What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-08-19 compared with 2020-08-13 · 319 added, 317 removed, 290 unchanged (69% of the section changed)

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EXECUTIVE OVERVIEW

The fiscal years ended June 27, 2020 , June 29, 2019 and June 30, 2018 were each 52-week periods.

Tapestry is a leading New York-based house of modern luxury accessories and lifestyle brands.

Tapestry is powered by optimism, innovation and inclusivity.

Our brands are approachable and inviting and create joy every day for people around the world.

Defined by quality, craftsmanship and creativity, our house of brands give global audiences the opportunity for exploration and self-expression.

Tapestry is comprised of the Coach, Kate Spade and Stuart Weitzman brands, all of which have been part of the American landscape for over 25 years.

The fiscal year ended July 3, 2021 was a 53-week period, June 27, 2020 and June 29, 2019 were each 52-week periods.

Tapestry, Inc.

is a leading New York-based house of modern luxury accessories and lifestyle brands.

Our global house of brands unites the magic of Coach, kate spade new york and Stuart Weitzman.

Each of our brands are unique and independent, while sharing a commitment to innovation and authenticity defined by distinctive products and differentiated customer experiences across channels and geographies.

We use our collective strengths to move our customers and empower our communities, to make the fashion industry more sustainable, and to build a company that’s equitable, inclusive, and diverse.

Individually, our brands are iconic.

Together, we can stretch what’s possible.

The Company has three reportable segments:

Coach - Includes global sales of Coach products to customers through Coach operated stores, including the Internet and concession shop-in-shops, and sales to wholesale customers and through independent third party distributors.

Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including the Internet, sales to wholesale customers, through concession shop-in-shops and through independent third party distributors.

Stuart Weitzman - Includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, including the Internet, sales to wholesale customers and through numerous independent third party distributors.

• Coach - Includes global sales of Coach products to customers through Coach operated stores, including e-commerce sites and concession shop-in-shops, and sales to wholesale customers and through independent third party distributors.

• Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including e-commerce sites, sales to wholesale customers, through concession shop-in-shops and through independent third party distributors.

• Stuart Weitzman - Includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, including e-commerce sites, sales to wholesale customers and through numerous independent third party distributors.

Each of our brands is unique and independent, while sharing a commitment to innovation and authenticity defined by distinctive products and differentiated customer experiences across channels and geographies.

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Moving with greater agility, simplifying internal processes and empowering teams to act quickly to meet the rapidly changing needs of the consumer.

The Company believes the successful execution of these priorities will fuel desire for the Coach, Kate Spade and Stuart Weitzman brands, driving accelerated revenue growth, higher gross margins and substantial operating leverage across Tapestry’s portfolio.

Key strategies by brand include:

Deepening Engagement with Consumers through enhanced brand and cultural relevance, united by our values and purpose to be authentic, inclusive and embody the courageous spirit of New York City

Creating Innovative and Compelling Product to exceed the expectations of our target consumers by geography and customer segments

Driving Digital Sales and New Customer Recruitment by offering a true omnichannel experience

Accelerating Growth in China through tailored and optimized assortments, enhanced marketing and expanded reach across direct channels and third party online distribution

Enhancing Profitability through more focused assortments and a disciplined approach to promotions, resulting in continued Average Unit Retail ("AUR") improvements and higher gross margin.

In addition, achieving operational excellence by right-sizing SG&A cost structure and store fleet

Crystallizing the Brand’s Purpose and Returning to a Position of Strength by fulfilling our promise as a lifestyle brand representing joy, optimism and color, amplified through unique, best-in-class storytelling on a multi-category lifestyle platform

Instilling a Laser Focus on the Customer across all touchpoints, and fostering a community of women emotionally connected to and inspired by the Kate Spade brand story and values

Reenergizing and Growing Handbags and Leathergoods by reintroducing non-negotiable brand elements, rebuilding the core offering, and capitalizing on a new Signature platform

Leaning into Digital Strength by modernizing and creating engaging brand experiences across all of our digital platforms, fully unleashing the power of Kate Spade community and brand

Capturing Market Share and Improving Profitability by acquiring, re-engaging, and retaining customers, driving top and bottom line growth

Stuart Weitzman

Renewing the Brand’s Reputation for Fit, Comfort and Quality, listening and responding to our customer’s needs in order to design beautiful and on-trend shoes

Growing Key Categories by building a leading presence in boots, booties and sandals and expanding the casual assortment, while dramatically simplifying the product offering

Restoring Profitability by focusing distribution on those markets and channels of greatest opportunity, notably China where the brand has strong momentum and high margins

Strengthening Relationship with Wholesale Partners by providing relevant products and faster, more consistent execution

Establishing a Robust Digital Presence which supports best-in-class multi-media content and depth of assortment

Recent Developments

The Company achieved approximately $200 million of gross run rate expense savings in fiscal 2021 and remains on track to realize gross run-rate savings of $300 million.

In fiscal 2021, the Company continued to make meaningful progress against its Acceleration Program to sharpen its focus on the consumer, leverage data to lead with a digital-first mindset and transform into a leaner and more responsive organization:

• Recruited approximately 4 million new customers, including through our e-commerce channels in North America, representing gains versus prior year;

• Continued to deliver an increase in number of repeat transactions versus prior year and reactivated lapsed customers across brands ;

• Drove high-single digit revenue gains with Chinese consumers globally compared to pre-pandemic levels;

• Effectively reduced SKU counts by 40% to 45% and improved assortment productivity , supported by data and analytics, resulting in stronger overall AUR and gross margin through higher IMUs and lower promotional activity and increased inventory turn for the fiscal year;

• Optimized global fleet with 59 net closures in FY21 compared to FY20, representing a net decrease of 90 doors over the past two years.

Covid-19 Pandemic

Tapestry began fiscal 2020 with a focus on profitable growth through innovation, global expansion, investing in digital capabilities, and harnessing the power of a multi-brand model.

However, the Covid-19 pandemic has had significant impacts on our business globally.

As a result, while the Company remains confident in its long-term strategy, its short-term focus has pivoted towards adapting to these challenges.

The Covid-19 virus has impacted regions all around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities.

Consequently, the spread of Covid-19 has caused significant global business disruptions, including full and partial store closures.

As a result of the widespread impact of Covid-19, Tapestry had temporarily closed the majority of its directly operated stores in globally for some period of time to help reduce the spread of Covid-19.

As of the end of the fiscal year, the vast majority of the Company's stores have reopened for either in-store or curb-side service.

Many of our wholesale and licensing partners have also closed their bricks and mortar stores as required by government orders during the third and fourth quarter.

In response to this challenging environment, the Company's focus is on the following actions:

A Focus on Revenue

Re-opening stores as quickly as possible, while following governmental and public health guidelines;

Aggressively leaning into the global digital opportunity for all brands.

Ensuring that our e-commerce platforms and distribution centers remain operational across all major regions.

Eliminating Non-Essential Operating Costs Across All Key Areas of Spend

Driving SG&A savings through the right-sizing of marketing expenses to adjust to the lower revenue base, while maintaining a focus on digital;

reducing fixed costs such as rent;

driving procurement savings, including reducing external third party services.

Strengthening the Company’s Balance Sheet and Enhancing Financial Flexibility

Tightly managing inventories by reflowing product introductions and cancelling inventory receipts for late summer/early fall 2020;

Reducing capital expenditures by delaying or cancelling new store openings, while prioritizing investment in high-return projects aligned with the multi-year growth agenda, notably in digital.

Preserving Liquidity

Drawing down $700 million from its $900 million Revolving Credit Facility to add to cash balances;

Suspending its quarterly cash dividend beginning in the fourth quarter of fiscal 2020;

Suspending its share repurchase program.

Addressing Organizational Costs

Reducing our corporate and retail workforce;

Applying for available government payroll subsidy programs in various countries to mitigate payroll expense;

A 50% reduction in cash compensation for the Board of Directors and salary reductions of 5% to 20%, depending on salary level, for all corporate employees above a certain salary threshold, expected to remain in effect until up to the end of fiscal year 2021;

Cancellation of our Annual Incentive Plan for fiscal year 2020, which resulted in no bonuses being paid for fiscal 2020;

Elimination of merit salary increases for all employees for fiscal year 2021.

Consequently, the spread of Covid-19 has caused significant global business disruptions.

As a result of the widespread impact of Covid-19, Tapestry had temporarily closed the majority of its directly operated stores globally for some period of time to help reduce the spread of Covid-19.

The vast majority of the Company's stores re-opened for either in-store or pick-up service and they have continued to operate since then, however, some store locations have experienced temporary re-closures or are operating under tighter restrictions in compliance with local government regulation.

Many of the Company's wholesale and licensing partners also closed their bricks and mortar stores as required by government orders during the third and fourth quarters of fiscal 2020, and while the majority of stores have reopened, they have also been subject to temporary re-closures and tighter capacity restrictions operating in compliance with the rules of certain local governments.

In addition, certain of the Company’s supply chain partners, particularly those in Southeast Asia, have experienced closures due to an increase in Covid-19 cases in the region, which has and may continue to negatively impact the Company’s supply chain operations.

However, there is still uncertainty around the duration of these disruptions and the possibility of other effects on the business.

We will continue to monitor the rapidly evolving situation pertaining to the Covid-19 outbreak, including guidance from international and domestic authorities.

In these circumstances, the Company will need to make adjustments to our operating plan.

Refer to Part I, Item 1A.

"Risk Factors" herein for further information.

In response to the challenges that Covid-19 has imposed on our business, the Company implemented the following actions to mitigate these headwinds:

• Re-opened stores as quickly as possible, while following governmental and public health guidelines.

• Driving with a digital-first mindset for all brands.

Implemented practices designed to support the continued operations of our e-commerce platforms and fulfillment centers remain operational across all major regions.

• Reduced capital expenditures through fleet optimization through fiscal 2021.

• Drove SG&A savings, including actions taken under the Acceleration Program, through the reduction of corporate and retail workforce, right-sizing of marketing expenses, reduction of fixed costs such as rent as well as procurement savings, including reducing external third party services.

• Did not pay out bonuses under the Annual Incentive Plan for fiscal year 2020, eliminated merit salary increases for all employees and temporarily reduced compensation for the Board of Directors and corporate employees above a certain salary threshold.

During the second quarter of fiscal 2021, compensation resumed normal levels.

• Tightly managed inventories by reflowing product introductions and cancelling inventory receipts as well as planned reduction of SKUs.

• Drew down $700 million from its $900 million Revolving Credit Facility to add to cash balances, all of which was repaid during fiscal 2021.

• Suspended its quarterly cash dividend and share repurchase program beginning in the fourth quarter of fiscal 2020.

Subsequent to the fiscal 2021 year end, the Company’s Board of Directors approved the reinstatement of the Company's shareholder return program and declared a quarterly dividend of $0.25 per common share payable on September 27, 2021.

The Company also intends to repurchase approximately $500.0 million worth of stock in fiscal 2022, of which $600.0 million is remaining under its current authorization.

The Company will continue to consider near-term exigencies and the long-term financial health of the business as clear steps are taken to mitigate the consequences of the Covid-19 pandemic.

CARES Act Tax Impact

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law in response to the Covid-19 pandemic.

The CARES Act contains numerous income tax provisions, such as refundable payroll tax credits, deferral of the employer portion of certain payroll taxes, net operating loss carrybacks, modifications to net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

The CARES Act require the Company to make significant judgments and estimates in the interpretation of the law and in the calculation of the provision for income taxes.

However, additional guidance may be issued by the Internal Revenue Service (“IRS”), the Department of the Treasury, or other governing body that may significantly differ from our interpretation of the law, which may result in a material adverse effect on our business, cash flow, results of operations, or financial conditions.

Acceleration Program

The Company is undergoing a review of its business under the Acceleration Program reflecting:

(i) actions to streamline the Company's organization;

(ii) select store closures as the Company optimizes its fleet (including store closure costs incurred as the Company exits certain regions in which it currently operates);

and (iii) professional fees and compensation costs incurred as a result of the development and execution of the Company's comprehensive strategic initiatives aimed at increasing profitability.

Including charges taken in fiscal 2020 , Company expects to incur total pre-tax charges of approximately $185 - $200 million related to the Acceleration Program with most of the remaining charges expected in fiscal 2021.

Refer to Note 7, "Restructuring Activities," and the "GAAP to Non-GAAP Reconciliation," herein, for further information.

The Company estimates that it will realize approximately $300 million in gross run rate expense savings from these initiatives, including $200 million projected for fiscal 2021.

Fiscal 2020 Impairments

During fiscal 2020, Stuart Weitzman results continued to be negatively impacted by trailing impacts of operational challenges first experienced in 2018.

While the Company addressed these challenges through investment in talent, operational process improvements, and a focus on the fashion sensibility of the core design aesthetic, the Brand experienced a reduction in demand.

This reduction in cash flows generated by the brand as well as the decline in future expected cash flows was exacerbated by the Covid-19 pandemic, which resulted in lower sales driven by full and partial closures of a significant portion of our stores globally.

The CARES Act contains numerous tax provisions, such as refundable payroll tax credits, deferral of the employer portion of certain payroll taxes, net operating loss carrybacks, modifications to net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property.

Additionally, on December 27, 2020, the Covid-19 stimulus package was signed into law, which contained enhancements to certain tax credits enacted under the CARES Act.

Certain provisions impacted the results of the Company.

Refer to Note 16, "Income Taxes" for additional information on these provisions.

Since March 2020, the governments of numerous countries in which we operate have issued relief packages in response to Covid-19.

These packages include, amongst other things, extended filing deadlines, wage subsidies, social security relief, rent relief and deferred tax payments.

The Company is seeking select relief under these provisions where eligible.

The Company has to make certain judgements in interpretation of the law and/or await guidance from the local authorities.

The Company recorded $95.0 million of tax benefits in fiscal 2021, most notably as a result of the Net Operating Loss ("NOL") carryback claim.

During fiscal 2021, the Company recorded $45.8 million of impairment charges related to lease right-of-use assets, which were primarily driven by the continued impacts of Covid-19.

Refer to Note 12, "Fair Value Measurements" for further information.

In addition, the Company recognized a reversal of raw material reserves of $8.1 million, which was established in fiscal 2020 as a result of the projected impact of Covid-19.

During fiscal 2020, the Company recorded $210.7 million of impairment charges to goodwill and $267.0 million of impairment charges to indefinite-lived brand intangible assets for the Stuart Weitzman reporting unit.

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During fiscal 2020, the Company recorded $267.7 million of impairment charges related to store assets, inclusive of lease assets as well as purchase commitments.

Impairment charges recorded in the first quarter related to an accounting policy change made in conjunction with the adoption of the new lease accounting standard, whereas the impairment charges recorded in the third and fourth quarter were primarily driven by lower cash flows due to Covid-19.

Refer to Note 12, "Fair Value Measurements," and Note 18, "Segment Information," for further information.

During fiscal 2020, the Company recorded $104.0 million of increases in inventory reserves, similarly driven by current and expected changes to operations as a result of Covid-19.

ERP Implementation

In fiscal 2020, the Company completed its multi-year Enterprise Resource Planning ("ERP") implementation.

Key milestones were achieved as follows:

Implementation of a global consolidation system which provided a common platform for financial reporting.

Deployment of global finance and accounting systems for Corporate, Coach and Stuart Weitzman and global finance, accounting, supply chain and human resource information systems for Kate Spade.

Supply chain functions for Coach and Stuart Weitzman were implemented at the beginning of fiscal 2020.

The Company is also implementing a point-of-sale system which supports all in-store transactions, distributes management reporting for each store, and collects sales and payroll information on a daily basis.

This daily collection of store sales and inventory information results in early identification of business trends and provides a detailed baseline for store inventory replenishment.

The implementation is complete for Coach stores in North America and Europe and expected to be implemented for Stuart Weitzman stores in North America in fiscal 2021 and Kate Spade North America in fiscal 2022.

Organization-related and Integration Costs

During fiscal 2019, the Company acquired certain distributors for the Kate Spade and Stuart Weitzman brands.

During fiscal 2018, the Company acquired Kate Spade & Company, certain distributors for the Coach and Stuart Weitzman brands and obtained operational control of the Kate Spade Joint Ventures.

The operating results of the respective entities have been consolidated in the Company's operating results commencing on the date of each acquisition.

As a result of these acquisitions, the Company incurred charges related to the integration and acquisition of the businesses.

These charges are primarily associated with organization-related costs, professional fees, one-time write-off of inventory and limited life purchase accounting adjustments.

The Company does not expect there to be any charges in fiscal 2021.

Refer to Note 6, "Integration," Note 4, "Acquisitions," and the "GAAP to Non-GAAP Reconciliation," herein, for further information.

Chief Executive Officer and Chief Financial Officer Changes

On September 4, 2019, the Company announced that Victor Luis departed as the Company’s Chief Executive Officer and resigned from the Board of Directors, effective as of September 3, 2019.

On September 4, 2019, the Company named Jide Zeitlin, Chairman of the Board of Directors, as the Company’s Chief Executive Officer.

In connection with Mr.

Luis’s departure, the Company and Mr.

Luis entered into a separation and mutual release agreement.

On July 21, 2020, the Company announced that Jide Zeitlin resigned as the Company’s Chairman, Chief Executive Officer and from the Company's Board of Directors, effective July 20, 2020.

Effective July 21, 2020, the Company appointed Joanne Crevoiserat, the Company's Chief Financial Officer, as Interim Chief Executive Officer.

The Company also appointed Andrea Shaw Resnick, the Company's Global Head of Investor Relations and Corporate Communications, as Interim Chief Financial Officer.

Refer to Note 22, "Subsequent Events," for further information.

During fiscal 2020, the Company recorded $104.0 million of increases in inventory reserves, driven by the impact of Covid-19.

Acceleration Program

The Company has implemented a strategic growth plan after undergoing a review of its business under the Acceleration Program and expects to incur certain costs reflecting:

(i) actions to streamline the Company's organization;

(ii) select store closures as the Company optimizes its fleet (including store closure costs incurred as the Company exits certain regions in which it currently operates);

and (iii) professional fees and share-based compensation costs incurred as a result of the development and execution of the Company's comprehensive strategic initiatives aimed at increasing profitability.

Including charges taken in fiscal 2020 and 2021, Company expects to incur total pre-tax charges of approximately $205 - $220 million related to the Acceleration Program.

The Acceleration Program is expected to be substantially complete by the end of fiscal 2022.

The Company achieved approximately $200 million of gross run rate expense savings in fiscal 2021 and remains on track to realize gross run-rate savings of $300 million.

Refer to Note 7, "Restructuring Activities," and the "GAAP to Non-GAAP Reconciliation," herein, for further information.

Current Trends and Outlook

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Consumer preferences, macroeconomic conditions, foreign currency fluctuations and geopolitical events continue to impact overall levels of consumer travel and spending on discretionary items, with inconsistent patterns across channels and geographies.

As previously noted, Covid-19 was officially declared a global pandemic by the World Health Organization in March 2020.

The virus has impacted regions all around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities.

These requirements have resulted in full and partial store closures globally, causing a significant reduction in sales starting in the third quarter of fiscal 2020.

While the vast majority of the Company's stores have reopened for either in-store or curb-side service as of the end of the fiscal year, stores may be required to close again for an extended period of time due to the possibility of a "second wave" of increased infections.

Covid-19 may also cause disruptions in the Company’s supply chain, resulting in facility closures, labor instability, potential inability to source raw materials and disrupted operating procedures in attempts to curb the spread of Covid-19 within our third-party manufacturers, distribution centers, and other vendors.

The Company’s e-commerce sites continue to operate, subject to the local guidance related to Covid-19 surrounding our distribution centers.

The disruptions related to Covid-19 have materially adversely impacted our operations, cash flow, and liquidity.

There is uncertainty around the duration of these disruptions and the possibility of other effects on the business.

We will continue to monitor the rapidly evolving situation pertaining to the Covid-19 outbreak, including guidance from international and domestic authorities.

In these circumstances, the Company will need to make adjustments to our operating plan.

Refer to Part I, Item 1A.

“Risk Factors” for further information.

Several organizations that monitor the world’s economy, including the International Monetary Fund, observed that global expansion has declined significantly in the last year and the outbreak of the Covid-19 pandemic has negatively shocked the global economy, contributing to further anticipated declines for the remainder of calendar 2020.

These organizations expect recovery to be more gradual than initially anticipated based on the economic activity displayed by economies with declining infection rates.

Economic activity has been marked by persistent social distancing and declines in productivity as businesses struggle to ramp up operations in response to risks and regulations related to Covid-19.

For economies that struggle with infection control, the negative impacts will be amplified due to lengthier lockdown provisions.

While intensifying uncertainty surrounds future economic growth, multilateral cooperation and support from local policymakers is pivotal in shaping the economic outlook.

Furthermore, currency volatility, political instability and potential changes to trade agreements may contribute to a worsening of the macroeconomic environment.

During fiscal 2020, Hong Kong SAR, China has been the subject of worsening political unrest, as demonstrated through ongoing public demonstrations and protests, which has impacted and is expected to continue to impact our business.

In addition, during fiscal 2019 and continuing into fiscal 2020, the Trump Administration and China have both imposed new tariffs on the importation of certain product categories into the respective country.

Continued increases in trade tensions could impact the Company's ability to grow its business with the Chinese consumer globally.

Additional macroeconomic impacts include but are not limited to the United Kingdom ("U.K.") voting to leave the European Union ("E.U."), commonly known as "Brexit." On March 29, 2017, the U.K.

triggered Article 50 of the Lisbon Treaty formally starting a 2 year negotiation period with the E.U., which was subsequently extended to January 31, 2020.

The virus has impacted regions all around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities.

These requirements have resulted in closures of our directly operated stores and locations of our wholesale partners globally, causing a significant reduction in sales starting in the third quarter of fiscal 2020.

While the vast majority of the Company's stores reopened for either in-store or curb-side service and have continued to operate since then, some store locations have experienced temporary re-closures or are operating under tighter restrictions in compliance with local government regulation, and other stores may be required to close again for an extended period of time due to the possibility of a resurgence of increased infections.

The Company has noted that certain geographies have experienced increased infection rates due to new variants of Covid-19, resulting in a decline in store traffic in these regions.

The Company currently expects that this trend will not have a material adverse impact on its financial results for Fiscal 2022.

However, if such infections rates continue to rise resulting in further declines in store traffic, the Company's financial results may be negatively impacted from that which is currently expected.

Furthermore, Covid-19 has and may continue to cause disruptions in the Company’s supply chain within our fulfillment centers and logistics providers, and has resulted in temporary closures in our third-party manufacturers.

The Company exports a significant amount of its products from Southeast Asia, which has and continues to experience increased rates of Covid-19.

The Company has been experiencing other global logistics challenges, such as delays as a result of port congestion, vessel availability and container shortages for imported products that are expected to persist in fiscal 2022, which will result in the Company using air freight with greater frequency than in the past.

In addition, the Company has recently incurred higher freight costs, as rates for ocean and air shipments have significantly increased from those experienced in the beginning of fiscal 2021.

Several organizations that monitor the world’s economy, including the International Monetary Fund, observed that the outbreak of the Covid-19 pandemic has negatively shocked the global economy.

Recent economic data forecasts a return to global growth for the remainder of calendar 2021 and 2022.

Projected growth is contingent on anticipated legislation of additional fiscal support and improved health metrics.

Moreover, there are factors that may hinder a global economic rebound, including expected inflationary pressures in calendar 2022.

Additionally, there are still lingering uncertainties due to Covid-19 that may limit growth rates and progress, such as expected vaccine rollouts and mutations of the virus.

Thus, the revisions to estimated growth are heavily dependent on continued strong multilateral cooperation to bring the pandemic under control, including funding and support from local policymakers to make strategic investments that aid economic activity.

Certain markets around the world have been faced with labor shortages, which have not impacted the Company's operations to date.

If these trends continue or worsen, it could potentially affect the Company's ability to attract and retain employees for its retail and fulfillment locations in the future.

Furthermore, currency volatility, political instability and potential changes to trade agreements or duty rates may contribute to a worsening of the macroeconomic environment or adversely impact our business.

Since fiscal 2019, the U.S.

and China have both imposed tariffs on the importation of certain product categories into the respective country, with limited progress in negotiations to reduce or remove the tariffs.

However, while the U.S.

has participated in multi-national negotiations on trade agreements and duty rates, there continues to be a possibility of increases in tariffs on goods imported into the U.S.

from other countries.

Furthermore, certain tax legislation contemplated by the Biden Administration, including increasing the U.S.

corporate tax rate, and by the Organization for Economic Co-operation and Development, would have an adverse impact on our tax rate and financial results if passed as currently communicated.

Additional macroeconomic impacts include but are not limited to the United Kingdom ("U.K.") voting to leave the European Union ("E.U."), commonly known as "Brexit." The U.K.

officially terminated its membership of the E.U.

on January 31, 2020 under the terms of a withdrawal agreement concluded between the U.K.

and has now entered into a transition phase until December 31, 2020.

During the transition phase, the U.K.

will generally continue operating as if it were still a member of the E.U.

Trade talks between the E.U.

and U.K., to determine their future relationship, are still underway.

passed on the opportunity to extend the transition phase beyond December 31, 2020, and as such, if a trade deal is not reached by December 31, 2020, the U.K.

can expect checks and tariffs on products going to and coming from the E.U.

beginning on January 1, 2021.

and concluded the transition phase on December 31, 2020.

The Company does not expect Brexit to materially impact our business.

As part of our efforts to improve our working capital efficiency, we have worked with certain suppliers to revisit terms and conditions, including the extension of payment terms.

As an alternative to our payment terms, available to certain suppliers is a voluntary supply chain finance (“SCF”) program that enables our suppliers to sell their receivables from the Company to a global financial institution on a non-recourse basis at a rate that leverages our credit rating.

We do not have the ability to refinance or modify payment terms to the global financial institution through the SCF program.

No guarantees are provided by the Company or any of our subsidiaries under the SCF program.

We will continue to monitor these trends and evaluate and adjust our operating strategies and cost management opportunities to mitigate the related impact on our results of operations, while remaining focused on the long-term growth of our business and protecting the value of our brands.

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Fiscal Year Ended

June 27, 2020

June 29, 2019

July 3, 2021 June 27, 2020 Variance

(millions, except per share data)

net sales Amount % of

net sales Amount %

Net sales $ 5,746.3 100.0 % $ 4,961.4 100.0 % $ 784.9 15.8 %

Gross profit 4,081.9 71.0 3,239.3 65.3 842.6 26.0

SG&A expenses

Operating income (loss)

3,113.9 54.2 3,790.1 76.4 (676.2) (17.8)

Operating income (loss) 968.0 16.8 (550.8) (11.1) 1,518.8 NM

Interest expense, net 71.4 1.2 60.1 1.2 11.3 18.8

Other expense (income)

Income (Loss) before provision for income taxes

Provision for income taxes

Net income (loss)

Other expense (income) (0.7) — 13.3 0.3 (14.0) NM

Income (Loss) before provision for income taxes 897.3 15.6 (624.2) (12.6) 1,521.5 NM

Provision for income taxes 63.1 1.1 27.9 0.7 35.2 NM

Net income (loss) 834.2 14.5 (652.1) (13.1) 1,486.3 NM

Net income (loss) per share:

Basic $ 3.00 $ (2.34) $ 5.34 NM

Diluted $ 2.95 $ (2.34) $ 5.29 NM

NM - Not meaningful

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Fiscal 2021 Items

Fiscal Year Ended June 27, 2020

Fiscal Year Ended July 3, 2021

Items affecting comparability

(As Reported)

ERP Implementation

Organization-related & Integration costs

Acceleration Program

Non-GAAP Basis

(As Reported) CARES Act Tax Impact Impairment Acceleration Program Non-GAAP Basis

(Excluding Items)

(millions, except per share data)

Coach 3,149.0 — 8.1 — 3,140.9

Kate Spade 768.4 — — — 768.4

Stuart Weitzman 164.5 — — — 164.5

Gross profit (1)

$ 4,081.9 $ — $ 8.1 $ — $ 4,073.8

Coach 1,836.9 — 20.4 21.9 1,794.6

Kate Spade 659.9 — 19.3 4.4 636.2

Stuart Weitzman 173.1 — 6.1 (2.5) 169.5

Corporate 444.0 — — 65.8 378.2

SG&A expenses $ 3,113.9 $ — $ 45.8 $ 89.6 $ 2,978.5

Coach 1,312.1 — (12.3) (21.9) 1,346.3

Kate Spade 108.5 — (19.3) (4.4) 132.2

Stuart Weitzman (8.6) — (6.1) 2.5 (5.0)

Corporate (444.0) — — (65.8) (378.2)

Operating income (loss) $ 968.0 $ — $ (37.7) $ (89.6) $ 1,095.3

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In fiscal 2021 the Company incurred charges as follows:

ERP Implementation - Total charges represent technology implementation costs.

Refer to the "Executive Overview" herein for further information.

Organization-related & Integration Costs - Total charges represent integration costs primarily related to professional fees.

Refer to the "Executive Overview" herein and Note 6, "Integration," for more information.

Impairment - Total charges are primarily due to impairment charges on the indefinite-lived brand intangible asset and goodwill for Stuart Weitzman, impairment charges on property and equipment assets and lease ROU assets, as well as increases in inventory reserves.

Refer to Note 12, "Fair Value Measurements," Note 15, "Goodwill and Other Intangible Assets," and Note 18, "Segment Information," for further information.

Acceleration Program - Total charges, incurred under the Acceleration Program, are primarily due to organization-related costs as a result of severance and store closures charges.

Store closure charges represent lease termination penalties, removal or modification of lease assets and liabilities established in connection with the adoption of the new lease accounting standard, establishing inventory reserves, accelerated depreciation and severance.

Refer to the "Executive Overview" and Note 7, "Restructuring Activities," herein for further information.

These actions taken together increased the Company's SG&A expenses by $871.2 million , Cost of sales by $118.0 million and Provision for income taxes by $65.9 million , negatively impacting net income by $923.3 million , or $(3.31) per diluted share.

• CARES Act Tax Impact - Total amount primarily relates to tax benefits, most notably as a result of the NOL carryback claim.

Refer to Note 16, "Income Taxes" for further information.

• Acceleration Program - Total charges incurred under the Acceleration Program are primarily professional fees incurred as a result of the development and execution of the Company's comprehensive strategic initiatives, share-based compensation, as well as actions to streamline the Company's organization, which include severance.

Refer to the "Executive Overview" herein and Note 7, "Restructuring Activities," for further information.

• Impairment - Total adjustments are primarily due to impairment charges on lease ROU assets, as well as a reversal of raw material reserves which was established in fiscal 2020 as a result of the projected impact of Covid-19.

Refer to the "Executive Overview" herein and Note 12, "Fair Value Measurements," for further information.

These actions taken together increased the Company's SG&A expenses by $135.4 million, decreased Cost of sales by $8.1 million and Provision for income taxes by $120.4 million, negatively impacting net income by $6.9 million, o r $0.02 pe r diluted share.

Fiscal 2020 Items

1 unchanged sentence

Items affecting comparability

(As Reported)

ERP Implementation

Integration & Acquisition

Impact of Tax Legislation

Non-GAAP Basis

(As Reported) ERP Implementation Organization-related & Integration costs Impairment Acceleration Program Non-GAAP Basis

(Excluding Items)

(millions, except per share data)

Coach 2,411.6 — (0.1) (61.9) — 2,473.6

Kate Spade 682.9 — (1.2) (32.3) — 716.4

Stuart Weitzman 144.8 — (4.3) (9.8) (8.4) 167.3

Gross profit (1)

$ 3,239.3 $ — $ (5.6) $ (104.0) $ (8.4) $ 3,357.3

Coach 1,822.2 — 0.5 116.7 18.5 1,686.5

Kate Spade 782.2 — 0.1 92.9 13.6 675.6

Stuart Weitzman 766.2 — (2.0) 526.7 17.6 223.9

Corporate 419.5 28.5 29.2 — 28.9 332.9

SG&A expenses $ 3,790.1 $ 28.5 $ 27.8 $ 736.3 $ 78.6 $ 2,918.9

Coach 589.4 — (0.6) (178.6) (18.5) 787.1

Kate Spade (99.3) — (1.3) (125.2) (13.6) 40.8

Stuart Weitzman (621.4) — (2.3) (536.5) (26.0) (56.6)

Corporate (419.5) (28.5) (29.2) — (28.9) (332.9)

Operating income (loss) $ (550.8) $ (28.5) $ (33.4) $ (840.3) $ (87.0) $ 438.4

5 unchanged sentences

• ERP Implementation - Total charges represent technology implementation costs.

Refer to the "Executive Overview" herein for further information.

Integration & Acquisition - Total charges primarily represent integration and acquisition costs related to organization-related costs, professional fees, one-time write-off of inventory and limited life purchase accounting adjustments.

Refer to the "Executive Overview" herein and Note 6, "Integration," for more information.

Impact of Tax Legislation - Total charges primarily related to the net impact of the transition tax and re-measurement of deferred tax balances.

Refer to the "Executive Overview" herein and Note 16, "Income Taxes," for further information.

These actions taken together increased the Company's SG&A expenses by $103.5 million and cost of sales by $27.8 million , decreased the provision for income taxes by $26.0 million , negatively impacting net income by $105.3 million , or $0.36 per diluted share.

• Organization-related & Integration Costs - Total charges represent integration costs primarily related to professional fees.

Refer to Note 6, "Integration," for more information.

• Impairment - Total charges are primarily due to impairment charges on the indefinite-lived brand intangible asset and goodwill for Stuart Weitzman, impairment charges on property and equipment assets and lease ROU assets, as well as increases in inventory reserves.

Refer to Note 12, "Fair Value Measurements," Note 15, "Goodwill and Other Intangible Assets," and Note 18, "Segment Information," for further information.

• Acceleration Program - Total charges, incurred under the Acceleration Program, are primarily due to organization-related costs as a result of severance and store closures charges.

Refer to the "Executive Overview" herein and Note 7, "Restructuring Activities," for further information.

These actions taken together increased the Company's SG&A expenses by $871.2 million and Cost of sales by $118.0 million and decreased the Provision for income taxes by $65.9 million, negatively impacting net income by $923.3 million, or $3.31 per diluted share.

Tapestry, Inc.

2 unchanged sentences

The change in net sales and gross margin in fiscal 2021 compared to fiscal 2020 has been presented both including and excluding currency fluctuation effects.

Net sales in fiscal 2020 decreased 17.7% or $1.07 billion to $4.96 billion .

Excluding the effects of foreign currency, net sales decreased by 17.5% or $1.05 billion .

This decrease was driven by the impact of the Covid-19 outbreak on our business.

Gross profit decreased 20.1% or $814.4 million to $ 3.24 billion in fiscal 2020 from $ 4.05 billion in fiscal 2019 .

The Company has provided comparisons to certain fiscal year 2019 results, which the Company believes is useful to investors and others in evaluating the Company’s results, due to the significant impact of the Covid-19 pandemic on the Company’s operations and financial results, notably in the second half of fiscal year 2020.

Fiscal Year Ended Variance

July 3, 2021 June 27, 2020 Amount % Constant Currency Change % Change versus FY19

Coach $ 4,253.1 $ 3,525.7 $ 727.4 20.6 % 18.6 % (0.4) %

Kate Spade 1,210.0 1,149.5 60.5 5.3 4.6 (11.5)

Stuart Weitzman 283.2 286.2 (3.0) (1.0) (3.4) (27.3)

Total Tapestry $ 5,746.3 $ 4,961.4 $ 784.9 15.8 14.1 (4.7)

Net sales in fiscal 2021 increased 15.8% or $784.9 million to $5.75 billion.

Excluding the impact of foreign currency, net sales increased by 14.1% or $699.0 million.

Included in net sales of $5.75 billion in fiscal 2021 is the favorable impact of the 53rd week, which resulted in incremental net revenues of $92.7 million.

• Coach Net Sales increased 20.6% or $727.4 million to $4.25 billion in fiscal 2021.

Excluding the impact of foreign currency, net sales increased 18.6% or $656.4 million.

The following discussion is presented excluding the favorable impact of the 53rd week to net sales of $67.7 million and the impact of foreign currency.

This increase is primarily attributed to a net increase of $517.5 million in net global retail sales driven by higher global e-commerce sales and store sales in mainland China, partially offset by lower store sales in North America, Europe and Other Asia, including Japan.

Wholesale sales also increased $64.8 million primarily due to growth of the wholesale business in mainland China.

• Kate Spade Net Sales increased 5.3% or $60.5 million to $1.21 billion in fiscal 2021.

Excluding the impact of foreign currency, net sales increased 4.6% or $52.5 million.

The following discussion is presented excluding the favorable impact of the 53rd week to net sales of $21.7 million and the impact of foreign currency.

This increase is primarily due to a net increase of $79.5 million in net global retail sales driven by higher global e-commerce sales, partially offset by lower stores sales in Other Asia, notably Japan, North America and Europe, due to the Covid-19 outbreak.

This was partially offset by a decrease in wholesale sales of $50.8 million due to the strategic pullback in disposition and lower demand as a result of the Covid-19 outbreak.

• Stuart Weitzman Net Sales decreased by 1.0% or $3.0 million to $283.2 million in fiscal 2021.

Excluding the impact of foreign currency, net sales decreased 3.4% or $9.9 million.

The following discussion is presented excluding the favorable impact of the 53rd week to net sales of $3.3 million and the impact of foreign currency.

This decrease is primarily due to a decline in the retail business of $16.1 million primarily driven by store closures related to fleet optimization under the Acceleration Program and market exits, partially offset by increase in store sales in mainland China and an increase in global e-commerce sales.

Fiscal Year Ended

July 3, 2021 June 27, 2020 Variance

Amount % of Net Sales Amount % of Net Sales Amount %

Coach $ 3,149.0 74.0 % $ 2,411.6 68.4 % $ 737.4 30.6 %

Kate Spade 768.4 63.5 682.9 59.4 85.5 12.5

Stuart Weitzman 164.5 58.1 144.8 50.6 19.7 13.6

Tapestry $ 4,081.9 71.0 $ 3,239.3 65.3 $ 842.6 26.0

Gross profit increased 26.0% or $842.6 million to $4.08 billion in fiscal 2021 from $3.24 billion in fiscal 2020.

Gross margin for fiscal 2021 was 71.0% as compared to 65.3% in fiscal 2020.

Excluding items affecting comparability of $118.0 million in fiscal 2020 and $27.8 million in fiscal 2019 , as discussed in the "GAAP to Non-GAAP Reconciliation" herein, gross profit decreased 17.7% or $724.2 million to $3.36 billion in fiscal 2020 , and gross margin remained at 67.7% in fiscal 2020 and fiscal 2019 .

This decrease in gross profit is primarily driven by decreases in Coach of $524.7 million , in Kate Spade of $153.5 million and in Stuart Weitzman of $46.0 million .

Selling, General and Administrative Expenses

Excluding items affecting comparability of a reduction of expense of $8.1 million in fiscal 2021 and $118.0 million in fiscal 2020, as discussed in the "GAAP to Non-GAAP Reconciliation" herein, gross profit increased 21.3% or $716.5 million to $4.07 billion in fiscal 2021, and gross margin increased 320 basis points to 70.9% in fiscal 2021 and 67.7% in fiscal 2020 and was not materially impacted by foreign currency.

The Company includes inbound product-related transportation costs from our service providers within Cost of sales.

1 unchanged sentence

for this reason, our gross margins may not be comparable to that of entities that include all costs related to their distribution network in Cost of sales.

SG&A expenses increased 17.2% or $556.1 million to $3.79 billion in fiscal 2020 as compared to $3.23 billion in fiscal 2019 .

As a percentage of net sales, SG&A expenses increased to 76.4% during fiscal 2020 as compared to 53.7% during fiscal 2019 .

Excluding items affecting comparability of $871.2 million in fiscal 2020 and $103.5 million in fiscal 2019 , SG&A expenses decreased 6.8% or $211.6 million to $2.92 billion from $3.13 billion in fiscal 2019 ;

and SG&A expenses as a percentage of net sales increased to 58.8% in fiscal 2020 from 51.9% in fiscal 2019 .

This decrease in SG&A expenses is primarily due to decreases in Coach of $154.4 million , Corporate expenses of $42.8 million , Kate Spade of $8.1 million and Stuart Weitzman of $6.3 million .

Corporate expenses, which are included within SG&A expenses discussed above but are not directly attributable to a reportable segment, decreased 5.2% or $23.1 million to $419.5 million in fiscal 2020 as compared to $442.6 million in fiscal 2019 .

Excluding items affecting comparability of $86.6 million and $66.9 million in fiscal 2020 and fiscal 2019 , respectively, SG&A expenses decreased 11.4% or $42.8 million to $332.9 million in fiscal 2020 as compared to $375.7 million in fiscal 2019 .

This decrease in SG&A expenses was primarily due to lower compensation cost mostly related to the cancellation of our Annual Incentive Plan for fiscal year 2020.

• Coach Gross Profit increased 30.6% or $737.4 million to $3.15 billion in fiscal 2021 from $2.41 billion in fiscal 2020.

Gross margin increased to 74.0% in fiscal 2021 as compared to 68.4% in fiscal 2020.

Excluding items affecting comparability of a reduction of expense of $8.1 million and $62.0 million in fiscal 2021 and fiscal 2020, respectively, Coach gross profit increased 27.0% or $667.3 million to $3.14 billion from $2.47 billion in fiscal 2020, and gross margin increased 370 basis points to 73.9% from 70.2% in fiscal 2020 and was not materially impacted by foreign currency.

This increase in gross margin is primarily attributed to reduced promotional activity.

• Kate Spade Gross Profit increased 12.5% or $85.5 million to $768.4 million in fiscal 2021 from $682.9 million in fiscal 2020.

Gross margin increased to 63.5% in fiscal 2021 from 59.4% in fiscal 2020.

Excluding items affecting comparability of $33.5 million in fiscal 2020, Kate Spade gross profit increased 7.3% or $52.0 million to $768.4 million from $716.4 million in fiscal 2020, and gross margin increased 120 basis points to 63.5% from 62.3% in fiscal 2020 and was not materially impacted by foreign currency.

This gross margin increase of 120 basis points is primarily due to reduced promotional activity and a strategic pullback in disposition, partially offset by higher inbound freight and duty expenses.

• Stuart Weitzman Gross Profit increased 13.6% or $19.7 million to $164.5 million in fiscal 2021 from $144.8 million in fiscal 2020.

Gross margin increased 750 basis points to 58.1% in fiscal 2021 from 50.6% in fiscal 2020.

Excluding items affecting comparability of $22.5 million in fiscal 2020, Stuart Weitzman gross profit decreased 1.7% or $2.8 million to $164.5 million from $167.3 million in fiscal 2020, and gross margin decreased 40 basis points to 58.1% in fiscal 2021 from 58.5% in fiscal 2020.

On a constant currency basis, gross margin decreased 260 basis points.

This decrease in gross margin is primarily due to channel mix and increased promotional activity.

Selling, General and Administrative Expenses

Fiscal Year Ended

July 3, 2021 June 27, 2020 Variance

Amount % of Net Sales Amount % of Net Sales Amount %

Coach $ 1,836.9 43.2 % $ 1,822.2 51.7 % $ 14.7 0.8 %

Kate Spade 659.9 54.5 782.2 68.0 (122.3) (15.6)

Stuart Weitzman 173.1 61.1 766.2 NM (593.1) (77.4)

Corporate 444.0 NA 419.5 NA 24.5 5.8

Tapestry $ 3,113.9 54.2 $ 3,790.1 76.4 $ (676.2) (17.8)

SG&A expenses decreased 17.8% or $676.2 million to $3.11 billion in fiscal 2021 as compared to $3.79 billion in fiscal 2020.

As a percentage of net sales, SG&A expenses decreased to 54.2% during fiscal 2021 as compared to 76.4% during fiscal 2020.

Excluding items affecting comparability of $135.4 million in fiscal 2021 and $871.2 million in fiscal 2020, SG&A expenses increased 2.0% or $59.6 million to $2.98 billion from $2.92 billion in fiscal 2020;

and SG&A expenses as a percentage of net sales decreased to 51.8% in fiscal 2021 from 58.8% in fiscal 2020.

This increase in SG&A expenses includes an increase in accrued Annual Incentive Plan expenses due to the cancellation of the Plan in fiscal 2020, higher marketing spend due to focus on digital and funding the endowment of the newly established Tapestry Foundation, partially offset by decreases as a result of actions taken as part of the Acceleration Program as well as benefits from wage subsidies and rent concessions.

• Coach SG&A Expenses increased 0.8% or $14.7 million to $1.84 billion in fiscal 2021 as compared to $1.82 billion in fiscal 2020.

As a percentage of net sales, SG&A expenses decreased to 43.2% in fiscal 2021 as compared to 51.7% in fiscal 2020.

Excluding items affecting comparability of $42.3 million and $135.7 million in fiscal 2021 and fiscal 2020, respectively, SG&A expenses increased 6.4% or $108.1 million to $1.79 billion in fiscal 2021 from $1.69 billion in fiscal 2020.

SG&A expenses as a percentage of sales decreased to 42.2% in fiscal 2021 from 47.8% in fiscal 2020.

This increase in SG&A expenses is primarily due to an increase in digital marketing spend and e-commerce related operational and selling costs in support of higher e-commerce sales, partially offset by a decline in occupancy costs and compensation costs primarily as a result of actions taken as part of the Acceleration Program.

• Kate Spade SG&A Expenses decreased 15.6% or $122.3 million to $659.9 million in fiscal 2021 from $782.2 million in fiscal 2020.

As a percentage of net sales, SG&A expenses decreased to 54.5% during fiscal 2021 as compared to 68.0% in fiscal 2020.

Excluding items affecting comparability of $23.7 million and $106.6 million in fiscal 2021 and fiscal 2020, respectively, SG&A expenses decreased 5.8% or $39.4 million to $636.2 million in fiscal 2021 compared to $675.6 million in fiscal 2020;

and SG&A expenses as a percentage of sales decreased to 52.6% in fiscal 2021 from 58.8% in fiscal 2020.

This decrease is due to a decline in occupancy costs, compensation costs and depreciation expense, primarily as a result of actions taken as part of the Acceleration Program, partially offset by an increase in digital marketing spend and e-commerce related operational and selling costs in support of higher e-commerce sales.

• Stuart Weitzman SG&A Expenses decreased 77.4% or $593.1 million to $173.1 million in fiscal 2021 as compared to $766.2 million in fiscal 2020.

Excluding items affecting comparability of $3.6 million in fiscal 2021 and $542.3 million in fiscal 2020, SG&A expenses decreased 24.3% or $54.4 million to $169.5 million in fiscal 2021 from $223.9 million in fiscal 2020;

and SG&A expenses as a percentage of net sales decreased to 59.9% in fiscal 2021 from 78.2% in fiscal 2020.

This decrease is primarily due to a decline in occupancy and compensation costs mainly as a result of fleet optimization under the Acceleration Program and market exits, as well as higher bad debt reserves in the prior year due to Covid-19.

• Corporate expenses, which are included within SG&A expenses discussed above but are not directly attributable to a reportable segment, increased 5.8% or $24.5 million to $444.0 million in fiscal 2021 as compared to $419.5 million in fiscal 2020.

Excluding items affecting comparability of $65.8 million and $86.6 million in fiscal 2021 and fiscal 2020, respectively, SG&A expenses increased 13.6% or $45.3 million to $378.2 million in fiscal 2021 as compared to $332.9 million in fiscal 2020.

This increase in SG&A expenses is primarily due to an increase in accrued Annual Incentive Plan expenses and the costs associated with the endowment of the newly established Tapestry Foundation, partially offset by the gain realized on the sale of our corporate office in Hong Kong SAR, China and on the deferred purchase price of the Kate Spade joint venture.

Operating Income (Loss)

Operating income decreased $1.37 billion to an operating loss of $550.8 million during fiscal 2020 as compared to operating income of $819.7 million in fiscal 2019 .

Fiscal Year Ended

July 3, 2021 June 27, 2020 Variance

Amount % of Net Sales Amount % of Net Sales Amount %

Coach $ 1,312.1 30.9 % $ 589.4 16.7 % $ 722.7 NM

Kate Spade 108.5 9.0 (99.3) (8.6) 207.8 NM

Stuart Weitzman (8.6) (3.1) (621.4) NM 612.8 98.6

Corporate (444.0) NA (419.5) NA (24.5) (5.8)

Tapestry 968.0 16.8 $ (550.8) (11.1) $ 1,518.8 NM

Operating income increased $1.52 billion to $968.0 million during fiscal 2021 as compared to operating loss of $550.8 million in fiscal 2020.

Operating margin was 16.8% in fiscal 2021 as compared to (11.1)% in fiscal 2020.

Excluding items affecting comparability of $989.2 million in fiscal 2020 and $131.3 million in fiscal 2019 , operating income decreased 53.9% or $512.6 million to $438.4 million from $951.0 million in fiscal 2019 ;

Excluding items affecting comparability of $127.3 million in fiscal 2021 and $989.2 million in fiscal 2020, operating income increased $656.9 million to $1.10 billion from $438.4 million in fiscal 2020;

and operating margin was 19.1% in fiscal 2021 as compared to 8.8% in fiscal 2020.

This decrease in operating income is primarily driven by declines in operating income in Coach of $370.3 million , in Kate Spade of $145.4 million and in Stuart Weitzman of $39.7 million , partially offset by a decrease in Corporate expenses of $42.8 million .

Included in operating income excluding items affecting comparability of $1.10 billion is $30.0 million from the favorable impact of the 53rd week in fiscal 2021.

• Coach Operating Income increased $722.7 million to $1.31 billion in fiscal 2021, resulting in an operating margin of 30.9%, as compared to $589.4 million and 16.7%, respectively in fiscal 2020.

Excluding items affecting comparability, Coach operating income increased $559.2 million to $1.35 billion from $787.1 million in fiscal 2020;

and operating margin was 31.7% in fiscal 2021 as compared to 22.3% in fiscal 2020.

This increase in operating income includes the favorable impact of the 53rd week in fiscal 2021 of $28.6 million and is due to an increase in gross profit, partially offset by higher SG&A expenses.

• Kate Spade Operating Income increased $207.8 million to an operating income of $108.5 million in fiscal 2021, resulting in an operating margin of 9.0% as compared to an operating loss of $99.3 million and operating margin of (8.6)% in fiscal 2020.

Excluding items affecting comparability, Kate Spade operating income increased $91.4 million to $132.2 million from $40.8 million in fiscal 2020, resulting in an operating margin of 10.9% as compared to 3.6% in fiscal 2020.

This increase in operating income includes the favorable impact of the 53rd week in fiscal 2021 of $4.7 million and is due to an increase in gross profit and lower SG&A expenses.

• Stuart Weitzman Operating Loss decreased $612.8 million to an operating loss of $8.6 million in fiscal 2021, as compared to an operating loss of $621.4 million in fiscal 2020.

Excluding items affecting comparability, Stuart Weitzman operating loss decreased $51.6 million to an operating loss of $5.0 million from an operating loss of $56.6 million in fiscal 2020;

and operating margin was (1.8)% in fiscal 2021 as compared to (19.8)% in fiscal 2020.

This decrease in operating loss includes the favorable impact of the 53rd week in fiscal 2021 of $0.2 million and is due to a lower SG&A expenses, partially offset by a decrease in gross profit.

Interest Expense, net

Net interest expense increased 18.8% or $11.3 million to $71.4 million in fiscal 2021 as compared to $60.1 million in fiscal 2020.

The increase in interest expense, net is due to lower interest income and the additional interest expense related to the draw down on the Revolving Credit Facility in the fourth quarter of the fiscal year.

This increase in interest expense, net is due to lower interest income and the additional interest expense related to the draw down on the Revolving Credit Facility in the fourth quarter of fiscal 2020 that was fully repaid in the third quarter of fiscal 2021.

Other Expense (Income)

Other expense increased $7.7 million to $13.3 million in fiscal 2020 as compared to $5.6 million in fiscal 2019 .

This increase in other expense is related to an increase in foreign exchange losses.

Other income increased $14.0 million to income of $0.7 million in fiscal 2021 as compared to expense of $13.3 million in fiscal 2020.

This increase in other income is related to an increase in foreign exchange gains.

Provision for Income Taxes

1 unchanged sentence

Excluding items affecting comparability, the effective tax rate was 17.9% in fiscal 2021 as compared to 25.7% in fiscal 2020.

The increase in our effective tax rate was primarily attributable to impact of permanent tax adjustments on lower net sales and the geographic mix of earnings.

The decrease in our effective tax rate was primarily attributable to geographic mix of earnings and the impact of nondeductible expenses on lower pretax operating income in fiscal 2020.

Net Income (Loss)

Net income decreased $1.3 billion to a net loss of $652.1 million in fiscal 2020 as compared to a net income of $643.4 million in fiscal 2019 .

Excluding items affecting comparability, net income decreased 63.8% or $477.5 million to $271.2 million in fiscal 2020 from $748.7 million in fiscal 2019 .

This decrease was primarily due to lower operating income, partially offset by a decrease in the provision for income taxes.

Net income increased $1.49 billion to a net income of $834.2 million in fiscal 2021 as compared to a net loss of $652.1 million in fiscal 2020.

Excluding items affecting comparability, net income increased $569.9 million to $841.1 million in fiscal 2021 from $271.2 million in fiscal 2020.

This increase was primarily due to higher operating income, partially offset by an increase in the provision for income taxes.

Net Income (Loss) per Share

Net loss per diluted share was $2.34 in fiscal 2020 as compared to net income per diluted share of $2.21 in fiscal 2019 .

Excluding items affecting comparability, net income per diluted share decreased 62.3% or $1.60 to $0.97 in fiscal 2020 from $2.57 in fiscal 2019 , primarily due to lower net income.

Segment Performance - Fiscal 2020

Fiscal Year Ended

June 27, 2020

June 29, 2019

SG&A expenses

Operating income

Coach Net Sales decreased 17.4% or $745.2 million to $3.53 billion in fiscal 2020 .

Excluding the impact of foreign currency, net sales decreased 17.2% or $736.4 million .

This decrease was primarily attributed to a net decline of $661.3 million in bricks and mortar retail sales globally due to the impact of the Covid-19 outbreak, which was partially offset by an increase in e-commerce sales globally.

Wholesale sales also declined $75.4 million due to lower demand as a result of the Covid-19 outbreak.

Coach Gross Profit decreased 19.5% or $584.8 million to $2.41 billion in fiscal 2020 from $3.00 billion in fiscal 2019 .

Gross margin decreased to 68.4% in fiscal 2020 as compared to 70.2% in fiscal 2019 .

Excluding items affecting comparability of $62.0 million and $1.9 million in fiscal 2020 and in fiscal 2019 , respectively, Coach gross profit decreased 17.5% or $524.7 million to $2.47 billion from $3.00 billion in fiscal 2019 , and gross margin remained at 70.2% in fiscal 2020 and in fiscal 2019 on a non-GAAP basis.

Excluding the impact of foreign currency in both periods, gross margin increased 30 basis points.

Coach SG&A expenses decreased 1.4% or $25.8 million to $1.82 billion in fiscal 2020 as compared to $1.85 billion in fiscal 2019 .

As a percentage of net sales, SG&A expenses increased to 51.7% in fiscal 2020 as compared to 43.3% in fiscal 2019 .

Excluding items affecting comparability of $135.7 million and $7.1 million in fiscal 2020 and fiscal 2019 , respectively, SG&A expenses decreased 8.4% or $154.4 million to $1.69 billion in fiscal 2020 from $1.84 billion in fiscal 2019 .

SG&A expenses as a percentage of sales increased from 47.8% in fiscal 2020 from 43.1% in fiscal 2019 .

This decrease in SG&A expenses is primarily due to a decline in compensation costs, mainly related to the cancellation of the Annual Incentive Plan for fiscal year 2020, and lower variable selling costs due to store closures in relation to Covid-19.

Coach Operating Income decreased 48.7% or $559.0 million to $589.4 million in fiscal 2020 , resulting in an operating margin of 16.7% , as compared to $1.15 billion and 26.9% , respectively in fiscal 2019 .

Excluding items affecting comparability, Coach operating income decreased 32.0% or $370.3 million to $787.1 million from $1.16 billion in fiscal 2019 ;

and operating margin was 22.3% in fiscal 2020 as compared to 27.1% in fiscal 2019 .

This decrease in operating income was due to a decrease in gross profit, partially offset by lower SG&A expenses.

Fiscal Year Ended

June 27, 2020

June 29, 2019

SG&A expenses

Operating income (loss)

Kate Spade Net Sales decreased 15.9% or $217.3 million to $1.15 billion in fiscal 2020 .

Excluding the impact of foreign currency, net sales decreased 16.0% or $218.4 million .

This decrease is primarily due to a decline of $190.5 million in retail sales mainly in North America due to full and partial store closures related to the Covid-19 outbreak.

Furthermore, wholesale sales declined $23.4 million due to lower demand as a result of the Covid-19 outbreak.

Kate Spade Gross Profit decreased 21.0% or $180.7 million to $682.9 million in fiscal 2020 from $863.6 million in fiscal 2019 .

Gross margin decreased to 59.4% in fiscal 2020 from 63.2% in fiscal 2019 .

Excluding items affecting comparability of $33.5 million and $6.3 million in fiscal 2020 and fiscal 2019 respectively, Kate Spade gross profit decreased 17.6% or $153.5 million to $716.4 million from $869.9 million in fiscal 2019 , and gross margin decreased 130 basis points to 62.3% from 63.6% in fiscal 2019 .

The gross margin decrease of 130 basis points is primarily due to promotional activity, unfavorable channel mix and the impact of directly operating the footwear business.

Kate Spade SG&A Expenses increased 12.0% or $84.0 million to $782.2 million in fiscal 2020 from $698.2 million in fiscal 2019 .

As a percentage of net sales, SG&A expenses increased to 68.0% during fiscal 2020 as compared to 51.1% in fiscal 2019 .

Excluding items affecting comparability of $106.6 million and $14.5 million in fiscal 2020 and fiscal 2019 , respectively, SG&A expenses decreased 1.2% or $8.1 million to $675.6 million in fiscal 2020 compared to $683.7 million in fiscal 2019 ;

and SG&A expenses as a percentage of sales increased to 58.8% in fiscal 2020 from 50.0% in fiscal 2019 .

This decrease was due to a decline in compensation costs, mostly related to the cancellation of the Annual Incentive Plan for fiscal 2020, and lower variable selling costs due to store closures in relation to Covid-19, partially offset by new store openings and increased marketing expenses.

Kate Spade Operating Income decreased $264.7 million to an operating loss of $99.3 million in fiscal 2020 , resulting in an operating margin of (8.6)% as compared to an operating income of $165.4 million and operating margin of 12.1% in fiscal 2019 .

Excluding items affecting comparability, Kate Spade operating income decreased 78.1% or $145.4 million to $40.8 million from $186.2 million in fiscal 2019 , resulting in an operating margin of 3.6% as compared to 13.6% in fiscal 2019 .

The decrease in operating income was due to lower gross profit, partially offset by lower SG&A expenses.

Stuart Weitzman

Fiscal Year Ended

June 27, 2020

June 29, 2019

SG&A expenses

Operating loss

Stuart Weitzman Net Sales decreased by 26.5% or $103.2 million to $286.2 million in fiscal 2020 .

Excluding the impact of foreign currency, net sales decreased 25.6% or $99.5 million .

This decrease was primarily due to lower shipments in the wholesale business of $74.2 million and a decline in the retail business of $25.3 million as a result of the Covid-19 outbreak partially offset by an expanded store network.

Stuart Weitzman Gross Profit decreased 25.3% or $48.9 million to $144.8 million in fiscal 2020 from $193.7 million in fiscal 2019 .

Gross margin increased 80 basis points to 50.6% in fiscal 2020 from 49.8% in fiscal 2019 .

Excluding items affecting comparability of $22.5 million in fiscal 2020 and $19.6 million in fiscal 2019 , Stuart Weitzman gross profit decreased 21.6% or $46.0 million to $167.3 million from $213.3 million in fiscal 2019 , and gross margin increased 370 basis points to 58.5% in fiscal 2020 from 54.8% in fiscal 2019 .

The year over year change in gross margin was positively impacted by foreign currency rates by

120 basis points.

Excluding the impact of foreign currency, the increase in gross margin of 250 basis points is primarily due to favorable channel mix.

Stuart Weitzman SG&A Expenses increased $521.0 million to $766.2 million in fiscal 2020 as compared to $245.2 million in fiscal 2019 .

Excluding items affecting comparability of $542.3 million in fiscal 2020 and $15.0 million in fiscal 2019 , SG&A expenses decreased 2.8% or $6.3 million to $223.9 million in fiscal 2020 from $230.2 million in fiscal 2019 ;

and SG&A expenses as a percentage of net sales increased to 78.2% in fiscal 2020 from 59.1% in fiscal 2019 .

This decrease is primarily due to a decrease in marketing expenses and compensation costs partially offset by additional store-related costs as a result of new store openings.

Stuart Weitzman Operating Loss increased $569.9 million to an operating loss of $621.4 million in fiscal 2020 , as compared to an operating loss of $51.5 million in fiscal 2019 .

Excluding items affecting comparability, Stuart Weitzman operating loss increased $39.7 million to an operating loss of $56.6 million from an operating loss of $16.9 million in fiscal 2019 ;

and operating margin was (19.8)% in fiscal 2020 as compared to (4.3)% in fiscal 2019 .

The increase in operating loss was due to a decrease in gross profit partially offset by lower SG&A expenses.

Net income per diluted share was $2.95 in fiscal 2021 as compared to net loss per diluted share of $2.34 in fiscal 2020.

Excluding items affecting comparability, net income per diluted share increased $2.00 to $2.97 in fiscal 2021 from $0.97 in fiscal 2020, primarily due to higher net income.

The impact of the 53rd week contributed approximately $0.09 to net income per diluted share.

FISCAL 2020 COMPARED TO FISCAL 2019

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The Company’s reported results are presented in accordance with GAAP.

The reported gross profit, SG&A expenses, operating income, provision for income taxes, net income and earnings per diluted share reflect certain items, including the impact of the Impairment charges and Acceleration Program costs in fiscal 2020, ERP Implementation and Organization-related and Integration charges in fiscal 2020 and 2019, and the impact of Tax Legislation in fiscal 2019.

The reported gross profit, SG&A expenses, operating income, provision for income taxes, net income and earnings per diluted share reflect certain items, including the impact of the CARES Act Tax Impact in fiscal 2021, Impairment costs and Acceleration Program costs in fiscal 2021 and 2020, and ERP Implementation and Organization-related and Integration charges in fiscal 2020.

As a supplement to the Company's reported results, these metrics are also reported on a non-GAAP basis to exclude the impact of these items, along with a reconciliation to the most directly comparable GAAP measures.

The Company has historically reported comparable store sales, which reflects sales performance at stores that have been open for at least 12 months, and includes sales from the Internet.

Furthermore, the Company has disclosed the impact of the 53rd week in fiscal 2021 on net sales, operating income and earnings per diluted share results.

The Company has historically reported comparable store sales, which reflects sales performance at stores that have been open for at least 12 months, and includes sales from e-commerce sites.

The Company excludes new stores, including newly acquired locations, from the comparable store base for the first twelve months of operation.

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Comparable store sales are not adjusted for store expansions.

Due to extensive full and partial store closures resulting from the Covid-19 pandemic, comparable store sales are not reported for fiscal year ended June 27, 2020 as the Company does not believe this metric is currently meaningful to the readers of its financial statements for this period.

Due to extensive full and partial store closures resulting from the Covid-19 pandemic, comparable store sales are not reported for fiscal year ended July 3, 2021 as the Company does not believe this metric is currently meaningful to the readers of its financial statements for this period.

These non-GAAP performance measures were used by management to conduct and evaluate its business during its regular review of operating results for the periods affected.

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Fiscal Year Ended

2021 June 27,

Net cash provided by operating activities $ 1,323.7 $ 407.0 $ 916.7

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Net increase (decrease) in cash and cash equivalents $ 581.4 $ 457.1 $ 124.3

The Company’s cash and cash equivalents increased by $457.1 million in fiscal 2020 compared to a decrease of $274.2 million in fiscal 2019 , as discussed below.

Net cash provided by operating activities

Net cash provided by operating activities decreased $385.4 million primarily due to changes in operating assets and liabilities of $192.3 million , the impact of non-cash charges of $717.8 million and changes in net income of $1.30 billion .

The Company’s cash and cash equivalents increased by $581.4 million in fiscal 2021 compared to an increase of $457.1 million in fiscal 2020, as discussed below.

Net cash provided by (used in) operating activities

Net cash provided by operating activities increased $916.7 million primarily due to changes in net income of $1.49 billion and changes in operating assets and liabilities of $310.6 million, partially offset by the impact of non-cash charges of $880.2 million.

The $310.6 million change in our operating asset and liability balances was primarily driven by:

Other liabilities changed by $18.0 million .

They were a use of cash of $37.8 million in fiscal 2020 compared to a use of cash of $55.8 million in fiscal 2019 , primarily driven by the application of net operating losses to reduce the Transition Tax liability partially in fiscal 2019, partially offset by a reclass of liability from long-term to short-term.

Other assets changed by $107.5 million .

They were a source of cash of $38.3 million in fiscal 2020 as compared to a use of cash of $69.2 million in fiscal 2019 , primarily driven by timing of tax related payments.

Inventories changed by $46.1 million .

They were a use of cash of $ 58.6 million in fiscal 2020 as compared to a use of cash of $ 104.7 million in fiscal 2019 , primarily driven by increased inventory in transit at the end of fiscal 2019, and lower than expected sales in fiscal 2020.

Accrued liabilities changed by $36.4 million .

They were a source of cash of $ 7.6 million in fiscal 2020 as compared to a use of cash of $ 28.8 million in fiscal 2019 , primarily driven by the timing of income tax payments, higher reserves due to Covid-19, partially offset by the cancellation of AIP.

Accounts payable changed by $51.9 million .

They were a use of cash of $91.7 million in fiscal 2020 as compared to a use of cash of $39.8 million in fiscal 2019 , primarily driven by the timing of lower inventory receipts across all brands.

Trade accounts receivable changed by $36.2 million .

They were a source of cash of $61.9 million in fiscal 2020 as compared to a source of cash of $25.7 million in fiscal 2019 , primarily driven by a decrease in wholesale shipments across all brands and a decrease in retail sales due to store closures related to Covid-19.

• Accounts payable were a source of cash of $307.3 million in fiscal 2021 as compared to a use of cash of $91.7 million in fiscal 2020, primarily due to the extension of payment terms to certain vendors in addition to higher inventory in transit compared to the prior period.

• Accrued liabilities were a source of cash of $140.3 million in fiscal 2021 as compared to a source of cash of $7.6 million in fiscal 2020, primarily attributed to increased accruals for Annual Incentive Plan payments compared to the prior period, partially offset by the timing of tax related payments.

• Inventories were a source of cash of $32.2 million in fiscal 2021 as compared to a use of cash of $58.6 million in fiscal 2020, primarily driven by more disciplined inventory management, higher than expected sales, and actions taken to exit certain markets, partially offset by higher inventory in transit compared to the prior period.

• Other assets were a use of cash of $223.1 million in fiscal 2021 as compared to a source of cash of $38.3 million in fiscal 2020, primarily related to an increase in income tax receivable due to the NOL carryback claim under the CARES Act.

• Trade accounts receivable were a use of cash of $9.6 million in fiscal 2021 as compared to a source of cash of $61.9 million in fiscal 2020, primarily driven by a lower balance in the fourth quarter of fiscal 2020 due to impacts from Covid-19.

Net cash provided by (used in) investing activities

Net cash provided by investing activities was $44.3 million in fiscal 2020 compared to a use of cash of $574.2 million in fiscal 2019 , resulting in a $618.5 million increase in net cash provided by investing activities.

Net cash used in investing activities was $91.0 million in fiscal 2021 compared to a source of cash of $44.3 million in fiscal 2020, resulting in a $135.3 million decrease in net cash provided by investing activities.

The $91.0 million use of cash in fiscal 2021 is primarily due to capital expenditures of $116.0 million.

This use of cash was partially offset by net cash proceeds from the sale of building of $23.9 million.

The $44.3 million source of cash in fiscal 2020 is primarily due to net cash proceeds from maturities and sales of investments of $462.1 million.

This source of cash was partially offset by purchases of investments of $212.4 million and capital expenditures of $205.4 million .

The $574.2 million use of cash in fiscal 2019 is primarily due to purchase of investments of $415.5 million and capital expenditures of $274.2 million .

This use of cash was partially offset by net cash proceeds from maturities and sales of investments of $159.0 million .

This source of cash was offset by purchases of investments of $212.4 million and capital expenditures of $205.4 million.

Net cash provided by (used in) financing activities

Net cash provided by financing activities was $5.9 million in fiscal 2020 as compared to a use of cash of $485.6 million in fiscal 2019 , resulting in a $491.5 million increase in net cash provided by financing activities.

The $5.9 million source of cash in fiscal 2020 was primarily due to proceeds from the draw down on the Revolving Credit Facility of $700.0 million , partially offset by dividend payments of $380.3 million and repurchases of common stock of $300.0 million .

The $485.6 million of cash used in fiscal 2019 was primarily due to dividend payments of $390.7 million and repurchases of common stock of $100.0 million .

Net cash used in financing activities was $666.0 million in fiscal 2021 as compared to a source of cash of $5.9 million in fiscal 2020, resulting in a $671.9 million decrease in net cash provided by financing activities.

The $666.0 million use of cash in fiscal 2021 was primarily due to repayments on the Revolving Credit Facility of $700.0 million, partially offset by proceeds from share based awards of $61.2 million.

The $5.9 million source of cash in fiscal 2020 was primarily due to proceeds from the draw down on the Revolving Credit Facility of $700.0 million, which was offset by dividend payments of $380.3 million and repurchases of common stock of $300.0 million.

Cash Flows - Fiscal 2020 Compared to Fiscal 2019

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Working Capital and Capital Expenditures

As of June 27, 2020 , in addition to our cash flows from operations, our sources of liquidity and capital resources were comprised of the following:

Sources of Liquidity

Outstanding Indebtedness

Total Available Liquidity (1)

As of July 3, 2021, in addition to our cash flows from operations, our sources of liquidity and capital resources were comprised of the following:

Sources of Liquidity Outstanding Indebtedness Total Available Liquidity (1)

Cash and cash equivalents (1)

$ 2,007.7 $ — $ 2,007.7

Short-term investments (1)

Revolving Credit Facility (2)

900.0 — 900.0

3.000% Senior Notes due 2022 (3)

400.0 400.0 —

4.250% Senior Notes due 2025 (3)

600.0 600.0 —

4.125% Senior Notes due 2027 (3)

As of June 27, 2020 , approximately 29.4% of our cash and short-term investments were held outside the United States.

In fiscal 2019, we have analyzed our global working capital and cash requirements, and the potential tax liabilities associated with repatriation, and have determined that we will likely repatriate some portion of available foreign cash in the foreseeable future.

600.0 600.0 —

Total $ 4,515.8 $ 1,600.0 $ 2,915.8

(1) As of July 3, 2021, approximately 33.5% of our cash and cash equivalents and short-term investments were held outside the United States.

We have analyzed our global working capital and cash requirements, and the potential tax liabilities associated with repatriation, and have determined that we will likely repatriate some portion of available foreign cash in the foreseeable future.

The Company has recorded deferred taxes on certain earnings of non-US subsidiaries that are deemed likely to be repatriated.

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The $900 million aggregate commitment amount under the revolving credit facility remains unchanged.

As of June 27, 2020, $700.0 million of borrowings were outstanding under the Revolving Credit Facility.

As of July 3, 2021, $0.0 million of borrowings were outstanding under the Revolving Credit Facility.

Refer to Note 13, "Debt," for further information on our existing debt instruments.

(3) In March 2015, the Company issued $600.0 million aggregate principal amount of 4.250% senior unsecured notes due April 1, 2025 at 99.445% of par (the "2025 Senior Notes").

Furthermore, on June 20, 2017, the Company issued $400.0 million aggregate principal amount of 3.000% senior unsecured notes due July 15, 2022 at 99.505% of par (the "2022 Senior Notes"), and $600.0 million aggregate principal amount of 4.125% senior unsecured notes due July 15, 2027 at 99.858% of par (the "2027 Senior Notes").

Furthermore, the indentures for the 2025 Senior Notes, 2022 Senior Notes and 2027 Senior Notes contain certain covenants limiting the Company's ability to:

On June 20, 2017, the Company issued $400.0 million aggregate principal amount of 3.000% senior unsecured notes due July 15, 2022 at 99.505% of par (the "2022 Senior Notes"), and $600.0 million aggregate principal amount of 4.125% senior unsecured notes due July 15, 2027 at 99.858% of par (the "2027 Senior Notes").

The indentures for the 2025 Senior Notes, 2022 Senior Notes and 2027 Senior Notes contain certain covenants limiting the Company's ability to:

(i) create certain liens, (ii) enter into certain sale and leaseback transactions and (iii) merge, or consolidate or transfer, sell or lease all or substantially all of the Company's assets.

As of June 27, 2020 , no known events of default have occurred.

July 3, 2021, no known events of default have occurred.

Refer to Note 13, "Debt," for further information on our existing debt instruments.

We believe that our Revolving Credit Facility is adequately diversified with no undue concentrations in any one financial institution.

As of June 27, 2020 , there were 12 financial institutions participating in the Revolving Credit Facility, with no one participant maintaining a combined maximum commitment percentage in excess of 14%.

As of July 3, 2021, there were 12 financial institutions participating in the Revolving Credit Facility, with no one participant maintaining a combined maximum commitment percentage in excess of 14%.

We have no reason to believe at this time that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the terms of the facility in the event we elect to draw funds in the foreseeable future.

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This future operating performance and cash flow are subject to prevailing economic conditions, which is uncertain as a result of Covid-19, and to financial, business and other factors, some of which are beyond the Company's control.

The Company expects total capital expenditures to be approximately $150 million in fiscal 2021.

The Company expects total capital expenditures to be approximately $220 million in fiscal 2022 as the Company continues to prioritize investing in digital capabilities.

The Company's results are typically affected by seasonal trends.

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Fluctuations in net sales, operating income and operating cash flows of the Company in any fiscal quarter may be affected by the timing of wholesale shipments and other events affecting retail sales, including adverse weather conditions or other macroeconomic events, including pandemics such as Covid-19.

Share Repurchase Plan

Stock Repurchase Plan

On May 9, 2019, the Company announced that its Board of Directors had authorized the repurchase up to $1.00 billion of shares of its outstanding common stock.

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In addition, the Company may terminate or limit the stock repurchase program at any time.

During fiscal 2020, the Company repurchased $300.0 million of common stock.

As of June 27, 2020 , the Company has the authorization to repurchase up to $600.0 million of additional shares under the plan.

As of July 3, 2021, the Company has $600.0 million of additional shares available to be repurchased as authorized under the plan.

Amendment No.

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"Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities," for further information.

The Company also intends to repurchase approximately $500.0 million worth of stock in fiscal 2022, of which $600.0 million is remaining under its current authorization.

Contractual and Other Obligations

Firm Commitments

As of June 27, 2020 , the Company's contractual obligations are as follows:

As of July 3, 2021, the Company's contractual obligations are as follows:

2023 – 2024 Fiscal

2025 – 2026 Fiscal 2027

Capital expenditure commitments $ 28.5 $ 17.7 $ 10.8 $ — $ —

Inventory purchase obligations

484.8 484.8 — — —

Operating lease obligations 2,207.8 389.4 616.3 410.5 791.6

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Mandatory transition tax payments (1)

144.0 16.9 74.2 52.9 —

Other 187.2 124.7 57.6 4.9 —

Total $ 4,915.4 $ 1,097.2 $ 1,262.7 $ 1,138.2 $ 1,417.3

(1) Mandatory transition tax payments represent our tax obligation incurred in connection with the deemed repatriation of previously deferred foreign earnings pursuant to the Tax Legislation.

Refer to Note 16, "Income Taxes," for further information.

Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $77.3 million as of June 27, 2020 , as we cannot make a reliable estimate of the period in which the liability will be settled, if ever.

The above table also excludes amounts included in current liabilities in the Consolidated Balance Sheet at June 27, 2020 as these items will be paid within one year and certain long-term liabilities not requiring cash payments.

Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $113.1 million as of July 3, 2021, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever.

The above table also excludes amounts included in current liabilities in the Consolidated Balance Sheet at July 3, 2021 as these items will be paid within one year and certain long-term liabilities not requiring cash payments.

Off-Balance Sheet Arrangements

In addition to the commitments included in the table above, we have outstanding letters of credit, surety bonds and bank guarantees of $33.3 million as of June 27, 2020 , primarily serving to collateralize our obligation to third parties for duty, leases, insurance claims and materials used in product manufacturing.

In addition to the commitments included in the table above, we have outstanding letters of credit, surety bonds and bank guarantees of $40.5 million as of July 3, 2021, primarily serving to collateralize our obligation to third parties for duty, leases, insurance claims and materials used in product manufacturing.

These letters of credit expire at various dates through 2028.

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Retail store and concession shop-in-shop revenues are recognized at the point-of-sale, when the customer obtains physical possession of the products.

Internet revenue from sales of products ordered through the Company’s e-commerce sites is recognized upon delivery and receipt of the shipment by its customers and includes shipping and handling charges paid by customers.

Retail and internet revenues are recorded net of estimated returns, which are estimated by developing an expected value based on historical experience.

Digital revenue from sales of products ordered through the Company’s e-commerce sites is recognized upon delivery and receipt of the shipment by its customers and includes shipping and handling charges paid by customers.

Retail and digital revenues are recorded net of estimated returns, which are estimated by developing an expected value based on historical experience.

Payment is due at the point of sale.

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Revenue for contractually guaranteed minimum royalty amounts is recognized ratably over the license year and any excess sales-based royalties are recognized as earned once the minimum royalty threshold is achieved.

At June 27, 2020 , a 10% change in the allowances for estimated uncollectible accounts, markdowns and returns would not have resulted in a material change in the Company's reserves and net sales.

At July 3, 2021, a 10% change in the allowances for estimated uncollectible accounts, markdowns and returns would not have resulted in a material change in the Company's reserves and net sales.

The Company holds inventory that is sold through retail and wholesale distribution channels, including e-commerce sites.

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Estimates may differ from actual results due to the quantity, quality and mix of products in inventory, consumer and retailer preferences and market conditions.

At June 27, 2020 , a 10% change in the inventory reserve, would not have resulted in material change in inventory and cost of sales.

At July 3, 2021, a 10% change in the inventory reserve, would not have resulted in material change in inventory and cost of sales.

Business Combinations

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Furthermore, the Company may utilize independent third-party valuation firms to assist in making these fair value determinations.

If goodwill is identified based upon the valuation of an acquired business, the goodwill is assigned to the reporting units which will benefit from the synergies that result from the business combination and reported within the segment that such reporting units comprise.

If goodwill is identified based upon the valuation of an acquired business, the goodwill is assigned to the

reporting units which will benefit from the synergies that result from the business combination and reported within the segment that such reporting units comprise.

Refer to Note 4, "Acquisitions," for detailed disclosures related to our acquisitions.

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The reduction in both cash from operations and future expected cash flows were exacerbated by the Covid-19 pandemic, which resulted in a decline in sales driven by full and partial closures of a significant portion of our stores globally.

As a result of these macroeconomic conditions, the Company concluded that a triggering event had occurred during the third quarter, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Stuart Weitzman reporting unit and indefinite-lived brand intangible assets.

The assessment concluded that the fair values of the Stuart Weitzman reporting unit and indefinite-lived brand intangible asset as of the third quarter did not exceed their respective carrying values.

As a result of these macroeconomic conditions, the Company concluded that a triggering event had occurred during the third quarter of fiscal 2020, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Stuart Weitzman reporting unit and indefinite-lived brand intangible assets.

The assessment concluded that the fair values of the Stuart Weitzman reporting unit and indefinite-lived brand intangible asset as of the third quarter of fiscal 2020 did not exceed their respective carrying values.

Accordingly, in the third quarter of fiscal 2020, the Company recorded a goodwill impairment charge of $210.7 million related to the Stuart Weitzman reporting unit, resulting in a full impairment.

During the third quarter of fiscal 2020, the Company also recorded an impairment charge of $267.0 million related to the Stuart Weitzman indefinite-lived brand, resulting in a full impairment.

The Company considered the excess of the fair value over its carrying value for all Coach and Kate Spade reporting unit and indefinite-lived brand intangibles, management did not perform an interim assessment for these reporting units.

Based on the annual assessment, the fair values of our Coach brand reporting units significantly exceeded their respective carrying values.

The fair values of the Kate Spade brand reporting unit and indefinite-lived brand as of the fiscal 2020 testing date exceeded their respective carrying values by approximately 13% and 35%, respectively.

Several factors could impact the Kate Spade brand's ability to achieve expected future cash flows, including continued economic volatility and potential operational challenges related to the Covid-19 pandemic, the reception of new collections in all channels, the success of international expansion strategies including the direct operation of certain previous distributor and joint venture businesses, the optimization of the store fleet productivity, the impact of promotional activity in department stores, and the simplification of certain corporate overhead structures and other initiatives aimed at increasing profitability of the business.

In considering the excess of the fair value over its carrying value for all Coach and Kate Spade reporting unit and indefinite-lived brand intangibles, management did not perform an interim assessment for these reporting units.

Further, the Company determined there was no impairment during the fiscal 2020 annual impairment assessment.

Based on the annual assessment in fiscal 2021, the fair values of our Coach brand reporting units significantly exceeded their respective carrying values.

The fair values of the Kate Spade brand reporting unit and indefinite-lived brand as of the fiscal 2021 testing date exceeded their carrying values by approximately 41% and 77%, respectively.

Several factors could impact the Kate Spade brand's ability to achieve expected future cash flows, including continued economic volatility and potential operational challenges related to the Covid-19 pandemic, the reception of new collections in all channels, the success of international expansion strategies, the optimization of the store fleet productivity, the impact of promotional activity in department stores, and other initiatives aimed at increasing profitability of the business.

Given the relatively small excess of fair value over carrying value as noted above, if profitability trends decline during fiscal 2022 from those that are expected, it is possible that an interim test, or our annual impairment test, could result in an impairment of these assets.

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To the extent that estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is recognized equal to the difference between the carrying value of such asset and its fair value, considering external market participant assumptions.

In determining future cash flows, the Company takes various factors into account, including the effects of macroeconomic trends such as consumer spending, in-store capital investments, promotional cadence, the level of advertising and changes in

merchandising strategy.

Since the determination of future cash flows is an estimate of future performance, there may be future impairments in the event that future cash flows do not meet expectations.

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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 7. Management’s Discussion and Analysis