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Risks Related to Macroeconomic Conditions
−Removed: The Covid-19 pandemic and resulting adverse economic conditions may continue to have a material adverse impact on our business, financial condition, results of operations and cash flows.
−Removed: The ongoing Covid-19 pandemic continues to impact a significant majority of the regions in which we operate, resulting in significant global business disruptions.
−Removed: The impacts of Covid-19 continue to materially adversely impact our operations, cash flow and liquidity.
−Removed: The virus has impacted all regions around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities.
−Removed: These requirements resulted in temporary closures of the majority of the Company's directly operated stores globally for some period of time to help reduce the spread of Covid-19 during fiscal 2020.
−Removed: Throughout fiscal years 2021 and 2022, the vast majority of the Company’s stores were opened and have continued to operate.
−Removed: However, some store locations have experienced temporary re-closures or operated under tighter restrictions in compliance with local government regulations.
−Removed: Many of the Company’s wholesale partners also experienced closure of their stores or operating restrictions during the fiscal year, as required by government orders.
−Removed: The Company’s performance in fiscal 2022 was adversely impacted as a result of infections due to variants of Covid-19 in certain regions, most notably in Greater China, which resulted in disruption in business performance including a decline in demand in the region.
−Removed: While the trends for Greater China started to improve at the end of fiscal 2022, the situation continues to be very volatile and infection rates and government restrictions may continue to persist.
−Removed: Covid-19 has also resulted in ongoing supply chain challenges, such as logistic constraints, the closure of certain third-party manufacturers and increased freight cost.
−Removed: The impact of the ongoing Covid-19 pandemic on our business will depend on future developments, which are highly uncertain and cannot be predicted, including the ultimate duration, severity and sustained geographic resurgence of the virus, including the emergence of new variants and strains of the virus, and the success of actions to contain the virus and its variants, or treat its impact, such as the availability and acceptance of vaccines, among others.
−Removed: While the full magnitude of the effects on our business continues to be difficult to predict, the Covid-19 pandemic has and may continue to have a material adverse impact on our business, financial condition, and results of operations.
−Removed: Our business may continue to be adversely impacted by several factors, including, but not limited to:
−Removed: • We source and manufacture our products on a global scale and we have and may continue to experience material temporary or long-term disruption in our supply chain, given the global reach of the Covid-19 pandemic.
−Removed: • Travel restrictions, closures or disruptions of business and facilities, including manufacturing facilities and raw material providers, unavailability of vaccines for our international employees or workers in our supply chain, or social, economic, political or labor instability in the affected areas may impact the operations of our raw material suppliers or manufacturing partners.
−Removed: This disruption to our supply chain has resulted and may continue to result in inventory not being available in a timely manner and/or during the appropriate season, and freight and other logistics costs, including increased carrier rates for ocean and air shipments, as the supply chain disruptions have caused us to increase our use of air freight with greater frequency than in the past, all of which could have a material adverse impact on our financial results.
−Removed: • The potential economic effects of the pandemic, including a possible recession or inflationary pressures, increased unemployment and decreased consumer credit availability, may result in lower consumer confidence and decreased disposable income and discretionary spending levels, which may lead to reduced sales of our products.
−Removed: Unfavorable economic conditions, fears of becoming ill and sustained travel restrictions may also reduce consumers’ willingness and ability to travel to major cities and vacation destinations in which the Company’s stores are located.
−Removed: Furthermore, reduced discretionary spending may result in an excess of inventory throughout the industry, which could lead to increased pressure on our gross margin in the near term if the Company has to increase promotional activity above its normal levels to sell through its existing product.
−Removed: • Social distancing measures and general consumer behaviors due to the Covid-19 pandemic may continue to impact mall and store traffic even as stores return to normal operations, which may have a further negative impact on our business.
−Removed: Furthermore, declines in traffic beyond our current expectations could result in additional impairment charges if expected future cash flows of the related asset group do not exceed the carrying value.
−Removed: • We continue to sell products through our stores and through our e-commerce sites.
−Removed: The majority of our fulfillment centers remain open and operational through the date of this report;
−Removed: however, such fulfillment centers may be forced to close or limit operations due to governmental mandates, health and safety concerns, or illness or absence of a substantial number of distribution center employees.
−Removed: We may not be able to keep up with demand for our products because we have and may continue to experience delays in or increased costs for the shipment or delivery of our products due to capacity constraints, shipping delays or port congestion.
Economic conditions, such as an economic recession, downturn, periods of inflation or uncertainty, could materially adversely affect our financial condition, results of operations and consumer purchases of luxury items.
Our results can be impacted by a number of macroeconomic factors, including but not limited to:
−Removed: consumer confidence and spending levels, tax rates, levels of unemployment, consumer credit availability, raw materials costs, pandemics (such as the ongoing Covid-19 pandemic) and natural disasters, fuel and energy costs (including oil prices), global factory production, supply chain operations, commercial real estate market conditions, credit market conditions and the level of customer traffic in malls and shopping centers.
−Removed: The Covid-19 pandemic has severely impacted and will likely continue to impact many of these factors.
+Added: consumer confidence and spending levels, tax rates, levels of unemployment, consumer credit availability, pandemics, natural disasters, raw material costs, fuel and energy costs (including oil prices), bank failures, market volatility, global factory production, supply chain operations, commercial real estate market conditions, credit market conditions and the level of customer traffic in malls, shopping centers and online.
Many of our products may be considered discretionary items for consumers.
−Removed: Demand for our products, and consumer spending in the premium handbag, footwear and accessories categories generally, is significantly impacted by trends in consumer confidence, general economic and business conditions, high levels of unemployment, periods of inflation, health pandemics (such as the ongoing Covid-19 pandemic), interest rates, foreign currency exchange rates, the availability of consumer credit, and taxation.
+Added: Demand for our products, and consumer spending in the premium handbag, footwear and accessories categories generally, is or may be significantly impacted by trends in consumer confidence, general economic and business conditions, high levels of unemployment, periods of inflation, health pandemics, interest rates, foreign currency exchange rates, the availability of consumer credit, and taxation.
Consumer purchases of discretionary luxury items, such as the Company's products, tend to decline during recessionary periods or periods of sustained high unemployment, when disposable income is lower.
−Removed: Unfavorable economic conditions, as well as travel restrictions and potential changes in consumer behavior resulting from the Covid-19 pandemic, may also reduce consumers’ willingness and ability to travel to major cities and vacation destinations in which our stores are located.
+Added: Unfavorable economic conditions may also reduce consumers’ willingness and ability to travel to major cities and vacation destinations in which our stores are located.
Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition.
+Added: The Covid-19 pandemic and resulting adverse economic conditions may continue to adversely affect our business, financial condition, results of operations and cash flows.
+Added: The Covid-19 pandemic has had, and may continue to have, a significant impact on our operations, cash flow and liquidity.
+Added: The virus has impacted all regions that we operate in around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities.
+Added: These requirements resulted in temporary closures of the majority of the Company's directly operated stores globally for some period of time to help reduce the spread of Covid-19 during fiscal 2020.
+Added: Throughout fiscal years 2021 through 2023, the vast majority of the Company’s stores were opened and have continued to operate, however, some store locations have experienced temporary re-closures or operated under tighter restrictions in compliance with local government regulations.
+Added: During the first half of fiscal 2023, the Company's results in Greater China were adversely impacted as a result of the Covid-19 pandemic.
+Added: Starting in December 2022, certain government restrictions were lifted and business trends have improved in the region.
+Added: Although the impact of the Covid-19 pandemic during fiscal 2023 has generally been less significant than those experienced in fiscal years 2021 and 2022, we cannot predict for how long and to what extent the Covid-19 pandemic may continue to impact our business, financial condition, and results of operations.
+Added: We continue to monitor the latest developments regarding the Covid-19 pandemic and potential impacts on our business, operating results and outlook.
+Added: The impact of regulations imposed in the future in response to the Covid-19 pandemic or other public health crises, could, among other things, require that we close our stores or distribution centers or otherwise make it difficult or impossible to operate our business.
Risks Related to our Business and our Industry
We face risks associated with operating in international markets.
−Removed: We operate on a global basis, with approximately 37.6% of our net sales coming from operations outside of United States as of the end of fiscal year 2022.
+Added: We operate on a global basis, with approximately 39.3% of our net sales coming from operations outside of United States for fiscal year 2023.
While geographic diversity helps to reduce the Company’s exposure to risks in any one country, we are subject to risks associated with international operations, including, but not limited to:
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or other jurisdictions, particularly with respect to tax and trade policies or (2) sanctions and related activities by the United States, European Union (“E.U.”) and others;
−Removed: • public health crises, such as pandemics and epidemic diseases (including the ongoing Covid-19 pandemic);
+Added: • public health crises, such as pandemics and epidemic diseases;
• changes to the U.S.'s participation in, withdrawal out of, renegotiation of certain international trade agreements or other major trade related issues including the non-renewal of expiring favorable tariffs granted to developing countries, tariff quotas, and retaliatory tariffs, trade sanctions, new or onerous trade restrictions, embargoes and other stringent government controls;
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Bribery Act, and other global anti-corruption laws, which in general concern the bribery of foreign public officials, and other regulations and requirements;
−Removed: • changes in tourist shopping patterns, particularly that of the Chinese consumer and as a result of the Covid-19 pandemic;
+Added: • changes in tourist shopping patterns, particularly that of the Chinese consumer;
+Added: • geopolitical instability (such as the uncertainty in U.S.-China relations);
• natural and other disasters;
−Removed: • political, civil and social unrest, such as the ongoing crisis in Ukraine;
+Added: • political, civil and social unrest;
• changes in legal and regulatory requirements, including, but not limited to safeguard measures, anti-dumping duties, cargo restrictions to prevent terrorism, restrictions on the transfer of currency, climate change and other environmental legislation, product safety regulations or other charges or restrictions.
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As a Company engaged in sourcing on a global scale, we are subject to the risks inherent in such activities, including, but not limited to:
−Removed: • continued disruptions or delays in shipments whether due to port congestion, logistics carrier disruption, other shipping capacity constraints or other factors, which has and may continue to result in significantly increased inbound freight costs and increased in-transit times;
+Added: • continued disruptions or delays in shipments whether due to port congestion, logistics carrier disruption (including as a result of labor disputes), other shipping capacity constraints or other factors, which has and may continue to result in significantly increased inbound freight costs and increased in-transit times;
• loss or disruption of key manufacturing or fulfillment sites or extended closure of such sites due to the Covid-19 pandemic or other unexpected factors;
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• regulation or prohibition of the transaction of business with specific individuals or entities and their affiliates or goods manufactured in certain regions by any government or regulatory authority in the jurisdictions where we conduct business, such as the listing of a person or entity as a Specially Designated National or Blocked Person by the U.S.
−Removed: Department of the Treasury’s Office of Foreign Assets Control and the issuance of Withhold Release Orders by the U.S.
+Added: Department of the Treasury’s Office of Foreign Assets Control and the issuance of Withhold Release Orders or other detentions of product by the U.S.
Customs and Border Patrol;
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• product quality issues;
−Removed: • political unrest, including the ongoing crisis in Ukraine, protests and other civil disruption;
+Added: • political unrest, protests and other civil disruption;
• public health crises, such as pandemic and epidemic diseases, and other unforeseen outbreaks;
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The occurrence of any of these events could materially adversely affect our business, financial condition and results of operations.
−Removed: Our business may be materially impacted if our distribution and fulfillment centers face significant interruptions and operations.
−Removed: We are dependent on a limited number of fulfillment and sourcing centers.
−Removed: Our ability to meet the needs of our customers and our retail stores and e-commerce sites depends on the proper operation of these centers.
−Removed: If any of these centers were to shut down or otherwise become inoperable or inaccessible for any reason, including as a result of the ongoing Covid-19 pandemic, we could suffer a substantial loss of inventory and/or disruptions of deliveries to our retail and wholesale customers.
−Removed: Depending on the duration of these closures, our results may be materially impacted.
−Removed: While we have business continuity and contingency plans for our sourcing and fulfillment center sites, significant disruption of manufacturing or fulfillment for any of the above reasons could interrupt product supply, result in a substantial loss of inventory, increase our costs, disrupt deliveries to our customers and our retail stores, and, if not remedied in a timely manner, could have a material adverse impact on our business.
−Removed: Because our fulfillment centers include automated and computer controlled equipment, they are susceptible to risks including power interruptions, hardware and system failures, software viruses, and security breaches.
−Removed: In North America we maintain fulfillment centers in Jacksonville, Florida, and Westchester, Ohio, operated by Tapestry.
−Removed: Globally we utilize fulfillment centers in mainland China, the Netherlands, the U.K.
−Removed: and Spain, owned and operated by third-parties, allowing us to better manage the logistics in these regions while reducing costs.
−Removed: We also utilize local fulfillment centers, through third-parties, in Japan, parts of Greater China (mainland China, Hong Kong SAR, Macao SAR and Taiwan), South Korea, Singapore, Malaysia, Spain, the U.K., Canada, Australia, and starting in fiscal 2023 in Mexico.
−Removed: The warehousing of the Company's merchandise, store replenishment and processing direct-to-customer orders is handled by these centers and a prolonged disruption in any center’s operation could materially adversely affect our business and operations.
−Removed: In addition, increases in the Company’s e-commerce sales has required additional fulfillment and fulfillment capacity.
−Removed: Additionally in fiscal year 2022, the Company entered into a lease agreement for a multi-brand fulfillment facility to be built in Las Vegas, Nevada in order to increase capacity and improve fulfillment capabilities as the Company continues to focus on expanding its digital and e-commerce business.
−Removed: Any delay in the construction or our failure to execute our operational plans for this fulfillment center could result in the Company not being able to meet customer demand for its products and could materially adversely affect our business and operations.
A decline in the volume of traffic to our stores could have a negative impact on our net sales.
−Removed: The success of our retail stores located within malls and shopping centers may be impacted by (1) closures, operating restrictions, store capacity restrictions and changes in consumer shopping behavior as a result of the Covid-19 pandemic;
−Removed: (2) the location of the store within the mall or shopping center;
−Removed: (3) surrounding tenants or vacancies;
−Removed: (4) increased competition in areas where malls or shopping centers are located;
−Removed: (5) the amount spent on advertising and promotion to attract consumers to the mall;
−Removed: and (6) a shift towards online shopping resulting in a decrease in mall traffic.
+Added: The success of our retail stores located within malls and shopping centers may be impacted by (i) changes in consumer shopping behavior, closures, operating restrictions and store capacity restrictions;
+Added: (ii) reduced travel resulting from economic conditions (including a recession or inflationary pressures);
+Added: (iii) the location of the store within the mall or shopping center;
+Added: (iv) surrounding tenants or vacancies;
+Added: (v) increased competition in areas where malls or shopping centers are located;
+Added: (vi) the amount spent on advertising and promotion to attract consumers to the mall;
+Added: and (vii) a shift towards online shopping resulting in a decrease in mall traffic.
Declines in consumer traffic could have a negative impact on our net sales and could materially adversely affect our financial condition and results of operations.
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Also, any delay in the development or launch of a new product could result in our company not being the first to bring product to market, which could compromise our competitive position.
−Removed: Our success and growth also depends on the continued development of our omni-channel presence for each of our brands globally, leaning into global digital opportunities for each brand, along with continued bricks and mortar expansion in select international regions, notably mainland China.
+Added: Our success and growth also depends on the continued development of our omni-channel presence for each of our brands globally, leaning into global digital opportunities for each brand, along with continued bricks and mortar expansion in select international regions, notably Greater China.
With respect to international expansion, our brands may not be well-established or widely sold in some of these markets, and we may have limited experience operating directly or working with our partners there.
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Furthermore, consumer demand and behavior, as well as tastes and purchasing trends may differ in these countries, and as a result, sales of our product may not be successful, or the margins on those sales may not be in line with those we currently anticipate.
−Removed: Further, expanding in certain markets may have upfront investment costs that may not be accompanied by sufficient
−Removed: revenues to achieve typical or expected operational and financial performance and therefore may be dilutive to our brands in the short-term.
+Added: Further, expanding in certain markets may have upfront investment costs that may not be accompanied by sufficient revenues to achieve typical or expected operational and financial performance and therefore may be dilutive to our brands in the short-term.
We may also have to compete for talent in international regions as we expand our omni-channel presence.
Consequently, if our global omni-channel expansion plans are unsuccessful, or we are unable to retain and/or attract key personnel, our business, financial condition and results of operation could be materially adversely affected.
−Removed: We have incorporated key strategies of our Acceleration Program, one of which is to Leverage Data and Lead with a Digital-First Mindset, including offering satisfying customer experiences across our e-commerce and social channels and meeting the needs of our customers who are engaging with our brands digitally.
We aim to provide a seamless omni-channel experience to our customers regardless of whether they are shopping in stores or engaging with our brands through digital technology, such as computers, mobile phones, tablets or other devices.
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Additionally, our digital business is subject to numerous risks that could adversely impact our results, including (i) a diversion of sales from our brand stores or wholesale customers, (ii) difficulty in recreating the in-store experience through digital channels, (iii) liability for online content, (iv) changing dynamics within the digital marketing environment and our ability to effectively market to consumers, (v) intense competition from online retailers, and (vi) the ability to provide timely delivery of e-commerce purchases, which is dependent on the capacity and operations of our owned and third-party operated fulfillment facilities.
−Removed: See “ Our business is subject to the risks inherent in global sourcing activities” for additional risks related to our distribution and fulfillment networks.
+Added: See “ Our business is subject to the risks inherent in global sourcing activities” for additional risks related to our fulfillment networks.
If we are unable to effectively execute our e-commerce and digital strategies and provide reliable experiences for our customers across all channels, our reputation and ability to compete with other brands could suffer, which could adversely impact our business, results of operations and financial condition.
−Removed: Our success depends, in part, on attracting, developing and retaining qualified employees, including key personnel.
−Removed: Our business and future success depends heavily on attracting, developing and retaining qualified employees, including our senior management team.
−Removed: Competition in our industry to attract and retain these employees is intense and is influenced by our ability to offer competitive compensation and benefits, employee morale, our reputation, recruitment by other employers, perceived internal opportunities, non-competition and non-solicitation agreements and macro unemployment rates.
−Removed: We depend on the guidance of our senior management team and other key employees who have significant experience and expertise in our industry and our operations.
−Removed: In recent years, we have experienced numerous changes to our senior leadership team.
−Removed: There can be no assurance that these individuals will remain with us or that we will be able to identify and attract suitable successors for these individuals.
−Removed: The loss of one or more of our key personnel or the direct or indirect consequences of results thereof, or any negative public perception with respect to these individuals or the loss of these individuals, could have a material adverse effect on our business, results of operations and financial condition.
−Removed: We do not maintain key-person or similar life insurance policies on any of senior management team or other key personnel.
−Removed: We must also attract, motivate and retain a sufficient number of qualified retail and fulfillment center employees.
−Removed: Historically, competition for talent in these positions has been intense and turnover is generally high, both of which have been exacerbated by the ongoing Covid-19 pandemic.
−Removed: If we are unable to attract and retain such employees with the necessary skills and experience, we may not achieve our objectives and our results of operations could be adversely impacted.
−Removed: Additionally, changes to our office environments, the adoption of new work models, and our requirements and/or expectations about when or how often certain employees work on-site or remotely may not meet the expectations of our employees.
−Removed: As businesses increasingly operate remotely, traditional geographic competition for talent may change in ways that we cannot presently predict.
−Removed: If our employment proposition is not perceived as favorable compared to other companies, it could negatively impact our ability to attract and retain our employees.
−Removed: The successful incorporation of our Acceleration Program is key to the long-term success of our business.
−Removed: The Company’s Acceleration Program focused on how to better meet the needs of each of its brands' unique customers by (i) Sharpening our Focus on the Customer (ii) Leveraging Data and Leading with a Digital-First Mindset and (iii) Transforming into a Leaner and More Responsive Organization.
−Removed: The Company does not expect to incur further expenses related to the Acceleration Program in Fiscal 2023.
−Removed: The Company believes the successful incorporation 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.
−Removed: The Acceleration Program reflects:
−Removed: (i) actions to streamline the Company's organization;
−Removed: (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);
−Removed: 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.
−Removed: The Company believes that long-term growth and increased profitability can be realized through its strategic growth efforts over time.
−Removed: However, there is no assurance that we will be able to sustain such efforts in accordance with our plans, that such
−Removed: efforts will result in the intended or otherwise desirable outcomes or that such efforts, even if successfully sustained, will be effective in achieving long-term growth or increased profitability.
−Removed: Refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 5, "Restructuring Activities," for further information regarding the Acceleration Program.
−Removed: Further, potential changes in our executive leadership team may have an adverse effect on our ability to implement or to achieve favorable results under the Acceleration Program and/or result in further changes to our strategy.
−Removed: If our incorporation of the initiatives under our Acceleration Program falls short, our business, financial condition and results of operation could be materially adversely affected.
+Added: The successful implementation of the Company’s 2025 growth strategy, future speed , is key to the long-term success of our business.
+Added: Building on the success of the Company’s strategic growth plan from fiscal 2020 through fiscal 2022, the Company introduced its 2025 growth strategy, future speed, in the first quarter of fiscal 2023, which is designed to amplify and extend the competitive advantages of the brands, with a focus on four strategic priorities:
+Added: (i) Building Lasting Customer Relationships;
+Added: (ii) Fueling Fashion Innovation & Product Excellence;
+Added: (iii) Delivering Compelling Omni-Channel Experiences;
+Added: and (iv) Powering Global Growth.
+Added: The Company believes that its intentional focus positions Tapestry to drive sustainable, profitable growth to create value for its stakeholders over time.
+Added: However, there is no assurance that we will be able to sustain such efforts in accordance with our plans, that such efforts will result in the intended or otherwise desirable outcomes or that such efforts, even if successfully sustained, will be effective in achieving long-term growth or increased profitability.
+Added: Refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" for further information regarding future speed .
+Added: If our incorporation of the initiatives under future speed falls short, our business, financial condition and results of operation could be materially adversely affected.
Significant competition in our industry could adversely affect our business.
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• protecting our trademarks and design patents;
+Added: • adapting to changes in technology, including the successful utilization of data analytics, artificial intelligence, and machine learning; and
• the ability to withstand prolonged periods of adverse economic conditions or business disruptions.
A failure to compete effectively or to keep pace with rapidly changing consumer preferences and technology and product trends could adversely affect our growth and profitability.
−Removed: Our business may be subject to increased costs due to excess inventories and a decline in profitability as a result of increasing pressure on margins if we misjudge the demand for our products.
−Removed: Our industry is subject to significant pricing pressure caused by many factors, including intense competition and a highly promotional environment, fragmentation in the retail industry, pressure from retailers to reduce the costs of products, and changes in consumer spending patterns.
−Removed: If we misjudge the market for our products or demand for our products are impacted by other factors, such as inflationary pressures, political instability or the ongoing Covid-19 pandemic, we may be faced with significant excess inventories for some products and missed opportunities for other products.
−Removed: We have in the past been, and may in the future be, forced to rely on donation, markdowns, promotional sales or other write-offs, to dispose of excess, slow-moving inventory, which may negatively impact our gross margin, overall profitability and efficacy of our brands.
−Removed: Increases in our costs, such as raw materials, labor or freight could negatively impact our gross margin.
−Removed: Our costs for raw materials are affected by, among other things, weather, customer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus customer countries and other factors that are generally unpredictable and beyond our control.
−Removed: Any of these factors may be exacerbated by global climate change.
−Removed: In addition, ongoing impacts of the pandemic, political instability, trade relations, sanctions, price inflationary pressure, or other geopolitical or economic conditions could cause raw material costs to increase and have an adverse effect on our future margins.
−Removed: Labor costs at many of our manufacturers have been increasing significantly and, as the middle class in developing countries continues to
−Removed: grow, it is unlikely that such cost pressure will abate.
−Removed: Furthermore, the cost of transportation has fluctuated and may continue to fluctuate significantly if oil prices continue to rise.
−Removed: We have also experienced increased freight and other logistics costs, including increased carrier rates for ocean and air shipments, in addition, the supply chain disruptions have caused us to increase our use of air freight with greater frequency than in the past.
−Removed: We may not be able to offset such increases in raw materials, labor or transportation costs through pricing measures or other means.
The success of our business depends on our ability to retain the value of our brands and to respond to changing fashion and retail trends in a timely manner.
Tapestry, Inc.
−Removed: is a New York-based house of accessible luxury lifestyle brands.
+Added: is a New York-based house of iconic accessories and lifestyle brands.
Our global house of brands unites the magic of Coach, kate spade new york and Stuart Weitzman.
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Even if our products, marketing campaigns and retail environments do meet changing customer preferences and/or stay ahead of changing fashion trends, our brand image could become tarnished or undesirable in the minds of our customers or target markets, which could materially adversely impact our business, financial condition, and results of operations.
+Added: Our success depends, in part, on attracting, developing and retaining qualified employees, including key personnel.
+Added: Our business and future success depends heavily on attracting, developing and retaining qualified employees, including our senior management team.
+Added: Competition in our industry to attract and retain these employees is intense and is influenced by our ability to offer competitive compensation and benefits, employee morale, our reputation, recruitment by other employers, perceived internal opportunities, non-competition and non-solicitation agreements and macro unemployment rates.
+Added: We depend on the guidance of our senior management team and other key employees who have significant experience and expertise in our industry and our operations.
+Added: There can be no assurance that these individuals will remain with us or that we will be able to identify and attract suitable successors for these individuals.
+Added: The loss of one or more of our key personnel or the direct or indirect consequences of results thereof, or any negative public perception with respect to these individuals or the loss of these individuals, could have a material adverse effect on our business, results of operations and financial condition.
+Added: We do not maintain key-person or similar life insurance policies on any of senior management team or other key personnel.
+Added: We must also attract, motivate and retain a sufficient number of qualified retail and fulfillment center employees.
+Added: Historically, competition for talent in these positions has been intense and turnover is generally high, both of which were exacerbated by the Covid-19 pandemic.
+Added: If we are unable to attract and retain such employees with the necessary skills and experience, we may not achieve our objectives and our results of operations could be adversely impacted.
+Added: Additionally, changes to our office environments, the adoption of new work models, and our requirements and/or expectations about when or how often certain employees work on-site or remotely may not meet the expectations of our employees.
+Added: As businesses increasingly operate remotely, traditional geographic competition for talent may change in ways that we cannot presently predict.
+Added: If our employment proposition is not perceived as favorable compared to other companies, it could negatively impact our ability to attract and retain our employees.
+Added: Our business may be materially impacted if our fulfillment centers face significant interruptions and operations.
+Added: We are dependent on a limited number of fulfillment centers.
+Added: Our ability to meet the needs of our customers and our retail stores and e-commerce sites depends on the proper operation of these centers.
+Added: If any of these centers were to shut down or otherwise become inoperable or inaccessible for any reason, we could suffer a substantial loss of inventory and/or disruptions of deliveries to our retail and wholesale customers.
+Added: Depending on the duration of these closures, our results may be materially impacted.
+Added: While we have business continuity and contingency plans for our sourcing and fulfillment center sites, significant disruption of manufacturing or fulfillment for any of the above reasons could interrupt product supply, result in a substantial loss of inventory, increase our costs, disrupt deliveries to our customers and our retail stores, and, if not remedied in a timely manner, could have a material adverse impact on our business.
+Added: Because our fulfillment centers include automated and computer-controlled equipment, they are susceptible to risks including power interruptions, hardware and system failures, software viruses, and security breaches.
+Added: In North America we maintain fulfillment centers in Jacksonville, Florida, Westchester, Ohio and Las Vegas, Nevada, operated by Tapestry.
+Added: Our multi-brand Las Vegas, Nevada fulfillment center began operations during fiscal 2023 and is expected to become fully operational during fiscal 2024.
+Added: This opening involves configuration and implementation of a cloud-based warehouse management system, training on this and other new technology and automation and integration with existing systems.
+Added: Any failure to execute our operational plans for this fulfillment center could result in the Company not being able to meet customer demand for its products and could materially adversely affect our business and operations.
+Added: Globally we utilize fulfillment centers in mainland China, the Netherlands, the U.K.
+Added: and Spain, owned and operated by third parties, allowing us to better manage the logistics in these regions while reducing costs.
+Added: We also utilize local fulfillment centers, through third-parties, in Japan, parts of Greater China, South Korea, Singapore, Malaysia, Spain, the U.K., Canada, Australia, and, starting during fiscal 2023, in Mexico.
+Added: The warehousing of the Company’s merchandise, store replenishment and processing direct-to-customer orders is handled by these centers and a prolonged disruption in any center’s operation could materially adversely affect our business and operations.
+Added: In addition, if our fulfillment centers are not sized to meet the optimal capacity for our products or are not adequately staffed, utilized or operated, our profitability may be negatively impacted.
+Added: Our business may be subject to increased costs due to excess inventories and a decline in profitability as a result of increasing pressure on margins if we misjudge the demand for our products.
+Added: Our industry is subject to significant pricing pressure caused by many factors, including intense competition and a highly promotional environment, fragmentation in the retail industry, pressure from retailers to reduce the costs of products, and changes in consumer spending patterns.
+Added: If we misjudge the market for our products or demand for our products are impacted by other factors, such as inflationary pressures, political instability or effects of the Covid-19 pandemic, we may be faced with significant excess inventories for some products and missed opportunities for other products.
+Added: We have in the past been, and may in the future be, forced to rely on donation, markdowns, promotional sales or other write-offs, to dispose of excess, slow-moving inventory, which may negatively impact our gross margin, overall profitability and efficacy of our brands.
+Added: Increases in our costs, such as raw materials, labor or freight could negatively impact our gross margin.
+Added: Our costs for raw materials are affected by, among other things, weather, customer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus customer countries and other factors that are generally unpredictable and beyond our control.
+Added: Any of these factors may be exacerbated by global climate change.
+Added: In addition, the remaining impacts of the pandemic, political instability, trade relations, sanctions, price inflationary pressure, or other geopolitical or economic conditions could cause raw material costs to increase and have an adverse effect on our future margins.
+Added: Labor costs at many of our manufacturers have been increasing significantly and, as the middle class in developing countries continues to grow, it is unlikely that such cost pressure will abate.
+Added: Furthermore, the cost of transportation has fluctuated and may continue to fluctuate significantly if oil prices continue to rise.
+Added: We may not be able to offset such increases in raw materials, labor or transportation costs through pricing measures or other means.
As we outsource functions, we will become more dependent on the third parties performing these functions.
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While we believe we conduct appropriate due diligence before entering into agreements with these third parties, the failure of any of these third parties to provide the expected services, provide them on a timely basis or to provide them at the prices we expect could disrupt or harm our business.
+Added: We also cannot guarantee that these third parties will not experience a personal data or security breach in the future, which could have a material impact on our operations.
Any significant interruption in the operations of these service providers, including as a result of changes in social, political, and economic conditions, including those resulting from military conflicts or other hostilities, that could result in the disruption of trade from the countries in which our manufacturers or suppliers are located, over which we have no control, could also have an adverse effect on our business.
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The retail industry, including wholesale customers, has experienced financial difficulty leading to consolidations, reorganizations, restructuring, bankruptcies and ownership changes.
−Removed: In addition, the Covid-19 pandemic has resulted in reduced operations or the closure, temporarily or permanently, of many of our wholesale partners.
−Removed: This may continue and could further decrease the number of, or concentrate the ownership of, wholesale stores that carry our licensees’ products.
+Added: Our wholesale customers have also experienced significant business disruptions as a result of the Covid-19 pandemic, including reduced operations or the closure, temporarily or permanently, of many of our wholesale partners.
+Added: This may continue and could further decrease the number of, or concentrate the ownership of, wholesale stores that carry our or our licensees’ products.
Furthermore, a decision by the controlling owner of a group of stores or any other significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to decrease or eliminate the amount of merchandise purchased from us or our licensing partners could result in an adverse effect on the sales and profitability within this channel.
Additionally, certain of our wholesale customers, particularly those located in the U.S., have in the past been highly promotional and have aggressively marked down their merchandise and may do so again in the future, which could negatively impact our brands or could affect our business, results of operations, and financial condition.
−Removed: Acquisitions may not be successful in achieving intended benefits, cost savings and synergies and may disrupt current operations.
−Removed: One component of our growth strategy historically has been acquisitions.
−Removed: Acquisitions are not currently contemplated in the Company's capital allocation priorities, however, our management team may in the future evaluate and consider other strategic investments or acquisitions.
−Removed: These involve various inherent risks and the benefits, cost savings and synergies sought may not be realized.
−Removed: The integration process of any newly acquired company may be complex, costly and time-consuming.
+Added: Mergers, acquisitions and other strategic investments may not be successful in achieving intended benefits, cost savings and synergies and may disrupt current operations.
+Added: One component of our historical growth strategy has been acquisitions, and, consistent with our longer-term capital allocation priorities, our management team expects to maintain M&A flexibility and may from time to time evaluate and consider acquisitions or other strategic investments.
+Added: These involve various inherent risks and as a result, the expected benefits, cost savings and synergies may not be realized.
+Added: The integration process of any newly acquired company, such as our proposed acquisition of Capri Holdings Limited ("Capri"), may be complex, costly and time-consuming.
The potential difficulties of integrating the operations of an acquired business and realizing our expectations for an acquisition, including the benefits that may be realized, include, among other things:
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• the impact on our or an acquired business’ internal controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002;
−Removed: • unanticipated changes in applicable laws and regulations;
−Removed: • unanticipated changes in the combined business due to potential divestitures or other requirements imposed by antitrust regulators;
+Added: • changes in applicable laws and regulations or the application of new laws and regulations;
+Added: • changes in the combined business due to potential divestitures or other requirements imposed by antitrust regulators;
• retaining key customers, suppliers and employees;
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Our failure to successfully complete the integration of any acquired business and any adverse consequences associated with future acquisition activities, could have an adverse effect on our business, financial condition and operating results.
−Removed: Completed acquisitions may result in additional goodwill and/or an increase in other intangible assets on our Balance Sheet.
+Added: Completed acquisitions may result in additional goodwill and/or an increase in other intangible assets on our Consolidated Balance Sheets.
We are required annually, or as facts and circumstances exist, to assess goodwill and other intangible assets to determine if impairment has occurred.
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Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our financial condition and results of operations.
+Added: We may not complete our acquisition of Capri within the time frame we anticipate or at all.
+Added: The completion of our acquisition of Capri is subject to a number of conditions, including, among others, receipt of Capri shareholder approval, receipt of certain global anti-trust clearances, including expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and receipt of certain other regulatory approvals.
+Added: The failure to satisfy the required conditions could delay the completion of the acquisition for a significant period of time or prevent it from occurring at all.
+Added: For example, under certain limited conditions, we and/or Capri may elect to terminate the merger agreement, which could materially and adversely affect our business and reputation.
+Added: A delay in completing the acquisition could cause us to realize some or all of the benefits later than we otherwise expect to realize them if the acquisition is successfully completed within the anticipated time frame, which could result in additional transaction costs or in other negative effects associated with uncertainty about the completion of the acquisition.
+Added: We may fail to realize all of the anticipated benefits of the Capri acquisition, and the merger or those benefits may take longer to realize than expected.
+Added: We believe that there are significant benefits and synergies that may be realized through our acquisition of Capri.
+Added: However, the efforts to realize these benefits and synergies will be a complex process and may cost more than we anticipate.
+Added: Further, our efforts to realize these benefits and synergies may disrupt both companies’ existing operations if not implemented in a timely and efficient manner.
+Added: The full benefits of the acquisition, including the anticipated sales or growth opportunities, may not be realized as expected or may not be achieved within the anticipated time frame, or at all.
+Added: Failure to achieve the anticipated benefits of the acquisition could adversely affect our results of operations or cash flows, cause dilution to our earnings per share, decrease or delay any accretive effect of the acquisition and negatively impact the price of our common stock.
+Added: In addition, we will be required post-closing to devote significant attention and resources to successfully align our business practices and operations.
+Added: This process may disrupt the businesses and, if ineffective, would limit the anticipated benefits of the acquisition.
+Added: We may be subject to litigation challenging the Capri acquisition, and an unfavorable judgment or ruling in any such lawsuits could prevent or delay the consummation of our acquisition of Capri and/or result in substantial costs.
+Added: Lawsuits related to our acquisition of Capri may be filed against us, Capri, and our respective affiliates, directors and officers.
+Added: If dismissals are not obtained or a settlement is not reached, these lawsuits could prevent or delay completion of the acquisition and/or result in substantial costs to us.
Our operating results are subject to seasonal and quarterly fluctuations, which could adversely affect the market price of the Company's common stock.
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While we maintain significant control over the products produced for us by our licensing partners, any of the foregoing risks, or the inability of any of our licensing partners to execute on the expected design and quality of the licensed products or otherwise exercise operational and financial control over its business, may result in loss of revenue and competitive harm to our operations in the licensed product categories.
−Removed: Further, while we believe that we
−Removed: could replace our existing licensing partners if required, any delay in doing so could adversely affect our revenues and harm our business.
+Added: Further, while we believe that we could replace our existing licensing partners if required, any delay in doing so could adversely affect our revenues and harm our business.
We also may decide not to renew our agreements with our licensing partners and bring certain categories in-house.
We may face unexpected difficulties or costs in connection with any action to bring currently licensed categories in-house.
−Removed: We are subject to risks associated with leasing retail space subject to long-term and non-cancelable leases.
+Added: We are subject to risks associated with leasing retail space subject to non-cancelable leases.
We may be unable to renew leases at the end of their terms.
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We do not own any of our retail store locations.
−Removed: We lease the majority of our stores under non-cancelable leases, many of which have historically had initial terms ranging from five and ten years, often with renewal options.
+Added: The majority of our stores are under non-cancelable, multi-year leases, often with renewal options.
We believe that the majority of the leases we enter into in the future will likely be non-cancelable.
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Likewise, our obligation to continue making lease payments in respect of leases for closed retail spaces could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Additionally, due to the volatile economic environment, it may be difficult to determine the fair market value of real estate properties when we are deciding whether to enter into leases or renew expiring leases.
+Added: Additionally, due to the uncertain economic environment, it may be difficult to determine the fair market value of real estate properties when we are deciding whether to enter into leases or renew expiring leases.
This may impact our ability to manage the profitability of our store locations, or cause impairments of our lease right of use assets if market values decline, any of which could have a material adverse effect on our financial condition or results of operations.
Risks Related to Information Security and Technology
−Removed: A delay, disruption in, failure of, or inability to upgrade our information technology systems precisely and efficiently could materially adversely affect our business, financial condition or results of operations and cash flow.
−Removed: We rely heavily on various information and other business systems to manage our operations, including management of our supply chain, point-of-sale processing in our brands’ stores, our online businesses associated with each brand and various other processes.
−Removed: We are continually evaluating and implementing upgrades and changes to our systems.
−Removed: In addition, from time to time, we implement new systems.
−Removed: Implementing new systems carries substantial risk, including failure to operate as designed, failure to properly integrate with other systems, potential loss of confidential and personal information, cost overruns, implementation delays and disruption of operations.
−Removed: Furthermore, failure of our computer systems due to inadequate system capacity, computer viruses, human error, changes in programming, security and personal data breaches, system upgrades or migration of these services, as well as employee and consumer privacy concerns and new global government regulations, individually or in accumulation, could have a material effect on our business, financial condition or results of operations and cash flow.
Computer system disruption and cyber security threats, including a personal data or security breach, could damage our relationships with our customers, harm our reputation, expose us to litigation and adversely affect our business.
−Removed: We depend on digital technologies for the successful operation of our business, including corporate email communications to and from employees, customers, stores and vendors, the design, manufacture and distribution of our finished goods, digital and local marketing efforts, data analytics, collection, use and retention of customer data, employee, vendor and partner information, the processing of credit card transactions, online e-commerce activities and our interaction with the public in the social media space.
−Removed: Due to persistent Covid-19 risks, our company decided to implement a hybrid working model.
−Removed: Recently many of our corporate employees and independent contractors returned to offices several days a week but continued to work remotely the other days.
−Removed: Continued remote working due to the Covid-19 pandemic has increased our dependence on digital technology during this period.
+Added: We depend on digital technologies for the successful operation of our business, including corporate email communications to and from employees, customers, stores and vendors, the design, manufacture and distribution of our finished goods, digital and local marketing and clienteling efforts, data analytics, collection, use and retention of customer data, employee, vendor and partner information, the processing of credit card transactions, online e-commerce activities and our interaction with the public in the social media space.
+Added: Due to persistent Covid-19 risks, our company implemented a hybrid working model.
+Added: Many of our corporate employees and independent contractors returned to offices several days a week but continued to work remotely the other days.
+Added: Continued remote working has increased our dependence on digital technology.
The possibility of a successful cyber-attack on any one or all of these systems is a serious threat.
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Although we contractually require these service providers to implement and use reasonable and adequate security measures and data protection, we cannot control third parties and cannot guarantee that a personal data or security breach will not occur in the future either at their location or within their systems.
−Removed: We also store all designs, goods specifications, projected sales and distribution plans for our finished products
+Added: We also store all designs, goods specifications, projected sales and distribution plans for our finished products digitally.
We have enterprise class and industry comparable security measures in place to protect both our physical facilities and digital systems from attacks.
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We have been incurring and expect that we will continue to incur significant costs implementing additional security measures to protect against new or enhanced data security or privacy threats, or to comply with current and new international, federal and state laws governing the unauthorized disclosure or exfiltration of confidential and personal information which are continuously being enacted and proposed such as the General Data Protection Regulation ("GDPR") in the E.U.
−Removed: the UK GDPR, the American Data Privacy and Protection Act, the California Consumer Privacy Act (CCPA), the California Privacy Rights Act (CPRA), the Virginia Consumer Data Protection Act (VCDPA), the Colorado Privacy Act (CPA) and the Utah Consumer Privacy Act, and the Connecticut Data Privacy Act (CTDPA) in the U.S.A., as well as increased cyber security and privacy protection costs such as organizational changes, Covid-19 employee and visitor health checks, copies of vaccination cards, deploying additional personnel and protection technologies, training employees, engaging outside counsel, third party experts and consultants.
+Added: the UK GDPR, the American Data Privacy and Protection Act, the California Consumer Privacy Act ("CCPA") as amended by the California Privacy Rights Act ("CPRA"), the Virginia Consumer Data Protection Act ("VCDPA"), the Colorado Privacy Act ("CPA"), the Utah Consumer Privacy Act ("UCPA"), the Connecticut Data Privacy Act ("CTDPA"), the Montana Consumer Data Privacy Act ("MCDPA"), the Washington My Health My Data Act ("WMHMDA"), the Florida Digital Bill of Rights ("FDBR"), the Texas Data Privacy and Security Act ("TDPSA") in the U.S.A., as well as increased cyber security and privacy protection costs such as organizational changes, deploying additional personnel and protection technologies, training employees and contractors, engaging outside counsel, third-party experts and consultants.
We may also experience loss of revenues resulting from unauthorized use of proprietary information including our intellectual property.
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While we carry cyber liability insurance, such insurance may not cover us with respect to any or all claims or costs associated with such a breach.
−Removed: In addition, we have e-commerce sites in certain countries throughout the world, including the U.S., Canada, Japan, mainland China, several throughout Europe, Australia and South Korea and have plans for additional e-commerce sites in other parts of the world.
+Added: In addition, we have e-commerce sites in certain countries throughout the world, including the U.S., Canada, Japan, Greater China, several throughout Europe, Australia and several throughout the rest of Asia and have plans for additional e-commerce sites in other parts of the world.
Additionally, Tapestry has informational websites in various countries.
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Any material disruptions in our e-commerce presence or information technology systems and applications could have a material adverse effect on our business, financial condition and results of operations.
+Added: A delay, disruption in, failure of, or inability to upgrade our information technology systems precisely and efficiently could materially adversely affect our business, financial condition or results of operations and cash flow.
+Added: We rely heavily on various information and other business systems, including data analytics and machine learning, to manage our operations, including management of our supply chain, point-of-sale processing in our brands’ stores, our online businesses associated with each brand and various other processes and metrics.
+Added: We are continually evaluating and implementing upgrades and changes to our systems.
+Added: In addition, from time to time, we implement new systems.
+Added: Implementing new systems and upgrading existing systems and data analytics models carries substantial risk, including failure to operate as designed, failure to properly integrate with other systems, failure to accurately capture or report data or metrics, potential loss of confidential and personal information, cost overruns, implementation delays and disruption of operations.
+Added: Furthermore, failure of our computer systems due to inadequate system capacity, computer viruses, human error, changes in programming, security and personal data breaches, system upgrades or migration of these services, as well as employee, vendor and consumer privacy concerns and new privacy and security laws and global government regulations, individually or in accumulation, could have a material effect on our business, financial condition or results of operations and cash flow.
Risks Related to Environmental, Social, and Governance Issues
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Inconsistency of legislation and regulations among jurisdictions may also affect our compliance costs with such laws and regulations.
−Removed: An assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, will be fraught with uncertainty given the wide scope of potential
−Removed: regulatory change in the countries in which we operate.
+Added: An assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, will be fraught with uncertainty given the wide scope of potential regulatory change in the countries in which we operate.
Any failure on our part to comply with such climate change-related regulations could lead to adverse consumer actions and/or investment decisions by investors, as well as expose us to legal risk.
−Removed: Increased scrutiny from investors and others regarding our corporate social responsibility initiatives, including environmental, social, governance and other matters of significance relating to sustainability, could result in additional costs or risks and adversely impact our reputation.
+Added: Increased scrutiny from investors and others regarding our environmental, social and governance ("ESG") initiatives, including matters of significance relating to sustainability, could result in additional costs or risks and adversely impact our reputation.
Stakeholders, including consumers, employees and investors, have increasingly focused on corporate responsibility practices of companies.
−Removed: Although we have announced our corporate responsibility strategy and 2025 Corporate Responsibility Goals, there can be no assurance that our stakeholders will agree with our strategy or that we will be successful in achieving our goals.
+Added: Although we have announced our ESG strategy and related goals, there can be no assurance that our stakeholders will agree with our strategy or that we will be successful in achieving our goals.
Failure to implement our strategy or achieve our goals on a timely basis, or at all, could damage our reputation, causing our investors or consumers to lose confidence in our Company and brands, and negatively impact our operations.
In addition, our brand is susceptible to risks associated with changing consumer attitudes regarding social and political issues and consumer perceptions of our position on these issues.
−Removed: Any corporate responsibility report that we publish or other sustainability disclosure we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management and workforce inclusion and diversity.
+Added: Any ESG report that we publish or other sustainability disclosure we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management and workforce inclusion and diversity.
It is possible that stakeholders may not be satisfied with our ESG practices or the speed of our adoption of these practices.
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Also, our failure, or perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our reputation, employee retention and the willingness of our customers and suppliers to do business with us.
+Added: In addition, many of the countries where we and our suppliers operate continue to enact legislation and regulatory rules that address climate change and other sustainability issues, including expanded disclosure requirements on greenhouse gas emissions and other climate related information.
+Added: Consumers, trade associations, interested non-governmental organizations and other stakeholders have increased focus and emphasis on sustainable features of products and other sustainability topics, including traceability and transparency, sustainability claims and product labeling requirements, responsible sourcing and deforestation, the use of energy and water, and the recyclability or recoverability of packaging, product, and materials.
+Added: The rules and regulations and governmental oversight continue to rapidly evolve with varying degrees of complexity and scope, many that include penalties for non-compliance.
+Added: Any failure on our part to comply with sustainability related legislation, regulations and frameworks could lead to adverse consumer action, government enforcement action and private litigation.
+Added: Our ability to comply with the evolution of consumer expectations, regulations and governmental standards and legal landscape can lead to increased risk, operational costs and management time and effort.
Risks Related to Global Economic Conditions and Legal and Regulatory Matters
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Over the past year, there has been significant discussion with regards to tax legislation by both the Biden Administration and the Organization for Economic Cooperation and Development (“OECD”).
−Removed: On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases.
−Removed: The Inflation Reduction Act of 2022 will become effective beginning in fiscal 2024.
−Removed: Given its recent pronouncement, it is unclear at this time what, if any, impact the Inflation Reduction Act of 2022 will have on the Company's tax rate and financial results.
−Removed: We will continue to evaluate its impact as further information becomes available.
+Added: On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law by the Biden Administration, with tax provisions primarily focused on implementing a 15% corporate alternative minimum tax on global adjusted financial statement income ("CAMT") and a 1% excise tax on share repurchases.
+Added: On December 12, 2022, the European Union member states also reached agreement to implement the OECD’s reform of international taxation known as Pillar Two Global Anti-Base Erosion ("GloBE") Rules, which broadly mirror the Inflation Reduction Act by imposing a 15% global minimum tax on multinational companies.
+Added: The CAMT and GloBE are anticipated to be effective beginning in fiscal 2024 and fiscal 2025, respectively.
+Added: The US Treasury and the OECD continue to seek input and release guidance on the CAMT and GloBE legislation and how the two will interact, so it is unclear at this time what, if any, impact either will have on the Company’s tax rate and financial results.
+Added: We will continue to evaluate their impact as further information becomes available.
+Added: With respect to the 1% excise tax on net share repurchases, this provision of the Inflation Reduction Act was effective on January 1, 2023 and did not have a material impact on our financial statements.
Our business is exposed to foreign currency exchange rate fluctuations.
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The majority of the Company's purchases and sales involving international parties, excluding international consumer sales, are denominated in U.S.
−Removed: Failure to adequately protect our intellectual property and curb the sale of counterfeit merchandise could injure our brands and negatively affect sales.
+Added: We may be unable to protect our intellectual property and curb the sale of counterfeit merchandise, which can cause harm to our reputation and business.
We believe our trademarks, copyrights, patents, and other intellectual property rights are extremely important to our success and our competitive position.
We devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts worldwide.
−Removed: Despite our efforts, counterfeiting still occurs and if we are unsuccessful in challenging a third-party’s rights related to trademark, copyright, or patent this could adversely affect our future sales, financial condition, and results of operations.
We pursue entities involved in the trafficking and sale of counterfeit merchandise through legal action or other appropriate measures.
We cannot guarantee that the actions we have taken to curb counterfeiting and protect our intellectual property will be adequate to protect the brand and prevent counterfeiting in the future.
−Removed: Our trademark applications may fail to result in registered trademarks or provide the scope of coverage sought.
−Removed: Furthermore, our efforts to enforce our intellectual property rights are often met with defenses and counterclaims attacking the validity and enforceability of our intellectual property rights.
+Added: Despite our efforts, our brands are still susceptible to counterfeiting.
+Added: Such counterfeiting dilutes our brands and can cause harm to our reputation and business.
+Added: Our efforts to enforce our intellectual property rights are often met with defenses and counterclaims attacking the validity and enforceability of our intellectual property rights.
+Added: In the ordinary course of business, we become involved in trademark oppositions and cancellation actions.
+Added: Our trademark applications may face objections from the trademark offices we seek to register them in and may not mature into registrations.
+Added: Other parties may seek to invalidate our trademarks or assert violations of their trademarks or other intellectual property and seek to block our sales of certain products.
Unplanned increases in legal and investigative fees and other costs associated with defending our intellectual property rights could result in higher operating expenses.
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As of July 1, 2023, our consolidated indebtedness was approximately $1.67 billion.
−Removed: In fiscal year 2022, the Company issued $500.0 million aggregate principal amount of 3.050% senior unsecured notes due March 15, 2032 at 99.705% of par (the "2032 Senior Notes") and completed a partial cash tender offer of the outstanding aggregate of its $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") and its $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", together with the 2032 Senior Notes and 2025 Senior Notes, the "Senior Notes").
−Removed: In addition, the Company financed and replaced the $900.0 Million Revolving Credit Facility by entering into a new credit facility that (i) includes an increased revolving credit facility (the "$1.25 Billion Revolving Credit Facility") from $900.0 million to $1.25 billion, (ii) includes an unsecured $500.0 million Term Loan (the "Term Loan") and (iii) redefines certain terms within the existing Revolving Credit Facility.
−Removed: The unsecured $500 million Term Loan was utilized to satisfy the Company’s remaining obligation under its $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").
−Removed: Additionally, the borrowings may be used to finance our working capital needs, capital expenditures, permitted investments, share purchases, dividends and other general corporate purposes.
+Added: In connection with the pending acquisition of Capri, we expect to incur up to $8.0 billion of additional indebtedness through a combination of senior notes and term loans.
+Added: If we cannot raise the senior notes and term loans by the closing of the Capri acquisition, we will incur bridge loans that will raise our borrowing costs if they remain outstanding and cannot be refinanced.
This substantial level of indebtedness could have important consequences to our business including making it more difficult to satisfy our debt obligations, increasing our vulnerability to general adverse economic and industry conditions, limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate and restricting us from pursuing certain business opportunities.
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Our ability to make payments on and to refinance our debt obligations and to fund planned capital expenditures depends on our ability to generate cash from our operations.
−Removed: This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including the financial impact of the Covid-19 pandemic on our business.
+Added: This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.
We cannot guarantee that our business will generate sufficient cash flow from our operations or that future borrowings will be available to us in an amount sufficient to enable us to make payments of our debt, fund other liquidity needs and make planned capital expenditures.
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Risks Related to Ownership of our Common Stock
+Added: If we are unable to pay quarterly dividends or conduct stock repurchases at intended levels, our reputation and stock price may be negatively impacted.
+Added: In fiscal 2023, the Company returned capital to its shareholders through (i) a quarterly cash dividend of $0.30 per common share, for an annual dividend rate of $1.20 per share, or approximately $280 million and (ii) the repurchase of 17.8 million shares of common stock for $700 million (the “Shareholder Return Programs”).
+Added: The dividend program and the stock repurchase program each require the use of a significant portion of our cash flow.
+Added: Our ability to pay dividends and conduct stock repurchases will depend on our ability to generate sufficient cash flows from operations in the future.
+Added: This ability may be subject to certain economic, financial, competitive and other factors that are beyond our control.
+Added: Our Board may, at its discretion, decrease or entirely discontinue these Shareholder Return Programs at any time.
+Added: Any failure to pay dividends or conduct stock repurchases, or conduct either program at expected levels, after we have announced our intention to do so may negatively impact our reputation, investor confidence in us and negatively impact our stock price.
Our stock price may periodically fluctuate based on the accuracy of our earnings guidance or other forward-looking statements regarding our financial performance, including our ability to return value to investors.
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We believe that this longer-term focus is in the best interests of the Company and our stockholders.
−Removed: At the same time, however, we recognize that, when possible, it is helpful to provide investors with guidance as to our forecast of net sales, operating income, net interest expense, earnings per diluted share and other financial metrics or projections.
−Removed: We did not provide detailed guidance in our earnings reports for the second half of fiscal year 2020 and fiscal year 2021 due to uncertainty surrounding the financial impact of Covid-19 on our business.
−Removed: We resumed providing guidance for fiscal year 2022 and while we generally expect to provide updates to our financial guidance when we report our results each fiscal quarter, we do not have any responsibility to provide guidance going forward or to update any of our forward-looking statements at such times or otherwise.
+Added: At the same time, however, we recognize that, when possible, it is helpful to provide investors with guidance as to our forecast of net sales, operating income, net interest expense, tax rate, earnings per diluted share and other financial metrics or projections.
+Added: While we generally expect to provide updates to our financial guidance when we report our results each fiscal quarter, we do not have any responsibility to provide guidance going forward or to update any of our forward-looking statements at such times or otherwise.
In addition, any longer-term guidance that we provide is based on goals that we believe, at the time guidance is given, are reasonably attainable for growth and performance over a number of years.
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We periodically return value to investors through payment of quarterly dividends and common stock repurchases.
−Removed: On March 26, 2020, we announced we were suspending our quarterly dividend payment, effective beginning the fourth quarter of fiscal 2020, and stock repurchase program due to the impact of Covid-19 pandemic.
−Removed: Starting in the first quarter of fiscal 2022, the Company’s Board of Directors approved the reinstatement of the Company's shareholder return program declaring a quarterly cash dividend of $0.25 per common share for an annual dividend rate of $1.00 per share, or approximately $260 million returned to shareholders in fiscal 2022 (the “Shareholder Return Program”).
−Removed: Additionally, during fiscal 2022 the Company repurchased 42.0 million shares of common stock for $1.60 billion.
−Removed: The Company also intends to repurchase approximately $700.0 million worth of stock in fiscal 2023, all of which is remaining under its current authorization.
−Removed: Investors may have an expectation that we will continue to pay our quarterly dividend at a certain time and at certain levels and / or repurchase shares available under our common stock repurchase program.
The market price of our securities could be adversely affected if our cash dividend rate or common stock repurchase activity differs from investors’ expectations.
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” for additional discussion of our quarterly dividend.
−Removed: If we are unable to pay quarterly dividends or conduct stock repurchases at intended levels, our reputation and stock price may be negatively impacted.
−Removed: On March 26, 2020, the Company announced that, due to the impact of the Covid-19 pandemic, Tapestry’s quarterly dividend, beginning in the fourth quarter of fiscal year 2020, along with the stock repurchase program would be suspended.
−Removed: In the first quarter of fiscal 2022, the Company’s Board of Directors approved the reinstatement of the Company's Shareholder Return Program.
−Removed: The dividend program and the stock repurchase program each require the use of a portion of our cash flow.
−Removed: Our ability to pay dividends and conduct stock repurchases will depend on our ability to generate sufficient cash flows from operations in the future.
−Removed: This ability may be subject to certain economic, financial, competitive and other factors that are beyond our control.
−Removed: Our Board of Directors (“Board”) may, at its discretion, decrease or entirely discontinue these programs at any time.
−Removed: Any failure to pay dividends or conduct stock repurchases, or conduct either program at expected levels, after we have announced our intention to do so may negatively impact our reputation, investor confidence in us and negatively impact our stock price.
−Removed: Provisions in the Company's charter, bylaws and Maryland law may delay or prevent an acquisition of the Company by a third party.
+Added: Certain provisions of the Company's charter, bylaws and Maryland law may delay or prevent an acquisition of the Company by a third-party.
The Company's charter, bylaws and Maryland law contain provisions that could make it more difficult for a third-party to acquire the Company without the consent of our Board.
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Although the Company's Board has no intention to do so at the present time, it could establish a class or series of preferred stock that could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for the Company's common stock or otherwise be in the best interest of the Company's stockholders.
−Removed: The Company's bylaws provide that nominations of persons for election to the Company's Board and the proposal of business to be considered at an annual meeting of stockholders may be made only in the notice of the meeting, by the Company's Board or by a stockholder who is a stockholder of record as of the record date set by the Company's Board for purposes of determining stockholders entitled to vote at the meeting, at the time of the giving of the notice by the stockholder pursuant to the Company's bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and has complied with the advance notice procedures of the Company's bylaws.
−Removed: Also, under Maryland law, business combinations, including mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities, between the Company and any interested stockholder, generally defined as any person who beneficially owns, directly or indirectly, 10% or more of the Company's common stock, or any affiliate of an interested stockholder are prohibited for a five-year period, beginning on the most recent date such person became an interested stockholder.
−Removed: After this period, a combination of this type must be approved by two super-majority stockholder votes, unless common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.
+Added: The Company's bylaws provide that nominations of persons for election to the Company's Board and the proposal of business to be considered at an annual meeting of stockholders may be made only in the notice of the meeting, by the Company's Board, by a stockholder who is a stockholder of record as of the record date set by the Company's Board for purposes of determining stockholders entitled to vote at the meeting, at the time of the giving of the notice by the stockholder pursuant to the Company's bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and has complied with the advance notice procedures of the Company's bylaws or by qualifying stockholders that satisfy the proxy access provisions of the Company’s bylaws.
+Added: Under Maryland law, business combinations, including mergers, consolidations, share exchanges, or, in circumstances specified in the statute, asset transfers or issuances or reclassifications of equity securities, between the Company and any interested stockholder, generally defined as any person who beneficially owns, directly or indirectly, 10% or more of the Company’s common stock, or any affiliate of an interested stockholder are prohibited for a five-year period, beginning on the most recent date such person became an interested stockholder.
+Added: After this period, a business combination must be approved by two super-majority stockholder votes, unless common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.
The statute permits various exemptions from its provisions, including business combinations that are exempted by our Board prior to the time that the interested stockholder becomes an interested stockholder.
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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.