distributing our products to our consumers which could result in customer dissatisfaction.

Any of these issues could have an adverse effect on our business and harm our reputation.

A substantial portion of our revenue is derived from a small number of large wholesale customers, and the loss of or decline in business from any of these wholesale customers could substantially reduce our total revenue.

A small number of our wholesale customers account for a significant portion of our sales.

Revenue from our five largest wholesale customers represented 12% of our total revenue for Fiscal 2021 and 17% of our total revenue for Fiscal 2020.

We do not have written agreements with any of our wholesale customers and purchases generally occur on an order-by-order basis.

The efficient flow of our products requires that our company-operated and third-party operated distribution facilities have adequate capacity to support the current level of e-commerce operations as well as any anticipated increased levels that may follow from the growth of our e-commerce business.

The current vessel container and other transportation shortages, labor shortages and port congestion globally, as well as disruptions in factory production in certain countries where we source our products has delayed, and is expected to continue to delay, inventory orders and impact product availability in our channels, including our e-commerce sites, and have resulted in increased freight and logistics costs.

As a result of these supply chain challenges, our inventory levels and net revenue have been impacted and could continue to be impacted in future periods.

Continued shortages of inventory, disruptions or delays, significantly higher costs and longer lead times for distributing our products to our consumers could result in customer dissatisfaction, and any of these issues could have an adverse effect on our business and harm our reputation.

We may not be able to respond to changing fashion and retail trends in a timely manner, which could have a material adverse effect on our brands, business, results of operations and financial condition.

The accessories, footwear and apparel industries have historically been subject to rapidly changing fashion trends and consumer preferences.

We believe that our success is largely dependent on the images of our brands and ability to anticipate and respond promptly to changing consumer demands and fashion trends in the design, styling, production, merchandising and pricing of products.

Any misstep in product quality or design, executive leadership, customer services, unfavorable publicity or excessive product discounting could negatively affect the image or our brands with our customers.

If we do not correctly gauge consumer needs and fashion trends and respond appropriately, consumers may not purchase our products and our brand names and the images of our brands may be impaired.

Even if we react appropriately to changes in fashion trends and consumer preferences, consumers may consider our brands to be outdated or associate our brands with styles that are no longer popular or trend-setting.

We have also recently begun to increase the price of our products.

There can be no guarantee that consumers will

accept these price increases.

Any of these outcomes could have a material adverse effect on our brands, business, results of operations and financial condition.

Increased scrutiny from investors and others regarding our corporate social responsibility initiatives, including environmental, social and other matters of significance relating to sustainability, could result in additional costs or risks and adversely impact our reputation.

Investor advocacy groups, certain institutional investors, investment funds, other market participants, shareholders and customers have increasingly focused on ESG or “sustainability” practices of companies.

These parties have placed increased importance on the implications of the social cost of their investments.

If our ESG practices do not meet investor or other industry stakeholder expectations and standards, which continue to evolve, our brand, reputation and customer and employee retention may be negatively impacted.

Any sustainability report that we publish or other sustainability disclosure we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management and workforce inclusion and diversity.

It is possible that stakeholders may not be satisfied with our ESG practices or the speed of adoption.

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.

Also, our failure, or perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our reputation, employee retention and the willingness of our customers and suppliers to do business with us.

Our wholesale business could suffer as a result of consolidations, liquidations, restructurings and other ownership changes.

As a result of the ongoing COVID-19 pandemic, many of our wholesale customers have experienced, and may continue to experience, liquidity constraints or other financial difficulties, causing a reduction in the amount of merchandise purchased from us and our product licensing partners, an increase in order cancellations and/or the need to extend payment terms.

Any or all of these measures could substantially reduce our revenue and have a material adverse effect on our profitability.

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In addition, such consolidation, bankruptcy or other changes with respect to our wholesale customers could decrease our opportunities in the market, increase our reliance on a smaller number of large wholesale customers and decrease our negotiating strength with our wholesale customers, which could have a material adverse effect on our business, results of operations and financial condition.

Additionally, certain of our wholesale customers, particularly those located in the U.S., have become highly promotional and have aggressively marked down their merchandise.

Additionally, certain of our wholesale customers, particularly those located in the United States, have become highly promotional and have aggressively marked down their merchandise.

We expect that such markdowns may continue to be exacerbated because of the impact of COVID-19.

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In addition, we may not be able to successfully integrate acquired businesses into our own business, or achieve any expected cost savings or synergies from such integration or we may determine to limit the integration of our brands.

In addition to the overarching and continued challenges resulting from the COVID-19 pandemic, the potential difficulties that we may face that could cause the results of our acquisitions to not be in line with our expectations include, among others:

In addition to the overarching and continued challenges resulting from the ongoing COVID-19 pandemic, the potential difficulties that we may face that could cause the results of our acquisitions to not be in line with our expectations include, among others:

• failure to implement our business plan for the combined business or to achieve anticipated revenue or profitability targets;

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• determining and maintaining product quality;

• maintaining key employees;

• retaining key employees;

• maintaining and growing market share;

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In addition, some of our competitors may be significantly larger and more diversified than us and may have significantly greater financial, technological, manufacturing, sales, marketing and distribution resources than we do.

Their capabilities in these areas may enable them to better withstand periodic downturns in the accessories, footwear and apparel industries (including those related to COVID-19), compete more effectively on the basis of price and production and more quickly develop new products.

Their capabilities in these areas may enable them to better withstand periodic downturns in the accessories, footwear and apparel industries (including those related to the ongoing COVID-19 pandemic and/or recent inflationary pressures), compete more effectively on the basis of price and production and more quickly develop new products.

The general availability of manufacturing contractors and agents also allows new entrants easy access to the markets in which we compete, which may increase the number of our competitors and adversely affect our competitive position and our business.

Any increased competition, or our failure to adequately address any of these competitive factors, could result in reduced revenues, which could adversely affect our business, results of operations and financial condition.

Competition, along with other factors such as consolidation, changes in consumer spending patterns and a highly promotional retail selling environment (including the impacts of COVID-19), could also result in significant pricing pressure.

These factors may cause us to reduce our sales prices to our wholesale customers and retail consumers, which could cause our gross margins to decline if we are unable to appropriately manage inventory levels and/or otherwise offset price reductions with comparable reductions in our operating costs.

Competition, along with other factors such as consolidation, changes in consumer spending patterns and a highly promotional retail selling environment, could also result in significant pricing pressure.

operating costs.

If our sales prices decline and we fail to sufficiently reduce our product costs or operating expenses, our profitability may decline, which could have a material adverse effect on our business, results of operations and financial condition.

The accessories, footwear and apparel industries have historically been subject to rapidly changing fashion trends and consumer preferences.

If we do not correctly gauge consumer needs and fashion trends and respond appropriately, consumers may not purchase our products and our brand names and the images of our brands may be impaired.

Any of these outcomes could have a material adverse effect on our brands, business, results of operations and financial condition.

We face risks associated with operating globally and our strategy to continue to expand internationally.

We operate on a global basis, with approximately 50% of our total revenue from operations outside of the U.S.

during Fiscal 2021.

As a result, we are subject to the risks of doing business internationally, including:

• political or civil unrest, including protests and other civil disruption;

• unforeseen public health crises, such as pandemic and epidemic diseases, including the COVID-19 pandemic and any variants thereof;

• economic instability and unsettled regional and global conflicts, which may negatively affect consumer spending by foreign tourists and local consumers in the various regions where we operate;

• laws, regulations and policies of foreign governments;

• potential negative consequences from changes in taxation policies;

• natural disasters or other extreme weather events, including those attributed to climate change;

• acts of terrorism, military actions or other conditions over which we have no control.

In addition, the United Kingdom (“U.K.”) formally left the European Union (“EU”) on January 31, 2020 (“Brexit”).

The consequences of Brexit could result in increased regulatory and legal complexities and cause disruption and create uncertainty surrounding our business, including affecting our relationship with our existing and future customers, suppliers and employees and resulting in increased costs from new or elevated customs duties or financial implications from operational challenges, trade or tax policies.

Brexit has also contributed to volatility and uncertainty in global stock markets and currency exchange rates, and could adversely impact investor confidence and consumer spending, including on discretionary items and retail products such as ours.

Finally, if our international expansion plans are unsuccessful, it could have a material adverse effect on our business, results of operations and financial condition.

We sell our products at varying retail price points based on geographic location that yield different gross profit margins and we achieve different operating profit margins, depending on geographic region, due to a variety of factors including product mix, store size, occupancy costs, labor costs and retail pricing.

Changes in any one or more of these factors could result in lower revenues, increased costs, and negatively impact our business, results of operations and financial condition.

Furthermore, consumer demand and behavior, as well as tastes and purchasing trends may differ in these countries and, as a result, sales of our product may not be successful, or the gross margins on those sales may not be in line with those we currently anticipate.

There can be no assurance that any or all of these events will not have a material adverse effect on our business, results of operations and financial condition.

Our business is subject to risks associated with importing products, and the imposition of additional duties, tariffs or trade restrictions could have a material adverse effect on our business, results of operations and financial condition.

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We rely on free trade agreements and other supply chain initiatives in order to maximize efficiencies relating to product importation.

For example, we have historically received benefits from duty-free imports on certain products from certain countries pursuant to the U.S.

Generalized System of Preferences ("GSP") program.

For example, we have historically received benefits from duty-free imports on certain products from certain countries pursuant to the United States Generalized System of Preferences (“GSP”) program.

The GSP program expired on December 31, 2020.

If the GSP program is not renewed or otherwise made retroactive, we could experience significant additional duties and our gross margin could be negatively impacted.

Additionally, we are subject to government regulations relating to importation activities, including related to U.S.

Customs and Border Protection ("CBP") withhold release orders.

If the GSP program is not renewed or otherwise made retroactive, we will continue to experience significant additional duties and our gross margin will continue to be negatively impacted.

Additionally, we are subject to government regulations relating to importation activities, including related to CBP withhold release orders.

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.

If additional tariffs or trade restrictions are implemented by the U.S.

or other countries, the cost of our products could increase which could adversely affect our business.

If we cannot successfully negotiate rent deferrals or abatements, lease modifications or lease terminations, our substantial operating lease obligations could have a material adverse effect on our business and our landlords may attempt to hold us in breach of our lease obligations and take other actions, including terminating our leases and/or accelerating our future rent.

If additional tariffs or trade restrictions are implemented by the United States or other countries, the cost of our products could increase which could adversely affect our business.

We are subject to risks associated with leasing retail space subject to long-term and non-cancelable leases.

We may be unable to renew leases at the end of their terms.

If we close a leased retail space, we remain obligated under the applicable lease.

We do not own any of our retail store facilities, but instead lease all of our stores under operating leases.

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We generally cannot cancel these leases or withhold payments at our option, and payments under these operating leases account for a significant portion of our operating costs.

For example, as of March 27, 2021, we were party to operating leases associated with our retail stores that we operate directly throughout the globe, as well as other global corporate facilities, requiring future minimum lease payments aggregating to $1.8 billion through Fiscal 2026 and approximately $493 million thereafter through Fiscal 2044.

On April 1, 2020, we suspended rent payments under the leases for these stores.

In many instances, we were able to negotiate with counterparties under our leases to defer or abate the applicable rent during the store closure period, to modify the terms (including rent) of our leases going forward when stores reopen, or in certain instances to terminate the leases and permanently close retail stores.

However, in instances where we were unable to negotiate with landlords, the landlords could allege that we are in default under

the lease and attempt to terminate our lease and/or accelerate our future rents.

Although we believe that strong legal grounds exist to support our claim that we are not obligated to pay rent during periods of closure as a result of the COVID-19 pandemic, there can be no assurance whether or not, and to what degree, such arguments will be successful, and any dispute under these leases may result in litigation with the landlord, which could be costly and have an uncertain outcome.

In addition, as certain of our retail stores in Europe, Canada and parts of Asia remain closed and as other locations reopen, we expect to require additional negotiations with our landlords to further defer or abate rent, to modify the terms of our leases (including rent and expiration date) and in certain instances to terminate a lease or permanently close a store.

There can be no assurance that we will be able to successfully negotiate rent deferrals or abatements, lease modifications or lease terminations on favorable terms or at all.

For example, as of April 2, 2022, we were party to operating leases associated with our retail stores that we operate directly throughout the globe, as well as other global corporate facilities, requiring future minimum lease payments aggregating to $1.6 billion through Fiscal 2027 and approximately $426 million thereafter through Fiscal 2044.

Our substantial operating lease obligations could have a material adverse effect on our business, results of operations and financial condition.

In certain cases, as we have done in the past, we may determine that it is no longer economical to operate a retail store subject to a lease or we may seek to generally downsize, consolidate, reposition, relocate or close some of our real estate locations.

In such cases, we may be required to negotiate a lease exit with the applicable landlord or remain obligated under the applicable lease for, among other things, payment of the base rent for the balance of the lease term.

For example, in connection with the impact of the ongoing COVID-19 pandemic and our Retail Fleet Optimization Plan, we have negotiated with some landlords on certain lease terminations.

In some instances, we may be unable to close an underperforming retail store due to continuous operation clauses in our lease agreements.

In addition, as each of our leases expire, we may be unable to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close retail stores in desirable locations.

Our inability to secure desirable retail space or favorable lease terms could impact our ability to grow.

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.

Additionally, due to the volatile 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.

This may impact our ability to manage the profitability of our store locations, or cause impairments of our lease right-of-use assets if market values decline, any of which could have a material adverse effect on our financial condition or results of operations.

We are dependent on a limited number of distribution facilities.

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Our ability to meet the needs of our own retail stores and e-commerce sites, as well as our wholesale customers, depends on the proper and uninterrupted operation of these distribution facilities.

If any of these distribution facilities were to shut down or otherwise become inoperable or inaccessible for any reason (including as a result of a government mandate or order due to COVID-19), we could suffer a substantial loss of inventory and/or disruptions of deliveries to our retail and wholesale customers.

In addition, we could incur significantly higher costs and longer lead times associated with the distribution of our products during the time it takes to reopen or replace the damaged facility.

If any of these distribution facilities were to shut down or otherwise become inoperable or inaccessible for any reason

(including due to the ongoing COVID-19 pandemic), we could suffer a substantial loss of inventory and/or disruptions of deliveries to our customers.

In addition, we could incur significantly higher costs and longer lead times associated with the distribution of our products during the time it takes to reopen or replace the damaged, inoperable or otherwise inaccessible facility.

Any of the foregoing factors could result in decreased sales and have a material adverse effect on our business, results of operations and financial condition.

In addition, we have been moving into new and larger facilities as needed to further support our efforts to operate with increased efficiency and flexibility.

There are risks inherent in operating in new distribution environments and implementing new warehouse management systems, including technological and operational difficulties that may arise with such transitions.

We may experience shipping delays should there be any disruptions in our new warehouse management systems or warehouses themselves.

The departure of members of our executive management and other key employees or our failure to attract and retain qualified personnel could have a material adverse effect on our business.

We depend on the services and management experience of executive officers, who have substantial experience and expertise in our business.

We also depend on other key employees involved in our design and marketing operations, including our creative officers for each of our brands, Ms.

Donatella Versace, Ms.

Sandra Choi and Mr.

Michael Kors.

Competition for qualified personnel in the fashion industry is intense, and competitors may use aggressive tactics to recruit our executive officers and key employees.

Our ability to attract and retain employees is influenced by our ability to offer competitive compensation and benefits, employee morale, our reputation, recruitment by other employers, perceived internal opportunities, non-competition and non-solicitation agreements and macro unemployment rates.

Although we have entered into employment agreements with our executive officers and other key employees, we may not be able to retain the services of such individuals in the future.

The loss of services of one or more of these individuals or any negative public perception with respect to, or relating to, the loss of one or more of these individuals, could have a material adverse effect on our business, results of operations and financial condition.

In addition, our operational efficiency initiatives as well as acquisitions and related integration activity may intensify this risk.

We must also attract, develop, motivate and retain a sufficient number of qualified retail and distribution center personnel.

Historically, competition for talent has been intense and the turnover rate in the retail industry is generally high.

There can be no assurance that we will be able to attract or retain a sufficient number of qualified employees in future periods to execute on our business objectives.

If we are unable to attract, develop, motivate and retain talented employees with the necessary skills and experience, or if changes to our organizational structure, operating results, or business model, including as a result of COVID-19, adversely affect morale, hiring and/or retention, we may not achieve our objectives and our results of operations could be adversely impacted.

To support the growth of our business, we also use third-party logistics centers that are responsible for distribution, warehousing and fulfillment services on our behalf.

Significant disruptions at these facilities could have a material adverse impact on our business.

Because our direct and third-party fulfillment centers include automated and computer-controlled equipment, they are susceptible to risks including power interruptions, hardware and system failures, software viruses, security breaches and other technological and operational disruptions and of which could cause shipping delays or otherwise adversely affect our business.

Fluctuations in our tax obligations and changes in tax laws, treaties and regulations may have a material adverse impact on our future effective tax rates and results of operations.

Our subsidiaries are subject to taxation in the U.S.

and various foreign jurisdictions, with the applicable tax rates varying by jurisdiction.

Our subsidiaries are subject to taxation in the United States and various foreign jurisdictions, with the applicable tax rates varying by jurisdiction.

As a result, our overall effective tax rate is affected by the proportion of earnings from the various tax jurisdictions.

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Although we believe that these transactions reflect arm’s-length terms and that proper transfer pricing documentation is in place, the transfer prices and conditions may be scrutinized by local tax authorities, which could result in additional tax liabilities.

On October 5, 2015, the Organization for Economic Co-operation and Development, an international association of thirty four countries, including the U.S.

and U.K., released the final reports from its Base Erosion and Profit Shifting (BEPS) Action Plans.

On October 5, 2015, the Organization for Economic Co-operation and Development (“OECD”), an international association of thirty four countries, including the United States and United Kingdom., released the final reports from its Base Erosion and Profit Shifting (“BEPS”) Action Plans.

The BEPS recommendations covered a number of issues, including country-by-country reporting, permanent establishment rules, transfer pricing rules and tax treaties.

Future tax reform resulting from this development may result in changes to long-standing tax principles, which could adversely affect our effective tax rate and/or result in higher cash tax liabilities.

In late 2021, the OECD published model legislation and the EU issued a draft directive related to the global minimum tax (“Pillar Two Model Rules”).

The directive is to be considered by member countries in calendar 2022 and if approved, could become effective as early as calendar 2023.

The enactment of the Pillar Two Model Rules in jurisdictions where we have operations may have a material impact on our global transfer pricing arrangements and a materially adverse impact on our tax provision, cash tax liability and effective tax rate.

Our business is exposed to foreign currency exchange rate fluctuations.

Our results of operations for our international subsidiaries are exposed to foreign exchange rate fluctuations as the financial results of the applicable subsidiaries are translated from the local currency into U.S.

Dollars during financial statement consolidation.

dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions could impact our consolidated results of operations.

In addition, we have intercompany notes amongst certain of our non-U.S.

subsidiaries, which may be denominated in a currency other than the local currency of a particular reporting entity.

If the United States dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions could impact our consolidated results of operations.

In addition, we have intercompany notes amongst certain of our non-United States subsidiaries, which may be denominated in a currency other than the local currency of a particular reporting entity.

As a result of using a currency other than the functional currency of the related subsidiary, results of these operations may be adversely affected during times of significant fluctuation between the functional currency of that subsidiary and the denomination currency of the note.

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However, we cannot fully anticipate all of our foreign currency exposures and cannot ensure that these hedges will fully offset the impact of foreign currency exchange rate fluctuations.

We also use fixed-to-fixed cross currency swap agreements to hedge our net investments in foreign operations against future volatility in the exchange rates between the U.S.

Dollars and these foreign currencies.

We also use fixed-to-fixed cross currency swap agreements to hedge our net investments in foreign operations against future volatility in the exchange rates between the United States dollar and these foreign currencies.

As a result, we are exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations.

As a result of operating retail stores and concessions in various countries outside of the U.S., we are also exposed to market risk from fluctuations in foreign currency exchange rates, particularly the Euro, the British Pound, the Chinese Renminbi, the Japanese Yen, the Korean Won and the Canadian Dollar, among others.

A substantial weakening of foreign currencies against the U.S.

Dollar could require us to raise our retail prices or reduce our profit margins in various locations outside of the U.S.

As a result of operating retail stores and concessions in various countries outside of the United States, we are also exposed to market risk from fluctuations in foreign currency exchange rates, primarily the Euro, the British Pound, the Chinese Renminbi, the Japanese Yen, the Korean Won and the Canadian dollar, among others.

A substantial weakening of foreign

currencies against the United States dollar could require us to raise our retail prices or reduce our profit margins in various locations outside of the United States.

In addition, our sales and profitability could be negatively impacted if consumers in those markets were unwilling to purchase our products at increased prices.

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• maintain customer relationships.

In addition, the geographic areas subject to our licensing agreements could be impacted by geopolitical risks.

Any of the foregoing risks, or the inability of any of our partners to successfully market our products or otherwise conduct its business, may result in loss of revenue and competitive harm to our operations in regions or product categories where we have entered into such licensing arrangements.

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Increases in the cost of raw materials could increase our production costs and cause our operating results and financial condition to suffer.

Our business is subject to volatility of costs related to certain raw materials used in the manufacturing of our products.

Our business is subject to volatility of costs related to certain raw materials used in the manufacturing of our products, including inflationary pressure.

The costs of raw materials used in our products are affected by, among other things, weather, consumer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus consumer countries and other factors that are generally unpredictable and beyond our control.

The ultimate effect of this change on our earnings cannot be quantified, as the effect of movements in raw materials prices on industry selling prices are uncertain, but any significant increase in these prices could have a material adverse effect on our business, results of operations and financial condition.

We are not always successful in our efforts to protect our business from the volatility of the market price of raw materials and our business can be materially affected by dramatic movements in prices of raw materials which have resulted, and are expected to continue to result, in increased pricing pressures and pressure on our margins.

We may not be able to implement price increases that fully mitigate the impact of these higher costs and/or any such price increases could have an adverse impact on consumer demand for our products.

In addition, our costs may be impacted by sanction tariffs and customs trade orders which could also impact sourcing and availability of raw materials used by our suppliers in the manufacturing of certain of our products.

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Increases in commodity prices, tariffs, sanctions, customs trade orders and/or manufacturing labor costs could increase our production costs and negatively impact our revenues, results of operations and financial condition.

We primarily use foreign manufacturing contractors and independent third-party agents to source our finished goods and our business is subject to risks inherent in global sourcing activities, including disruptions or delays in manufacturing or shipments.

We primarily use foreign manufacturing contractors and independent third-party agents to source our finished goods.

Our products are primarily produced by, and purchased or procured from, independent manufacturing contractors located mainly in Asia and Europe.

A manufacturing contractor’s failure to ship products to us in a timely manner or to meet the required quality standards could cause us to miss the delivery date requirements of our customers for those items.

The failure to make timely deliveries may cause customers to cancel orders, refuse to accept deliveries or demand reduced prices, any of which could have a material adverse effect on us.

The failure to

make timely deliveries may cause customers to cancel orders, refuse to accept deliveries or demand reduced prices, any of which could have a material adverse effect on us.

We do not have written agreements with any of our third-party manufacturing contractors.

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Any single agent could unilaterally terminate its relationship with Michael Kors at any time.

In Fiscal 2021, Michael Kors’ largest third-party agent, whose primary place of business is Hong Kong and who Michael Kors has worked with for over 10 years, sourced approximately 26% of its purchases of finished goods, based on unit volume.

In Fiscal 2022, Michael Kors’ largest third-party agent, whose primary place of business is Hong Kong and who Michael Kors has worked with for over ten years, sourced approximately 24% of its purchases of finished goods, based on unit volume.

Our inability to promptly replace agents that terminate their relationships with us or cease to provide high quality service in a timely and cost-efficient manner could have a material adverse effect on our business, results of operations and financial condition.

In addition, 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:

• disease pandemics, epidemics and health-related concerns, including related to COVID-19 or variants thereof;

• labor disputes or strikes at the location of the source of our goods and/or at ports of entry;

• disruptions or delays in shipments, including port delays and congestion, and/or capacity constraints on transportation of goods due to COVID-19;

• political or military conflict;

• heightened terrorism security concerns;

• a significant decrease in availability or an increase in the cost of raw materials;

• the migration and development of manufacturing contractors;

• product quality issues;

• imposition of regulations, quotas and safeguards relating to imports and our ability to adjust in a timely manner to changes in trade regulations;

• increases in the costs of fuel (including volatility in the price of oil), travel and transportation (including vessel and freight);

• imposition of duties, taxes and other charges on imports;

• significant fluctuation of the value of the U.S.

Dollar against foreign currencies;

• restrictions on transfers of funds out of countries where our foreign licensees are located;

• compliance by our independent manufacturers and suppliers with our Supplier Code of Conduct and other applicable compliance policies;

• compliance with 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 and the U.S.

Foreign Corrupt Practices Act, U.K.

Bribery Act and other global anti-corruption laws, as applicable.

As we outsource functions, we will become more dependent on the third parties performing these functions.

We look for opportunities to cost effectively enhance capability of business services.

While we believe we conduct appropriate due diligence before entering into agreements with these third parties, the failure of any of these third parties to provide the expected services, provide them on a timely basis or to provide them at the prices we expect could disrupt or harm our business.

Any significant interruption in the operations of these service providers, over which we have no control, could also have an adverse effect on our business.

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 business is susceptible to the risks associated with climate change and other environmental impacts which could negatively affect our business and operations.

Our retail stores, distribution centers and manufacturing facilities, including those operated by third-parties, are subject to risks relating to climate change and other environmental impacts from our operations.

For example, the physical effects of climate change, such as severe weather events, natural disasters and/or significant changes in climate patterns as well as our carbon emissions and our business’ overall impact on the environment could subject us to reputational, market and/or regulatory risks.

Climate change and other environmental concerns may cause social and economic disruptions in the places where we operate, including disruptions to our supply chain and to local infrastructure and transportation systems which could limit material availability and quality, impact our ability to ship and deliver product and prevent access to our physical locations.

These events could also adversely affect the economy and negatively impact consumer confidence and discretionary spending.

Concern over climate change may result in new or additional legal, legislative and regulatory requirements to reduce or mitigate the effects of climate change on the environment which may result in increased administrative costs.

There is also increased focus, including by investors, customers, and other stakeholders, on climate change and other sustainability matters.

In April 2020, we announced a global strategy to achieve significant, measurable goals across a range of important environmental and social sustainability issues, including, material sourcing, reducing greenhouse gas emissions and converting to renewal energy, responsible water use and waste reduction.

We may not be successful in attaining our goals, and even if we meet our commitments, there remains a significant risk that climate change and other environmental events could negatively impact our operations.

Our industry is subject to significant pricing pressure caused by many factors which may cause our profitability and gross margins in the future to be materially lower than our expectations.

Our industry is subject to significant pricing pressure caused by many factors, including the impact of the ongoing COVID-19 pandemic and recent inflationary pressure on the economy and consumer discretionary spending, higher freight costs, intense competition and a highly promotional environment, fragmentation in the retail industry, pressure from retailers to reduce the costs of products, wholesale demands for allowances, incentives and other forms of economic support for our partners, changes in consumer behavior, fashion trends, pricing, the timing of the release of new merchandise and promotional events, changes in our merchandise mix, the success of marketing programs and weather and other environmental conditions.

These factors may cause our profitability and gross margins in the future to be materially lower than in recent periods and our expectations, which could have a material adverse effect on our business, results of operations and financial condition.

We may be faced with significant excess inventories (due to the impact of the ongoing COVID-19 pandemic, supply chain disruptions or

otherwise), and in the future, if we misjudge the market for our products, we may have excess inventories for some products and missed opportunities for other products.

We may be forced to rely on markdowns or promotional sales to dispose of excess and slow-moving inventory, which also may negatively impact our gross margin and profitability.

Risks Related to Information Technology and Data Security

Privacy breaches and other cyber security risks related to our business could negatively affect our reputation, credibility and business.

We are dependent on information technology (“IT”) systems and networks for a significant portion of our direct-to-consumer sales, including our e-commerce sites and retail business credit card transaction authorization and processing.

We are responsible for storing data relating to our customers and employees and also rely on third party vendors for the storage, processing and transmission of personal and Company information.

Consumers, lawmakers and consumer advocates alike are increasingly concerned over the security of personal information transmitted over the Internet, consumer identity theft and privacy and the retail industry, in particular, has been the target of many recent cyber-attacks.

In addition to taking the necessary precautions ourselves, we generally require that third-party service providers implement reasonable security measures to protect our employees’ and customers’ identity and privacy.

We do not, however, control these third-party service providers and cannot guarantee the elimination of electronic or physical computer break-ins or security breaches in the future.

Cyber security breaches, including physical or electronic break-ins, security breaches due to employee error or misconduct, attacks by “hackers,” phishing scams, malicious software programs such as viruses and malware, and other breaches outside of our control, could result in unauthorized access or damage to our IT systems and the IT systems of our third party service providers.

Despite our efforts and the efforts of our third-party service providers to secure our and their IT systems, attacks on these systems do occur from time to time.

As the techniques used to obtain unauthorized access to IT systems become more varied and sophisticated (as cybercriminals are finding new ways to launch their attacks) and if the occurrence of such security breaches becomes more frequent, we and our third-party service providers may be unable to adequately anticipate these techniques and implement appropriate preventative measures.

While we maintain cyber risk insurance to provide some coverage for certain risks associated with cyber security incidents, there is no assurance that such insurance would cover all or a significant portion of the costs or consequences associated with a cyber security incident.

A significant breach of customer, employee or Company data could damage our reputation, our relationship with customers and our brands, and could result in lost sales, sizable fines, significant breach-notification and other costs and lawsuits, as well as adversely affect our results of operations.

We may also incur additional costs in the future related to the implementation of additional security measures to protect against new or enhanced data security and privacy threats, or to comply with current and new state, federal and international laws governing the unauthorized disclosure of confidential information which are continuously being enacted and proposed, such as the General Data Protection Regulation in the EU, the California Consumer Privacy Act, the Virginia Consumer Data Protection Act and the Colorado Privacy Act (CPA) in the United States and the Personal Information Protection Law in China, as well as increased cyber security protection costs such as organizational changes, deploying additional personnel and protection technologies, training employees, engaging third party experts and consultants and lost revenues resulting from unauthorized use of proprietary information.

A material delay or disruption in our information technology systems or e-commerce websites or our failure or inability to upgrade our information technology systems precisely and efficiently could have a material adverse effect on our business, results of operations and financial condition.

We rely extensively on our IT systems to track inventory, manage our supply chain, record and process transactions, manage customer communications, summarize results and manage our business.

The failure of our IT systems to operate properly or effectively, problems with transitioning to upgraded or replacement systems, or difficulty in or failure to implement new systems, could adversely affect our business.

We also operate a number of e-commerce websites throughout the world.

Our IT systems and e-commerce websites may be subject to damage and/or interruption from power outages, computer, network and telecommunications failures, malicious software, such as viruses and malware, attacks by “hackers”, security breaches, usage errors or misconduct by our employees and bad acts by our customers and website visitors which could materially adversely affect our business.

We are undergoing a multi-year ERP implementation.

The implementation of the ERP will require a significant investment in human and financial resources.

Implementing new systems also carries substantial risk, including failure to operate as designed, failure to properly integrate with other systems, potential loss of data or information, cost overruns, implementation delays and disruption of operations.

Third-party vendors are also relied upon to design, program, maintain and service our ERP implementation program.

Any failures of these vendors to properly deliver their services could similarly have a material adverse effect on our business.

In addition, any disruptions or malfunctions affecting our ERP implementation plan could cause critical information upon which we rely to be delayed, defective, corrupted, inadequate, inaccessible or lost or

otherwise cause delays or disruptions to our operations, and we may have to make significant investments to fix or replace impacted systems.

Risks Related to Legal and Regulatory

If we fail to comply with labor laws or collective bargaining agreements, or if our independent manufacturing contractors fail to use acceptable, ethical business practices, our business and reputation could suffer.

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However, we generally do not control these manufacturing contractors or suppliers or their labor, environmental or other business practices.

or that violate our Supplier Code of Conduct, could interrupt or otherwise disrupt the shipment of our products, harm our trademarks or damage our reputation.

The violation of labor, environmental or other laws by an independent manufacturer or supplier, or divergence of an independent manufacturer’s or supplier’s labor practices from those generally accepted as ethical or appropriate or that violate our Supplier Code of Conduct, could interrupt or otherwise disrupt the shipment of our products, harm our trademarks or damage our reputation.

Further, we could be prohibited from importing goods by governmental authorities.

The occurrence of any of these events could materially adversely affect our business, financial condition and results of operations.

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We are susceptible to others imitating our products and infringing our intellectual property rights in the Americas, EMEA, Asia and elsewhere in the world in both online and offline channels.

Our brands enjoy significant worldwide consumer recognition and the generally higher pricing of our products creates additional incentive for counterfeiters

to infringe on our brands.

Our brands enjoy significant worldwide consumer recognition and the generally higher pricing of our products creates additional incentive for counterfeiters to infringe on our brands.

We work with customs authorities, law enforcement, legal representatives and brand specialists globally in an effort to prevent the sale of counterfeit products, but we cannot guarantee the extent to which our efforts to prevent counterfeiting of our brands and other intellectual property infringement will be successful.

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We self-insure certain risks and may be impacted by unfavorable claims experience.

We use a combination of insurance and self-insurance programs, including a wholly-owned captive insurance entity, to provide for the potential liabilities for certain risks including, employee health-care benefits, workers’ compensation, general liability, marine transport and inventory, property damage and business interruption.

liability, general liability, marine transport and inventory, property damage, cyber risk and business interruption.

Claims are difficult to predict and may be volatile.

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An unfavorable outcome in any proceeding, lawsuit, dispute or claim may have an adverse impact on our business, financial condition and results of operations.

Our business is susceptible to the risks associated with climate change and other environmental impacts which could negatively affect our business and operations.

These events could also adversely affect the economy and negatively impact consumer confidence and discretionary spending.

Concern over climate change may result in new or additional legal, legislative and regulatory requirements to reduce or mitigate the effects of climate change on the environment.

There is also increased focus, including by investors, customers, and other stakeholders, on climate change and other sustainability matters.

Investor advocacy groups, certain institutional investors, investment funds, other market participants, shareholders and customers have increasingly focused on the environmental, social and governance ("ESG") or “sustainability” practices of companies.

These parties have placed increased importance on the implications of the social cost of their investments.

It is possible that stakeholders may not be satisfied with our ESG practices or the speed of adoption.

We could also incur additional costs and require additional resources to monitor, report and comply with various ESG practices.

The accessories, footwear and apparel industries have historically been subject to cyclical variations, recessions in the general economy and uncertainties regarding future economic prospects that can affect consumer spending habits.

Purchases of discretionary luxury items, such as our products, tend to decline during recessionary periods when disposable income is lower.

The success of our operations depends on a number of factors impacting discretionary consumer spending, including the duration and severity of the pandemic and the success of vaccination efforts, new information concerning the virus or variants of the variance, and actions different states, regions or countries may take to contain the virus (including extended lock-downs and travel restrictions), among others, general economic conditions, consumer confidence, wages and unemployment, housing prices, consumer debt, interest rates, fuel and energy costs, taxation and political conditions.

A worsening of the economy may negatively affect consumer and wholesale purchases of our products and could have a material adverse effect on our business, results of operations and financial condition.

Our industry is subject to significant pricing pressure caused by many factors which may cause our profitability and gross margins in the future to be materially lower than our expectations.

Our industry is subject to significant pricing pressure caused by many factors, including the impact of COVID-19 on the economy and consumer discretionary spending, intense competition and a highly promotional environment, fragmentation in the retail industry, pressure from retailers to reduce the costs of products, changes in consumer behavior, fashion trends, pricing, inflation, the timing of the release of new merchandise and promotional events, changes in our merchandise mix, the success of marketing programs and weather and other environmental conditions.

We may be faced with significant excess inventories (due to the impact of COVID-19 or otherwise), and in the future, if we misjudge the market for our products, we may have excess inventories for some products and missed opportunities for other products.

We may be forced to rely on markdowns or promotional sales to dispose of excess and slow-moving inventory, which also may negatively impact our gross margin and profitability.

Risks Related to Privacy and Data Security

Privacy breaches and other cyber security risks related to our business could negatively affect our reputation, credibility and business.

We are responsible for storing data relating to our customers and employees and also rely on third party vendors for the storage, processing and transmission of personal and Company information.

In addition to taking the necessary precautions ourselves, we generally require that third-party service providers implement reasonable security measures

to protect our employees’ and customers’ identity and privacy.

We do not, however, control these third-party service providers and cannot guarantee the elimination of electronic or physical computer break-ins or security breaches in the future.

Despite our efforts and the efforts of our third-party service providers to secure our and their IT systems, attacks on these systems do occur from time to time.

As the techniques used to obtain unauthorized access to IT systems become more varied and sophisticated (including in connection with the COVID-19 pandemic, as cybercriminals are finding new ways to launch their attacks) and if the occurrence of such security breaches becomes more frequent, we and our third-party service providers may be unable to adequately anticipate these techniques and implement appropriate preventative measures.

We may also incur additional costs in the future related to the implementation of additional security measures to protect against new or enhanced data security and privacy threats, or to comply with current and new state, federal and international laws governing the unauthorized disclosure of confidential information which are continuously being enacted and proposed, such as the General Data Protection Regulation in the EU and the California Consumer Privacy Act in California in the United States, as well as increased cyber security protection costs such as organizational changes, deploying additional personnel and protection technologies, training employees, engaging third party experts and consultants and lost revenues resulting from unauthorized use of proprietary information.

We rely extensively on our IT systems to track inventory, manage our supply chain, record and process transactions, manage customer communications, summarize results and manage our business.

We also operate a number of e-commerce websites throughout the world.

In early Fiscal 2020, we embarked on a multi-year ERP implementation, but as a result of COVID-19 and our need to significantly reduce our capital expenditures in order to protect our liquidity and cash flows, we temporarily suspended our ERP project.

Parts of the project have resumed as of the fourth quarter of Fiscal 2021.

Our inability to fully resume our ERP implementation and to upgrade our IT systems could result in system failures, disruptions, damage or malfunctions, cause critical information upon which we rely to be delayed, defective, corrupted, inadequate, inaccessible or lost and otherwise cause delays or disruptions to our operations.

If any of these events happen, we may have to make significant investments to fix or replace impacted systems.

Our failure or inability to upgrade IT systems effectively also could cause us to be unable to compete effectively, could harm our reputation and credibility, and could have a material adverse effect on our business, results of operations and financial condition.

Risks Related to Our Debt

We have incurred a substantial amount of indebtedness, which could adversely affect our financial condition and restrict our ability to incur additional indebtedness or engage in additional transactions.

As of March 27, 2021, our consolidated indebtedness was approximately $1.3 billion, net of debt issuance costs.

Our total borrowings as of March 27, 2021 primarily relate to senior notes of $450 million and term loans of $870 million.

As of April 2, 2022, our consolidated indebtedness was approximately $1.2 billion, net of debt issuance costs.

Our total borrowings as of April 2, 2022 primarily relate to senior notes of $450 million, term loans of $497 million and revolving credit facility of $175 million.

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.

Until recently, we have been able to use our cash from operations to fund our debt service obligations and to utilize our 2018 Revolving Credit Facility to supplement our near-term liquidity needs.

Our cash from operations have declined significantly, largely due to retail store closures and reduced store traffic caused by the COVID-19 pandemic.

Our substantial level of indebtedness could have negative consequences to our business and we cannot guarantee that our business will generate sufficient cash flow from our operations or that future

borrowings will be available to us in an amount sufficient to enable us to make payments of our debt, fund other liquidity needs, make necessary capital expenditures or pursue certain business opportunities.

Our substantial level of indebtedness could have negative consequences to our business and we cannot guarantee that our business will generate sufficient cash flow from our operations or that future borrowings will be available to us in an amount sufficient to enable us to make payments of our debt, fund other liquidity needs, make necessary capital expenditures or pursue certain business opportunities.

Our financial results, our substantial indebtedness and our credit ratings could adversely affect the availability and terms of our financing and negatively impact our ability to enter into new financing arrangements in the future.

The obligations under the second amendment, dated June 25, 2020 (the “Second Amendment”), to the third amended and restated credit facility, dated as of November 15, 2018 (the “2018 Credit Facility”) are secured by liens on substantially all of the assets of the Company and its U.S.

subsidiaries that are borrowers and guarantors, subject to certain exceptions, and substantially all of the registered intellectual property of the Company and its subsidiaries.

This requirement for collateral will be removed if the Company achieves an investment grade ratings requirement for two consecutive full fiscal quarters but there can be no assurance that the ratings requirement will be satisfied.

In addition, our ability to access the credit and capital markets in the future as a source of funding, and the borrowing costs associated with such financing, is dependent upon market conditions and our credit rating and outlook.

In March 2020, Moody’s Investor Service downgraded their credit rating of us from Baa2 to Ba1, and in April 2020 Fitch Ratings downgraded their credit rating of us from BBB- to BB+.

These downgrades, and any future reduction in our credit ratings, could result in reduced access to the credit and capital markets, more restrictive covenants in future financial documents and higher interest costs, and potentially increased lease or hedging costs.

We are currently rated investment grade by two of the Company’s three credit rating agencies.

If our investment rating is downgraded in the future, it could result in reduced access to the credit and capital markets, more restrictive covenants in future financial documents and higher interest costs and potentially increased lease or hedging costs.

We may be unable to meet financial covenants in our indebtedness agreements which could result in an event of default and restrictive covenants in such agreements may restrict our ability to pursue our business strategies.

Pursuant to the Second Amendment, the financial covenant in the Company’s 2018 Credit Facility requiring it to maintain a ratio of the sum of total indebtedness plus the capitalized amount of all operating lease obligations for the last four fiscal quarters to Consolidated EBITDAR of no greater than 3.75 to 1.0 has been waived through the fiscal quarter ending June 26, 2021.

The Company terminated the waiver period effective May 26, 2021.

Effective as of that date, the applicable ratio will be calculated net of the Company’s unrestricted cash and cash equivalents in excess of $100 million and shall exclude up to $150 million of supply chain financings, and the maximum permitted net leverage ratio will be 4.00 to 1.0.

The Second Amendment also requires the Company, during the period from June 25, 2020 until it delivers its financial statements with respect to the fiscal quarter ending June 26, 2021, to maintain at all times unrestricted cash and cash equivalents plus the aggregate undrawn amounts under the revolving facilities under the 2018 Credit Facility of not less than $500 million.

In addition, the 2018 Credit Facility and the Indenture governing our senior notes contain certain restrictive covenants that impose operating and financial restrictions on us, and the Second Amendment imposes incremental restrictions on certain of these covenants during the covenant relief period provided under the 2018 Credit Facility, including restrictions on our ability to:

The terms of our indebtedness contain affirmative and negative covenants that impose operating and financial restrictions on us and may restrict our ability to engage in future business opportunities or pursue our strategies.

The Company’s 2018 Credit Facility requires us to maintain a quarterly maximum permitted net leverage ratio of no greater than 4.0 to 1.0.

The 2018 Credit Facility and the Indenture governing our senior notes contain certain restrictive covenants, including restrictions on our ability to:

• incur additional indebtedness and guarantee indebtedness;

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A breach of the covenants or restrictions under the documents that govern our indebtedness could result in an event of default under the applicable indebtedness.

Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies.

In addition, an event of default under the credit agreement governing our 2018 Credit Facility would permit the lenders under our 2018 Credit Facility to terminate all commitments to extend further credit under that facility and foreclose on the collateral that secures the 2018 Credit Facility.

Such a default may allow creditors to accelerate the related debt and may result in the

acceleration of any other debt to which a cross-acceleration or cross-default provision applies.

In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.

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• limited in how we conduct our business;

• unable to raise additional debt or equity financing to operate during general economic or business downturns, including as a result of COVID-19;

• unable to raise additional debt or equity financing to operate during general economic or business downturns, including as a result of the ongoing COVID-19 pandemic and recent inflationary pressures and possible recession;

• unable to compete effectively or to take advantage of new business opportunities.

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We believe that this longer-term focus is in the best interests of our Company and our shareholders.

At the same time, however, we recognize that it is helpful to provide investors with guidance as to our forecast of total revenue, earnings per share, comparable store sales and other financial metrics or projections.

At the same time, however, we recognize that it is helpful to provide investors with guidance as to our forecast of total revenue, earnings per share and other financial metrics or projections.

While we generally expect to provide updates to our financial guidance when we report our results each fiscal quarter, we do not have any responsibility to update any of our forward-looking statements at such times or otherwise.

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Investors may have an expectation that we will repurchase all shares available under our share repurchase program.

As a result of COVID-19, we suspended our share repurchase program.

The market price of our securities could be adversely affected if our share repurchase activity differs from investors’ expectations or if our share repurchase program were to terminate.

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In particular, the British Virgin Islands has a less developed body of securities laws as compared to the United States, and some states (such as Delaware) have more fully developed and judicially interpreted bodies of corporate law.

As a result of the foregoing, holders of our ordinary shares may have more difficulty in protecting their interests through actions against our management, directors or major shareholders than they would as shareholders of a U.S.

The laws of the British Virgin Islands provide limited protection for minority shareholders, so minority shareholders will have limited or no recourse if they are dissatisfied with the conduct of our affairs.

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British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

The circumstances in which any such action may be brought, and the procedures and defenses that may be available in respect of any such action, may result in the rights of shareholders of a British Virgin Islands' company being more limited than those of shareholders of a company organized in the United States.

limited than those of shareholders of a company organized in the United States.

Accordingly, shareholders may have fewer alternatives available to them if they believe that corporate wrongdoing has occurred.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors