What changed in this filing

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Item 1A. Risk Factors

2024-05-29 compared with 2023-05-31 · 147 added, 127 removed, 334 unchanged (45% of the section changed)

You should carefully read this entire report, including, without limitation, the following risk factors and the section of this annual report entitled “Note Regarding Forward-Looking Statements.” Any of the following factors could materially adversely affect our business, results of operations and financial condition.

You should carefully read this entire report, including, without limitation, the following risk factors and the section of this annual report entitled “Special Note On Forward-Looking Statements.” Any of the following factors could materially adversely affect our business, results of operations and financial condition.

Additional risks and uncertainties not currently known to us or that we currently view as immaterial may also materially adversely affect our business, results of operations and financial condition.

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

Risks Related to the Merger

We are subject to litigation challenging the Merger, including the lawsuit by the U.S.

FTC attempting to block the pending Merger, and an unfavorable judgment or ruling in any such lawsuits could prevent or delay the consummation of the Merger and/or result in substantial costs and otherwise have a material adverse impact on our business and our share price.

On April 22, 2024, the U.S.

FTC filed a lawsuit to attempt to block the pending Merger (the “FTC Lawsuit”), and we announced that Capri intends to vigorously defend the case alongside Tapestry in working toward completing the Merger.

While the pending Merger has received regulatory approval from all other jurisdictions where such approval is required, including, but not limited to, the European Union, Japan and China, U.S.

regulatory approval remains an outstanding condition to closing the Merger.

We cannot predict with certainty whether and when U.S.

regulatory approval will be obtained, and the Court in the FTC Lawsuit may decide to issue an injunction that prevents the Merger from being consummated.

Additionally, there can be no assurance that if regulatory clearance is obtained, it will not result in the imposition of conditions, limitations, obligations or restrictions that have the direct or indirect effect of preventing the completion of the Merger, reducing the anticipated benefits of the Merger, or result in the delay or abandonment of the Merger.

Upon termination of the Merger Agreement for failure to receive regulatory approval, our remedy may be limited to the recovery of certain expenses, and we may have incurred other substantial costs that cannot be recouped.

If the FTC Lawsuit successfully enjoins the pending Merger, it could have a material adverse impact on our business and our share price.

In addition, in connection with the Merger Agreement, a number of complaints have been filed in federal and state court as individual actions, which we refer to collectively as the “Complaints”.

The Complaints allege that the preliminary proxy statement filed by Capri on September 8, 2023 in connection with the Merger Agreement (the “Preliminary Proxy”) or the definitive proxy statement filed by Capri on September 20, 2023 (the “Definitive Proxy,” and together with the Preliminary Proxy, the “Merger Proxy”), as applicable, misrepresents and/or omits certain purportedly material information.

The Complaints also assert violations of Sections 14(a) and 20(a) of the U.S.

Securities Exchange Act of 1934, as amended, and Rule 14a-9 promulgated thereunder against Capri and the Board of Directors.

The Complaints seek, among other things:

(i) an injunction enjoining the consummation of the Merger and the other transactions contemplated by the Merger Agreement;

(ii) rescission or rescissory damages in the event the Merger and the other transactions contemplated by the Merger Agreement are consummated;

(iii) direction that defendants account for all damages suffered as a result of any wrongdoing;

(iv) costs of the action, including plaintiffs’ attorneys’ and expert fees and expenses;

and (v) other relief the court may deem just and proper.

In addition to the Complaints, purported shareholders of Capri have sent demand letters (which we refer to as the “Demands,” and together with the Complaints, the “Matters”) alleging similar deficiencies regarding the disclosures made in the Merger Proxy.

However, in order to avoid the risk that the Matters delay or otherwise adversely affect the Merger, and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, Capri provided supplemental disclosures to the Merger Proxy in Capri's Current Report on Form 8-K, filed with the SEC on October 17, 2023.

Capri management believes that the Matters are without merit.

Capri cannot provide assurance regarding the outcomes of the Matters and may be subject to additional demands or filed actions.

If additional similar complaints or demands are filed or sent, absent new or significantly different allegations, Capri will not necessarily disclose such additional filings or demands.

If dismissals are not obtained or a settlement is not reached, these lawsuits could prevent or delay completion of Merger and/or result in substantial costs to us.

The pendency of the Merger could adversely affect our business, financial results and operations.

The Merger Agreement provides that, among other things and on the terms and subject to the conditions set forth therein, Tapestry will acquire Capri in an all-cash transaction by means of a merger of Merger Sub with and into Capri, with Capri surviving the Merger as a wholly owned subsidiary of Tapestry.

The pendency of the Merger and any announcements relating to the Merger could cause disruptions in and create uncertainty surrounding our business, including by affecting our relationships with our existing and future customers, vendors and employees, which could have a significant negative impact on

our future revenues and results of operations, regardless of whether the Merger is completed.

In particular, we could potentially lose important personnel as a result of the departure of employees who decide to pursue other opportunities in light of the pending Merger.

In addition, management and financial resources have been diverted and will continue to be diverted towards the completion of the Merger, which could have a negative impact on our future revenues and/or results of operations.

We are also subject to restrictions, without the consent of Tapestry, on the conduct of our business prior to the consummation of the Merger as provided in the Merger Agreement, including, among other things, certain restrictions on our ability to make certain capital expenditures, make investments and acquisitions, enter into certain contracts, open store locations, sell, transfer or dispose of our assets and incur indebtedness.

These restrictions could prevent us from pursuing otherwise attractive business opportunities, result in our inability to respond effectively and/or timely to competitive pressures, industry developments and future opportunities, and otherwise have a significant negative impact on our future revenues and/or results of operations.

Failure to complete the pending Merger could adversely affect our business and the market price of our ordinary shares.

There is no assurance that the closing of the Merger will occur.

Consummation of the Merger is subject to various conditions, including the receipt of certain regulatory approvals, and certain other conditions.

We cannot predict with certainty whether and when any of these conditions will be satisfied.

Also, subject to limited exceptions, either Tapestry or we may terminate the Merger Agreement if the Merger has not been consummated on or before August 10, 2024 (subject to two automatic three-month extensions, the “Outside Date”);

provided that this right to terminate the Merger Agreement will not be available to any party whose failure to fulfill or perform any obligation or covenant under the Merger Agreement has been a principal cause of the failure of the Merger to be consummated by the Outside Date and such action or failure to act constitutes a material breach of the Merger Agreement.

If the Merger is not consummated, and there are no other parties willing and able to acquire us at a price of $57 per share or higher or on other terms acceptable to us, our share price will likely decline.

We have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the pending Merger, as well as the direction of management resources towards the Merger, for which we will have received little or no benefit if the closing of the Merger does not occur.

A failed transaction may result in negative publicity and a negative impression of us in the investment community.

If the Merger is not consummated, there can be no assurance that any other transaction acceptable to us will be offered and our business, prospects or results of operations may be adversely affected.

Upon termination of the Merger Agreement, our remedy may be limited to reimbursement of certain expenses or we may not be entitled to receive any reimbursement.

We may also incur significant goodwill and/or intangible asset impairment charges with respect to one or more of our reporting units if the Merger is not consummated.

The occurrence of any of these events individually or in combination could have a material adverse impact on our results of operations and our share price.

Risks Related to Macroeconomic Conditions

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Global economic conditions and the related impact on levels of consumer spending worldwide have impacted, and are likely to continue to impact, our business and the accessories, footwear and apparel industry overall.

Inflation, rising interest rates, higher fuel and energy costs and commodity prices, reductions in net worth based on market declines and uncertainty, home prices, credit availability and consumer debt levels, concerns of a global banking crisis, political instability due to war or other geopolitical factors and other macroeconomic pressures and general uncertainty regarding the overall future economic environment have led to recession fears and are creating a challenging retail environment.

Inflation, rising interest rates, higher fuel and energy costs and commodity prices, reductions in net worth based on market declines and uncertainty, home prices, credit availability and consumer debt levels, political instability due to war or other geopolitical factors and other macroeconomic pressures and general uncertainty regarding the overall future economic environment have created a challenging retail 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.

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Reduced consumer confidence and adversely impacted consumer spending patterns in any of the regions in which we operate could adversely affect our business, results of operations and financial condition.

The COVID-19 pandemic may continue to adversely affect our business and results of operations.

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

While the overall COVID-19 situation appears to be improving, our business and operating results may be negatively impacted by COVID-19 again in the future if the virus worsens or if regions or countries where we operate reinstate extended lock-downs and/or implement travel restrictions.

Long term store closure requirements and/or other operational restrictions placed on our business or the business of our wholesale customers or supply chain partners as a result of COVID-19 could materially impact or disrupt our business and limit our ability to fully operate in the ordinary course, which could materially impact our financial results.

The COVID-19 pandemic may adversely affect our business and results of operations.

The COVID-19 pandemic caused significant disruption to the global economy, consumer spending and behavior, tourism and to financial markets and negatively impacted our business during fiscal years 2020 through 2023.

Although the impact of the COVID-19 pandemic during fiscal 2024 has generally been less significant than those experienced in prior fiscal years, we cannot predict the extent to which the COVID-19 pandemic may again impact our business, financial condition, and results of

The impact of regulations imposed in the future in response to the COVID-19 pandemic or other public health crises, could materially impact or disrupt our business and limit our ability to fully operate in the ordinary course, which could negatively impact our financial results.

Risks Related to Our Business

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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, sustainability production, merchandising and pricing of products.

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

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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 increased 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.

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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.

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.

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.

Our business could suffer as a result of reductions in our wholesale channel and/or consolidations, liquidations, restructurings and other ownership changes by our wholesale partners.

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This could result in store closings by our wholesale customers, which would decrease the number of stores carrying our products, while the remaining stores may purchase a smaller amount of our products and/or may reduce the retail floor space designated for our brands.

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.

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 United States, have become highly promotional and have aggressively marked down their merchandise.

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Such promotional activity could negatively impact our business.

The departure of 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 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.

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 adversely affect morale, hiring and/or retention, we may not achieve our objectives and our results of operations could be adversely impacted.

In addition, the announcement and pendency of the Merger could cause disruptions in and create uncertainty surrounding

our business, including affecting our relationships with our existing and future employees, regardless of whether the Merger is

In particular, we could potentially lose important personnel as a result of the departure of employees who decide to

pursue other opportunities in light of the pending transaction.

We face risks associated with operating globally.

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and (vi) 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.

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.

If our retail stores underperform due to declining consumer traffic or otherwise and our expected future cash flows of the related underlying retail store asset do not exceed such asset’s carrying value, we may incur store impairment charges.

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Transportation shortages, labor shortages and port congestion as well as disruptions in factory production in certain countries where we source our products may delay inventory orders and impact product availability in our channels, including our e-commerce sites, which could result in customer dissatisfaction, and have an adverse effect on our business and harm our reputation.

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

Donatella Versace, Ms.

Sandra Choi and Mr.

Michael Kors.

Competition for qualified personnel in the fashion industry is intense and turnover in the industry for retail associates is generally high.

Competitors may use aggressive tactics to recruit our employees.

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;

• 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;

• disruptions, delays or reductions in shipments, including port delays and congestion, and/or capacity constraints on transportation of goods or at our factories;

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

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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.

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If we misjudge the market for our products or demand for our products is impacted by other factors, such as inflationary pressures, political instability or COVID-19, we may be faced with significant excess inventories for some products and missed opportunities for other products.

We have in the past been, and may in the future be, forced to rely on donation, markdowns, promotional sales or other write-offs, to dispose of excess, slow-moving inventory, which may negatively impact our gross margin, overall profitability and efficacy of our brands.

We have in the past been, and may in the future be, forced to rely on markdowns, promotional sales, donations or other write-offs to dispose of excess, slow-moving inventory, which may negatively impact our gross margin, overall profitability and efficacy of our brands.

In addition, increases in our costs, such as raw materials, labor or freight, could negatively impact our gross margin, and we may not be able to offset such cost increases through pricing measures or other means.

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

As part of our long-term strategy, we intend to grow our market share and revenue through the following initiatives:

• trendsetting and innovative product offerings;

• increased brand engagement;

• optimizing customer experience;

• investing in technology;

• expanding our global presence.

We also intend to support the growth of Versace and Jimmy Choo sales through retail store openings and further developing each brand’s e-commerce and omni-channel presence, as well as expanding into the luxury accessories market.

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, our business, results of operations and financial condition could be materially adversely affected.

Our long-term strategy involves growing and revitalizing our brands, particularly Michael Kors and Versace.

Our achievement of revenue and profitability growth will depend largely upon our ability to offer trendsetting and innovative products, increase brand engagement, and optimize customer experience.

We cannot assure you that we can execute successfully any of these actions or deliver growth and profitability for our brands.

Our success and growth also depends on the continued development of our omni-channel presence for each of our brands globally along with continued bricks and mortar expansion in select international regions, notably Greater China.

Achievement of our growth strategy may also require investment in new capabilities, distribution channels, and technologies.

These investments may result in short-term costs without accompanying current revenues and, therefore, may be dilutive to our earnings in the short term.

There can be no assurance regarding the timing of or extent to which we will realize the anticipated benefits of these investments and other costs, if at all.

We may be required to take impairment charges with respect to one or more of our brands.

We are required to test goodwill, brand and other intangible assets acquired as a result of acquisitions for impairment.

If the carrying value of goodwill and intangible assets exceed the related fair value, we would be required to record an impairment charge for the difference, and such charge could be significant.

For example, in Fiscal 2024 we recorded impairment charges of $227 million and $262 million related to Versace and Jimmy Choo, respectively.

Impairment charges could have a material impact on our financial results.

Our current and future licensing and joint venture arrangements may not be successful and may make us susceptible to the actions of third-parties over whom we have limited control.

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• maintain customer relationships.

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

The geographic areas subject to our licensing agreements could also 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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The misuse of our brand by a licensing or joint venture partner could have a material adverse effect on our business, results of operations and financial condition.

Acquisitions may not achieve intended benefits and may not be successfully integrated.

One component of our growth strategy has historically been acquisitions.

Acquisitions are not currently contemplated in the Company's capital allocation priorities, however, we may in the future evaluate and consider other strategic investments or acquisitions.

Acquisitions involve various inherent risks and the benefits, cost savings and synergies sought may not be realized.

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;

• delays or difficulties in completing the integration of acquired companies or assets;

• higher than expected costs, lower than expected cost savings and/or a need to allocate resources to manage unexpected operating difficulties;

• unanticipated issues in integrating logistics, information and other systems;

• unanticipated changes in applicable laws and regulations;

• retaining key customers, suppliers and employees;

• operating risks inherent in the acquired business and our business;

• diversion of the attention and resources of management and resource constraints;

• retaining and obtaining required regulatory approvals, licenses and permits;

• unanticipated changes in the combined business due to potential divestitures or other requirements imposed by antitrust regulators;

• assumption of liabilities not identified in due diligence or other unanticipated issues, expenses and liabilities;

• the impact on our internal controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002.

We are required to test goodwill and indefinite-lived intangible assets acquired as a result of acquisitions for impairment at least annually.

For Fiscal 2023, the carrying value of certain Jimmy Choo reporting units and brand indefinite-lived intangible assets exceeded its respective fair values requiring us to record impairment charges of $106 million.

Please refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.

We are subject to risks associated with leasing retail space subject to long-term and non-cancelable 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 April 1, 2023, 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 $1.5 billion through Fiscal 2028 and approximately $427 million thereafter through Fiscal 2044.

For example, as of March 30, 2024, 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 2029 and approximately $600 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.

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.

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.

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.

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

If any of these distribution facilities were to shut down or otherwise become inoperable or inaccessible for any reason, we could suffer a substantial loss of inventory and/or disruptions of deliveries to our 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.

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We are dependent on third-parties to perform certain outsourced functions.

We are increasingly looking for opportunities to cost effectively enhance capability of business services, which includes outsourcing certain functions.

We are increasingly looking for opportunities to cost effectively enhance the capability of business services, which includes outsourcing certain functions.

While we believe we conduct appropriate due diligence before entering into agreements with these third-party service providers, 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.

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Manufacturing labor costs are also subject to volatility based on local and global economic conditions.

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.

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.

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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.

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-notifications and other costs and lawsuits, as well as adversely affect our results of operations.

Additionally, we may incur increased costs and experience a significant strain on our resources to account for implementation of additional required security measures and technologies to protect personal data and confidential information 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, various consumer privacy and data privacy and protection acts in the United States, including, but not limited to, the American Data Privacy and Protection Act, the California Consumer Privacy Act and the California Privacy Rights Act, the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Utah Consumer Privacy Act, the Connecticut Data Privacy Act and the Iowa Consumer Data Protection Act, and the Personal Information Protection Law in China.

Additionally, we may incur increased costs and experience a significant strain on our resources to account for implementation of additional required security measures and technologies to protect personal data and confidential information 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 (“GDPR”) in the EU and the UK, various consumer privacy and data privacy and protection acts in the United States, including, but not limited to, the American Data Privacy and Protection Act, the California Consumer Privacy Act as amended by the California Privacy Rights Act, the Virginia Consumer Data Protection Act, the Colorado Privacy Act, the Utah Consumer Privacy Act, the Connecticut Data Privacy Act, the Iowa Consumer Data Protection Act, the Montana Consumer Data Privacy Act, the Oregon Consumer Privacy Act, the Washington MY Health My Data Act, the Florida Digital Bill of Rights, the Texas Data Privacy and Security Act and the Personal Information Protection Law in China.

Lastly, increased scrutiny by federal regulators (such as the FTC) and state attorney generals focused on the retail industry may lead to increased privacy and cyber security costs such as organizational changes, deploying additional personnel, acquiring and implementing enhanced privacy and security technologies on e-commerce sites, mandatory employee training for those handling customer and employee personal data, and engaging third-party experts and consultants, and the unauthorized use of proprietary information may lead to lost revenues.

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

We have a publicly announced global strategy to achieve significant, measurable goals across a range of important environmental and social sustainability issues, including, renewable energy, responsible material sourcing, water use and chemical management and waste reduction.

and waste reduction.

We have also set science-based targets around greenhouse gas emissions (GHG) reductions.

We rely on our supply chain partners to meet certain of our targets, including our GHG emissions reduction goals;

however, our supply chain is complex and comprised of parties not within our control.

It is possible that stakeholders may not be satisfied with our

ESG targets, practices or the speed of adoption or that we may not be successful in achieving our goals on the timelines set or at all, which could negatively impact our brands, our reputation, and customer and employee retention.

In addition, many countries in which we and our suppliers operate have begun enacting new ESG and climate legislation and regulations.

Such proposed regulations include expanded disclosure requirements regarding GHG emissions and other climate-related information, including independent auditors providing some level of attestation to the accuracy of such disclosures.

We rely on our supply chain partners to meet certain of our targets, including our scope 3 GHG emissions reduction goals;

however, our supply chain is complex and almost entirely comprised of parties not within our control.

It is possible that stakeholders may not be satisfied with our ESG targets, practices or the speed of adoption or that we may not be successful in achieving our goals on the timelines set or at all, which could negatively impact our brands, our reputation, and customer and employee retention.

In addition, many jurisdictions in which we and our suppliers operate have begun enacting new ESG and climate legislation and regulations.

Such proposed and/or enacted regulations include expanded disclosure requirements regarding GHG emissions and other climate-related information, including disclosure of climate-related risks and independent auditors providing some level of attestation to the accuracy of such disclosures.

Our ability to comply with any such new ESG and/or climate laws and regulations may lead to increased costs and operational complexity and/or we may be required to divert costs and resources in order to comply with ESG frameworks, and legal, legislative and regulatory requirements.

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

Our business, including our retail, distribution and manufacturing operations, is susceptible to the risks associated with climate change and other environmental impacts.

For example, the physical effects of climate change, such as severe weather events, natural disasters and/or significant changes in climate patterns may (i) cause potential disruptions to our retail stores, distribution centers and corporate facilities or those facilities of our wholesale customers, licensees or suppliers, (ii) adversely impact global supply chains, including the availability and cost of raw materials, (iii) negatively affect the ability of our manufacturers to fulfill our orders timely and/or to our specifications, (iv) cause shipping disruptions and/or (v) lead to higher freight costs.

An increase in extreme weather conditions could also result in more frequent damage and/or closures of our stores and distribution centers (or facilities of our wholesale customers, licensees or suppliers), adversely impact retail traffic, consumer’s disposable income levels or spending habits on discretionary items, or otherwise disrupt business operations in the communities in which we or our partners operate, any of which could result in lost sales or higher costs.

In addition, concern over climate change may result in transitional risks such as 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 operational and administrative compliance costs.

These physical and transitional risks relating to climate could negatively affect our business and operations.

Our business, including our retail, distribution and manufacturing operations, is susceptible to the physical and transitional risks associated with climate change and other environmental impacts that could negatively affect our business and operations.

For example, the acute and chronic physical risks of climate change, such as increased severity of extreme weather events, changes in weather and precipitation patterns and/or rising temperatures and sea levels may (i) cause potential disruptions to our retail stores, distribution centers and corporate facilities or those facilities of our wholesale customers, licensees or suppliers, (ii) adversely impact global supply chains, including the availability and cost of raw materials, (iii) negatively affect the ability of our manufacturers to fulfill our orders timely and/or to our specifications, (iv) cause shipping disruptions and/or (v) lead to higher freight costs.

An increase in extreme weather conditions could also result in more frequent damage and/or closures of our stores and distribution centers (or facilities of our wholesale customers, licensees or suppliers), adversely impact retail traffic, consumers’ disposable income levels or spending habits on discretionary items, or otherwise disrupt business operations in the communities in which we or our partners operate, any of which could result in lost sales or higher costs.

In addition, concern over climate change may result in policy/legal-, technology-, market- and/or reputation-related transition risks.

For example, increased climate-related disclosures, increased exposure to litigation resulting from new or additional legal requirements, mandates on our products and services, and substitution of existing products with lower emission options may result in increased operational and administrative compliance costs.

Changing customer behavior, increased costs of raw materials, shifts in customer preferences, increased stakeholder concern and stigmatization of the fashion industry are also climate-related transition risks that could negatively impact us.

Risks Related to Tax, Legal and Regulatory Matters

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

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

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

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.

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We record tax expense based on our estimates of taxable income and required reserves for uncertain tax positions in multiple tax jurisdictions.

At any time, there are multiple tax years that are subject to examinations by various taxing authorities.

At any time, there are multiple tax years that are subject to examinations by

various taxing authorities.

The ultimate resolution of these audits and negotiations with taxing authorities may result in a settlement amount that differs from our original estimate.

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The Organization for Economic Cooperation and Development, the European Union and other countries (including countries in which we operate) have committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed in an effort to limit perceived base erosion and profit shifting incentives.

In particular, the OECD’s Pillar Two initiative introduces a 15% global minimum tax applied on a country-by-country basis, for which many jurisdictions have now committed to an effective enactment date starting January 1, 2024.

If these proposals are implemented in any jurisdictions in which we operate, they could negatively impact our effective tax rate as well as increase the tax compliance and reporting costs related to such requirements.

These proposals have already been implemented in several jurisdictions in which we operate, and they could negatively impact our effective tax rate as well as increase the tax compliance and reporting costs related to such requirements.

However, based on our initial analysis, the Pillar Two initiative is not projected to have a material impact on our consolidated financial statements.

We will continue to examine and reflect the impact of any changes in future financial statements as applicable.

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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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.

prevent counterfeiting of our brands and other intellectual property infringement will be successful.

Such counterfeiting and other intellectual property infringement could dilute our brands and otherwise harm our reputation and business.

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In some cases, other intellectual property owners may have prior rights to our trademarks or similar trademarks or intellectual property.

Furthermore, the laws of certain foreign countries may

not protect trademarks, copyrights and/or other intellectual property rights to the same extent as the laws of the United States or the European Union.

Furthermore, the laws of certain foreign countries may not protect trademarks, copyrights and/or other intellectual property rights to the same extent as the laws of the United States or the European Union.

From time to time, in the ordinary course of our business, we become involved in opposition and cancellation proceedings with respect to trademarks or other intellectual property similar to some of our brands.

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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.

See also “We may be subject to litigation challenging the Merger, and an unfavorable judgment or ruling

in any such lawsuits could prevent or delay the consummation of the Merger and/or result in substantial costs.”

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 April 1, 2023, our consolidated indebtedness was approximately $1.8 billion.

Our total borrowings as of April 1, 2023 primarily relate to our revolving credit facility of $874 million, Versace term loan of $488 million and senior notes of $450 million.

As of March 30, 2024, our consolidated indebtedness was approximately $1.7 billion.

Our total borrowings as of March 30, 2024 primarily relate to our revolving credit facility of $764 million, Versace term loan of $486 million and senior notes of $450 million.

Our ability to make payments on and refinance our debt obligations and to fund planned capital expenditures depends on our ability to generate cash from our operations.

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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.

We are also subject to restrictions under the Merger Agreement that would limit our ability to incur indebtedness prior to the consummation of the Merger, without the consent of Tapestry.

In addition, our ability to access 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.

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

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.

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The Company’s 2022 Credit Facility and the 2022 Versace Credit Facility (of which the Company provides a parent guarantee) requires us to maintain a quarterly maximum permitted net leverage ratio of no greater than 4.0 to 1.0.

The 2022 Credit Facility, the 2022

Versace Credit Facility and the Indenture governing our senior notes also contain certain restrictive covenants, including restrictions on our and certain of our subsidiaries ability to:

The 2022 Credit Facility, the 2022 Versace Credit Facility and the Indenture governing our senior notes also contain certain restrictive covenants, including restrictions on our and certain of our subsidiaries ability to:

• incur additional indebtedness and guarantee indebtedness;

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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 addition, an event of default under the credit agreement governing our 2022 Credit Facility or the Versace 2022 Credit Facility would permit the lenders under our those credit facilities to terminate all commitments to extend further credit under such facility.

In addition, an event of default under the credit agreement governing our 2022 Credit Facility or the Versace 2022 Credit Facility would permit the lenders under those credit facilities to terminate all commitments to extend further credit under such facility.

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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If one or more of our counterparty financial institutions default on their obligations to us, we may incur significant losses or our financial liquidity could be adversely impacted.

As part of our hedging activities, we enter into transactions involving derivative financial instruments, including fixed-to-fixed cross-currency swaps to hedge our net investments in foreign operations against future volatility in the exchange rates between the United States dollar and foreign currencies, with various financial institutions.

As part of our hedging activities, we enter into transactions involving derivative financial instruments, including cross-currency swaps to hedge our net investments in foreign operations against future volatility in the exchange rates between the United States dollar and foreign currencies, with various financial institutions.

In addition, we have significant amounts of cash, cash equivalents and other investments on deposit or in accounts with banks or other financial institutions in the United States and abroad.

We also rely on borrowings under our revolving credit facilities, under which we had $694 million of borrowing capacity as of April 1, 2023.

We also rely on borrowings under our revolving credit facilities, under which we had $803 million of borrowing capacity as of March 30, 2024.

We rely on that borrowing capacity to fund our operations.

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Risks Related to Our Ordinary Shares

Our share price may periodically fluctuate based on the accuracy of our earnings guidance or other forward-looking statements regarding our financial performance.

Our share price may periodically fluctuate based on forward-looking expectations regarding our financial performance.

Our business and long-range planning process is designed to maximize our long-term growth and profitability and not to achieve an earnings target in any particular fiscal quarter.

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 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.

In addition, any longer-term guidance that we provide is based on goals that we believe, at the time guidance is given, are reasonably attainable for growth and performance over a number of years.

However, such long-range targets are more difficult to predict than our current quarter and fiscal year

expectations.

If, or when, we announce actual results that differ from those that have been predicted by us, outside investment analysts, or others, our share price could be adversely affected.

Investors who rely on these predictions when making investment decisions with respect to our securities do so at their own risk.

Given the pending Merger, the Company stopped providing investors with forward-looking earnings guidance and withdrew its previously issued guidance.

Actual results may differ from those that have been previously predicted by us, outside investment analysts, or others, our share price could be adversely affected.

Investors who rely on these outside predictions when making investment decisions with respect to our securities do so at their own risk.

We take no responsibility for any losses suffered as a result of such changes in our share price.

If we are unable to conduct share repurchases at expected levels, our share price could be adversely affected.

We periodically return value to shareholders through our share repurchase program.

On November 9, 2022, the Company announced that its Board of Directors approved the Existing Share Repurchase Plan which permits the Company to repurchase up to $1 billion of its outstanding ordinary shares over two years in open market or privately negotiated transactions and/or pursuant to Rule 10b5-1 trading plans, subject to market conditions, applicable legal requirements, trading restrictions under the Company’s insider trading policy and other relevant factors.

The program may be suspended or discontinued at any time.

Our ability to conduct share repurchases depends on our ability to generate sufficient cash flows from operations in the future which may be limited by economic, financial, competitive and other factors that are beyond our control.

The Existing Share Repurchase Plan may also be suspended or discontinued at any time.

Investors may have an expectation that we will repurchase all shares available under our Existing Share Repurchase Plan.

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

Pursuant to the terms of the Merger Agreement, and subject to certain limited exceptions, the Company may not repurchase its ordinary shares.

Accordingly, despite having previously had a share repurchase program as a way to return value to its shareholders, the Company has not repurchased any of its ordinary shares since entering into the Merger Agreement, and the Company does not expect to repurchase any of its ordinary shares prior to the Merger or earlier termination of the Merger Agreement.

As a result, the market price of our ordinary shares could be adversely affected.

Failure to maintain adequate financial and management processes and controls could lead to errors in our financial reporting, which could harm our business and cause a decline in the price of our ordinary shares.

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If our management is unable to certify the effectiveness of our internal controls or if our independent registered public accounting firm cannot render an opinion on the effectiveness of our internal control over financial reporting, or if material weaknesses in our internal controls are identified, we could be subject to regulatory scrutiny and a loss of public confidence, which could have an adverse effect on our business and cause a decline in the price of our ordinary shares.

Provisions in our organizational documents may delay or prevent our acquisition by a third-party.

Our Memorandum and Articles of Association (together, as amended from time to time, our “Memorandum and Articles”) contain several provisions that may make it more difficult or expensive for a third-party to acquire control of us without the approval of our board of directors.

These provisions may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our shareholders receiving a premium over the market price for their ordinary shares.

These provisions include, among others:

• our board of directors’ ability to amend the Memorandum and Articles to create and issue, from time to time, one or more classes of preference shares and, with respect to each such class, to fix the terms thereof by resolution;

• provisions relating to the multiple classes and three-year terms of directors, the manner of election of directors, removal of directors and the appointment of directors upon an increase in the number of directors or vacancy on our board of directors;

• restrictions on the ability of shareholders to call meetings and bring proposals before meetings;

• elimination of the ability of shareholders to act by written consent;

• the requirement of the affirmative vote of 75% of the shares entitled to vote to amend certain provisions of our Memorandum and Articles.

These provisions of our Memorandum and Articles could discourage potential takeover attempts and reduce the price that investors might be willing to pay for our ordinary shares in the future, which could reduce the market price of our ordinary shares.

Rights of shareholders under British Virgin Islands law differ from those under United States law, and, accordingly, our shareholders may have fewer protections.

Our corporate affairs are governed by our Memorandum and Articles, the BVI Business Companies Act (Revised Edition 2020) (as amended) (the “BVI Act”) and the common law of the British Virgin Islands.

The rights of shareholders to take legal action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under British

Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands and by the BVI Act.

The rights of shareholders to take legal action against our directors, actions by minority shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are to a large extent governed by the common law of the British Virgin Islands and by the BVI Act.

The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the British Virgin Islands.

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(iii) acts that infringe on the personal rights of the shareholders, such as the right to vote;

and (iv) acts where the Company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded to minority shareholders under the laws of many states in the United States.

(iv) acts where the Company has not complied with provisions requiring approval of a special or extraordinary majority of shareholders, which are more limited than the rights afforded to minority shareholders under the laws of many states in the United States.

It may be difficult to enforce judgments against us or our executive officers and directors in jurisdictions outside the United States.

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This means that even if shareholders were to sue us successfully, they may not be able to recover anything to make up for the losses suffered.

Unresolved Staff Comments

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