What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-08-17 compared with 2022-08-18 · 188 added, 258 removed, 337 unchanged (57% of the section changed)

3 unchanged sentences

References to "Coach," "Stuart Weitzman," "Kate Spade" or "kate spade new york" refer only to the referenced brand.

EXECUTIVE OVERVIEW

The fiscal year ended July 2, 2022 was a 52-week period, July 3, 2021 was a 53-week period, and June 27, 2020 was a 52-week period.

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to the accompanying consolidated financial statements and notes thereto to help provide an understanding of our results of operations, financial condition, and liquidity.

MD&A is organized as follows:

This section provides a general description of the business and brands as well as the Company’s growth strategy.

• Global Economic Conditions and Industry Trends.

This section includes a discussion on global economic conditions and industry trends that affect comparability that are important in understanding results of operations and financial conditions, and in anticipating future trends.

• Results of operations .

An analysis of our results of operations in fiscal 2023 compared to fiscal 2022.

• Non-GAAP measures.

This section includes non-GAAP measures that are useful to investors and others in evaluating the Company’s ongoing operating and financial results in a manner that is consistent with management's evaluation of business performance and understanding how such results compare with the Company’s historical performance.

• Financial Condition.

This section includes a discussion on liquidity and capital resources including an analysis of changes in cash flow as well as working capital and capital expenditures.

• Critical Accounting policies and estimates.

This section includes any critical accounting policies or estimates that impact the Company.

The fiscal year ended July 1, 2023 was a 52-week period, July 2, 2022 was a 52-week period, and July 3, 2021 was a 53-week period.

Tapestry, Inc.

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

(the "Company") is a leading New York-based house of iconic accessories and lifestyle brands.

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

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The Company has three reportable segments:

• 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.

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

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

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

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

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.

Our success does not depend solely on the performance of a single channel, geographic area or brand.

Acceleration Program

Starting in fiscal 2020, the Company embarked on a strategic growth plan after undergoing a review of its business under the Acceleration Program, resulting in certain costs to date 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.

The guiding principle under the Acceleration Program is to better meet the needs of each of its brands' unique customers by:

• Sharpening our Focus on the Consumer:

Operating with a clearly defined purpose and strategy for each brand and an unwavering focus on the consumer at the core of everything we do.

• Leveraging Data and Leading with a Digital-First Mindset:

Building significant data and analytics capabilities to drive decision-making and increase efficiency;

Offering immersive customer experiences across our e-commerce and social channels to meet the needs of consumers who are increasingly utilizing digital platforms to engage with brands;

Rethinking the role of stores with an intent to optimize our fleet.

• Transforming into a Leaner and More Responsive Organization:

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

Throughout fiscal 2022, the Company made meaningful progress under its Acceleration Program by sharpening the Company's focus on the consumer, leveraging data to lead with a digital-first mindset and transforming into a leaner and more responsive organization:

• Recruited approximately 7.7 million new customers across channels in North America, representing a 10% increase versus prior year, with growth in both stores and online.

• Maintained a consumer-centric lens and fostered emotional connections with customers, resulting in higher average spend per customer, increased retention rates and the continued reactivation of lapsed customers across brands.

• Delivered global average unit retail ("AUR") gains at Coach, Kate Spade, and Stuart Weitzman , reflecting brand heat and pricing power, the increasing traction of their product offerings, and select price increases, as well as continued benefits from structural changes to lessen promotional activity.

• Advanced Digital capabilities through significant investments in the channel, including in talent, to improve the customer experience and drive conversion;

achieved $2 billion in Digital revenue in the fiscal year, representing 30% of total sales.

• Realized gross run-rate savings of approximately $300 million in fiscal 2022 , which continues to fund investments in brand-building activities.

The Company does not expect to incur further expenses related to the Acceleration Program in fiscal 2023.

Refer to Note 5, "Restructuring Activities," and the "GAAP to Non-GAAP Reconciliation," herein, for further information.

Recent Developments

Covid-19 Pandemic

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

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

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

While the vast majority of the Company's stores and locations of our wholesale and licensing partners have reopened, certain have experienced temporary re-closures or are operating under tighter restrictions in compliance with local government regulations.

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 disruptions in business performance including a decline in demand in the region.

While the trends in 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.

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

During the first quarter of fiscal 2022, certain of the Company’s third-party manufacturers, primarily located in Vietnam, experienced ongoing and longer-than-expected government mandated restrictions, which resulted in a significant decrease in production capacity for these third-party manufacturers.

In response, the Company took deliberate actions such as shifting production to other countries, adjusting its merchandising strategies, where possible, and increasing the use of air freight to expedite delivery.

Based on these actions, and the improved production levels since the first quarter, the Company has been able to meet anticipated levels of demand.

The Company has been experiencing other global logistics challenges, such as delays as a result of port congestion, vessel availability, container shortages for imported products and rising freight costs.

To mitigate delays, the Company strategically used air freight with greater frequency than in the past, primarily in the second and third fiscal quarter of 2022.

Due to these logistical challenges, during fiscal 2022, the Company recognized within Cost of sales $178.5 million of incremental freight costs compared to fiscal 2021, in order to maintain product flow to meet consumer demand.

There is still uncertainty associated with the Covid-19 pandemic, and challenges are expected to persist into fiscal 2023, including 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 and adjust our operating plan as needed.

Refer to Part I, Item 1A.

"Risk Factors" herein.

The Company continues to take strategic actions in response to the current environment.

The Company remains committed to driving SG&A savings, including actions taken under the Acceleration Program.

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.

Covid-19 Related Impairments

There were no Covid-19 related impairments recorded in fiscal 2022.

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 11, "Fair Value Measurements" for further information.

In addition, in fiscal 2021, 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.

Crisis in Ukraine

In the second half of fiscal 2022, a humanitarian crisis unfolded in Ukraine, which has created significant economic uncertainty in the region.

The Company does not have directly operated stores in Russia or Ukraine and has a minimal distributor and wholesale business which was less than 0.1% of the Company’s total Net sales for fiscal 2022 and fiscal 2021.

Starting in the third quarter of fiscal 2022 the Company paused all wholesale shipments to Russia and Ukraine.

The Company's total business in Europe represented less than 5% of fiscal 2022 and fiscal 2021 total Net sales.

Current Trends and Outlook

2025 Growth Strategy

Building on the success of the strategic growth plan from fiscal 2020 through fiscal 2022 (the “Acceleration Program”), in the first quarter of fiscal 2023, the Company introduced the 2025 growth strategy (“ future speed”), designed to amplify and extend the competitive advantages of its brands, with a focus on four strategic priorities:

• Building Lasting Customer Relationships:

The Company’s brands aim to leverage Tapestry’s transformed business model to drive customer lifetime value through a combination of increased customer acquisition, retention and reactivation.

• Fueling Fashion Innovation & Product Excellence:

The Company aims to drive sustained growth in core handbags and small leathergoods, while accelerating gains in footwear and lifestyle products.

• Delivering Compelling Omni-Channel Experiences:

The Company aims to extend its omni-channel leadership to meet the customer wherever they shop, delivering growth online and in stores.

• Powering Global Growth:

The Company aims to support balanced growth across regions, prioritizing North America and China, its largest markets, while capitalizing on opportunities in under-penetrated geographies such as Southeast Asia and Europe.

GLOBAL ECONOMIC CONDITIONS AND INDUSTRY TRENDS

The environment in which we operate is subject to a number of different factors driving global consumer spending.

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

The outbreak of a novel strain of Covid-19 continues to impact a significant majority of the regions in which we operate, resulting in significant global business disruptions.

The widespread impact of Covid-19 resulted in temporary closures of directly operated stores globally, as well as at our wholesale and licensing partners starting in fiscal 2020.

Since then, certain directly operated stores and the stores of our wholesale and licensing partners have experienced temporary re-closures or are operating under tighter restrictions in compliance with local government regulation.

Furthermore, as discussed in "Recent Developments", Covid-19 has also resulted in ongoing supply chain challenges, such as logistic constraints, the closure of certain third-party manufacturers and increased freight costs.

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

However, the full extent of the impact of Covid-19 on our business and operating results will depend largely on future events outside of our control including the ultimate duration, severity and geographic resurgence of the virus and the success of actions to contain the virus, including variants of the novel strain, or treat its impact, among others.

We will continue to monitor the below 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.

Furthermore, refer to Part I, Item 1 - "Business" for additional discussion on our expected store openings and closures within each of our segments.

For a detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, see Part I, Item 1A.

"Risk Factors".

Current Macroeconomic Conditions and Outlook

During fiscal 2023, the macroeconomic environment remained challenging and volatile.

Several organizations that monitor the world’s economy, including the International Monetary Fund, continue to forecast growth in the global economy.

However, some of these organizations have recently revised the forecast downward since the third quarter of fiscal 2022 primarily to reflect a higher-than-anticipated slowdown in Greater China, reflective of Covid-19 outbreaks and lockdown, and further negative economic impacts due to the crisis in Ukraine.

Inflation is expected to remain elevated for longer than in previous forecasts and concerns regarding an oncoming recession have increased in recent months.

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.

Some of these organizations have recently revised the forecast slightly upwards since the third quarter of fiscal 2023.

Nevertheless, the updated forecast is still below the historical average, which is reflective of the current volatile environment, including higher than anticipated inflation, tighter monetary and fiscal policies aiming to lower inflation, financial market volatility, and the negative economic impacts due to the crisis in Ukraine.

The World Health Organization (“WHO”) announced in May 2023 that it no longer considered Covid-19 to be a global health emergency.

Supply chains have largely recovered, and shipping costs and delivery times are back to pre-pandemic levels.

In fiscal 2023, the U.S.

Dollar has appreciated as compared to foreign currencies in regions where we conduct our business.

During fiscal 2023, this trend has resulted in adverse impacts to our business as compared to prior year, including, but not limited to, decreased Net sales of $217.5 million, negative impact to gross margin of approximately 90 basis points, and negative impact to operating margin of approximately 120 basis point.

Currency volatility, political instability and potential changes to trade agreements or duty rates may also 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.

Additionally, the Company has historically benefited from duty-free imports on certain products from certain countries pursuant to the U.S.

In response to the current environment, the Company continues to take strategic actions considering near-term exigencies and remains committed to maintaining the health of the brands and business.

Covid-19 Pandemic

The Covid-19 pandemic has resulted in varying degrees of business disruption for the Company since it began in fiscal 2020 and has impacted all regions around the world, resulting in restrictions and shutdowns implemented by national, state, and local authorities.

Such disruptions continued during the first half of fiscal 2023, and the Company's results in Greater China were adversely impacted as a result of the Covid-19 pandemic.

Starting in December 2022, certain government restrictions were lifted in the region and business trends have improved.

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.

We continue to monitor the latest developments regarding the Covid-19 pandemic and potential impacts on our business, operating results and outlook.

Refer to Part I, Item 1A.

"Risk Factors" for additional discussion regarding risks to our business associated with the Covid-19 pandemic.

Supply Chain and Logistics Challenges

Covid-19 has and may cause disruptions in the Company’s supply chain within our third-party manufacturers and logistics providers.

During fiscal 2022, certain of the Company’s third-party manufacturers, primarily located in Vietnam, experienced ongoing and longer-than-expected government mandated restrictions, which resulted in a significant decrease in production capacity for these third-party manufacturers.

Based on these actions and improved production levels, the Company has and expects that it will continue to be able to meet anticipated levels of demand.

The Company has experienced other global logistical challenges, such as delays as a result of port congestion, vessel availability, container shortages for imported products and rising freight costs.

During fiscal 2023, freight costs on inbound shipments have started to moderate and the Company has significantly reduced the use of air freight when compared to fiscal 2022.

As a result, during fiscal 2023, the Company incurred lower freight expense of $84.8 million when compared to the prior year, positively impacting gross margin by approximately 140 basis points.

Generalized System of Preferences (“GSP”) program

The GSP program expired in the third quarter of fiscal 2021, resulting in additional duties that have negatively impacting gross profit.

The Company has historically benefited from duty-free imports on certain products from certain countries pursuant to the U.S.

Generalized System of Preferences (“GSP”) program.

The GSP program expired in the third quarter of fiscal 2021, resulting in additional duties and negatively impacting gross profit.

Crisis in Ukraine

In the third quarter of fiscal 2022, a humanitarian crisis unfolded in Ukraine, which has created significant economic uncertainty in the region.

Starting in the third quarter of fiscal 2022 the Company paused all wholesale shipments to Russia.

The Company's total business in Europe represented less than 5% of fiscal 2023 and fiscal 2022 total Net sales.

Tax Legislation

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”).

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.

The Inflation Reduction Act of 2022 will become effective beginning in fiscal 2024.

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.

We will continue to evaluate its impact as further information becomes available.

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.

Furthermore, refer to Part I, Item 1 - "Business" for additional discussion on our expected store openings and closures within each of our segments.

For a detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, refer to Part I, Item 1A - "Risk Factors".

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law by the Biden Administration, with tax provisions primarily focused on implementing a 15% corporate alternative minimum tax on global adjusted financial statement income ("CAMT") and a 1% excise tax on share repurchases.

On 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.

The CAMT and GloBE are anticipated to be effective beginning in fiscal 2024 and fiscal 2025, respectively.

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.

We will continue to evaluate their impact as further information becomes available.

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.

This excise tax is recorded in Retained earnings as part of Stockholders' Equity.

RESULTS OF OPERATIONS

FISCAL 2023 COMPARED TO FISCAL 2022

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Interest expense, net 27.6 0.4 58.7 0.9 (31.1) (53.0)

Other expense (income) 16.4 0.2 (0.7) — 17.1 NM

Other expense (income) 1.7 — 16.4 0.2 (14.7) (89.5)

Income (Loss) before provision for income taxes 1,143.1 17.2 1,047.0 15.7 96.1 9.2

Provision for income taxes 190.7 2.9 63.1 1.1 127.6 NM

Provision for income taxes 207.1 3.1 190.7 2.9 16.4 8.6

Net income (loss) 936.0 14.1 856.3 12.8 79.7 9.3

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The Company’s reported results are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The reported results during fiscal 2022 and fiscal 2021 reflect certain items which affect the comparability of our results, as noted in the following tables.

There were no charges affecting comparability during fiscal 2023.

The reported results during fiscal 2022 reflect certain items which affect the comparability of our results, as noted in the following tables.

Refer to "Non-GAAP Measures" herein for further discussion on the Non-GAAP measures.

9 unchanged sentences

Gross profit $ 4,650.4 $ — $ — $ 4,650.4

$ 4,650.4 $ — $ — $ 4,650.4

Coach 2,079.9 6.7 — 2,073.2

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Net income (loss) per diluted common share $ 3.17 $ (0.15) $ (0.15) $ 3.47

(1) Adjustments within Gross profit are recorded within Cost of sales.

In fiscal 2022 the Company incurred charges as follows:

In fiscal 2022 the Company incurred adjustments as follows:

• Debt Extinguishment - Debt extinguishment charges relate to the premiums, amortization and fees associated with the $500 million cash tender of the Company's 2027 Senior Notes and 2025 Senior Notes in the second quarter of fiscal 2022.

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These actions taken together increased the Company's SG&A expenses by $42.8 million, increased Loss on extinguishment of debt by $53.7 million and decreased Provision for income taxes by 16.3 million, negatively impacting net income by 80.2 million, or 0.30 per diluted share.

Fiscal 2021 Items

Fiscal Year Ended July 3, 2021

Items affecting comparability

(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

Provision for income taxes 63.1 (95.0) (7.8) (17.6) 183.5

Net income (loss) $ 834.2 $ 95.0 $ (29.9) $ (72.0) $ 841.1

Net income (loss) per diluted common share $ 2.95 $ 0.31 $ (0.10) $ (0.23) $ 2.97

(1) Adjustments within Gross profit are recorded within Cost of sales.

In fiscal 2021 the Company incurred adjustments as follows:

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

• 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 5, "Restructuring Activities," for further information.

• Impairment - Total adjustments are primarily due to impairment charges on lease right-of use ("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 11, "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, or $0.02 per diluted share.

Tapestry, Inc.

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The change in net sales and gross margin in fiscal 2023 compared to fiscal 2022 has been presented both including and excluding currency fluctuation effects.

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, starting in fiscal year 2020.

All percentages shown in the tables below and the discussion that follows have been calculated using unrounded numbers.

Fiscal Year Ended Variance

July 2, 2022 July 3, 2021 Amount % Constant Currency Change % Change versus FY19

July 1, 2023 July 2, 2022 Amount % Constant Currency Change

Coach $ 4,960.4 $ 4,921.3 $ 39.1 0.8 % 4.5 %

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Total Tapestry $ 6,660.9 $ 6,684.5 $ (23.6) (0.4) 2.9

Net sales in fiscal 2022 increased 16.3% or $938.2 million to $6.68 billion.

Net sales in fiscal 2023 decreased 0.4% or $23.6 million to $6.66 billion.

Excluding the impact of foreign currency, net sales increased by 2.9% or $193.9 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 0.8% or $39.1 million to $4.96 billion in fiscal 2023.

Excluding the impact of foreign currency, net sales increased 4.5% or $219.9 million.

The following discussion is presented excluding the favorable impact of the 53rd week to fiscal 2021 net sales of $67.7 million and the impact of foreign currency.

The increase is primarily attributed to a net increase of $656.1 million in net retail sales driven by higher e-commerce in North America and global store sales with the exception of a decrease in store sales in Greater China due to Covid-19 related disruptions.

This increase in net sales was also partially attributed to a $101.5 million increase in wholesale sales.

• Kate Spade Net Sales increased 19.5% or $235.5 million to $1.45 billion in fiscal 2022.

Excluding the impact of foreign currency, net sales increased 20.1% or $242.9 million.

The following discussion is presented excluding the favorable impact of the 53rd week to fiscal 2021 net sales of $21.7 million and the impact of foreign currency.

The increase is primarily due to a net increase of $221.3 million in net retail sales driven by higher store and e-commerce sales in North America and store sales in Europe partially offset by a decrease in store sales in Greater China due to Covid-19 related disruptions.

This increase in net sales was also partially attributed to a $47.9 million increase in wholesale sales.

• Stuart Weitzman Net Sales increased by 12.2% or $34.5 million to $317.7 million in fiscal 2022.

This increase in net sales was primarily due to an increase of $161.3 million in net retail sales driven by an increase of store sales globally, partially offset by a decrease in e-commerce sales.

The increase in net sales was also attributed to a $30.5 million increase in wholesale sales.

• Kate Spade Net Sales decreased 1.8% or $26.6 million to $1.42 billion in fiscal 2023.

Excluding the impact of foreign currency, net sales increased 0.2% or $3.0 million.

The following discussion is presented excluding the favorable impact of the 53rd week to fiscal 2021 net sales of $3.3 million and the impact of foreign currency.

The increase in net sales was primarily attributed to a $27.6 million increase in wholesale sales.

This increase in net sales was also attributed to a $6.4 million increase in retail sales, primarily driven by higher e-commerce and store sales in North America, partially offset by a decrease in store sales in Greater China due to Covid-19 related disruptions.

This increase in net sales was primarily due to an increase of $2.4 million in net retail sales driven by higher store sales globally, partially offset by a decrease in e-commerce sales.

• Stuart Weitzman Net Sales decreased by 11.4% or $36.1 million to $281.6 million in fiscal 2023.

Excluding the impact of foreign currency, net sales decreased 9.1% or $29.0 million.

This decrease in net sales was primarily due to a decrease of $15.3 million in net retail sales driven by a decrease in stores globally, partially offset by a increase in e-commerce sales.

This decrease in net sales was also attributed to a $13.7 million decrease in wholesale sales.

Fiscal Year Ended

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Gross profit increased 1.4% or $64.5 million to $4.71 billion in fiscal 2023 from $4.65 billion in fiscal 2022.

Gross margin for fiscal 2022 was 69.6% as compared to 71.0% in fiscal 2021.

Excluding items affecting comparability of a reduction of expense of $8.1 million in fiscal 2021 as discussed in the "GAAP to Non-GAAP Reconciliation" herein, gross profit increased 14.2% or $576.6 million to $4.65 billion from $4.07 billion in fiscal 2021.

Excluding items affecting comparability, gross margin decreased 130 basis points to 69.6% compared to 70.9% in fiscal 2021 and was not materially impacted by foreign currency.

Gross margin increased 120 basis points to 70.8% in fiscal 2023 from 69.6% in fiscal 2022.

This increase in Gross margin was primarily attributed to lower freight costs, net pricing improvements and favorable geography mix, partially offset by unfavorable currency translation.

Refer to "Current Macroeconomic Conditions and Outlook" and "Supply Chain and Logistics Challenges" herein, for further information.

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

The Company includes certain transportation-related costs due to our distribution network in SG&A expenses rather than in Cost of sales;

The Company, similar to some companies, includes certain transportation-related costs due to our distribution network in SG&A expenses rather than in Cost of sales;

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

The Company incurred incremental freight costs in fiscal 2022 compared to fiscal 2021 in order to maintain product flow to meet consumer demand.

Refer to "Recent Developments," herein, for further information.

• Coach Gross Profit increased 12.9% or $404.8 million to $3.55 billion in fiscal 2022 from $3.15 billion in fiscal 2021.

Gross margin decreased 180 basis points to 72.2% in fiscal 2022 as compared to 74.0% in fiscal 2021.

Excluding items affecting comparability of a reduction of expense of $8.1 million in fiscal 2021, Coach gross profit increased 13.1% or $412.9 million to $3.55 billion from $3.14 billion in fiscal 2021.

Excluding items affecting comparability, gross margin decreased 170 basis points to 72.2% from 73.9% in fiscal 2021 and was not materially impacted by foreign currency.

This decrease in gross margin was primarily attributed to higher inbound freight costs.

Unfavorable geography and product mix were more than offset by reduced promotional activity and stronger-than-anticipated sell-throughs.

• Kate Spade Gross Profit increased 18.7% or $143.6 million to $912.0 million in fiscal 2022 from $768.4 million in fiscal 2021.

Gross margin decreased 40 basis points to 63.1% in fiscal 2022 from 63.5% in fiscal 2021.

Kate Spade gross margin was not materially impacted by foreign currency.

This decrease in gross margin was primarily attributed to higher inbound freight costs.

Unfavorable channel and geography mix and higher duties were more than offset by reduced promotional activity, favorable product mix and pricing actions, as well as stronger-than-anticipated sell-throughs.

• Stuart Weitzman Gross Profit increased 12.2% or $20.1 million to $184.6 million in fiscal 2022 from $164.5 million in fiscal 2021.

Gross margin remained flat at 58.1% in fiscal 2022 and fiscal 2021.

On a constant currency basis, gross margin increased 120 basis points.

This increase in gross margin is primarily due to reduced promotional activity and favorable product mix and pricing actions offset by unfavorable geography and channel mix.

Selling, General and Administrative Expenses

2 unchanged sentences

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

Coach $ 2,079.9 42.3 % $ 1,836.9 43.2 % $ 243.0 13.2 %

$ 2,117.2 42.7 % $ 2,079.9 42.3 % $ 37.3 1.8 %

Kate Spade (1)

785.1 55.3 754.6 52.2 30.5 4.0

Stuart Weitzman (1)

Corporate 457.3 NA 444.0 NA 13.3 3.0

174.4 62.0 182.8 57.5 (8.4) (4.6)

Corporate (1)(2)

465.8 NA 457.3 NA 8.5 1.9

Tapestry $ 3,542.5 53.1 $ 3,474.6 52.0 $ 67.9 2.0

SG&A expenses increased 2.0% or $67.9 million to $3.54 billion in fiscal 2023 as compared to $3.47 billion in fiscal 2022.

As a percentage of net sales, SG&A expenses decreased to 52.0% during fiscal 2022 as compared to 54.2% during fiscal 2021.

Excluding items affecting comparability of $42.8 million in fiscal 2022 and $135.4 million in fiscal 2021, SG&A expenses increased 15.2% or $453.3 million to $3.43 billion from $2.98 billion in fiscal 2021;

and SG&A expenses as a percentage of net sales decreased to 51.3% in fiscal 2022 from 51.8% in fiscal 2021.

• Coach SG&A Expenses increased 13.2% or $243.0 million to $2.08 billion in fiscal 2022 as compared to $1.84 billion in fiscal 2021.

As a percentage of net sales, SG&A expenses decreased to 42.3% in fiscal 2022 as compared to 43.2% in fiscal 2021.

Excluding items affecting comparability of $6.7 million and $42.3 million in fiscal 2022 and fiscal 2021, respectively, SG&A expenses increased 15.5% or $278.6 million to $2.07 billion in fiscal 2022 from $1.79 billion in fiscal 2021.

SG&A expenses as a percentage of sales decreased to 42.1% in fiscal 2022 from 42.2% in fiscal 2021.

This increase in SG&A expenses is primarily due to higher marketing spend, most notably in digital, increased compensations costs, increased variable distribution and selling costs and a decrease in Covid-19 related wage subsidies and rent concessions.

• Kate Spade SG&A Expenses increased 14.3% or $94.7 million to $754.6 million in fiscal 2022 as compared to $659.9 million in fiscal 2021.

As a percentage of net sales, SG&A expenses decreased to 52.2% during fiscal 2022 as compared to 54.5% in fiscal 2021.

Excluding items affecting comparability of $5.9 million and $23.7 million in fiscal 2022 and fiscal 2021, respectively, SG&A expenses increased 17.7% or $112.5 million to $748.7 million in fiscal 2022 compared to $636.2 million in fiscal 2021;

and SG&A expenses as a percentage of sales decreased to 51.8% in fiscal 2022 from 52.6% in fiscal 2021.

This increase is due to higher marketing spend, most notably in digital, increased compensation costs and an increase in variable distribution and selling costs.

• Stuart Weitzman SG&A Expenses increased 5.6% or $9.7 million to $182.8 million in fiscal 2022 as compared to $173.1 million in fiscal 2021.

As a percentage of net sales, SG&A expenses decreased to 57.5% during fiscal 2022 as compared to 61.1% in fiscal 2021.

Excluding items affecting comparability of $3.6 million in fiscal 2022 and $3.6 million in fiscal 2021, SG&A expenses increased 5.7% or $9.7 million to $179.2 million in fiscal 2022 from $169.5 million in fiscal 2021;

and SG&A expenses as a percentage of net sales decreased to 56.4% in fiscal 2022 from 59.9% in fiscal 2021.

This increase is primarily due to a decrease in Covid-19 related rent concessions and higher selling costs.

• Corporate expenses, which are included within SG&A expenses discussed above but are not directly attributable to a reportable segment, increased 3.0% or $13.3 million to $457.3 million in fiscal 2022 as compared to $444.0 million in fiscal 2021.

Excluding items affecting comparability of $26.6 million and $65.8 million in fiscal 2022 and fiscal 2021, respectively, SG&A expenses increased 13.9% or $52.5 million to $430.7 million in fiscal 2022 as compared to $378.2 million in fiscal 2021.

This increase in SG&A expenses is primarily due to higher compensation costs.

Additionally in fiscal 2021, the Company recognized one-time gains as a result of the sale of our corporate office in Hong Kong SAR, China and on the deferred purchase price of the Kate Spade joint venture.

The Company also made an endowment of the Tapestry foundation in fiscal 2021.

As a percentage of net sales, SG&A expenses increased to 53.1% during fiscal 2023 as compared to 52.0% during fiscal 2022.

Excluding items affecting comparability of $42.8 million in fiscal 2022, SG&A expenses increased 3.2% or $110.7 million to $3.54 billion from $3.43 billion in fiscal 2022.

SG&A as a percentage of net sales increased 180 basis points to 53.1% compared to 51.3% in fiscal 2022.

This increase in SG&A as a percentage of net sales was primarily due to higher information technology costs, increased occupancy costs, and higher marketing spend.

(1) In fiscal 2022, Coach, Kate Spade, Stuart Weitzman and Corporate incurred charges affecting comparability of $6.7 million, $5.9 million, $3.6 million and $26.6 million respectively.

Excluding those items affecting comparability:

SG&A expenses increased 2.1% or $44.0 million to $2.12 billion from $2.07 billion in fiscal 2022;

and SG&A expenses as a percentage of net sales increased to 42.7% in fiscal 2023 from 42.1% in fiscal 2022.

• Kate Spade:

SG&A expenses increased 4.9% or $36.4 million to $785.1 million from $748.7 million in fiscal 2022;

and SG&A expenses as a percentage of net sales increased to 55.3% in fiscal 2023 from 51.8% in fiscal 2022.

• Stuart Weitzman:

SG&A expenses decreased 2.7% or $4.8 million to $174.4 million from $179.2 million in fiscal 2022;

and SG&A expenses as a percentage of net sales increased to 62.0% in fiscal 2023 from 56.4% in fiscal 2022.

SG&A expenses increased 8.2% or $35.1 million to $465.8 in fiscal 2023 as compared to $430.7 million in fiscal 2022.

(2) Corporate expenses, which are included within SG&A expenses discussed above but are not directly attributable to a reportable segment.

Operating Income (Loss)

5 unchanged sentences

Stuart Weitzman (6.7) (2.4) 1.8 0.6 (8.5) NM

Corporate (457.3) NA (444.0) NA (13.3) (3.0)

Corporate (465.8) — (457.3) NA (8.5) (1.9)

Tapestry $ 1,172.4 17.6 $ 1,175.8 17.6 $ (3.4) (0.3)

Operating income increased $207.8 million to $1.18 billion during fiscal 2022 as compared to $968.0 million in fiscal 2021.

Operating margin was 17.6% in fiscal 2022 as compared to 16.8% in fiscal 2021.

Excluding items affecting comparability of $42.8 million in fiscal 2022 and $127.3 million in fiscal 2021, operating income increased $123.3 million to $1.22 billion from $1.10 billion in fiscal 2021;

and operating margin was 18.2% in fiscal 2022 as compared to 19.1% in fiscal 2021.

Within operating income in fiscal 2021 of $1.10 billion, which excludes items affecting comparability, is $30.0 million from the favorable impact of the 53rd week.

• Coach Operating Income increased $161.8 million to $1.47 billion in fiscal 2022, resulting in an operating margin of 29.9%, as compared to $1.31 billion and 30.9%, respectively in fiscal 2021.

Operating income decreased $3.4 million to $1.17 billion during fiscal 2023 as compared to $1.18 billion in fiscal 2022.

Operating margin remained even at 17.6% in fiscal 2023 as compared to 17.6% in fiscal 2022.

Excluding items affecting comparability of $42.8 million in fiscal 2022, operating income decreased $46.2 million to $1.17 billion from $1.22 billion in fiscal 2022;

and operating margin decreased 60 basis points to 17.6% in fiscal 2023 as compared to 18.2% in fiscal 2022.

This decrease in operating margin was primarily attributed to a increase of 180 basis points in SG&A as a percentage of sales partially offset by a 120 basis points increase in gross margin.

• Coach Operating Income increased $56.0 million to $1.53 billion in fiscal 2023, resulting in an operating margin increase of 90 basis points to 30.8%, as compared to $1.47 billion and 29.9%, respectively in fiscal 2022.

Excluding items affecting comparability, Coach operating income increased $49.3 million to $1.53 billion from $1.48 billion in fiscal 2022;

and operating margin was 30.1% in fiscal 2022 as compared to 31.7% in fiscal 2021.

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

• Kate Spade Operating Income increased $48.9 million to $157.4 million in fiscal 2022, resulting in an operating margin of 10.9%, as compared to 108.5 million and 9.0%, respectively in fiscal 2021.

Excluding items affecting comparability, Kate Spade operating income increased $31.1 million to $163.3 million from $132.2 million in fiscal 2021;

and operating margin was 11.3% in fiscal 2022 as compared to 10.9% in fiscal 2021.

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

• Stuart Weitzman Operating Income increased $10.4 million to $1.8 million in fiscal 2022, resulting in an operating margin of 0.6%, as compared to an operating loss of $8.6 million in fiscal 2021 and operating margin of (3.1)%.

Excluding items affecting comparability, Stuart Weitzman operating loss decreased $10.4 million to an operating income of $5.4 million from an operating loss of $5.0 million in fiscal 2021;

and operating margin was 1.7% in fiscal 2022 as compared to (1.8)% in fiscal 2021.

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

and operating margin increased 70 basis points to 30.8% in fiscal 2023 as compared to 30.1% in fiscal 2022.

This increase in operating margin was primarily attributed to a 130 basis points increase in gross margin, mainly due to lower freight costs and net pricing improvements, partially offset by unfavorable currency translation, and a 60 basis point increase in SG&A expenses as a percentage of net sales, mainly due to higher information technology costs and higher marketing spend, partially offset by a decrease in selling costs.

• Kate Spade Operating Income decreased $42.4 million to $115.0 million in fiscal 2023, resulting in an operating margin decrease of 280 basis points to 8.1%, as compared to 157.4 million and 10.9%, respectively in fiscal 2022.

Excluding items affecting comparability, Kate Spade operating income decreased $48.3 million to $115.0 million from $163.3 million in fiscal 2022;

and operating margin decreased 320 basis points to 8.1% in fiscal 2023 as compared to 11.3% in fiscal 2022.

This decrease in operating margin was primarily attributed to a 350 basis points increase in SG&A expenses as a percentage of net sales, partially due to deleverage of expenses on lower net sales.

This increase in SG&A expenses as a percentage of net sales was mainly due to an increase in selling and distribution costs, higher information technology costs and increased occupancy costs, partially offset by a 30 basis points increase in gross margin, mainly due to lower freight costs and favorable geography mix, partially offset by unfavorable currency translation, increased promotional activity and unfavorable channel mix.

• Stuart Weitzman Operating Loss increased $8.5 million to a loss of $6.7 million in fiscal 2023, resulting in an operating margin decrease of 300 basis points to (2.4)%, as compared to operating income of $1.8 million in fiscal 2022 and operating margin of 0.6%.

Excluding items affecting comparability, Stuart Weitzman operating loss increased $12.1 million to an operating loss of $6.7 million from operating income of $5.4 million in fiscal 2022;

and operating margin decreased 410 basis points to (2.4)% in fiscal 2023 as compared to 1.7% in fiscal 2022.

This decrease in operating margin was primarily attributable to a 560 basis point increase in SG&A expenses as a percentage of net sales, partially due to deleverage of expenses on lower net sales.

This increase in SG&A expenses as a percentage of net sales was mainly due to higher marketing spend, increased compensation costs, higher information technology costs and higher depreciation, partially offset by a 150 basis points increase in gross margin, primarily attributed to net pricing improvements and lower freight costs, partially offset by unfavorable currency translation.

• Corporate Operating Loss increased (1.9)% or $8.5 million to $465.8 million in fiscal 2023.

Excluding items affecting comparability, Corporate operating loss increased $35.1 million to $465.8 million from $430.7 million in fiscal 2022.

This increase in operating loss was attributed to an increase in SG&A expenses primarily due to higher information technology costs, higher professional fees, increased compensation costs and increased occupancy costs.

Loss on Extinguishment of Debt

In the second quarter of fiscal 2022, the Company early tendered $500 million in aggregate of the Company’s 2027 Senior Notes and 2025 Senior Notes.

As a result, the Company incurred a loss on extinguishment of debt of $53.7 million in fiscal 2022, primarily related to the premiums, amortization and fees associated with the partial tender.

There was no loss on extinguishment of debt in fiscal 2023 as compared to $53.7 million in fiscal 2022.

This was primarily related to the premiums, amortization and fees associated with the partial tender of the company's 2027 senior notes and 2025 senior notes.

Interest Expense, net

Net interest expense decreased 53.0% or $31.1 million to $27.6 million in fiscal 2023 as compared to $58.7 million in fiscal 2022.

This decrease in Interest expense, net is due to higher interest income and lower bond interest expense on senior notes.

This decrease in Interest expense, net was mainly due to the favorable impact of the net investment hedges, lower bond interest expense on senior notes, as well as higher interest income offset by higher interest on the term loan.

Other Expense (Income)

Other expense increased $17.1 million to $16.4 million in fiscal 2022 as compared to an income of $0.7 million in fiscal 2021.

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

Other expense decreased $14.7 million to $1.7 million in fiscal 2023 as compared to an expense of $16.4 million in fiscal 2022.

This decrease in other expense was related to a decrease in foreign exchange losses.

Provision for Income Taxes

The effective tax rate was 18.1% in fiscal 2023 as compared to 18.2% in fiscal 2022.

Excluding items affecting comparability, the effective tax rate was 18.1% in fiscal 2022 as compared to 17.9% in fiscal 2021.

The increase in our effective tax rate was primarily attributable to geographic mix of earnings.

Excluding items affecting comparability, the effective tax rate was 18.1% in fiscal 2022.

Net Income (Loss)

Net income increased $79.7 million to a net income of $936.0 million in fiscal 2023 as compared to a net income of $856.3 million in fiscal 2022.

Excluding items affecting comparability, net income increased $95.4 million to $936.5 million in fiscal 2022 from $841.1 million in fiscal 2021.

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

Excluding items affecting comparability, net income decreased $0.5 million to $936.0 million in fiscal 2023 from $936.5 million in fiscal 2022.

Net Income (Loss) per Share

1 unchanged sentence

Excluding items affecting comparability, net income per diluted share increased $0.41 to $3.88 in fiscal 2023 from $3.47 in fiscal 2022, primarily due to higher net income and a decrease in shares outstanding.

The impact of the 53rd week in fiscal 2021 contributed approximately $0.09 to net income per diluted share.

FISCAL 2022 COMPARED TO FISCAL 2021

The comparison of fiscal 2021 to 2020 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended July 3, 2021, filed on August 19, 2021.

The comparison of fiscal 2022 to 2021 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended July 2, 2022, filed on August 18, 2022 within Part II.

"Management's Discussion and Analysis of Financial Conditions and Results of Operations".

NON-GAAP MEASURES

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 in fiscal 2022 and fiscal 2021 and the reported Loss on extinguishment of debt in fiscal 2022 reflect certain items, including the impact of Debt Extinguishment costs in fiscal 2022, Acceleration Program costs in fiscal 2022 and 2021, and the CARES Act Tax Impact and Impairment costs in fiscal 2021.

There were no items affecting comparability during fiscal 2023.

The reported SG&A expenses, operating income, loss on extinguishment of debt, provision for income taxes, net income and earnings per diluted share in fiscal 2022 reflect certain items, including Acceleration Program costs and debt extinguishment costs.

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.

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.

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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 July 2, 2022 as the Company does not believe this metric is currently meaningful to the readers of its financial statements for this period.

Due to extensive temporary store closures resulting from the impact of the Covid-19 pandemic, comparable store sales are not reported for the fiscal year ended July 1, 2023 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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Net increase (decrease) in cash and cash equivalents $ (63.7) $ (1,217.9) $ 1,154.2

The Company’s cash and cash equivalents decreased by $1.22 billion in fiscal 2022 compared to an increase of $581.4 million in fiscal 2021, as discussed below.

The Company’s cash and cash equivalents decreased by $63.7 million in fiscal 2023 compared to a decrease of $1.22 billion in fiscal 2022, as discussed below.

Net cash provided by (used in) operating activities

Net cash provided by operating activities decreased $470.5 million primarily due to changes in operating assets and liabilities of $597.1 million, partially offset by the loss on extinguishment of debt of $53.7 million, the impact of non-cash charges of $50.8 million and higher net income of $22.1 million.

Net cash provided by operating activities increased $122.0 million primarily due to changes in operating assets and liabilities of $149.9 million and higher net income of $79.7 million, partially offset by lower impact of non-cash adjustments of $107.6 million.

The $149.9 million change in our operating asset and liability balances was primarily driven by:

• Inventories were a use of cash of $311.7 million in fiscal 2022 as compared to a source of cash of $32.2 million in fiscal 2021, primarily driven by higher receipts, increased in-transit levels due to longer lead times and increased inbound freight costs compared to prior year.

• Accounts payable were a source of cash of $86.4 million in fiscal 2022 as compared to a source of cash of $307.3 million in fiscal 2021, primarily due to the extension of payment terms with certain vendors in fiscal 2021 and higher inventory in-transit in fiscal 2022.

• Other assets were a use of cash of $20.2 million in fiscal 2022 as compared to a use of cash of $223.1 million in fiscal 2021, primarily attributed to income tax receivables including the NOL carryback claim under the CARES Act filed in fiscal 2021 and the timing of payments and other refunds in the U.S.

• Accrued liabilities were a use of cash of $16.1 million in fiscal 2022 as compared to a source of cash of $140.3 million in fiscal 2021, primarily attributed to the Annual Incentive Plan payment as the Company did not pay out during fiscal 2021 (for performance during fiscal year 2020) offset by increased distribution costs driven by higher sales and inbound freight.

• Inventories were a source of cash of $49.9 million in fiscal 2023 as compared to a use of cash of $311.7 million in fiscal 2022, primarily driven by lower in-transits and receipts due to the strategic decision to pull back on receipts as well as normalization of lead times.

• Trade accounts receivable were a source of cash of $44.1 million in fiscal 2023 as compared to a use of cash of $96.0 million in fiscal 2022, primarily driven by higher wholesale sales in fiscal 2022 compared to fiscal 2021.

• Accounts payable were a use of cash of $98.1 million in fiscal 2023 as compared to a source of cash of $86.4 million in fiscal 2022, primarily driven by lower in-transit inventory and receipts compared to prior year due to the strategic decision to pull back on receipts.

• Accrued liabilities were a use of cash of $93.0 million in fiscal 2023 as compared to a use of cash of $16.1 million in fiscal 2022, primarily driven by a decrease in accruals for the Annual Incentive Plan, a decrease in accrued freight and duty, partially offset by an increase in accrued interest due to the net investment hedge and the timing of income tax payments.

• Other liabilities were a use of cash of $61.1 million in fiscal 2023 as compared to a use of cash of $9.2 million in fiscal 2022, primarily driven by lower long-term transition tax due to timing of payment schedule.

Net cash provided by (used in) investing activities

Net cash used in investing activities was $253.6 million in fiscal 2022 compared to a use of cash of $91.0 million in fiscal 2021, resulting in a $162.6 million increase in net cash used in investing activities.

Net cash provided by investing activities was $5.7 million in fiscal 2023 compared to a use of cash of $253.6 million in fiscal 2022, resulting in a $259.3 million increase in net cash provided by investing activities.

The $5.7 million source of cash in fiscal 2023 is primarily due to proceeds from maturities and sales of investments of $148.0 million, settlement of net investment hedge of $41.9 million, partially offset by capital expenditures of $184.2 million.

The $253.6 million use of cash in fiscal 2022 is primarily due to purchases of investments of $540.4 million and capital expenditures of $93.9 million, partially offset by proceeds from maturities and sales of investments of $380.7 million.

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 sales of building of $23.9 million.

Net cash provided by (used in) financing activities

Net cash used in financing activities was $1.78 billion in fiscal 2022 as compared to a use of cash of $666.0 million in fiscal 2021, resulting in a $1.11 billion increase in net cash used in financing activities.

Net cash used in financing activities was $1.04 billion in fiscal 2023 as compared to a use of cash of $1.78 billion in fiscal 2022, resulting in a $742.2 million decrease in net cash used in financing activities.

The $1.04 billion use of cash in fiscal 2023 was primarily due to repurchase of common stock of $703.5 million, dividend payments of $283.3 million as well as taxes paid to net settle share-based awards of $55.6 million.

The $1.78 billion use of cash in fiscal 2022 was primarily due to repurchase of common stock of $1.60 billion, repayment of debt of $900.0 million, payment of dividends of $264.4 million and the payment of debt extinguishment costs of $50.7 million, partially offset by proceeds from debt, net of discount of $998.5 million.

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.

Cash Flows - Fiscal 2022 Compared to Fiscal 2021

The comparison of fiscal 2021 to 2020 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended July 3, 2021, filed on August 19, 2021.

The comparison of fiscal 2022 to 2021 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended July 2, 2022, filed on August 18, 2022 within Part II.

"Management's Discussion and Analysis of Financial Conditions and Results of Operations" .

Working Capital and Capital Expenditures

4 unchanged sentences

Short-term investments (1)

163.4 — 163.4

Term Loans (2)

500.0 500.0 —

Revolving Credit Facility (2)

1,250.0 — 1,250.0

Term Loan (2)

468.8 468.8 —

3.050% Senior Notes due 2032 (3)

6 unchanged sentences

(1) As of July 1, 2023, approximately 47.0% 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.

See Note 15, "Income Taxes" for more information.

(2) On May 11, 2022, 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 replaced Revolving Credit Facility.

(2) On May 11, 2022, the Company entered into a definitive agreement whereby Bank of America, N.A., as administrative agent, other agents party thereto, and a syndicate of banks and financial institutions have made available to the Company a $1.25 billion revolving credit facility (the "$1.25 Billion Revolving Credit Facility") and an unsecured $500.0 Million Term Loan (the “Term Loan”).

Both the $1.25 Billion Revolving Credit Facility and Term Loan (collectively, the “Credit Facilities”) will mature on May 11, 2027.

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The Term Loan amortizes in an amount equal to 5.00% per annum, with payments made quarterly.

As of July 2, 2022, $31.2 million of the Term Loan is included in Current debt on the Consolidated Balance Sheet.

As of July 1, 2023, $25.0 million of the Term Loan is included in Current debt on the Consolidated Balance Sheets.

Borrowings under the Term Loan bear interest at a rate per annum equal to, at the Company’s option, either (i) an alternate base rate or (ii) a term secured overnight financing rate plus, in each case, an applicable margin.

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Refer to Note 12, "Debt," for further information on our existing debt instruments.

$296.6 million of the outstanding aggregate principal amount under its 2027 Senior Notes and 2025 Senior Notes, respectively.

In June 2017, the Company issued $600.0 million aggregate principal amount of 2027 Senior Notes, and $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").

The 2022 Senior Notes were fully redeemed as of July 2, 2022.

(3) In December 2021, 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 cash tender offers for $203.4 million and $296.6 million of the outstanding aggregate principal amount under its 2027 Senior Notes and 2025 Senior Notes, respectively.

In June 2017, the Company issued $600.0 million aggregate principal amount of 2027 Senior Notes.

In March 2015, the Company issued $600.0 million aggregate principal amount of 2025 Senior Notes.

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Our ability to fund working capital needs, planned capital expenditures, and scheduled debt payments, as well as to comply with all of the financial covenants under our debt agreements, depends on future operating performance and cash flow.

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.

To improve our working capital efficiency, starting in fiscal 2021 we made available to certain suppliers a voluntary supply chain finance (“SCF”) program that enables our suppliers to sell their receivables from the Company to a global financial institution on a non-recourse basis at a rate that leverages our credit rating.

This future operating performance and cash flow are subject to prevailing economic conditions, and to financial, business and other factors, some of which are beyond the Company's control.

To improve our working capital efficiency, we make available to certain suppliers a voluntary supply chain finance (“SCF”) program that enables our suppliers to sell their receivables from the Company to a global financial institution on a non-recourse basis at a rate that leverages our credit rating.

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

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In the second fiscal quarter, working capital requirements are reduced substantially as we generate higher net sales and operating income, especially during the holiday season.

In fiscal 2022, due to the increased in-transit times, the Company started to build inventory in the fourth fiscal quarter for the fiscal 2023 winter and holiday season.

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 macroeconomic events, such as Covid-19, or adverse weather conditions.

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

Stock Repurchase Plan

On November 11, 2021, the Company announced the Board of Directors authorized a common stock repurchase program to repurchase up to $1.00 billion of its outstanding common stock (the "2021 Share Repurchase Program").

On May 12, 2022, the Company announced the Board of Directors authorized the additional repurchase of up to $1.50 billion of its common stock (the "2022 Share Repurchase Program").

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

As of July 2, 2022, the Company had $1.50 billion of additional shares available to be repurchased as authorized under the 2021 Share Repurchase Program and 2022 Share Repurchase Program.

As of July 1, 2023 the Company had $800 million of additional shares available to be repurchased as authorized under the 2022 Share Repurchase Program.

Refer to Part II, Item 5.

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

The Company intends to repurchase approximately $700.0 million worth of stock in fiscal 2023, all of which is remaining under its current authorization.

During fiscal 2023, the Company repurchased $700 million worth of shares.

Contractual and Other Obligations

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Interest on outstanding debt (1)

345.8 74.0 130.8 80.0 61.0

Mandatory transition tax payments (2)

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Total $ 4,593.7 $ 974.3 $ 1,150.3 $ 1,221.6 $ 1,247.5

(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 15, "Income Taxes," for further information.

(1) Interest on outstanding debt includes fixed interest expenses for unsecured notes and variable interest expenses for the term loan.

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Refer to Note 12, "Debt," for further information.

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

Refer to Note 15, "Income Taxes," for further information.

We expect to fund these firm commitments with operating cash flows generated in the normal course of business and, if necessary, through availability under our credit facilities or other accessible sources of financing.

Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $100.6 million as of July 1, 2023, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever.

Besides the firm commitments noted above, the above table excludes other amounts included in current liabilities in the Consolidated Balance Sheet at July 2, 2022 as these items will be paid within one year and certain long-term liabilities not requiring cash payments.

Besides the firm commitments noted above, the above table excludes other amounts included in current liabilities in the Consolidated Balance Sheets at July 1, 2023 as these items will be paid within one year and certain long-term liabilities not requiring cash payments.

Capri Holdings Limited Acquisition

On August 10, 2023, the Company entered into an Agreement and Plan of Merger by and among the Company, Sunrise Merger Sub, Inc., a direct wholly owned subsidiary of Tapestry, and Capri Holdings Limited.

Refer to Note 21, "Subsequent Event," herein for further information.

The Company intends to fund the acquisition through a combination of senior notes, term loans and excess Tapestry cash.

Furthermore, on August 10, 2023, the Company entered into a bridge facility commitment letter pursuant to which Bank of America, N.A., BofA Securities, Inc.

and Morgan Stanley Senior Funding, Inc.

committed to provide up to $8.0 billion under a 364-day senior unsecured bridge loan facility to finance the acquisition.

Off-Balance Sheet Arrangements

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The Company performs its annual impairment assessment of goodwill as well as brand intangibles at the beginning of the fourth quarter of each fiscal year.

The Company determined that there was no impairment in fiscal 2022 or fiscal 2021.

During the third quarter of fiscal 2020, profitability trends continued to decline from those that were expected for the Stuart Weitzman brand.

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 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.

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 in fiscal 2020.

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

The Company determined that there was no impairment in fiscal 2023, fiscal 2022 and fiscal 2021.

Based on the annual assessment in fiscal 2023, the fair values of our Coach brand reporting units significantly exceeded their respective carrying values.

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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