What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-08-15 compared with 2023-08-17 · 167 added, 213 removed, 312 unchanged (55% of the section changed)

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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.

Fiscal 2024, fiscal 2023 and fiscal 2022 were 52-week periods.

Tapestry, Inc.

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

is a house of iconic accessories and lifestyle brands.

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

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

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

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The Company has three reportable segments:

• 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, 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.

• Coach - Includes global sales of primarily Coach brand products to customers through our DTC, wholesale and licensing businesses.

• Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through our DTC, wholesale and licensing businesses.

• Stuart Weitzman - Includes global sales of Stuart Weitzman brand products primarily through our DTC and wholesale businesses.

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

Capri Holdings Limited Acquisition

On August 10, 2023, the Company entered into the Merger Agreement by and among the Company, Sunrise Merger Sub, Inc., a direct wholly owned subsidiary of Tapestry, and Capri for $57.00 per share in cash for a total enterprise value of approximately $8.50 billion.

The Capri Acquisition, once completed, will bring together six highly complementary brands with global reach, powered by the Company’s data-rich customer engagement platform and diversified, direct-to-consumer operating model.

The transaction is expected to close during calendar year 2024.

In order to finance the Capri Acquisition, on November 27, 2023, the Company issued $4.50 billion of U.S.

dollar-denominated senior unsecured notes (the "Capri Acquisition USD Senior Notes") and €1.50 billion of Euro-denominated senior unsecured notes (the "Capri Acquisition EUR Senior Notes" and, together with the Capri Acquisition USD Senior Notes, the "Capri Acquisition Senior Notes") which, together with the $1.40 billion of delayed draw unsecured term loan facilities (the "Capri Acquisition Term Loan Facilities") executed on August 30, 2023, complete the expected financing for the Capri Acquisition.

The Company has received regulatory approval from all applicable jurisdictions except for the United States.

On April 22, 2024, the FTC filed a complaint against the Company and Capri in the United States District Court for the Southern District of New York seeking to enjoin the consummation of the Capri Acquisition.

The FTC’s complaint alleges that the Capri Acquisition, if consummated, would violate Section 7 of the Clayton Act and that the Merger Agreement and the Capri Acquisition constitute unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act and should be enjoined.

The Company believes the FTC’s claims are without merit and intends to defend the lawsuit vigorously.Refer to Note 5, "Acquisitions" for further information.

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:

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:

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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.

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.

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During fiscal 2024, 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.

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.

Several organizations that monitor the world’s economy, including the International Monetary Fund, continue to forecast growth in the global economy, and remains unchanged since the third quarter of fiscal 2024.

The forecast is below the historical growth average and is reflective of the current volatile environment, including tighter monetary and fiscal policies which have started to moderate inflation, financial market volatility and the negative economic impacts of geopolitical instability in certain regions of the world.

In fiscal 2024, freight costs have continued to moderate as compared to prior year.

As a result, during fiscal 2024, the Company incurred lower freight expense of $84.2 million when compared to the prior year, positively impacting gross margin by approximately 130 basis points.

In fiscal 2024, 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.

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

During fiscal 2024, this trend has resulted in impacts to our business including, but not limited to, decreased Net

sales of $77.3 million, a positive impact to gross margin of approximately 30 basis points which benefited from the Company's hedging activity and approximately 10 basis point positive impact to operating margin.

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.

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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.

Geopolitical Disruptions to Supply Chain

During fiscal 2024, certain geopolitical events have impacted trade routes in the Red Sea which have modestly increased inventory in-transit times and costs.

The Company has taken actions to minimize any potential disruptions and, at this time, does not anticipate material impact to our business or operating results.

We will continue to closely monitor the situation.

Covid-19 Pandemic

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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.

During fiscal 2024, the Covid-19 pandemic did not materially impact our business or operating results.

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

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"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.

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 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 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.

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 2023 and fiscal 2022.

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 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.

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% CAMT on global adjusted financial statement income and a 1% excise tax on share repurchases.

The CAMT was effective at the beginning of fiscal 2024 and did not have a material impact on the Company’s effective tax rate.

On December 12, 2022, the E.U.

member states also reached an agreement to implement the OECD’s reform of international taxation known as GloBE, which broadly mirrors the Inflation Reduction Act by imposing a 15% global minimum tax on multinational companies.

Based on the countries in which we do business that have enacted legislation effective January 1, 2025, we do not expect the impact of these changes to be material for fiscal 2025.

A number of other countries are also implementing similar legislation with effective dates starting in 2026.

As a result, we do expect a modest negative impact on the Company’s effective tax rate, however, this could change as other countries enact similar legislation and further guidance is released.

We continue to closely monitor regulatory developments to assess potential impacts.

RESULTS OF OPERATIONS

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Fiscal Year Ended

July 1, 2023 July 2, 2022 Variance

June 29, 2024 July 1, 2023 Variance

(millions, except per share data)

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SG&A expenses 3,749.4 56.2 3,542.5 53.1 206.9 5.8

3,542.5 53.1 3,474.6 52.0 67.9 2.0

Operating income (loss) 1,140.1 17.1 1,172.4 17.6 (32.3) (2.8)

Loss on extinguishment of debt — — 53.7 0.8 (53.7) NM

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

Interest expense, net 125.0 1.9 27.6 0.4 97.4 NM

Other expense (income) 3.2 — 1.7 — 1.5 84.1

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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 2024 reflect certain items which affect the comparability of our results, as noted in the following table.

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.

Fiscal 2024 Items

Fiscal Year Ended July 2, 2022

Fiscal Year Ended June 29, 2024

Items affecting comparability

(As Reported) Acceleration Program Debt Extinguishment Non-GAAP Basis

(As Reported) Acquisition Costs Non-GAAP Basis

(Excluding Items)

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Stuart Weitzman (21.2) — (21.2)

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

Coach 2,079.9 6.7 — 2,073.2

Kate Spade 754.6 5.9 — 748.7

Stuart Weitzman 182.8 3.6 — 179.2

Corporate (622.4) (109.9) (512.5)

Operating income (loss) $ 1,140.1 $ (109.9) $ 1,250.0

Net income (loss) $ 816.0 $ (184.2) $ 1,000.2

Net income (loss) per diluted common share $ 3.50 $ (0.79) $ 4.29

In fiscal 2024, the Company incurred charges as follows:

• Acquisition Costs - Total pre-tax charges of $226.6 million attributable to the Capri Acquisition.

These charges include:

◦ Interest expense, net :

$116.7 million of financing related charges, which primarily includes the net impact of the Capri Acquisition Senior Notes, and the financing fees of the unsecured bridge loan facility in an aggregate principal amount of up to $8.00 billion;

◦ SG&A expenses :

$109.9 million primarily related to professional fees recorded within Corporate.

These actions taken together negatively impacted Operating income by $109.9 million, increased Interest expense, net by $116.7 million and reduced the Provision for income taxes by $42.4 million, resulting in a net decrease in Net income by $184.2 million, or $0.79 per diluted share.

Supplemental Segment Data

Fiscal Year Ended June 29, 2024

Items Affecting Comparability

(As Reported) Acquisition Costs Non-GAAP Basis

(Excluding Items)

Coach $ 2,224.3 $ — $ 2,224.3

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Corporate 622.4 109.9 512.5

Operating income (loss) $ 1,175.8 $ (42.8) $ — $ 1,218.6

Loss on extinguishment of debt 53.7 — 53.7 —

Provision for income taxes 190.7 (3.4) (12.9) 207.0

Net income (loss) $ 856.3 $ (39.4) $ (40.8) $ 936.5

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

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.

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

• Acceleration Program - Total charges incurred under the Acceleration Program are primarily share-based compensation and professional fees incurred as a result of the development and execution of the Company's comprehensive strategic initiative.

Refer to the "Executive Overview" herein and Note 5, "Restructuring Activities," for further information.

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.

SG&A expenses $ 3,749.4 $ 109.9 $ 3,639.5

Tapestry, Inc.

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Currency Fluctuation Effects

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 change in net sales in fiscal 2024 compared to fiscal 2023 has been presented both including and excluding currency fluctuation effects.

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

Fiscal Year Ended Variance

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

June 29, 2024 July 1, 2023 Amount % Constant Currency Change

Coach $ 5,095.3 $ 4,960.4 $ 134.9 2.7 % 4.1 %

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Stuart Weitzman 241.5 281.6 (40.1) (14.2) (13.4)

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

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

Tapestry $ 6,671.2 $ 6,660.9 $ 10.3 0.2 1.3

Net sales in fiscal 2024 increased 0.2% or $10.3 million to $6.67 billion.

Excluding the impact of foreign currency, net sales increased by 1.3% or $87.6 million.

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Excluding the impact of foreign currency, net sales increased 4.1% or $202.4 million.

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.

This increase in net sales was primarily due to an increase of $110.7 million in DTC sales driven by an increase in store and to a lesser extent, e-commerce sales.

The increase in net sales was also attributed to an $81.4 million increase in wholesale sales primarily driven by international, which included growth in the digital wholesale channel.

• Kate Spade Net Sales decreased 6.0% or $84.5 million to $1.33 billion in fiscal 2024.

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

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.

Excluding the impact of foreign currency, net sales decreased 5.4% or $77.1 million.

This decrease in net sales was primarily due a decrease of $76.9 million in DTC sales as a result of lower store and to a lesser extent, e-commerce sales.

• Stuart Weitzman Net Sales decreased by 14.2% or $40.1 million to $241.5 million in fiscal 2024.

Excluding the impact of foreign currency, net sales decreased 13.4% or $37.7 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

July 1, 2023 July 2, 2022 Variance

June 29, 2024 July 1, 2023 Variance

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

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Gross profit increased 3.7% or $174.6 million to $4.89 billion in fiscal 2024 from $4.71 billion in fiscal 2023.

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.

Gross margin in fiscal 2024 increased 250 basis points to 73.3% as compared to 70.8% in fiscal 2023.

This increase in Gross margin was primarily attributed to lower freight costs, net pricing improvements and favorable currency impacts.

Refer to "Current Macroeconomic Conditions and Outlook" herein, for further information.

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

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Fiscal Year Ended

July 1, 2023 July 2, 2022 Variance

June 29, 2024 July 1, 2023 Variance

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

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

Coach $ 2,224.3 43.7 % $ 2,117.2 42.7 % $ 107.1 5.1 %

Kate Spade 738.6 55.3 785.1 55.3 (46.5) (5.9)

785.1 55.3 754.6 52.2 30.5 4.0

Stuart Weitzman 164.1 68.0 174.4 62.0 (10.3) (5.9)

174.4 62.0 182.8 57.5 (8.4) (4.6)

Corporate (1)(2)

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Excluding items affecting comparability of 109.9 million in fiscal 2024, SG&A expenses increased 2.7% or $97.0 million to $3.64 billion from $3.54 billion in fiscal 2023.

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.

SG&A as a percentage of net sales increased 140 basis points to 54.5% as compared to 53.1% in fiscal 2023.

This increase in SG&A as a percentage of net sales was primarily due to higher marketing spend, higher compensation costs, increased occupancy costs and higher professional fees, partially offset by a decrease in distribution costs.

(1) In fiscal 2024, Corporate incurred charges affecting comparability of $109.9 million.

Excluding those items affecting comparability, SG&A expenses increased 10.0% or $46.7 million to $512.5 million in fiscal 2024 as compared to $465.8 million in fiscal 2023.

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

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Fiscal Year Ended

July 1, 2023 July 2, 2022 Variance

June 29, 2024 July 1, 2023 Variance

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

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Stuart Weitzman (21.2) (8.8) (6.7) (2.4) (14.5) NM

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

Corporate (622.4) NA (465.8) NA (156.6) (33.6)

Tapestry $ 1,140.1 17.1 $ 1,172.4 17.6 $ (32.3) (2.8)

Operating income decreased $32.3 million to $1.14 billion during fiscal 2024 as compared to $1.17 billion in fiscal 2023.

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;

Operating margin was 17.1% in fiscal 2024 as compared to 17.6% in fiscal 2023.

Excluding items affecting comparability of $109.9 million in fiscal 2024, operating income increased $77.6 million to $1.25 billion from $1.17 billion in fiscal 2023;

and operating margin increased 110 basis points to 18.7% in fiscal 2024 as compared to 17.6% in fiscal 2023.

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

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.

This increase in operating margin was primarily attributed to an increase of 250 basis points in gross margin partially offset by a 140 basis points increase in SG&A as a percentage of sales.

• Coach Operating Income increased $121.2 million to $1.65 billion in fiscal 2024, resulting in an operating margin increase of 160 basis points to 32.4%, as compared to $1.53 billion and 30.8%, respectively in fiscal 2023.

This increase in operating margin was primarily attributed to:

◦ Gross Margin , increased 260 basis points mainly due to lower freight costs, net pricing improvements and favorable currency impacts;

◦ SG&A expenses as a percentage of net sales , increased 100 basis points mainly due to higher marketing spend and higher compensation costs, partially offset by a decrease in distribution costs.

• Kate Spade Operating Income increased $17.6 million to $132.6 million in fiscal 2024, resulting in an operating margin increase of 180 basis points to 9.9%, as compared to 115.0 million and 8.1%, respectively in fiscal 2023.

This increase in operating margin was primarily attributed to:

◦ Gross Margin , increased 180 basis points mainly due to lower freight costs and net pricing improvements;

◦ SG&A expenses as a percentage of net sales , remained even to prior year mainly driven by increased occupancy costs and higher information technology costs, partially offset by lower marketing spend, depreciation and lower compensation costs.

• Stuart Weitzman Operating Loss increased $14.5 million to a loss of $21.2 million in fiscal 2024, resulting in an operating margin decrease of 640 basis points to (8.8)%, as compared to an operating loss of $6.7 million and operating margin of (2.4)% in fiscal 2023.

• Corporate Operating Expenses increased (33.6)% or $156.6 million to $622.4 million in fiscal 2024.

Excluding items affecting comparability, Corporate operating expenses increased $46.7 million to $512.5 million from $465.8 million in fiscal 2023.

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

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 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.

Interest expense, net, increased $97.4 million to $125.0 million in fiscal 2024 as compared to $27.6 million in fiscal 2023.

Excluding items affecting compatibility, Interest expense, net, decreased $19.3 million to $8.3 million from $27.6 million in fiscal 2023.

This decrease in Interest expense, net, was mainly due to higher interest income partially offset by higher interest on the term loan due 2027 (the "Term Loan due 2027").

Other Expense (Income)

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

Other expense increased $1.5 million to $3.2 million in fiscal 2024 as compared to an expense of $1.7 million in fiscal 2023.

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

Provision (Benefit) for Income Taxes

The effective tax rate was 19.4% in fiscal 2024 as compared to 18.1% in fiscal 2023.

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

Excluding items affecting comparability, the effective tax rate was 19.2% in fiscal 2024 as compared to 18.1% in fiscal 2023.

The increase in effective tax rate was primarily driven by discrete items recognized in the period partially offset by geographic mix of earnings.

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 decreased $0.5 million to $936.0 million in fiscal 2023 from $936.5 million in fiscal 2022.

Net income decreased 12.8% or $120.0 million to $816.0 million in fiscal 2024 as compared to a net income of $936.0 million in fiscal 2023.

Excluding items affecting comparability, net income increased 6.9% or $64.2 million to $1.00 billion in fiscal 2024 from $936.0 million in fiscal 2023.

Net Income (Loss) per Share

Net income per diluted share was $3.50 in fiscal 2024 as compared to net income per diluted share of $3.88 in fiscal 2023.

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.

Excluding items affecting comparability, net income per diluted share increased $0.41 to $4.29 in fiscal 2024 from $3.88 in fiscal 2023.

This change was primarily due to higher net income and a decrease in shares outstanding.

FISCAL 2023 COMPARED TO FISCAL 2022

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

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.

The reported SG&A expenses, operating income, interest expense, provision for income taxes, net income and earnings per diluted share in fiscal 2024 reflect certain items affecting comparability, including the impact of Acquisition costs.

There were no items affecting comparability in fiscal 2023.

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

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

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

The Company excludes closed stores from the calculation.

Comparable store sales are not adjusted for store expansions.

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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The Company’s internal management reporting excluded these items.

In addition, the human resources committee of the Company’s Board uses these non-GAAP measures when setting and assessing achievement of incentive compensation goals.

In addition, the HR Committee uses these non-GAAP measures when setting and assessing achievement of incentive compensation goals.

The Company operates on a global basis and reports financial results in U.S.

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Further, these non-GAAP measures may be unique to the Company, as they may be different from non-GAAP measures used by other companies.

For a detailed discussion on these non-GAAP measures, see Item 7.

For a detailed discussion on these non-GAAP measures, see the GAAP to Non-GAAP Reconciliation discussions above in this Item 7.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations."

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Net increase (decrease) in cash and cash equivalents $ 5,415.9 $ (63.7) $ 5,479.6

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.

The Company’s cash and cash equivalents increased by $5.42 billion in fiscal 2024 compared to a decrease of $63.7 million in fiscal 2023, as discussed below.

Net cash provided by (used in) operating activities

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 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 operating activities increased $280.4 million primarily due to changes in operating assets and liabilities of $426.8 million partially offset by lower net income of $120.0 million and lower impact of non-cash adjustments of $26.4 million.

The $426.8 million increase in changes in operating asset and liability balances was primarily driven by the following:

• Accrued liabilities were a source of cash of $91.6 million in fiscal 2024 as compared to a use of cash of $93.0 million in fiscal 2023, primarily driven by accrued incentive compensation and an increase in accrued interest due to issuance of the Capri Acquisition Senior Notes.

• Accounts payable were a source of cash of $49.1 million in fiscal 2024 as compared to a use of cash of $98.1 million in fiscal 2023, primarily driven by a reduction of in-transit inventory in the prior year.

• Other Assets were a use of cash of $0.1 million in fiscal 2024 as compared to a use of cash of $100.7 million in fiscal 2023, primarily driven by an increase in other receivables due to the net investment hedge, tax refunds in the current year and lower cloud computing project spend.

Net cash provided by (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.

Net cash used in investing activities was $1.04 billion in fiscal 2024 compared to a source of cash of $5.7 million in fiscal 2023, resulting in a $1.05 billion increase in net cash used in investing activities.

The $1.04 billion use of cash in fiscal 2024 was primarily due to purchases of investments of $2.71 billion, partially offset by maturities and sales of investments of $1.68 billion, mainly related to the proceeds of the Capri Acquisition Senior Notes.

The $5.7 million source of cash in fiscal 2023 was 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.

Net cash provided by (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.

Net cash provided by financing activities was $5.21 billion in fiscal 2024 as compared to a use of cash of $1.04 billion in fiscal 2023, resulting in a $6.25 billion increase in net cash provided by financing activities.

The $5.21 billion source of cash in fiscal 2024 was primarily due to proceeds from the issuance of the Capri Acquisition Senior Notes of $6.09 billion, partially offset by the repayment of the Term Loan due 2027 of $468.8 million, and dividend payments of $321.4 million.

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.

Effect of exchange rate changes on cash and cash equivalents

Effect of exchange rate changes on cash and cash equivalents was a decrease of $12.2 million as compared to a decrease of $8.7 million in fiscal 2023.

Cash Flows - Fiscal 2023 Compared to Fiscal 2022

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Working Capital and Capital Expenditures

As of July 1, 2023, in addition to our cash flows from operations, our sources of liquidity and capital resources were comprised of the following:

Sources of Liquidity Outstanding Indebtedness Total Available Liquidity (1)

The following table presents our financial condition as of June 29, 2024 and July 1, 2023 :

June 29, 2024 July 1, 2023 Change

Cash and cash equivalents (1)

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Short-term investments (1)

Revolving Credit Facility (2)

1,061.8 15.4 1,046.4

Term Loan (2)

Current debt (2)

(303.4) (25.0) (278.4)

3.050% Senior Notes due 2032 (3)

Long-term debt (2)

(6,937.2) (1,635.8) (5,301.4)

4.125% Senior Notes due 2027 (3)

Total, net $ (36.8) $ (919.3) $ 882.5

(1) As of June 29, 2024, approximately 4.2% of our Cash and cash equivalents and Short-term investments were held outside the United States.

(2) Refer to Note 12, "Debt" for discussion of the carrying values of our debt.

Sources of Liquidity

Our primary sources of liquidity are the cash flows generated from our operations, our cash and cash equivalents and short-term investments, availability under our credit facilities and other available financing options.

The following table presents the total availability, borrowings outstanding and remaining availability under our credit facilities as of June 29, 2024:

Total Availability Borrowings Outstanding Remaining Availability

Revolving Credit Facility (1)

$ 2,000.0 $ — $ 2,000.0

4.250% Senior Notes due 2025 (3)

Capri Acquisition Term Loan Facilities (1)

1,400.0 — 1,400.0

China Credit Facility (1)(2)

Total $ 3,434.4 $ — $ 3,434.4

(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.

(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.

The Company and its subsidiaries must comply on a quarterly basis with a maximum 4.0 to 1.0 ratio of (a) consolidated debt minus unrestricted cash and cash equivalents in excess of $300 million to (b) consolidated EBITDAR.

Borrowings under the $1.25 Billion Revolving Credit Facility bear interest at a rate per annum equal to, at the Company’s option, (i) for borrowings in U.S.

Dollars, either (a) an alternate base rate or (b) a term secured overnight financing rate, (ii) for borrowings in Euros, the Euro Interbank Offered Rate, (iii) for borrowings in Pounds Sterling, the Sterling Overnight Index Average Reference Rate and (iv) for borrowings in Japanese Yen, the Tokyo Interbank Offer Rate, plus, in each case, an applicable margin.

The applicable margin will be adjusted by reference to a grid (the “Pricing Grid”) based on the ratio of (a) consolidated debt to (b) consolidated EBITDAR (the “Gross Leverage Ratio”).

Additionally, the Company will pay facility fees, calculated at a rate per annum determined in accordance with the Pricing Grid, on the full amount of the $1.25 Billion Revolving Credit Facility, payable quarterly in arrears, and certain fees with respect to letters of credit that are issued.

The $1.25 Billion Revolving Credit Facility may be used to finance the working capital needs, capital expenditures, permitted investments, share purchases, dividends and other general corporate purposes of the Company and its subsidiaries (which may include commercial paper backup).

There were no outstanding borrowings on the $1.25 Billion Revolving Credit Facility as of July 1, 2023.

The Term Loan includes a two-month delayed draw period from the closing date.

On June 14, 2022 the Company drew down on the Term Loan to satisfy the Company’s remaining obligations under the 3.000% senior unsecured notes due 2022 and for general corporate purposes.

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

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.

The applicable margin will be adjusted by reference to a pricing grid based on the Gross Leverage Ratio.

Additionally, the Company will pay a ticking fee on the undrawn amount of the Term Loan.

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

(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.

Furthermore, the indentures for the 2032 Senior Notes, 2027 Senior Notes, and 2025 Senior Notes contain certain covenants limiting the Company’s ability to:

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

As of July 1, 2023, no known events of default have occurred.

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

(1) Refer to Note 12, "Debt" for further information on these instruments.

(2) The carrying amounts of the China Credit Facility include the impact of changes in the exchange rate of the United States Dollar against the RMB.

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

As of July 1, 2023, there were 14 financial institutions participating in the Revolving Credit Facility and Term Loans, with no one participant maintaining a combined maximum commitment percentage in excess of 14%.

As of June 29, 2024, there were 18 financial institutions participating in the Revolving Credit Facility and 24 financial institutions participating in the Capri Acquisition Term Loan Facilities with no one participant maintaining a combined maximum commitment percentage in excess of 10%.

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

We have the ability to draw on our credit facilities or access other sources of financing options available to us in the credit and capital markets for, among other things, acquisition or integration-related costs, our restructuring initiatives, settlement of a material contingency or a material adverse business or macroeconomic development, as well as for other general corporate business purposes.

If (i) the Capri Acquisition has not been completed by February 10, 2025 (or such later date mutually agreed between the Company and Capri) (such date, the “special mandatory redemption end date”), (ii) prior to the special mandatory redemption end date, the Merger Agreement is terminated in accordance with its terms or (iii) the Company otherwise notifies the trustee that it will not pursue the consummation of the Capri Acquisition, all of the Capri Acquisition Senior Notes will be redeemed at a redemption price equal to 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the special mandatory redemption date.

Management believes that cash flows from operations, access to the credit and capital markets and our credit lines, on-hand cash and cash equivalents and our investments will provide adequate funds to support our operating, capital and debt service requirements for fiscal 2025 and beyond.

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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.

Supply Chain Finance

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.

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

Total capital expenditures and cloud computing implementation costs were $260.8 million in fiscal 2023 as the Company continues to prioritize investing in digital capabilities.

Refer to Note 2, "Basis of Presentation and Organization," for additional information.

Capital Expenditures

Total capital expenditures and cloud computing implementation costs were $144.1 million in fiscal 2024.

Certain cloud computing implementation costs are recognized within Prepaid expenses and Other assets on the Consolidated Balance Sheets.

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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.

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 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").

On May 12, 2022, the Company announced the Board authorized the additional repurchase of up to $1.50 billion of its common stock.

Pursuant to this program, purchases of the Company's common stock will be made subject to market conditions and at prevailing market prices, through open market purchases.

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

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.

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

As of June 29, 2024 the Company had $800 million of additional shares available to be repurchased as authorized under the 2022 Share Repurchase Program.

In August 2023, the Company suspended its share repurchase activity in connection with the Capri Acquisition.

Refer to Note 5, "Acquisitions," for further information.

There were no shares repurchased during fiscal 2024.

Contractual and Other Obligations

Firm Commitments

As of July 1, 2023, the Company's contractual obligations are as follows:

As of June 29, 2024, the Company's contractual obligations are as follows:

2026 – 2027 Fiscal

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Inventory purchase obligations 485.4 485.4 — — —

352.6 352.6 — — —

Operating lease obligations 1,877.7 378.9 570.8 304.7 623.3

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Debt repayment (1)

7,306.8 303.4 1,785.6 1,932.2 3,285.6

Interest on outstanding debt (1)(2)

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Total $ 12,518.3 $ 1,762.8 $ 3,304.1 $ 2,845.3 $ 4,606.1

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

The estimated interest expenses associated with our term loan is based on the current interest rate as of July 1, 2023.

(1) The principal amounts and interest of the Capri Acquisition EUR Senior Notes include the impact of changes in the exchange rate of the United States Dollar against the Euro as of June 29, 2024.

(2) Interest on outstanding debt includes fixed interest expenses for unsecured notes.

The estimated interest expenses associated with our term loan is based on the current interest rate as of June 29, 2024.

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

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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 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.

Excluded from the above contractual obligations table is the non-current liability for unrecognized tax benefits of $134.8 million as of June 29, 2024, 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 Sheets at June 29, 2024 as these items will be paid within one year and certain long-term liabilities not requiring cash payments.

Off-Balance Sheet Arrangements

In addition to the commitments included in the table above, we have outstanding letters of credit, surety bonds and bank guarantees of $37.1 million as of July 1, 2023, primarily serving to collateralize our obligation to third parties for duty, leases, insurance claims and materials used in product manufacturing.

In addition to the commitments included in the table above, we have outstanding letters of credit, surety bonds and bank guarantees totaling $28.4 million as of June 29, 2024, primarily serving to collateralize our obligation to third parties for duty, leases, insurance claims and materials used in product manufacturing.

These letters of credit expire at various dates through calendar 2039.

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Actual results could differ from estimates in amounts that may be material to the financial statements.

The development and selection of the Company’s critical accounting policies and estimates are periodically reviewed with the Audit Committee of the Board.

The development and selection of the Company’s critical accounting policies and estimates are periodically reviewed with the Audit Committee.

The accounting policies discussed below are considered critical because changes to certain judgments and assumptions inherent in these policies could affect the financial statements.

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Payment is due at the point of sale.

The Company recognizes revenue within the wholesale channel at the time title passes and risk of loss is transferred to customers, which is generally at the point of shipment of products but may occur upon receipt of the shipment by the customer in certain cases.

The Company recognizes revenue within the wholesale business at the time title passes and risk of loss is transferred to customers, which is generally at the point of shipment of products but may occur upon receipt of the shipment by the customer in certain cases.

Wholesale revenue is recorded net of estimates for returns, discounts, end-of-season markdowns, cooperative advertising allowances and other consideration provided to the customer.

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

At July 1, 2023, a 10% change in the allowances for estimated uncollectible accounts, markdowns and returns would not have resulted in a material change in the Company's reserves and net sales.

At June 29, 2024, a 10% change in the allowances for estimated uncollectible accounts, markdowns and returns would not have resulted in a material change in the Company's reserves and net sales.

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

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

At July 1, 2023, a 10% change in the inventory reserve, would not have resulted in material change in inventory and cost of sales.

At June 29, 2024, a 10% change in the inventory reserve, would not have resulted in material change in inventory and cost of sales.

Goodwill and Other Intangible Assets

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The fair values of the Kate Spade brand reporting unit and indefinite-lived brand as of the fiscal 2024 testing date exceeded their carrying values by approximately 20% and 55%, respectively.

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

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

Given the relatively small excess of fair value over carrying value as noted above, if profitability trends decline during fiscal 2025 from those that are expected, it is possible that an interim test, or our annual impairment test, could result in an impairment of these assets.

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Although the Company believes that the estimates and assumptions used are reasonable and legally supportable, the final determination of tax audits could be different than that which is reflected in historical tax provisions and recorded assets and liabilities.

Tax authorities periodically audit the Company’s income tax returns and the tax authorities may take a contrary position that could result in a significant impact on the Company's results of operations.

Tax authorities periodically audit the Company’s income tax returns, these tax authorities may take a contrary position that could result in a significant impact on the Company's results of operations.

Significant management judgment is required in determining the effective tax rate, in evaluating tax positions and in determining the net realizable value of deferred tax assets.

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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