TPR Tapestry, Inc. - 10-K

ITEM 1A. RISK FACTORS

You should consider carefully all of the information set forth or incorporated by reference in this document and, in particular, the following risk factors associated with the business of the Company and forward-looking information in this document. Please also see “Special Note on Forward-Looking Information” at the beginning of this report. The risks described below are not the only ones we face. Additional risks not presently known to us or that we currently deem immaterial may also have an adverse effect on us. If any of the risks below actually occur, our business, results of operations, cash flows or financial condition could suffer.

Risks Related to Macroeconomic Conditions

We face risks associated with potential changes to international trade agreements and the imposition of additional tariffs on importing our products.

Most of our imported products are subject to tariffs, indirect taxes, quotas and non-tariff trade barriers that may limit the quantity of products that we may import into the U.S. and other countries or may impact the cost of such products. To maximize opportunities, we rely on free trade agreements and other supply chain initiatives and, as a result, we are subject to government regulations and restrictions with respect to our cross-border activity. Additionally, we are subject to government regulations relating to importation activities, including related to U.S. Customs and Border Protection ("CBP") enforcement actions. The imposition of taxes, duties and quotas, the withdrawal from or material modification to trade agreements, and/or the detention of our goods by CBP for any reason, could have a material adverse effect on our business, results of operations and financial condition.

There has been significant reform in U.S. trade policy following the change in U.S. presidential administration in January 2025. International trade disputes as well as changes and uncertainty regarding international trade and trade policies, including the imposition or threat of the imposition of new or increased tariffs or other trade restrictions on goods from the countries where our manufacturers are located, could result in a materially adverse impact to our business. During fiscal 2025, the primary manufacturers of Coach products were located in Vietnam, Cambodia, the Philippines and India, and the primary manufacturers of Kate Spade products were located in Vietnam, Cambodia, mainland China, and the Philippines. Increased tariffs or other trade restrictions against these countries, as well as any tariffs or other trade restrictions implemented by these countries in retaliation, could limit our ability to manufacture products in countries that have the labor and technical expertise needed. Further, such tariffs or other trade restrictions could require us to absorb costs or try to pass costs onto consumers, which could materially impact our revenue and profitability. In addition, any negative perception of or sentiments towards the U.S., whether in response to changes in tariffs, trade policy or otherwise, could impact the perception of our Company. Our ability to navigate any uncertainty, changes or expansion in tariffs or other trade restrictions could have a material negative impact on our business, financial conditions and results of operations.

Economic conditions, such as an economic recession, downturn, periods of inflation or uncertainty, could materially adversely affect our financial condition, results of operations and consumer purchases of discretionary items.

Our results can be impacted by a number of macroeconomic factors, including but not limited to: consumer confidence and spending levels, tax rates, levels of unemployment, consumer credit availability, pandemics, natural disasters, raw material costs, fuel and energy costs, bank failures, market volatility, global factory production, supply chain operations, commercial real estate market conditions, credit market conditions and the level of customer traffic in malls, shopping centers and online.

Many of our products can be considered discretionary items for consumers. Demand for our products, and consumer spending in the handbag, footwear and accessories categories generally is or may be significantly impacted by trends in consumer confidence, general economic and business conditions, high levels of unemployment, periods of inflation, health pandemics, interest rates, foreign currency exchange rates, the availability of consumer credit and taxation. Consumer purchases of discretionary items, such as the Company's products, tend to decline during recessionary periods or periods of sustained high unemployment when disposable income is lower.

Unfavorable economic conditions may also reduce consumers’ willingness and ability to travel to major cities and vacation destinations in which our stores are located. Our sensitivity to economic cycles and any related fluctuation in consumer demand may have a material adverse effect on our financial condition.

Risks Related to our Business and our Industry

We face risks associated with operating in international markets.

We operate on a global basis, with approximately 40.0% of our net sales coming from operations outside of United States for fiscal year 2025. While geographic diversity helps to reduce the Company’s exposure to risks in any one country, we are subject to risks associated with international operations, including, but not limited to:

• political or economic instability or changing macroeconomic conditions in our major markets, including the potential impact of new policies that may be implemented by the U.S. or other jurisdictions, particularly with respect to tax and trade policies;

• public health crises, such as pandemics and epidemic diseases;

• changes to the U.S.'s participation in, withdrawal out of, renegotiation of certain international trade agreements or other major trade related issues, including the non-renewal of expiring favorable tariffs granted to developing countries, tariff quotas and retaliatory tariffs, trade sanctions, new or onerous trade restrictions, embargoes and other stringent government controls;

• changes in exchange rates for foreign currencies, which may adversely affect the retail prices of our products, result in decreased international consumer demand, or increase our supply costs in those markets, with a corresponding negative impact on our gross margin rates;

• compliance with laws relating to foreign operations, including the Foreign Corrupt Practices Act ("FCPA"), the U.K. Bribery Act and other global anti-corruption laws, which in general concern the bribery of foreign public officials and other regulations and requirements;

• changes in tourist shopping patterns and consumer behavior, particularly that of the Chinese consumer;

• geopolitical instability (such as the uncertainty in U.S.-China relations);

• natural and other disasters;

• political, civil and social unrest; and

• changes in legal and regulatory requirements, including, but not limited to safeguard measures, anti-dumping duties, cargo restrictions to prevent terrorism, restrictions on the transfer of currency, climate change and other environmental legislation, product safety regulations or other charges or restrictions.

Our business is subject to the risks inherent in global sourcing activities.

As a Company engaged in sourcing on a global scale, we are subject to the risks inherent in such activities, including, but not limited to:

• disruptions or delays in shipments whether due to port congestion, logistics carrier disruption (including as a result of labor disputes), militant attacks on commercial shipping vessels in the Red Sea, other shipping capacity constraints or other factors, which has and may continue to result in significantly increased inbound freight costs and increased in-transit times;

• loss or disruption of key manufacturing or fulfillment sites or extended closure of such sites due to unexpected factors;

• imposition of additional duties, taxes and other charges or restrictions on imports or exports;

• unavailability, or significant fluctuations in the cost, of raw materials;

• compliance by us and our independent manufacturers and suppliers with labor laws and other foreign governmental regulations;

• increases in the cost of labor, fuel (including volatility in the price of oil), travel and transportation;

• compliance with our Global Business Integrity Program;

• compliance by our independent manufacturers and suppliers with our Supplier Code of Conduct, social auditing procedures and requirements and other applicable compliance policies;

• compliance with applicable laws and regulations, including U.S. laws regarding the identification and reporting on the use of “conflict minerals” sourced from the Democratic Republic of the Congo in the Company’s products, other laws and regulations regarding the sourcing of materials in the Company’s products, the FCPA, U.K. Bribery Act and other global anti-corruption laws, as applicable, and other U.S. and international regulations and requirements;

• regulation or prohibition of the transaction of business with specific individuals or entities and their affiliates or goods manufactured in certain regions by any government or regulatory authority in the jurisdictions where we conduct business, such as the listing of a person or entity as a Specially Designated National or Blocked Person by the U.S. Department of the Treasury’s Office of Foreign Assets Control or other sanctions regimes;

• inability to engage new independent manufacturers that meet the Company’s cost-effective sourcing model;

• product quality issues;

• political unrest, protests and other civil disruption;

• public health crises, such as pandemic and epidemic diseases, and other unforeseen outbreaks;

• natural disasters or other extreme weather events, whether as a result of climate change or otherwise; and

• acts of war or terrorism and other external factors over which we have no control.

We are subject to labor laws governing relationships with employees, including minimum wage requirements, overtime, working conditions and citizenship requirements. Compliance with these laws may lead to increased costs and operational complexity and may increase our exposure to governmental investigations or litigation.

In addition, we require our independent manufacturers and suppliers to operate in compliance with applicable laws and regulations, as well as our Supplier Code of Conduct and other compliance policies under our Global Business Integrity Program; however, we do not control these manufacturers or suppliers or their labor, environmental or other business practices. Copies of our Global Business Integrity Program documents, including our Global Operating Principles, Anti-Corruption Policy and Supplier Code of Conduct are available through our website, www.tapestry.com. The violation of labor, environmental or other laws by an independent manufacturer or supplier, or divergence of an independent manufacturer’s or supplier’s labor practices from those generally accepted as ethical or appropriate in the U.S., could interrupt or otherwise disrupt the shipment of our products, harm our trademarks or damage our reputation. In addition, if there is negative publicity regarding the production methods of any of our suppliers or manufacturers, even if unfounded or not specific to our supply chain, our reputation and sales could be adversely affected, we could be subject to legal liability, or could cause us to contract with alternative suppliers or manufacturing sources. The occurrence of any of these events could materially adversely affect our business, financial condition and results of operations.

A decline in the volume of traffic to our stores could have a negative impact on our net sales.

The success of our retail stores located within malls and shopping centers may be impacted by (i) changes in consumer shopping behavior and store closures; (ii) reduced travel resulting from economic conditions (including a recession or inflationary pressures); (iii) the location of the store within the mall or shopping center; (iv) surrounding tenants or vacancies; (v) increased competition in areas where malls or shopping centers are located; (vi) the amount spent on advertising and promotion to attract consumers to the mall; and (vii) a shift towards online shopping resulting in a decrease in store traffic. Declines in consumer traffic could have a negative impact on our net sales and could materially adversely affect our financial condition and results of operations. Furthermore, declines in traffic could result in store impairment charges if expected future cash flows of the related asset group do not exceed the carrying value.

The success of our business depends on our ability to retain the value of our brands and respond to changing consumer preferences and fashion trends in a timely manner.

Each of our brands are unique and independent, while sharing a commitment to innovation and authenticity defined by unique brand purposes, distinctive products, and differentiated customer experiences across business channels and geographies. Any misstep in product quality or design, executive leadership, customer service, marketing, unfavorable publicity or excessive product discounting could negatively affect the image of our brands with our customers. Furthermore, our brands’ communications, product lines and experiences are subject to rapidly changing fashion trends and consumer preferences, including the increasing shift to digital brand engagement and social media communication. If we do not anticipate and respond promptly to changing customer preferences and fashion trends in the design, production, and styling of our products, as well as create compelling marketing campaigns that appeal to our target consumers, our sales and results of operations may be negatively impacted.

The shift towards digital engagement has become increasingly important, with increased use of social media platforms by our brand representatives, influencers and our employees. Actions taken by our partners on social media that do not show our brands in a manner consistent with our desired image or that are damaging to such partner’s reputation, whether or not through our brand social media platforms, could harm our brand reputation and materially impact our business.

Our growth depends on the continued success of existing products, as well as the successful design, introduction of new products and maintaining an appropriate rationalization of our assortment. Our ability to create new products and to sustain existing products is affected by whether we can successfully anticipate and respond to consumer preferences and fashion trends. The failure to develop and launch successful new products or to rationalize our assortment appropriately could hinder the growth of our business. Also, any delay in the development or launch of a new product could result in our company not being the first to bring product to market, which could compromise our competitive position.

Our success also depends in part on our and our executive leadership team's ability to execute on our plans and strategies for each of our brands and for Tapestry, as a multi-brand enterprise. Even if our products, marketing campaigns, consumer experiences and environments do meet changing customer preferences and/or stay ahead of changing fashion trends, our brand image could become tarnished or undesirable in the minds of our customers or target markets, which could materially adversely

impact the growth of our brands and the Tapestry multi-brand portfolio, and our overall business, financial condition, and results of operations.

The growth of our business depends on the successful execution of our global omni-channel expansion efforts and our ability to execute our digital and e-commerce priorities.

Our success and growth depend on the continued development of our omni-channel presence for each of our brands globally, leaning into global digital opportunities for each brand, along with select bricks and mortar expansion. With respect to international expansion, our brands may not be well-established or widely sold in some of these markets, and we may have limited experience operating directly or working with our partners there. In addition, some of these markets, either through bricks and mortar stores or digital channels, have different operational characteristics, including but not limited to employment and labor, privacy, transportation, logistics, real estate, environmental regulations and local reporting or legal requirements.

We aim to provide a seamless omni-channel experience to our customers regardless of whether they are shopping in stores or engaging with our brands through digital technology, such as computers, mobile phones, tablets or other devices. This requires investment in new technologies and reliance on third-party digital partners, over which we may have limited control. Additionally, our digital business is subject to numerous risks that could adversely impact our results, including (i) a diversion of sales from our brand stores or wholesale customers, (ii) difficulty in recreating the in-store experience through digital channels, (iii) liability for online content, (iv) changing dynamics within the digital marketing environment and our ability to effectively market to consumers, (v) intense competition from online retailers, and (vi) the ability to provide timely delivery of e-commerce purchases, which is dependent on the capacity and operations of our owned and third-party operated fulfillment facilities. See “ Our business is subject to the risks inherent in global sourcing activities” for additional risks related to our fulfillment networks. If we are unable to effectively execute our e-commerce and digital strategies and provide reliable experiences for our customers across all business channels, our reputation and ability to compete with other brands could suffer, which could adversely impact our business, results of operations and financial condition.

Furthermore, consumer demand and behavior, as well as tastes and purchasing trends, may differ across countries, and as a result, sales of our product may not be successful, or the margins on those sales may not be in line with those we currently anticipate. Further, expanding in certain markets may have upfront investment costs that may not be accompanied by sufficient revenues to achieve typical or expected operational and financial performance and therefore may be dilutive to our brands in the short-term. We may also have to compete for talent in international regions as we expand our omni-channel presence.

Consequently, if our global omni-channel expansion plans are unsuccessful, or we are unable to retain and/or attract key personnel, our business, financial condition and results of operations could be materially adversely affected.

Significant competition in our industry could adversely affect our business.

We face intense competition from many other brands in the product lines and markets we participate in, which include the Company's wholesale customers. Competition is based on a number of factors, including, without limitation, the following:

• our competitors may develop new products or product categories that are more popular with our customers;

• anticipating and responding in a timely fashion to changing consumer demands and shopping preferences, including the ever-increasing shift to digital brand engagement, social media communications, and online and cross-channel shopping;

• maintaining strong brand recognition, loyalty, and a reputation for quality, including through digital brand engagement and online and social media presence;

• recruiting and retaining key talent;

• developing and producing innovative, high-quality products in sizes, colors, and styles that appeal to a diverse group of consumers;

• competitively pricing our products and creating an acceptable value proposition for consumers, including price increases to mitigate inflationary pressures while simultaneously balancing the risk of lower consumer demand in response to any such price increases;

• providing strong and effective marketing support in several diverse demographic markets, including through digital and social media platforms in order to stay better connected to consumers;

• providing attractive, reliable, secure, and user-friendly digital commerce sites;

• sourcing sustainable raw materials at cost-effective prices;

• ensuring product availability and optimizing supply chain efficiencies with third-party suppliers and retailers;

• protecting our trademarks and design patents;

• identifying and adapting to changes in technology, including the successful utilization of data analytics, artificial intelligence, and machine learning; and

• the ability to withstand prolonged periods of adverse economic conditions or business disruptions.

A failure to compete effectively or to keep pace with rapidly changing consumer preferences, technology and product trends could adversely affect our growth and profitability.

Our success depends, in part, on attracting, developing and retaining qualified employees, including key personnel.

Our business and future success depends heavily on attracting, developing and retaining qualified employees, including our senior management team. Competition in our industry to attract and retain these employees is intense and is influenced by our ability to offer competitive compensation and benefits, employee morale, our reputation, recruitment by other employers, perceived internal opportunities, non-competition and non-solicitation agreements and macro unemployment rates.

We depend on the guidance of our senior management team and other key employees who have significant experience and expertise in our industry and our operations. There can be no assurance that these individuals will remain with us or that we will be able to identify and attract suitable successors for these individuals. The loss of one or more of our key personnel or the direct or indirect consequences of results thereof, or any negative public perception with respect to these individuals or the loss of these individuals, could have a material adverse effect on our business, results of operations and financial condition. We do not maintain key-person or similar life insurance policies on any of senior management team or other key personnel.

We must also attract, motivate and retain a sufficient number of qualified retail and fulfillment center employees. Historically, competition for talent in these positions has been intense and turnover is generally high. If we are unable to attract and retain such employees with the necessary skills and experience, we may not achieve our objectives and our results of operations could be adversely impacted.

Additionally, changes to our office environments, the adoption of new work models, and our requirements and/or expectations about when or how often certain employees work on-site or remotely may not meet the expectations of our employees. As businesses increasingly operate remotely, traditional geographic competition for talent may change in ways that we cannot presently predict. If our employment proposition is not perceived as favorable compared to other companies, it could negatively impact our ability to attract and retain our employees.

Mergers, acquisitions and other strategic investments may not be successful in achieving intended benefits, cost savings and synergies and may disrupt current operations.

One component of our historical growth strategy has been acquisitions, and, consistent with our longer-term capital allocation priorities, our management team expects to maintain M&A flexibility and may from time to time evaluate and consider acquisitions or other strategic investments. These involve various inherent risks and as a result, the expected benefits, cost savings and synergies may not be realized.

The integration process of any newly acquired company may be complex, costly and time-consuming. The potential difficulties of integrating the operations of an acquired business and realizing our expectations for an acquisition, including the benefits that may be realized, include, among other things:

• failure of the business to perform as planned following the acquisition or achieve anticipated revenue, cash flow or profitability targets;

• delays, unexpected costs or difficulties in completing the acquisition or integration of acquired companies or assets, including as a result of regulatory challenges;

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

• difficulties assimilating the operations and personnel of acquired companies into our operations;

• diversion of the attention and resources of management or other disruptions to current operations;

• the impact on our or an acquired business’ internal controls and compliance with the requirements under the Sarbanes-Oxley Act of 2002;

• changes in applicable laws and regulations or the application of new laws and regulations;

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

• failures or delays in receiving the necessary approvals by the relevant regulators and authorities;

• retaining key customers, suppliers and employees;

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

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

• lower than anticipated demand for product offerings by us or our licensees;

• assumption of liabilities not identified in due diligence; and

• other unanticipated issues, expenses and liabilities.

Our failure to successfully complete the integration of any acquired business, including as a result of regulatory challenges, and any adverse consequences associated with future acquisition activities, could have an adverse effect on our business, financial condition and operating results. Even if the integration of any acquired business is successfully completed, the full expected benefits and synergies of the acquisition may not be realized. Additional unanticipated costs, which could be material, may also be incurred in the integration of our business and the acquired business. Additionally, the full benefits of an acquisition may not be realized if the combined business does not perform as expected or demand for the combined company’s services does not meet our expectations.

Completed acquisitions may result in additional goodwill and/or an increase in other intangible assets on our Consolidated Balance Sheets. We are required annually, or as facts and circumstances exist, to assess goodwill and other intangible assets to determine if impairment has occurred. If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other intangible assets and the implied fair value of the goodwill or the fair value of other intangible assets in the period the determination is made. We cannot accurately predict the amount and timing of any potential future impairment of assets. Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our financial condition and results of operations.

We may seek to sell one or more lines of our business in an effort to maximize shareholder value, which may adversely affect our business, our reputation, our results of operations and financial position or our stock price.

We continuously evaluate how to best structure our business in an effort to maximize shareholder value, which could include the divestiture of certain of our lines of business, such as our recently completed sale of the Stuart Weitzman Business. Divestitures are subject to numerous risks and uncertainties, including, among others:

• the risk that a divestiture may not be completed in the expected time frame or at all;

• disruption of our management’s attention from ongoing business operations due to a proposed or pending divestiture;

• the acceptance of a less than favorable sales price or other terms of sale;

• the potential loss of key personnel or operations;

• adverse reactions from our borrowers, lenders or other counterparties, or those of the divested lines of business;

• the risk of litigation or other judicial or administrative proceedings arising from the divestiture; and

• negative reactions from market analysts and adverse impacts on our stock price.

A divestiture could result in significant costs to us and is subject to numerous risks, including those listed above. We cannot provide any assurance that a sale of one or more lines of business will be successful or will not harm our business, our reputation, our results of operations and financial position or our stock price.

Our business may be materially impacted if our fulfillment centers face significant interruptions and operations.

We are dependent on a limited number of fulfillment centers. Our ability to meet the needs of our customers and our retail stores and e-commerce sites depends on the proper operation of these centers. If any of these centers were to shut down or otherwise become inoperable or inaccessible for any reason, including as a result of accidents, economic and weather conditions, natural disasters, pandemic diseases, labor shortages and other unforeseen events and circumstances, we could suffer a substantial loss of inventory and/or disruptions of deliveries to our retail and wholesale customers. Depending on the duration of these closures, our results may be materially impacted. While we have business continuity and contingency plans for our sourcing and fulfillment center sites, significant disruption of manufacturing or fulfillment for any of the above reasons could interrupt product supply, result in a substantial loss of inventory, increase our costs, disrupt deliveries to our customers and our retail stores, and, if not remedied in a timely manner, could have a material adverse impact on our business.

Because our fulfillment centers include automated and computer-controlled equipment, they are susceptible to risks including power interruptions, system failures, software viruses, configuration errors and security breaches. In North America we maintain fulfillment centers in Florida, Ohio and Nevada, operated by Tapestry.

Globally we utilize fulfillment centers in mainland China, the Netherlands, the U.K. and Spain, owned and operated by third parties, allowing us to better manage the logistics in these regions while reducing costs. We also utilize local fulfillment

centers, through third parties, in Japan, parts of Greater China, South Korea, Singapore, Malaysia, Canada, Australia, and Mexico. The warehousing of the Company’s merchandise, store replenishment and processing direct-to-customer orders is handled by these centers and a prolonged disruption in any center’s operation could materially adversely affect our business and operations.

In addition, if our fulfillment centers are not sized to meet the optimal capacity for our products or are not adequately staffed, utilized or operated, our profitability may be negatively impacted.

Our business may be subject to increased costs due to excess inventories and a decline in profitability as a result of increasing pressure on margins if we misjudge the demand for our products.

Our industry is subject to significant pricing pressure caused by many factors, including intense competition and a highly promotional environment, fragmentation in the retail industry, pressure from retailers to reduce the costs of products, and changes in consumer spending patterns. If we misjudge the market for our products or demand for our products are impacted by other factors, such as inflationary pressures, political instability or other macroeconomic events, we may be faced with significant excess inventories for some products and missed opportunities for other products. We have in the past been, and may in the future be, forced to rely on donation, markdowns, promotional sales or other write-offs, to dispose of excess, slow-moving inventory, which may negatively impact our gross margin, overall profitability and efficacy of our brands.

Increases in our costs, such as raw materials, labor or freight could negatively impact our gross margin. Our costs for raw materials are affected by, among other things, weather, customer demand, speculation on the commodities market, the relative valuations and fluctuations of the currencies of producer versus customer countries and other factors that are generally unpredictable and beyond our control. Any of these factors may be exacerbated by global climate change. In addition, political instability, trade relations, sanctions, price inflationary pressure, or other geopolitical or economic conditions could cause raw material costs to increase and have an adverse effect on our future margins. Labor costs at many of our manufacturers have been increasing significantly and, as the middle class in developing countries continues to grow, it is unlikely that such cost pressure will abate. Furthermore, the cost of transportation has fluctuated and may continue to fluctuate significantly if oil prices continue to rise. We may not be able to offset such increases in raw materials, labor or transportation costs through pricing measures or other means.

As we outsource functions, we will become more dependent on the third parties performing these functions.

As part of our long-term strategy, we look for opportunities to cost effectively enhance capability of business services. While we believe we conduct appropriate due diligence before entering into agreements with these third parties, the failure of any of these third parties to provide the expected services, provide them on a timely basis or to provide them at the prices we expect could disrupt or harm our business. We also cannot guarantee that these third parties will not experience a personal data or security breach in the future, which could have a material impact on our operations. Any significant interruption in the operations of these service providers, including as a result of changes in social, political, and economic conditions, including those resulting from military conflicts or other hostilities, that could result in the disruption of trade from the countries in which our manufacturers or suppliers are located, over which we have no control, could also have an adverse effect on our business. Furthermore, we may be unable to provide these services or implement substitute arrangements on a timely and cost-effective basis on terms favorable to us.

Our wholesale business could suffer as a result of consolidations, liquidations, restructurings and other ownership changes in the wholesale industry.

Our wholesale business comprised approximately 13% of total net sales for fiscal 2025. The retail industry, including wholesale customers, has experienced financial difficulty leading to consolidations, reorganizations, restructuring, bankruptcies and ownership changes. This may continue and could further decrease the number of, or concentrate the ownership of, wholesale stores that carry our or our licensees’ products. Furthermore, a decision by the controlling owner of a group of stores or any other significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to decrease or eliminate the amount of merchandise purchased from us or our licensing partners could result in an adverse effect on the sales and profitability within this business channel.

Additionally, certain of our wholesale customers, particularly those located in the U.S., have in the past been highly promotional and have marked down their merchandise and may do so again in the future, which could impact our brands or could affect our business, results of operations, and financial condition.

Our operating results are subject to seasonal and quarterly fluctuations, which could adversely affect the market price of the Company's common stock.

The Company's results are typically affected by seasonal trends. We have historically realized, and expect to continue to realize, higher sales and operating income in the second quarter of our fiscal year. Business underperformance in the Company's second fiscal quarter could have a material adverse effect on its full year operating results and result in higher inventories. In

addition, fluctuations in net sales, operating income and operating cash flows of the Company in any fiscal quarter may be affected by the timing of wholesale shipments and other events affecting retail sales, including adverse weather conditions or other macroeconomic events.

We rely on our licensing partners to preserve the value of our licenses and the failure to maintain such partners could harm our business.

Our brands currently have multi-year agreements with licensing partners for certain products. In the future, we may enter into additional licensing arrangements. The risks associated with our own products also apply to our licensed products, as do unique risks stemming from problems that our licensing partners may experience, including risks associated with each licensing partner’s ability to obtain capital, manage its labor relations, maintain relationships with its suppliers, manage its credit and bankruptcy risks, and maintain customer relationships. While we maintain significant approval rights over the products produced for us by our licensing partners, any of the foregoing risks, or the inability of any of our licensing partners to execute on the expected design and quality of the licensed products or otherwise exercise operational and financial control over its business, may result in loss of revenue and competitive harm to our operations in the licensed product categories. Further, while we believe that we could engage with new licensing partners if required, any delay in doing so could adversely affect our revenues and harm our business.

We are subject to risks associated with leasing retail space subject to non-cancelable leases. We may be unable to renew leases at the end of their terms. If we close a leased retail space, we remain obligated under the applicable lease.

We do not own any of our retail store locations. The majority of our stores are under non-cancelable, multi-year leases, often with renewal options. We believe that the majority of the leases we enter into in the future will likely be non-cancelable. Generally, our leases are “net” leases, which require us to pay our proportionate share of the cost of insurance, taxes, maintenance and utilities. We generally cannot cancel these leases at our option. In certain cases, as we have done in the past, we may determine that it is no longer economical to operate a retail store subject to a lease or we may seek to generally downsize, consolidate, reposition, relocate or close some of our real estate locations. In such cases, we may be required to negotiate a lease exit with the applicable landlord or remain obligated under the applicable lease for, among other things, payment of the base rent for the balance of the lease term. In some instances, we may be unable to close an underperforming retail store due to continuous operation clauses in our lease agreements. In addition, as each of our leases expire, we may be unable to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to close retail stores in desirable locations. Our inability to secure desirable retail space or favorable lease terms could impact our ability to grow. Likewise, our obligation to continue making lease payments in respect of leases for closed retail spaces could have a material adverse effect on our business, financial condition and results of operations.

Additionally, due to the uncertain economic environment, it may be difficult to determine the fair market value of real estate properties when we are deciding whether to enter into leases or renew expiring leases. This may impact our ability to manage the profitability of our store locations, or cause impairments of our lease right-of-use assets if market values decline, any of which could have a material adverse effect on our financial condition or results of operations.

Risks Related to Information Security and Technology

Computer system disruption and cyber security threats, including a personal data or security breach, could damage our relationships with our customers, harm our reputation, expose us to litigation and adversely affect our business.

We depend on digital technologies for the successful operation of our business, including corporate email and chat communications to and from employees, customers, stores and vendors, the design, manufacture and distribution of our finished goods, digital and local marketing and clienteling efforts, data analytics, collection, use and retention of customer, employee, vendor and partner information, the processing of credit card transactions, online e-commerce activities and our interaction with the public in the social media space. Our company implemented a hybrid working model. Continued remote working has increased our dependence on digital technology. Despite the security measures we have in place, including those described in Item 1C “Cybersecurity”, the possibility of a successful cyber-attack on any one or all of these systems is a serious threat. The retail industry, in particular, has been the target of many cyber-attacks. As part of our business model, we collect, retain and transmit confidential information and personal data over public networks. In addition to our own databases, we use third-party service providers to store, process and transmit this information on our behalf. Although we contractually require these service providers to implement and use reasonable and adequate security measures and data protection, we cannot control third parties and cannot guarantee that a personal data or security breach will not occur in the future either at their location or within their systems. We also store all designs, goods specifications, projected sales and distribution plans for our finished products digitally. We have enterprise class and industry comparable security measures in place to protect both our physical facilities and digital systems from attacks. Despite these efforts, however, we may be vulnerable to targeted or random cyber-attacks, personal data or security breaches, acts of vandalism, computer malware, misplaced or lost data, programming and/or human errors, or other similar events. Further, like other companies in the retail industry, during the ordinary course of business, we and our vendors have in the past experienced, and we expect to continue to experience, cyber-attacks of varying degrees and

types, including phishing and other attempts to breach or gain unauthorized access to our systems. As artificial intelligence becomes increasingly integrated into business systems, concerns about data exposure and privacy risks are intensifying. Additionally, artificial intelligence is being used to carry out advanced social engineering attacks, increasing potential for harm. To date, these attacks have not had a material impact on our operations, but we cannot provide assurance that cyber-attacks will not have a material impact in the future.

Awareness and sensitivity to personal data breaches and cyber security threats by consumers, employees and lawmakers is at an all-time high. Any misappropriation or unauthorized access to confidential or personal information gathered, stored or used by us, be it intentional or accidental, could have a material impact on the operation of our business, including severely damaging our reputation and our relationships with our customers, employees, vendors and investors. We have been incurring and expect that we will continue to incur significant costs implementing additional security measures to protect against new or enhanced data security or privacy threats, or to comply with current and new international, federal and state laws governing the unauthorized disclosure, access to, loss, alteration or exfiltration of confidential and personal information which are continuously being enacted and proposed such as the General Data Protection Regulation ("GDPR") in the E.U., the UK GDPR, the California Consumer Privacy Act ("CCPA") as amended by the California Privacy Rights Act ("CPRA"), the Virginia Consumer Data Protection Act ("VCDPA"), the Colorado Privacy Act ("CPA"), the Utah Consumer Privacy Act ("UCPA"), the Connecticut Data Privacy Act ("CTDPA"), the Montana Consumer Data Privacy Act ("MCDPA"), the Washington My Health My Data Act ("WMHMDA"), the Florida Digital Bill of Rights ("FDBR"), the Texas Data Privacy and Security Act ("TDPSA") and other comprehensive and sectoral state privacy laws in the U.S., as well as increased cyber security and privacy protection costs such as organizational changes, deploying additional personnel and protection technologies, training employees and contractors, engaging outside counsel, third-party experts and consultants. We may also experience loss of revenues resulting from unauthorized use of proprietary information including our intellectual property. Lastly, we could face sizable fines, significant breach containment and notification costs to supervisory authorities and the affected data subjects, and increased litigation and customer claims, as a result of cyber security or personal data breaches. While we carry cyber liability insurance, such insurance may not cover us with respect to any or all claims or costs associated with such a breach.

In addition, we have e-commerce sites in certain countries throughout the world, including the U.S., Canada, Japan, South Korea, Greater China, Europe, Middle East, Australia and Southeast Asia and have plans for additional e-commerce sites in other parts of the world. Additionally, Tapestry has informational websites in various countries. Given the robust nature of our e-commerce presence and digital strategy, it is imperative that we and our e-commerce partners maintain uninterrupted operation of our: (i) computer hardware, (ii) software systems, (iii) customer databases and (iv) ability to email or otherwise keep in contact with our current and potential customers. Despite our preventative efforts, our systems are vulnerable from time-to-time to damage, disruption or interruption from, among other things, physical damage, natural disasters, inadequate system capacity, system issues, security and personal data breaches, email blocking lists, computer malware or power outages. Any material disruptions in our e-commerce presence or information technology systems and applications could have a material adverse effect on our business, financial condition and results of operations.

A delay, disruption in, failure of, or inability to upgrade our information technology systems precisely and efficiently could materially adversely affect our business, financial condition or results of operations and cash flow.

We rely heavily on various information and other business systems, including data analytics and machine learning, and artificial intelligence, to manage our operations, including management of our supply chain, point-of-sale processing in our brands’ stores, our online businesses associated with each brand and various other processes and metrics. We are continually evaluating and implementing upgrades and changes to our systems. In addition, from time to time, we implement new systems.

Implementing new systems and upgrading existing systems and data analytics models carries substantial risk, including failure to operate as designed, failure to properly integrate with other systems, failure to accurately capture or report data or metrics, potential loss of confidential and personal information, cost overruns, implementation delays and disruption of operations. Furthermore, failure of our computer systems due to inadequate system capacity, computer viruses, human error, changes in programming, security and personal data breaches, system upgrades or migration of these services, as well as employee, vendor and consumer privacy concerns and new privacy and security and artificial intelligence laws and global government regulations, individually or in accumulation, could have a material effect on our business, financial condition or results of operations and cash flow.

Risks Related to our Indebtedness

We have incurred a substantial amount of indebtedness, which could restrict our ability to engage in additional transactions or incur additional indebtedness.

As of June 28, 2025, our consolidated debt was approximately $2.39 billion. In fiscal year 2025, the Company issued $1.50 billion of senior unsecured notes, consisting of $750.0 million aggregate principal amount of 5.100% senior unsecured notes due March 11, 2030 and $750.0 million aggregate principal amount of 5.500% senior unsecured notes due March 11, 2035. Also in fiscal year 2025, the Company refinanced and replaced the Company's unsecured revolving facility dated May 11, 2022

(the "Existing Revolving Credit Facility") with a new revolving credit facility (the "Amended Revolving Credit Facility"), dated as of May 22, 2025. Under the Amended Revolving Credit Facility, the Lenders have made available to the Company a $2.00 billion unsecured revolving credit facility, including sub facilities for letters of credit, with a maturity date of May 22, 2030.

Under the terms of our debt facilities, we must comply with certain restrictions limiting the Company’s ability to, among other things: (i) incur certain indebtedness, (ii) create certain liens, (iii) enter into certain sale and leaseback transactions, (iv) make certain investments or payments and (v) merge, or consolidate or transfer, sell or lease all or substantially all of the Company’s assets. Under the Amended Revolving Credit Facility, we are required to comply on a quarterly basis with a maximum net leverage ratio of 4.00:1.00, which may be increased to 4.50:1:00 following the consummation of a material acquisition, subject to certain limitations set forth in the Amended Revolving Credit Facility.

The consequences and limitations under our outstanding indebtedness could impede our ability to engage in future business opportunities or strategic acquisitions. In addition, a prolonged disruption in our business may impact our ability to satisfy the leverage ratio covenant under our Amended Revolving Credit Facility. Non-compliance with these terms would constitute an event of default under our credit facilities, which may result in acceleration of payment to the lenders. In the event of an acceleration of payment to the lenders, this would result in a cross default of the Company’s senior notes, causing the Company’s outstanding borrowings to also become due and payable on demand.

Our ability to generate cash flows from our operations is, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. In addition, our ability to access the credit and capital markets in the future as a source of funding, and the borrowing costs associated with such financing, is dependent upon market conditions and our credit rating and outlook.

As a result of having operations outside of the U.S., we are also exposed to market risk from fluctuations in foreign currency exchange rates. Substantial changes in foreign currency exchange rates could cause our sales and profitability to be negatively impacted.

Risks Related to Corporate Responsibility

The risks associated with climate change and other environmental impacts and increased focus by stakeholders on climate change, could negatively affect our business and operations.

Our business is susceptible to risks associated with climate change, including through disruption to our supply chain, potentially impacting the production and distribution of our products including availability and pricing of raw materials, as well as shipping disruptions and/or higher freight costs. Climate change can lead to physical and transition risks impacting our business. The physical risks result from climatic events, such as wildfires, storms and floods, whereas transition risks result from policy action taken to transition the economy off of fossil fuels. Increased frequency and/or intensity of extreme weather events (such as storms and floods) due to climate change could also lead to more frequent store and fulfillment center closures, adversely impacting retail traffic and/or consumer's disposable income levels or spending habits on discretionary items, or otherwise disrupt business operations in the communities in which we operate, any of which could result in lost sales or higher costs.

There is also increased focus from our stakeholders, including consumers, employees and investors, on climate change issues. Many countries in which we and our suppliers operate have begun to enact new legislation and regulations in an attempt to mitigate the potential impacts of climate change, which could result in higher sourcing, operational and compliance-related costs for the Company. Such proposed measures include expanded disclosure requirements regarding GHG emissions and other climate-related information, as well as independent auditors providing some level of attestation to the accuracy of such disclosures. Inconsistency of legislation and regulations among jurisdictions may also affect our compliance costs with such laws and regulations. An assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, will be fraught with uncertainty given the wide scope of potential regulatory change in the countries in which we operate. Any failure on our part to comply with such climate change-related regulations could lead to adverse consumer actions and/or investment decisions by investors, as well as expose us to legal risk.

Increased scrutiny from investors and others regarding our Corporate Responsibility initiatives, including matters of significance relating to sustainability, could result in additional costs or risks and adversely impact our reputation.

Stakeholders, including consumers, employees and investors, have increasingly focused on corporate responsibility practices of companies. Although we have announced our Corporate Responsibility strategy and related goals, there can be no

assurance that our stakeholders will agree with our strategy or that we will be successful in achieving our goals. Failure to implement our strategy or achieve our goals on a timely basis, or at all, could damage our reputation, causing our investors or consumers to lose confidence in our Company and brands, and negatively impact our operations. In addition, our brand is susceptible to risks associated with changing consumer attitudes regarding social and political issues and consumer perceptions of our position on these issues.

Any Corporate Responsibility report that we publish or other sustainability disclosure we make may include our policies and practices on a variety of social and ethical matters, including corporate governance, environmental compliance, employee health and safety practices, human capital management, product quality, supply chain management and our workforce. It is possible that stakeholders may not be satisfied with our Corporate Responsibility practices or the speed of our adoption of these practices. We could also incur additional costs and require additional resources to monitor, report and comply with various Corporate Responsibility practices and various legal, legislative and regulatory requirements. Also, our failure, or perceived failure, to meet the standards included in any sustainability disclosure could negatively impact our reputation, employee retention and the willingness of our customers and suppliers to do business with us.

In addition, many of the countries where we and our suppliers operate continue to enact legislation and regulatory rules that address climate change and other sustainability issues, including expanded disclosure requirements on GHG emissions and other climate related information. Consumers, trade associations, interested non-governmental organizations and other stakeholders have increased focus and emphasis on sustainable features of products and other sustainability topics, including traceability and transparency, sustainability claims and product labeling requirements, responsible sourcing and deforestation, the use of energy and water, and the recyclability or recoverability of packaging, product, and materials. The rules and regulations and governmental oversight continue to rapidly evolve with varying degrees of complexity and scope, many that include penalties for non-compliance. Any failure on our part to comply with sustainability related legislation, regulations and frameworks could lead to adverse consumer action, government enforcement action and private litigation. Our ability to comply with the evolution of consumer expectations, regulations and governmental standards and legal landscape can lead to increased risk, operational costs and management time and effort.

Risks Related to Global Economic Conditions and Legal and Regulatory Matters

Fluctuations in our tax obligations and effective tax rate may result in volatility of our financial results and stock price.

We are subject to income taxes in many jurisdictions. We record tax expense based on our estimates of taxable income and required reserves for uncertain tax positions in multiple tax jurisdictions. At any one time, multiple tax years are subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may result in a settlement which differs from our original estimate. As a result, we expect that throughout the year there could be ongoing variability in our quarterly effective tax rates as events occur and exposures are evaluated. In addition, our effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings. Further, proposed tax changes that may be enacted in the future could impact our current or future tax structure and effective tax rates.

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, 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 Organization for Economic Co-operation and Development’s (“OECD”) reform of international taxation known as Global Anti-Base Erosion Rules (“GloBE”), which broadly mirrors the Inflation Reduction Act by imposing a 15% global minimum tax on multinational companies, which was effective on January 1, 2025. Based on the countries in which we do business, these changes did not have a material impact in fiscal 2025. Other countries are also implementing similar legislation with effective dates starting in fiscal 2026, known as Qualifying Domestic Minimum Top-Up Tax ("QDMTT"). On June 26, 2025, the U.S. Treasury reached an agreement with the other G7 countries regarding the application of GloBE rules to U.S. parented multinational enterprises ("U.S. MNEs"). Most notably, the agreement includes a full exclusion for U.S. MNEs from the Undertaxed Profits Rule and Income Inclusion Rule, which are two of the three taxing mechanisms under GloBE. Given that the third mechanism, QDMTT is still in force, it is unclear what impact if any this agreement will have on the Company. Unless U.S. MNEs are likewise excluded from QDMTT, the Company believes QDMTT would have a negative impact on its effective tax rate in fiscal 2026 and beyond.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted. Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of research and development expenditures (reinstating full expensing beginning January 2025), permanent extension of 100% bonus depreciation, and revisions to international tax regimes that more closely align with the original application of Tax Cut Jobs Act of 2017. The Company is evaluating the financial implications of the OBBBA and will begin reflecting its effects in the first quarter of fiscal 2026. The Company believes this legislation will not have a material impact on its financial statements but will continue to evaluate as guidance becomes available.

Our business is exposed to foreign currency exchange rate fluctuations.

Due to our global operations, we are exposed to foreign currency exchange rate risk with respect to our sales, profits, assets and liabilities denominated in currencies other than the U.S. dollar. In addition, certain of our subsidiaries transact in currencies other than their functional currency, including intercompany transactions, which results in foreign currency transaction gains or losses. If the U.S. dollar strengthens against these subsidiaries’ foreign currencies, the translation of their foreign currency denominated transactions may decrease consolidated net sales and profitability. Furthermore, majority of the Company's purchases and sales involving international parties, excluding international consumer sales, are denominated in U.S. dollars. In order to minimize the impact on earnings related to foreign currency rate movements, we hedge certain cross currency intercompany inventory transactions and foreign currency balance sheet exposures which includes the Company’s cross currency intercompany loan portfolio. We cannot ensure, however, that these hedges will fully offset the impact of foreign currency rate movements. Our continued international expansion will increase our exposure to foreign currency fluctuations.

We may be unable to protect our intellectual property and curb the sale of counterfeit merchandise, which can cause harm to our reputation and business.

We believe our trademarks, copyrights, patents and other intellectual property rights are extremely important to our success and our competitive position. We devote significant resources to the registration and protection of our trademarks and to anti-counterfeiting efforts worldwide. We pursue entities involved in the trafficking and sale of counterfeit merchandise through legal action or other appropriate measures. We cannot guarantee that the actions we have taken to curb counterfeiting and protect our intellectual property will be adequate to protect the brand and prevent counterfeiting in the future. Despite our efforts, our brands are still susceptible to counterfeiting. Such counterfeiting dilutes our brands and can cause harm to our reputation and business. Our efforts to enforce our intellectual property rights are from time to time met with defenses and counterclaims attacking the validity and enforceability of our intellectual property rights. In the ordinary course of business, we become involved in trademark oppositions and cancellation actions. Our trademark applications may face objections from the trademark offices we seek to register them in and may not mature into registrations. Other parties may seek to invalidate our trademarks or assert violations of their trademarks or other intellectual property and seek to block our sales of certain products. Unplanned increases in legal and investigative fees and other costs associated with defending our intellectual property rights could result in higher operating expenses. Finally, many countries’ laws do not protect intellectual property rights to the same degree as U.S. laws.

Risks Related to Ownership of our Common Stock

If we are unable to pay quarterly dividends or conduct stock repurchases at intended levels, our reputation and stock price may be negatively impacted.

In fiscal 2025, the Company returned capital to its shareholders through a quarterly cash dividend of $0.35 per common share, for an annual dividend rate of $1.40 per share, or $299.3 million. On November 24, 2024, the Company announced that it entered into Accelerated Share Repurchase (“ASR”) agreements to repurchase $2.00 billion shares of Tapestry common stock. In addition to the ASR program, the Company has $800.0 million remaining under its previous share repurchase authorization. The dividend program and the stock repurchase program each require the use of a significant portion of our cash flow. Our ability to pay dividends and conduct stock repurchases will depend on our ability to generate sufficient cash flows from operations in the future. This ability may be subject to certain economic, financial, competitive and other factors that are beyond our control. Our Board may, at its discretion, decrease or entirely discontinue the dividend program at any time. Any failure to pay dividends or conduct stock repurchases, or conduct either program at all or at expected levels, after we have announced our intention to do so may negatively impact our reputation, investor confidence in us and negatively impact our stock price.

Our stock price may periodically fluctuate based on the accuracy of our earnings guidance or other forward-looking statements regarding our financial performance, including our ability to return value to investors.

Our business and long-range planning process is designed to maximize our long-term strength, growth, and profitability, and not to achieve an earnings target in any particular fiscal quarter. We believe that this longer-term focus is in the best interests of the Company and our stockholders. At the same time, however, we recognize that, when possible, it is helpful to provide investors with guidance as to our forecast of net sales, operating income, net interest expense, tax rate, earnings per diluted share and other financial metrics or projections. While we generally expect to provide updates to our financial guidance when we report our results each fiscal quarter, we do not have any responsibility to provide guidance going forward or to update any of our forward-looking statements at such times or otherwise. In addition, any longer-term guidance that we provide is based on goals that we believe, at the time guidance is given, are reasonably attainable for growth and performance over a number of years. However, such long-range targets are more difficult to predict than our current quarter and fiscal year expectations. If, or when, we announce actual results that differ from those that have been predicted by us, outside investment analysts or others, our stock price could be adversely affected. Investors who rely on these predictions when making investment

decisions with respect to our securities do so at their own risk. We take no responsibility for any losses suffered as a result of such changes in our stock price.

We periodically return value to investors through payment of quarterly dividends and common stock repurchases. On November 24, 2024, the Company announced that it entered into ASR agreements to repurchase $2.00 billion shares of Tapestry common stock. In addition to the ASR program, the Company has $800.0 million remaining under its previous share repurchase authorization. The market price of our securities could be adversely affected if our cash dividend rate or common stock repurchase activity differs from investors’ expectations. Refer to “ If we are unable to pay quarterly dividends or conduct stock repurchases at intended levels, our reputation and stock price may be negatively impacted. ” for additional discussion of our quarterly dividend.

Certain provisions of the Company's charter, bylaws and Maryland law may delay or prevent an acquisition of the Company by a third-party.

The Company's charter, bylaws and Maryland law contain provisions that could make it more difficult for a third-party to acquire the Company without the consent of our Board. The Company's charter permits a majority of its entire Board, without stockholder approval, to amend the charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Company has the authority to issue. In addition, the Company's Board may classify or reclassify any unissued shares of common stock or preferred stock and may set the preferences, rights and other terms of the classified or reclassified shares without stockholder approval. Although the Company's Board has no intention to do so at the present time, it could establish a class or series of preferred stock that could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for the Company's common stock or otherwise be in the best interest of the Company's stockholders.

The Company's bylaws provide that nominations of persons for election to the Company's Board and the proposal of business to be considered at an annual meeting of stockholders may be made only in the notice of the meeting, by or at the direction of the Company's Board, by a stockholder who is a stockholder of record as of the record date set by the Company's Board for purposes of determining stockholders entitled to vote at the meeting, at the time of the giving of the notice by the stockholder pursuant to the Company's bylaws and at the time of the meeting (and any postponement or adjournment thereof), who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and has complied with the advance notice procedures of the Company's bylaws or by qualifying stockholders that satisfy the proxy access provisions of the Company’s bylaws.

Under Maryland law, business combinations, including mergers, consolidations, share exchanges and, in circumstances specified in the statute, asset transfers and issuances or reclassifications of equity securities, between the Company and any interested stockholder, generally defined as any person who beneficially owns, directly or indirectly, 10% or more of the Company’s common stock, or any affiliate of an interested stockholder are prohibited for a five-year period, beginning on the most recent date such person became an interested stockholder. After this period, a business combination must be approved by two super-majority stockholder votes, unless common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares. The statute permits various exemptions from its provisions, including business combinations that are exempted by our Board prior to the time that the interested stockholder becomes an interested stockholder.

The Company’s charter provides that, except as may be provided by our Board in setting the terms of any class or series of preferred stock, any vacancy on our Board may be filled only by a majority of the remaining directors, even if the remaining directors do not constitute a quorum. The Company’s charter further provides that a director may be removed only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors. This provision, when coupled with the exclusive power of our Board to fill vacant directorships, may preclude stockholders from removing incumbent directors except by a substantial affirmative vote and filling the vacancies created by such removal with their own nominees.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions, including derivative actions, which could limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company and its directors, officers, other employees, or the Company's stockholders and may discourage lawsuits with respect to such claims.

Unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Company, (b) any action asserting a claim of breach of any duty owed by any director or officer or other employee of the Company to the Company or to the stockholders of the Company, (c) any action asserting a claim against the Company or any director or officer or other employee of the Company arising pursuant to any provision of the Maryland General Corporation Law, the charter or the bylaws of the Company or (d) any action asserting a claim against the Company or any director or officer or other employee of the Company that is governed by the internal affairs doctrine, shall, to the fullest extent permitted by law, be the Circuit Court for Baltimore City, Maryland (or, if that court does

not have jurisdiction, the United States District court for the District of Maryland, Baltimore Division). This exclusive forum provision is intended to apply to claims arising under Maryland state law and would not apply to claims brought pursuant to the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, or any other claim for which the federal courts have exclusive jurisdiction.

Although we believe the exclusive forum provision benefits us by providing increased consistency in the application of Maryland law for the specified types of actions and proceedings, this provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company and its directors, officers or other employees and may discourage lawsuits with respect to such claims.

Our rights and the rights of our stockholders to recover claims against our directors and officers are limited, which could reduce your and our recovery against them if they cause us to incur losses.

Maryland law provides that directors have no liability in their capacity as directors if they perform their duties in good faith, in a manner they reasonably believe to be in the best interest of the corporation and with the care that an ordinarily prudent person in a like position would use under similar circumstances. As permitted by the MGCL, the Company’s charter limits the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from:

• actual receipt of an improper benefit or profit in money, property or services; or

• a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated.

Our charter authorizes us, and our bylaws obligate us, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, to pay or reimburse reasonable expenses in advance of final disposition of the proceeding to any of our directors and officers for actions taken by them in those capacities to the maximum extent permitted by Maryland law. As a result, we and our stockholders may have more limits rights against our directors and officers than might otherwise exist absent the current provisions in our charter and bylaws.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the Company's financial condition and results of operations should be read together with the Company’s consolidated financial statements and notes to those financial statements included elsewhere in this document. When used herein, the terms “the Company,” "Tapestry," “we,” “us” and “our” refer to Tapestry, Inc., including consolidated subsidiaries. References to "Coach," "Stuart Weitzman," "Kate Spade" or "kate spade new york" refer only to the referenced brand.

INTRODUCTION

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:

• Overview. 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 2025 compared to fiscal 2024 .

• 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.

OVERVIEW

Fiscal 2025, fiscal 2024 and fiscal 2023 were 52-week periods.

Tapestry, Inc. is a house of iconic accessories and lifestyle brands. Our global house of brands unites the magic of Coach and kate spade new york. 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 harness the power of an inclusive culture. Individually, our brands are iconic. Together, we can stretch what’s possible.

The Company has three reportable segments:

• 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, wholesale and licensing businesses.

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

Stuart Weitzman Business Divestiture

On February 16, 2025, the Company entered into a Purchase Agreement with Caleres to sell the Stuart Weitzman Business (as defined below). The Purchaser acquired certain assets and liabilities of the Company's global business of designing, manufacturing, promotion, marketing, production, distribution, sales and licensing of Stuart Weitzman branded products (the "Stuart Weitzman Business") for total cash consideration of $105.0 million (the "Purchase Price"), subject to customary adjustments for cash, indebtedness, net working capital and transaction expenses. The sale was completed on August 4, 2025 (the "Stuart Weitzman Business Divestiture"). Refer to Note 5, "Acquisitions and Divestitures," and Note 21, "Subsequent Events," for further information.

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. 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. 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, and on October 24, 2024, the Court issued its Opinion and Order granting the FTC's request for a preliminary injunction of the Merger, pending an administrative trial on the merits which was scheduled to begin on December 9, 2024. On October 28, 2024, the Company and Capri filed a Notice of Appeal with respect to the October 24, 2024 Opinion and Order. On November 6, 2024, the United States Court of Appeals for the Second Circuit entered an order setting an expedited briefing schedule for the appeal of the decision of the United States District Court of the Southern District of New York granting the preliminary injunction of the merger. On November 13, 2024, the Parties entered into a Termination Agreement (the “Termination Agreement”), pursuant to which the Parties agreed to terminate the Merger Agreement, including all schedules and exhibits thereto and all ancillary agreements contemplated thereby or entered pursuant thereto (the “Termination Date”), effective immediately. Pursuant to the Termination Agreement, the Company agreed to reimburse Capri for its expenses in an amount equal to $45.1 million in cash on November 14, 2024. The Parties also agreed to release each other from claims, demands, damages, actions, causes of action and liability relating to or arising out of the Merger Agreement and the transactions contemplated therein or thereby. Following termination of the Merger Agreement, the Parties and the FTC filed a stipulation withdrawing the appeal to the United States Court of Appeals for the Second Circuit on November 19, 2024 and the Second Circuit dismissed the appeal on November 20, 2024. The Parties and the FTC also filed a Joint Motion to dismiss the complaint in the administrative trial on November 15, 2024 and the FTC dismissed the complaint on December 4, 2024. On November 25, 2024, due to the termination of the Merger Agreement and pursuant to the terms of the indenture governing the Capri Acquisition Senior Notes, as supplemented, the Company redeemed all outstanding Capri Acquisition Senior Notes at a redemption price of 101% of the aggregate principal amount of such Capri Acquisition Senior Notes, plus accrued and unpaid interest to, but excluding, the date of redemption. In addition, the Capri Acquisition Term Loan Facilities were terminated concurrently with the execution of the Termination Agreement on November 13, 2024. Refer to Note 5, "Acquisitions and Divestitures" and Note 12, "Debt" for further information.

2025 Growth Strategy

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.

The Company's next investor day will be held in September 2025, during which the Company will present its latest long-term growth strategy.

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 business 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.

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

Currency volatility, geopolitical instability and political uncertainty, such as the impact of policies implemented and that may be implemented by the U.S. Presidential Administration, including, but not limited to, changes to trade agreements, tax legislation or duty rates may also contribute to a worsening of the macroeconomic environment or adversely impact our business.

During the second half of fiscal 2025, the U.S. Government announced tariffs on imports from select countries. The majority of the Company's products sold in the U.S. are imported from countries in which these tariffs were announced. As a result of the Company's actions to accelerate inventory purchases and based on current trends of the business, we did not experience a meaningful negative impact to our results of operations in fiscal 2025.

At the time of this report, the Company estimates a projected tariff and trade policy impact of approximately 230 basis points to operating margin in fiscal 2026 after consideration of mitigating actions. In addition, there could be further impact to our results of operations in fiscal 2026 and beyond depending on the outcome of trade negotiations. The Company is prepared to take actions to mitigate this negative impact as changes in trade relations, economic and monetary policies are made clear.

The macroeconomic environment remained challenging and volatile during fiscal 2025. 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 2025. The forecast is below the historical growth average and is reflective of the current volatile environment, including escalation of trade tensions, tighter monetary and fiscal policies which have continued to moderate inflation, financial market volatility and the negative economic impacts of geopolitical instability in certain regions of the world.

In fiscal 2025, the U.S. Dollar has continued to fluctuate as compared to foreign currencies in regions where we conduct our business. During fiscal 2025, this trend has resulted in impacts to our business including, but not limited to, decreased Net sales of $13.4 million, no impact to gross margin and approximately 20 basis point negative impact to operating margin.

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

Fiscal 2025 Impairment

During the fourth quarter of fiscal 2025, the Company performed its annual goodwill and indefinite-lived intangible assets impairment analysis. The assessment concluded that the fair values of the Kate Spade reporting unit and indefinite-lived brand intangible asset did not exceed their respective carrying values due to a reduction in both current and future expected cash flows, which includes an estimated impact of cost increases due to changes in tariff and trade policies. As a result, the Company recorded $244.1 million of impairment charges to goodwill for the Kate Spade reporting unit and $610.7 million of impairment charges to indefinite-lived brand intangible assets during the fourth quarter of fiscal 2025. Refer to "Critical Accounting Policies and Estimates," herein, for further information.

Tax Legislation

On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, with tax provisions primarily focused on implementing a 15% corporate alternative minimum tax (“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 Organization for Economic Co-operation and Development’s (“OECD”) reform of international taxation known as Global Anti-Base Erosion Rules (“GloBE”), which broadly mirrors the Inflation Reduction Act by imposing a 15% global minimum tax on multinational companies, which was effective on January 1, 2025. Based on the countries in which we do business, these changes did not have a material impact in fiscal 2025. Other countries are also implementing similar legislation with effective dates starting in fiscal 2026, known as Qualifying Domestic Minimum Top-Up Tax ("QDMTT"). On June 26, 2025, the U.S. Treasury reached an agreement with the other G7 countries regarding the application of GloBE rules to U.S. parented multinational enterprises ("U.S. MNEs"). Most notably, the agreement includes a full exclusion for U.S. MNEs from the Undertaxed Profits Rule and Income Inclusion Rule, which are two of the three taxing mechanisms under GloBE. Given that the third mechanism, QDMTT is still in force, it is unclear what impact if any this agreement will have on the Company. Unless U.S. MNEs are likewise excluded from QDMTT, the Company believes QDMTT would have a negative impact on its effective tax rate in fiscal 2026 and beyond.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted. Key income tax-related provisions of the OBBBA include the repeal of mandatory capitalization of research and development expenditures (reinstating full expensing beginning January 2025), permanent extension of 100% bonus depreciation, and revisions to international tax regimes that more closely align with the original application of Tax Cut Jobs Act of 2017. The Company is evaluating the financial implications of the OBBBA and will begin reflecting its effects in the first quarter of fiscal 2026. The Company believes this legislation will not have a material impact on its financial statements but will continue to evaluate as guidance becomes available.

RESULTS OF OPERATIONS

FISCAL 2025 COMPARED TO FISCAL 2024

The following table summarizes results of operations for fiscal 2025 compared to fiscal 2024. All percentages shown in the tables below and the related discussion that follows have been calculated using unrounded numbers.

Fiscal Year Ended

June 28, 2025

June 29, 2024

Variance

(millions, except per share data)

Amount

net sales

Amount

net sales

Amount

Net sales

Gross profit

SG&A expenses

Operating income (loss)

Loss on extinguishment of debt

Interest expense, net

Other expense (income)

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

Net income (loss) per share:

Basic

Diluted

NM - Not meaningful

GAAP to Non-GAAP Reconciliation

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 2025 and fiscal 2024 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 2025 Items

Fiscal Year Ended June 28, 2025

Items affecting comparability

GAAP Basis

(As Reported)

Acquisition and Divestiture Costs

Organizational Efficiency Costs

Impairment

Non-GAAP Basis

(Excluding Items)

(millions, except per share data)

Coach

Kate Spade

Stuart Weitzman

Corporate

Operating income (loss)

Net income (loss)

Net income (loss) per diluted common share

In fiscal 2025, the Company incurred charges as follows:

• Acquisition and Divestiture Costs - Includes costs related to the terminated Capri Acquisition and the Stuart Weitzman Business Divestiture. These charges include:

◦ Capri Acquisition Costs: Total pre-tax charges of $268.4 million primarily related to:

▪ Loss on extinguishment of debt - $119.4 million primarily related to redemption premiums, as well as unamortized debt issuance costs and discounts, as a result of the redemption of the Capri Acquisition Senior Notes in fiscal 2025 due to the termination of the Capri Acquisition agreement;

▪ SG&A expenses - $88.8 million primarily related to expense reimbursement payment made to Capri and professional fees recorded;

▪ Interest expense, net - $60.2 million of financing related charges which primarily includes the net impact of the Capri Acquisition Senior Notes; and

◦ Stuart Weitzman Business Divestiture Costs : Total pre-tax charges of $23.7 million primarily due to the loss on business held for sale, professional fees, share-based compensation expense and store impairment.

• Organizational Efficiency Costs - Total pre-tax charges of $17.2 million primarily related to severance costs and technology costs.

• Impairment - Total pre-tax charges of $854.8 million primarily due to impairment charges on the indefinite-lived brand intangible asset and goodwill for Kate Spade. Refer to Note 14, "Goodwill and Other Intangible Assets" for further information.

These actions taken together negatively impacted operating income by $984.5 million, increased Loss on extinguishment of debt by $119.4 million, increased interest expense by $60.2 million and reduced the provision for income tax by $213.1 million resulting in a net decrease in net income by $951.0 million or $4.28 per diluted share.

Supplemental Segment Data

Fiscal Year Ended June 28, 2025

Items affecting comparability

GAAP Basis

(As Reported)

Acquisition and Divestiture Costs

Organizational Efficiency Costs

Impairment

Non-GAAP Basis

(Excluding Items)

(millions)

Coach

Kate Spade

Stuart Weitzman

Corporate

SG&A expenses

Fiscal 2024 Items

Fiscal Year Ended June 29, 2024

Items affecting comparability

GAAP Basis

(As Reported)

Acquisition Costs

Non-GAAP Basis

(Excluding Items)

(millions, except per share data)

Coach

Kate Spade

Stuart Weitzman

Corporate

Operating income (loss)

Net income (loss)

Net income (loss) per diluted common share

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

GAAP Basis

(As Reported)

Acquisition Costs

Non-GAAP Basis

(Excluding Items)

(millions)

Coach

Kate Spade

Stuart Weitzman

Corporate

SG&A expenses

Tapestry, Inc. Summary - Fiscal 2025

Currency Fluctuation Effects

The change in net sales in fiscal 2025 compared to fiscal 2024 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.

Net Sales

Fiscal Year Ended

Variance

June 28, 2025

June 29, 2024

Amount

Constant Currency Change

(millions)

Coach

Kate Spade

Stuart Weitzman

Tapestry

Net sales in fiscal 2025 increased 5.1% or $339.5 million to $7.01 billion. Excluding the impact of foreign currency, net sales increased by 5.3% or $352.9 million.

• Coach Net Sales increased 9.9% or $503.2 million to $5.60 billion in fiscal 2025. Excluding the impact of foreign currency, net sales increased 10.1% or $514.5 million. This increase in net sales was primarily due to an increase of $445.0 million in DTC sales as a result of an increase in both e-commerce and store sales, mainly driven by North America, Europe and Greater China. The increase in net sales was also attributed to a $89.4 million increase in wholesale sales, mainly driven by North America and Greater China.

• Kate Spade Net Sales decreased 10.3% or $137.3 million to $1.20 billion in fiscal 2025. Excluding the impact of foreign currency, net sales decreased 10.1% or $135.2 million. This decrease in net sales was due to a decrease of $148.7 million in DTC sales as a result of lower store and to a lesser extent, e-commerce sales. The decrease in DTC sales was partially offset by an increase of $10.2 million in wholesale sales.

• Stuart Weitzman Net Sales decreased 10.9% or $26.4 million to $215.1 million in fiscal 2025. Excluding the impact of foreign currency, net sales decreased 10.9% or $26.4 million.

Gross Profit

Fiscal Year Ended

June 28, 2025

June 29, 2024

Variance

(millions)

Amount

% of Net Sales

Amount

% of Net Sales

Amount

Coach

Kate Spade

Stuart Weitzman

Tapestry

Gross profit increased 8.2% or $399.4 million to $5.29 billion in fiscal 2025 from $4.89 billion in fiscal 2024. Gross margin in fiscal 2025 increased 210 basis points to 75.4% as compared to 73.3% in fiscal 2024. This increase in Gross margin was primarily attributed to net pricing improvements.

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

Selling, General and Administrative Expenses

Fiscal Year Ended

June 28, 2025

June 29, 2024

Variance

(millions)

Amount

% of Net Sales

Amount

% of Net Sales

Amount

Coach

Kate Spade (1)

Stuart Weitzman (2)

Corporate (3)(4)

Tapestry

SG&A expenses increased 30.0% or $1.12 billion to $4.87 billion in fiscal 2025 as compared to $3.75 billion in fiscal 2024. As a percentage of net sales, SG&A expenses increased to 69.5% during fiscal 2025 as compared to 56.2% during fiscal 2024. Excluding items affecting comparability of $984.5 million in fiscal 2025, SG&A expenses increased 6.9% or $249.9 million to $3.89 billion from $3.64 billion in fiscal 2024. SG&A as a percentage of net sales increased 90 basis points to 55.4% as compared to 54.5% in fiscal 2024. This increase in SG&A as a percentage of net sales was primarily due to higher marketing spend and higher compensation costs driven by accrued incentive compensation, partially offset by leverage of fixed costs on higher net sales.

(1) In fiscal 2025, Kate Spade incurred charges affecting comparability of $860.5 million. Excluding those items affecting comparability, SG&A expenses decreased 4.3% or $31.9 million to $706.7 million in fiscal 2025 as compared to $738.6 million in fiscal 2024. SG&A as a percentage of net sales increased 380 basis points to 59.1% in fiscal 2025 as compared to 55.3% in fiscal 2024.

(2) In fiscal 2025, Stuart Weitzman incurred charges affecting comparability of $0.6 million. Excluding those items affecting comparability, SG&A expenses decreased 18.9% or $30.9 million to $133.2 million in fiscal 2025 as compared to $164.1 million in fiscal 2024. SG&A as a percentage of net sales decreased 610 basis points to 61.9% in fiscal 2025 as compared to 68.0% in fiscal 2024.

(3) In fiscal 2025, Corporate incurred charges affecting comparability of $122.6 million. Excluding those items affecting comparability, SG&A expenses increased 7.9% or $40.6 million to $553.1 million in fiscal 2025 as compared to $512.5 million in fiscal 2024.

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

Operating Income (Loss)

Fiscal Year Ended

June 28, 2025

June 29, 2024

Variance

(millions)

Amount

% of Net Sales

Amount

% of Net Sales

Amount

Coach

Kate Spade

Stuart Weitzman

Corporate

Tapestry

Operating income decreased $725.1 million to $415.0 million during fiscal 2025 as compared to $1.14 billion in fiscal 2024. Operating margin was 5.9% in fiscal 2025 as compared to 17.1% in fiscal 2024. Excluding items affecting comparability of $984.5 million in fiscal 2025, operating income increased $149.5 million to $1.40 billion from $1.25 billion in fiscal 2024; and operating margin increased approximately 130 basis points to 20.0% in fiscal 2025 as compared to 18.7% in fiscal 2024. This increase in operating margin was primarily attributed to an increase of 210 basis points in gross margin partially offset by 90 basis points increase in SG&A as a percentage of sales.

• Coach Operating Income increased $224.2 million to $1.88 billion in fiscal 2025, resulting in an operating margin increase of 110 basis points to 33.5%, as compared to $1.65 billion and 32.4%, respectively in fiscal 2024. This increase in operating margin was primarily attributed to:

◦ Gross Margin , increased 200 basis points mainly due to net pricing improvements;

◦ SG&A expenses as a percentage of net sales , increased 90 basis points mainly due to higher marketing spend, partially offset by leverage of fixed costs on higher net sales.

• Kate Spade Operating Loss increased $901.8 million to a loss of $769.2 million in fiscal 2025, resulting in an operating margin of (64.3)%, as compared to income of $132.6 million and 9.9%, respectively in fiscal 2024. Excluding items affecting comparability, operating income decreased $41.3 million to $91.3 million in fiscal 2025 from $132.6 million in fiscal 2024; and operating margin decreased 230 basis points to 7.6% in fiscal 2025 as compared to 9.9% in fiscal 2024. This decrease in operating margin was primarily attributed to:

◦ Gross Margin , increased 150 basis points mainly due to lower duty expenses, lower freight costs and net pricing improvements;

◦ SG&A expenses as a percentage of net sales , increased 380 basis points mainly driven by higher marketing spend, deleverage of fixed costs on lower net sales, partially offset by a decrease in distribution costs.

• Stuart Weitzman Operating Loss decreased $5.8 million to a loss of $15.4 million in fiscal 2025, resulting in an operating margin increase of 170 basis points to (7.1)%, as compared to an operating loss of $21.2 million and operating margin of (8.8)% in fiscal 2024. Excluding items affecting comparability, operating loss decreased $6.4 million to a loss of $14.8 million in fiscal 2025 from a loss of $21.2 million in fiscal 2024; and operating margin increased 200 basis points to (6.8)% in fiscal 2025 as compared to (8.8)% in fiscal 2024.

• Corporate Operating Expenses increased 8.6% or $53.3 million to $675.7 million in fiscal 2025. Excluding items affecting comparability, Corporate operating expenses increased $40.6 million to $553.1 million from $512.5 million in fiscal 2024. This increase in operating expenses was due to higher compensation costs driven by accrued incentive compensation and higher professional fees, partially offset by lower occupancy costs.

Loss on Extinguishment of Debt

Loss on extinguishment of debt increased $120.1 million in fiscal 2025 to $120.1 million as compared to $0.0 million in fiscal 2024. Excluding items affecting comparability, Loss on extinguishment of debt was $0.7 million in fiscal 2025 as compared to $0.0 million in fiscal 2024.

Interest Expense, net

Interest expense, net, decreased $39.6 million to $85.4 million in fiscal 2025 as compared to $125.0 million in fiscal 2024. Excluding items affecting comparability, Interest expense, net, increased $16.9 million to $25.2 million from $8.3 million in fiscal 2024. This increase in net interest expense was mainly due to an increase in interest expense as a result of the issuance of the 2030 and 2035 Senior Notes and borrowings under the Existing Revolving Credit Facility, partially offset by a decrease in interest expense as a result of the repayment of the Term Loan due 2027.

Other Expense (Income)

Other income increased $9.8 million to Other income of $6.6 million in fiscal 2025 as compared to Other expense of $3.2 million in fiscal 2024. This increase in Other income was related to an increase in foreign exchange gains.

Provision (Benefit) for Income Taxes

The effective tax rate was 15.2% in fiscal 2025 as compared to 19.4% in fiscal 2024. Excluding items affecting comparability, the effective tax rate was 17.8% in fiscal 2025 as compared to 19.2% in fiscal 2024. The decrease 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 decreased 77.6% or $632.8 million to $183.2 million in fiscal 2025 as compared to a net income of $816.0 million in fiscal 2024. Excluding items affecting comparability, net income increased 13.4% or $134.0 million to $1.13 billion in fiscal 2025 from $1.00 billion in fiscal 2024.

Net Income (Loss) per Share

Net income per diluted share was $0.82 in fiscal 2025 as compared to net income per diluted share of $3.50 in fiscal 2024. Excluding items affecting comparability, net income per diluted share increased $0.81 to $5.10 in fiscal 2025 from $4.29 in fiscal 2024. This change was primarily due to higher net income and a decrease in shares outstanding.

FISCAL 2024 COMPARED TO FISCAL 2023

The comparison of fiscal 2024 to 2023 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended June 29, 2024, filed on August 15, 2024 within Part II. Item 7. "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 SG&A expenses, Operating income, Interest expense, Provision for income taxes, Net income and earnings per diluted share in fiscal 2025 and fiscal 2024 and the reported Loss on extinguishment of debt in fiscal 2025, reflect certain items affecting comparability, including the impact of Acquisition and Divestiture Costs, Organizational Efficiency Costs and Impairment charges. As a supplement to the Company's reported results, these measures 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 incurred Acquisition and Divestiture Costs which consist of non-recurring acquisition and divestiture costs, primarily financing-related expenses and professional fees from the terminated Capri Acquisition as well as costs related to the Stuart Weitzman Business Divestiture, inclusive of the loss on business held for sale, professional fees, share-based compensation expense and store impairment. The Company also incurred Organizational Efficiency Costs which consist of non-recurring costs, primarily from various initiatives aimed at streamlining the organization and optimizing processes. These costs mainly include one-time severance and technology related charges. Impairment charges incurred by the Company consist of non-recurring impairment costs related to Kate Spade indefinite-lived brand intangible assets and goodwill.

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. Management and the Company’s Board utilized these non-GAAP measures to make decisions about the uses of Company resources, analyze performance between periods, develop internal projections and measure management performance. 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.

The Company operates on a global basis and reports financial results in U.S. dollars in accordance with GAAP. Fluctuations in foreign currency exchange rates can affect the amounts reported by the Company in U.S. dollars with respect to its foreign revenues and profit. Accordingly, certain material increases and decreases in operating results for the Company and its segments have been presented both including and excluding currency fluctuation effects. These effects occur from translating foreign-denominated amounts into U.S. dollars and comparing to the same period in the prior fiscal year. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. The Company calculates constant currency revenue results by translating current period revenue in local currency using the prior year period's currency conversion rate.

We believe these non-GAAP measures 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. Additionally, we believe presenting certain increases and decreases in constant currency provides a framework for assessing the performance of the Company's business outside the United States and helps investors and analysts understand the effect of significant year-over-year currency fluctuations. We believe excluding these items assists investors and others in developing expectations of future performance.

By providing the non-GAAP measures, as a supplement to GAAP information, we believe we are enhancing investors’ understanding of our business and our results of operations. The non-GAAP financial measures are limited in their usefulness and should be considered in addition to, and not in lieu of, GAAP financial measures. 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 the GAAP to Non-GAAP Reconciliation discussions above in this Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations."

FINANCIAL CONDITION

Cash Flows - Fiscal 2025 Compared to Fiscal 2024

Fiscal Year Ended

June 28,

June 29,

Change

(millions)

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

The Company’s cash and cash equivalents decreased by $5.02 billion in fiscal 2025 compared to an increase of $5.42 billion in fiscal 2024, as discussed below.

Net cash provided by (used in) operating activities

Net cash provided by operating activities decreased $39.0 million primarily due to lower net income of $632.8 million and changes in operating assets and liabilities of $207.2 million partially offset by a higher impact of non-cash adjustments of $801.0 million primarily related to the impairment of goodwill and intangible assets.

The $207.2 million decrease in changes in operating asset and liability balances was primarily driven by the following:

• Inventories were a use of cash of $108.2 million in fiscal 2025 compared to a source of cash of $85.8 million in fiscal 2024, primarily driven by increased inventory purchases for Coach to support continued sales growth and pull forward of inventory receipts.

• Accounts payable were a use of cash of $15.0 million in fiscal 2025 as compared to a source of cash of $49.1 million in fiscal 2024, primarily driven by a decrease in professional fees due to higher spending in the prior year related to the Capri Acquisition and timing of other payments, partially offset by an increase in advertising.

• Accounts receivables were a source of cash of $8.8 million in fiscal 2025 as compared to a use of cash of $37.3 million in fiscal 2024, primarily driven by timing of collections.

Net cash provided by (used in) investing activities

Net cash provided by investing activities was $914.0 million in fiscal 2025 compared to a use of cash of $1.04 billion in fiscal 2024, resulting in a $1.96 billion increase in net cash provided by investing activities.

The $914.0 million source of cash in fiscal 2025 was primarily due to proceeds from maturities and sales of investments of $2.92 billion, partially offset by purchases of investments of $1.89 billion, mainly related to the proceeds of the Capri Acquisition Senior Notes.

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.

Net cash provided by (used in) financing activities

Net cash used in financing activities was $7.18 billion in fiscal 2025 as compared to a source of cash of $5.21 billion in fiscal 2024, resulting in a $12.39 billion increase in net cash used in financing activities.

The $7.18 billion use of cash in fiscal 2025 was primarily due to the repayment of debt of $7.16 billion, which mainly included the Capri Acquisition Senior Notes, use of cash of $2.02 billion under the Company's accelerated share repurchase program partially offset by proceeds from the issuance of debt of $2.25 billion.

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.

Effect of exchange rate changes on cash and cash equivalents

Effect of exchange rate changes on cash and cash equivalents was an increase of $26.3 million as compared to a decrease of $12.2 million in fiscal 2024.

Cash Flows - Fiscal 2024 Compared to Fiscal 2023

The comparison of fiscal 2024 to 2023 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended June 29, 2024, filed on August 15, 2024 within Part II. Item 7. "Management's Discussion and Analysis of Financial Conditions and Results of Operations" .

Working Capital and Capital Expenditures

The following table presents our financial condition as of June 28, 2025 and June 29, 2024 :

June 28, 2025

June 29, 2024

Change

(millions)

Cash and cash equivalents (1)

Short-term investments (1)

Current debt (2)

Long-term debt (2)

Total, net

(1)     As of June 28, 2025, approximately 26.2% 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 28, 2025:

Total Availability

Borrowings Outstanding

Remaining Availability

(millions)

Amended Revolving Credit Facility (1)

China Credit Facility (1)(2)

Total

(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 Renminbi.

We believe that our Amended Revolving Credit Facility is adequately diversified with no undue concentrations in any one financial institution. As of June 28, 2025, there were 18 financial institutions participating in the Amended Revolving Credit Facility, with no one participant maintaining a 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.

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 2026 and beyond. There can be no assurance that any such capital will be available to the Company on acceptable terms or at all. 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 and to financial, business and other factors, some of which are beyond the Company's control.

Stuart Weitzman Business Divestiture

On February 16, 2025, the Company entered into a Purchase Agreement to sell the Stuart Weitzman Business for total cash consideration of $105.0 million, subject to customary adjustments. The sale was completed on August 4, 2025. Refer to Note 5, "Acquisitions and Divestitures," and Note 21, "Subsequent Events," for further information.

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. We do not have the ability to refinance or modify payment terms to the global financial institution through the SCF program. No guarantees are provided by the Company or any of our subsidiaries under the SCF program. Refer to Note 3, "Significant Accounting Policies," for additional information.

Capital Expenditures

Total capital expenditures and cloud computing implementation costs were $153.0 million in fiscal 2025. Certain cloud computing implementation costs are recognized within Prepaid expenses and Other assets on the Consolidated Balance Sheets.

Seasonality

The Company's results are typically affected by seasonal trends. During the first fiscal quarter, we typically build inventory for the winter and holiday season. 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.

Stock Repurchase Program

On May 12, 2022, the Company announced that its Board of Directors (the "Board") authorized a common stock repurchase program to repurchase up to $1.50 billion of its outstanding common stock (the "2022 Share Repurchase Program"). Purchases of the Company's common stock under this program were executed through open market purchases, including through purchase agreements under Rule 10b5-1.

On November 13, 2024, the Board authorized the Company to repurchase up to $2.00 billion of outstanding shares of its common stock (the "2025 Share Repurchase Program"). Under the 2025 Share Repurchase Program, the Company may repurchase shares on the open market, in privately negotiated transactions or in other transactions, including accelerated share repurchase programs. On November 21, 2024, the Company entered into accelerated share repurchase agreements (the “ASR Agreements”) with Bank of America, N.A. and Morgan Stanley & Co. LLC (the “Dealers”) to repurchase an aggregate of up to $2.00 billion of the Company’s shares of common stock. Under the ASR Agreements, the Company paid $2.00 billion to the Dealers and received an initial delivery of 28,363,766 shares of the Company's common stock on November 26, 2024. The total number of shares purchased by the Company pursuant to the ASR Agreements will be based on the volume-weighted average price ("VWAP") of the Company's common stock on specified dates during the term of each of the ASR Agreements, less a discount, and subject to adjustments pursuant to the terms and conditions of the ASR Agreements. The difference between the initially delivered shares and the total number of shares purchased will be settled in four tranches, no later than the first quarter of fiscal 2026. During the quarter ended March 29, 2025, the Company cash settled $3.0 million related to 43,094 shares of common stock owed for the settlement of one tranche as a result of the increase in the VWAP of the Company's common stock. During the quarter ended June 28, 2025, the Company cash settled $3.6 million related to 49,442 shares of common stock of an additional tranche.

As of June 28, 2025, the Company had $800.0 million of additional shares available to be repurchased as authorized under the 2022 Share Repurchase Program and no remaining availability to repurchase shares under the 2025 Share Repurchase Program. There were no shares repurchased during the three months ended June 28, 2025 under the 2022 Share Repurchase Program and the 2025 Share Repurchase Program.

Contractual and Other Obligations

Firm Commitments

As of June 28, 2025, the Company's contractual obligations are as follows:

Total

Fiscal

Fiscal

Fiscal

Fiscal 2031

and Beyond

(millions)

Capital expenditure & cloud computing implementation commitments

Inventory purchase obligations (1)

Operating lease obligations

Debt repayment (2)

Interest on outstanding debt (2)(3)

Other

Total

(1)     Includes inventory purchase obligations related to the Stuart Weitzman Business as of June 28, 2025 of $24.6 million.

(2)     The principal and interest of the China Credit Facility include the impact of changes in the exchange rate of the United States Dollar against the Renminbi as of June 28, 2025.

(3)     Interest on outstanding debt includes fixed interest expenses for unsecured notes. Refer to Note 12, "Debt," 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 $137.5 million as of June 28, 2025, 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 28, 2025 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 totaling $26.5 million as of June 28, 2025, 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.

We do not maintain any other off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect on our consolidated financial statements. Refer to Note 13, "Commitments and Contingencies," for further information.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect our results of operations, financial condition and cash flows as well as the disclosure of contingent assets and liabilities as of the date of the Company's financial statements. Actual results could differ from estimates in amounts that may be material to the financial statements. Predicting future events is inherently an imprecise activity and, as such, requires the use of judgment. 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.

The accounting policies discussed below are considered critical because changes to certain judgments and assumptions inherent in these policies could affect the financial statements. For more information on the Company's accounting policies, please refer to the Notes to Consolidated Financial Statements.

Revenue Recognition

Revenue is recognized when the Company satisfies its performance obligations by transferring control of promised products or services to its customers, which may be at a point of time or over time. Control is transferred when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized is the amount of consideration to which the Company expects to be entitled, including estimation of sale terms that may create variability in the consideration. Revenue subject to variability is constrained to an amount which will not result in a significant reversal in future periods when the contingency that creates variability is resolved.

Retail store and concession shop-in-shop revenues are recognized at the point-of-sale, when the customer obtains physical possession of the products. Digital revenue from sales of products ordered through the Company’s e-commerce sites is recognized upon delivery and receipt of the shipment by its customers and includes shipping and handling charges paid by customers. Retail and digital revenues are recorded net of estimated returns, which are estimated by developing an expected value based on historical experience. Payment is due at the point of sale.

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. The Company's historical estimates of these variable amounts have not differed materially from actual results.

The Company recognizes licensing revenue over time during the contract period in which licensees are granted access to the Company's trademarks. These arrangements require licensees to pay a sales-based royalty and may include a contractually guaranteed minimum royalty amount. Revenue for contractually guaranteed minimum royalty amounts is recognized ratably over the license year and any excess sales-based royalties are recognized as earned once the minimum royalty threshold is achieved.

At June 28, 2025, 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.

Inventories

The Company holds inventory that is sold through retail and wholesale distribution channels, including e-commerce sites. Substantially all of the Company's inventories are comprised of finished goods and are reported at the lower of cost or net realizable value. Inventory costs include material, conversion costs, freight and duties and are primarily determined on a weighted-average cost basis. The Company reserves for inventory, including slow-moving and aged inventory, based on current product demand, expected future demand and historical experience. A decrease in product demand due to changing customer tastes, buying patterns or increased competition could impact the Company's evaluation of its inventory and additional reserves might be required. Estimates may differ from actual results due to the quantity, quality and mix of products in inventory, consumer and retailer preferences and market conditions. At June 28, 2025, a 10% change in the inventory reserve, would not have resulted in a material change in inventory and cost of sales.

Goodwill and Other Intangible Assets

Upon acquisition, the Company estimates and records the fair value of purchased intangible assets, which primarily consists of brands, customer relationships, right-of-use assets and order backlog. Goodwill and certain other intangible assets deemed to have indefinite useful lives, including brand intangible assets, are not amortized, but are assessed for impairment at least annually. Finite-lived intangible assets are amortized over their respective estimated useful lives and, along with other long-lived assets as noted above, are evaluated for impairment periodically whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. Estimates of fair value for finite-lived and indefinite-lived intangible assets are primarily determined using discounted cash flows and the multi-period excess earnings method, respectively, with consideration of market comparisons as appropriate. This approach uses significant estimates and assumptions, including projected future cash flows, discount rates and growth rates.

The Company generally performs its annual goodwill and indefinite-lived intangible assets impairment analysis using a quantitative approach. The quantitative goodwill impairment test identifies the existence of potential impairment by comparing the fair value of each reporting unit with its carrying value, including goodwill. If the fair value of a reporting unit exceeds its carrying value, the reporting unit's goodwill is considered not to be impaired. If the carrying value of a reporting unit exceeds its fair value, an impairment charge is recognized in an amount equal to that excess. The impairment charge recognized is limited to the amount of goodwill allocated to that reporting unit.

Determination of the fair value of a reporting unit and intangible asset is based on management's assessment, considering independent third-party appraisals when necessary. Furthermore, this determination is judgmental in nature and often involves the use of significant estimates and assumptions, which may include projected future cash flows, discount rates, growth rates, and determination of appropriate market comparables and recent transactions. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and the amount of any such charge.

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. During the fourth quarter of fiscal 2025, the Company performed its annual goodwill and indefinite-lived intangible assets impairment analysis. The assessment concluded that the fair values of the Kate Spade reporting unit and indefinite-lived brand intangible asset did not exceed their respective carrying values due to a reduction in both current and future expected cash flows, which includes an estimated impact of cost increases due to changes in tariff and trade policies. Accordingly, the Company recorded $244.1 million of impairment charges to goodwill for the Kate Spade reporting unit during the fourth quarter of the fiscal year. The Company also recorded an impairment charge of $610.7 million related to the Kate Spade indefinite-lived brand intangible. The Company determined that there was no impairment in fiscal 2024 or fiscal 2023.

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. If profitability trends decline during fiscal 2026 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.

Based on the annual assessment in fiscal 2025 of the Coach brand reporting unit, the Company determined the fair values significantly exceeded their respective carrying values, therefore resulting in no impairment.

Valuation of Long-Lived Assets

Long-lived assets, such as Property and equipment and Operating lease right-of-use ("ROU") assets, are evaluated for impairment whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. In evaluating long-lived assets for recoverability, the Company uses its best estimate of future cash flows expected to result from the use of the related asset group and its eventual disposition. 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.

The Company recorded $ 8.8  million and $ 6.3  million of impairment charges within SG&A expense in the Consolidated Statement of Operations in fiscal 2025 and fiscal 2024, respectively.

Share-Based Compensation

The Company recognizes the cost of equity awards to employees and the non-employee Directors based on the grant-date fair value of those awards. The grant-date fair values of share unit awards are based on the fair value of the Company's common stock on the date of grant. The grant-date fair value of stock option awards is determined using the Black-Scholes option pricing model and involves several assumptions, including the expected term of the option, expected volatility and dividend yield. The expected term of options represents the period of time that the options granted are expected to be outstanding and is based on historical experience. Expected volatility is based on historical volatility of the Company’s stock as well as the implied volatility from publicly traded options on the Company's stock. Dividend yield is based on the current expected annual dividend per share and the Company’s stock price. Changes in the assumptions used to determine the Black-Scholes value could result in significant changes in the Black-Scholes value.

For stock options and share unit awards, the Company recognizes share-based compensation net of estimated forfeitures and revises the estimates in subsequent periods if actual forfeitures differ from the estimates. The Company estimates the forfeiture rate based on historical experience as well as expected future behavior.

The Company grants performance-based share awards to key executives, the vesting of which is subject to the executive’s continuing employment and the Company's or individual's achievement of certain performance goals. On a quarterly basis, the Company assesses actual performance versus the predetermined performance goals and adjusts the share-based compensation expense to reflect the relative performance achievement. Actual distributed shares are calculated upon conclusion of the service and performance periods, and include dividend equivalent shares. If the performance-based award incorporates a market condition, the grant-date fair value of such award is determined using a pricing model, such as a Monte Carlo Simulation.

A hypothetical 10% change in our stock-based compensation expense would not have a material impact to our fiscal 2025 net income.

Income Taxes

The Company’s effective tax rate is based on pre-tax income, statutory tax rates, tax laws and regulations and tax planning strategies available in the various jurisdictions in which the Company operates. The Company classifies interest and penalties on uncertain tax positions in the Provision for income taxes. The Company records net deferred tax assets to the extent it believes that it is more likely than not that these assets will be realized. In making such determination, the Company considers all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent and expected future results of operation. The Company reduces deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that some amount of deferred tax assets is not expected to be realized. The Company is not permanently reinvested with respect to earnings of a limited number of foreign entities and has recorded the tax consequences of remitting earnings from these entities. The Company is permanently reinvested with respect to all other earnings.

The Company recognizes the impact of tax positions in the financial statements if those positions will more likely than not be sustained on audit, based on the technical merits of the position. 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, 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.

Refer to Note 15, “Income Taxes,” for further information.

Recent Accounting Pronouncements

Refer to Note 3, "Significant Accounting Policies," to the accompanying audited consolidated financial statements for a description of certain recently adopted, issued or proposed accounting standards which may impact our consolidated financial statements in future reporting periods.