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MarketScreener Homepage  >  Equities  >  Nyse  >  Tapestry, Inc.    TPR

TAPESTRY, INC.

(TPR)
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TAPESTRY : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

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08/13/2020 | 05:45pm EDT
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.
EXECUTIVE OVERVIEW
The fiscal years ended June 27, 2020, June 29, 2019 and June 30, 2018 were each
52-week periods.
Tapestry is a leading New York-based house of modern luxury accessories and
lifestyle brands. Tapestry is powered by optimism, innovation and inclusivity.
Our brands are approachable and inviting and create joy every day for people
around the world. Defined by quality, craftsmanship and creativity, our house of
brands give global audiences the opportunity for exploration and
self-expression. Tapestry is comprised of the Coach, Kate Spade and Stuart
Weitzman brands, all of which have been part of the American landscape for over
25 years.
The Company has three reportable segments:
•     Coach - Includes global sales of Coach products to customers through Coach
      operated stores, including the Internet and concession shop-in-shops, and
      sales to wholesale customers and through independent third party
      distributors.

• Kate Spade - Includes global sales primarily of kate spade new york brand

products to customers through Kate Spade operated stores, including the

Internet, sales to wholesale customers, through concession shop-in-shops

and through independent third party distributors.

• Stuart Weitzman - Includes global sales of Stuart Weitzman brand products

primarily through Stuart Weitzman operated stores, including the Internet,

sales to wholesale customers and through numerous independent third party

distributors.



 Each of our brands is unique and independent, while sharing a commitment to
innovation and authenticity defined by distinctive products and differentiated
customer experiences across channels and geographies. Our success does not
depend solely on the performance of a single channel, geographic area or brand.
Acceleration Program
The guiding principle of the Company's multi-year growth agenda under the
Acceleration Program is to better meet the needs of each of its brands' unique
customers by:
•      Sharpening our Focus on the Consumer: Operating with a clearly defined
       purpose and strategy for each brand and an unwavering focus on the
       consumer at the core of everything we do


•      Leveraging Data and Leading with a Digital-First Mindset: Building
       significant data and analytics capabilities to drive decision-making and
       increase efficiency; Offering immersive customer experiences across our
       e-commerce and social channels to meet the needs of consumers who are

increasingly utilizing digital platforms to engage with brands; Rethinking

the role of stores with an intent to optimize our fleet

• Transforming into a Leaner and More Responsive Organization: Moving with

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


The Company believes the successful execution of these priorities will fuel
desire for the Coach, Kate Spade and Stuart Weitzman brands, driving accelerated
revenue growth, higher gross margins and substantial operating leverage across
Tapestry's portfolio. Key strategies by brand include:
Coach
•      Deepening Engagement with Consumers through enhanced brand and cultural

relevance, united by our values and purpose to be authentic, inclusive and

embody the courageous spirit of New York City

• Creating Innovative and Compelling Product to exceed the expectations of

       our target consumers by geography and customer segments


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

• Accelerating Growth in China through tailored and optimized assortments,

       enhanced marketing and expanded reach across direct channels and third
       party online distribution



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• Enhancing Profitability through more focused assortments and a disciplined

approach to promotions, resulting in continued Average Unit Retail ("AUR")

improvements and higher gross margin. In addition, achieving operational

excellence by right-sizing SG&A cost structure and store fleet

Kate Spade • Crystallizing the Brand's Purpose and Returning to a Position of Strength

by fulfilling our promise as a lifestyle brand representing joy, optimism

       and color, amplified through unique, best-in-class storytelling on a
       multi-category lifestyle platform


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

• Reenergizing and Growing Handbags and Leathergoods by reintroducing

       non-negotiable brand elements, rebuilding the core offering, and
       capitalizing on a new Signature platform

• Leaning into Digital Strength by modernizing and creating engaging brand

       experiences across all of our digital platforms, fully unleashing the
       power of Kate Spade community and brand


•      Capturing Market Share and Improving Profitability by acquiring,

re-engaging, and retaining customers, driving top and bottom line growth

Stuart Weitzman • Renewing the Brand's Reputation for Fit, Comfort and Quality, listening

       and responding to our customer's needs in order to design beautiful and
       on-trend shoes

• Growing Key Categories by building a leading presence in boots, booties

       and sandals and expanding the casual assortment, while dramatically
       simplifying the product offering


•      Restoring Profitability by focusing distribution on those markets and

channels of greatest opportunity, notably China where the brand has strong

momentum and high margins

• Strengthening Relationship with Wholesale Partners by providing relevant

products and faster, more consistent execution

• Establishing a Robust Digital Presence which supports best-in-class

multi-media content and depth of assortment



Recent Developments
Covid-19 Pandemic
Tapestry began fiscal 2020 with a focus on profitable growth through innovation,
global expansion, investing in digital capabilities, and harnessing the power of
a multi-brand model. However, the Covid-19 pandemic has had significant impacts
on our business globally. As a result, while the Company remains confident in
its long-term strategy, its short-term focus has pivoted towards adapting to
these challenges.
The Covid-19 virus has impacted regions all around the world, resulting in
restrictions and shutdowns implemented by national, state, and local
authorities. Consequently, the spread of Covid-19 has caused significant global
business disruptions, including full and partial store closures. As a result of
the widespread impact of Covid-19, Tapestry had temporarily closed the majority
of its directly operated stores in globally for some period of time to help
reduce the spread of Covid-19. As of the end of the fiscal year, the vast
majority of the Company's stores have reopened for either in-store or curb-side
service. Many of our wholesale and licensing partners have also closed their
bricks and mortar stores as required by government orders during the third and
fourth quarter.
In response to this challenging environment, the Company's focus is on the
following actions:
A Focus on Revenue
•      Re-opening stores as quickly as possible, while following governmental and

public health guidelines; and

• Aggressively leaning into the global digital opportunity for all brands.

Ensuring that our e-commerce platforms and distribution centers remain

operational across all major regions.

Eliminating Non-Essential Operating Costs Across All Key Areas of Spend • Driving SG&A savings through the right-sizing of marketing expenses to

adjust to the lower revenue base, while maintaining a focus on digital;

reducing fixed costs such as rent; driving procurement savings, including

       reducing external third party services.



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Strengthening the Company's Balance Sheet and Enhancing Financial Flexibility
•      Tightly managing inventories by reflowing product introductions and
       cancelling inventory receipts for late summer/early fall 2020; and


•      Reducing capital expenditures by delaying or cancelling new store

openings, while prioritizing investment in high-return projects aligned

with the multi-year growth agenda, notably in digital.



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

• Suspending its quarterly cash dividend beginning in the fourth quarter of

fiscal 2020; and

• Suspending its share repurchase program.



Addressing Organizational Costs
• Reducing our corporate and retail workforce;


• Applying for available government payroll subsidy programs in various

countries to mitigate payroll expense;

• A 50% reduction in cash compensation for the Board of Directors and salary

reductions of 5% to 20%, depending on salary level, for all corporate

employees above a certain salary threshold, expected to remain in effect

until up to the end of fiscal year 2021;

• Cancellation of our Annual Incentive Plan for fiscal year 2020, which

resulted in no bonuses being paid for fiscal 2020; and

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



The Company will continue to consider near-term exigencies and the long-term
financial health of the business as clear steps are taken to mitigate the
consequences of the Covid-19 pandemic.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES
Act") was signed into law in response to the Covid-19 pandemic. The CARES Act
contains numerous income tax provisions, such as refundable payroll tax credits,
deferral of the employer portion of certain payroll taxes, net operating loss
carrybacks, modifications to net interest deduction limitations and technical
corrections to tax depreciation methods for qualified improvement property. The
CARES Act require the Company to make significant judgments and estimates in the
interpretation of the law and in the calculation of the provision for income
taxes. However, additional guidance may be issued by the Internal Revenue
Service ("IRS"), the Department of the Treasury, or other governing body that
may significantly differ from our interpretation of the law, which may result in
a material adverse effect on our business, cash flow, results of operations, or
financial conditions.
Acceleration Program
The Company is undergoing a review of its business under the Acceleration
Program reflecting: (i) actions to streamline the Company's organization; (ii)
select store closures as the Company optimizes its fleet (including store
closure costs incurred as the Company exits certain regions in which it
currently operates); and (iii) professional fees and compensation costs incurred
as a result of the development and execution of the Company's comprehensive
strategic initiatives aimed at increasing profitability. Including charges taken
in fiscal 2020, Company expects to incur total pre-tax charges of approximately
$185 - $200 million related to the Acceleration Program with most of the
remaining charges expected in fiscal 2021. Refer to Note 7, "Restructuring
Activities," and the "GAAP to Non-GAAP Reconciliation," herein, for further
information. The Company estimates that it will realize approximately $300
million in gross run rate expense savings from these initiatives, including $200
million projected for fiscal 2021.
Fiscal 2020 Impairments
During fiscal 2020, Stuart Weitzman results continued to be negatively impacted
by trailing impacts of operational challenges first experienced in 2018. While
the Company addressed these challenges through investment in talent, operational
process improvements, and a focus on the fashion sensibility of the core design
aesthetic, the Brand experienced a reduction in demand. This reduction in cash
flows generated by the brand as well as the decline in future expected cash
flows was exacerbated by the Covid-19 pandemic, which resulted in lower sales
driven by full and partial closures of a significant portion of our stores
globally. During fiscal 2020, the Company recorded $210.7 million of impairment
charges to goodwill and $267.0 million of impairment charges to indefinite-lived
brand intangible assets for the Stuart Weitzman reporting unit. Refer to
"Critical Accounting Policies and Estimates," herein, for further information.

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During fiscal 2020, the Company recorded $267.7 million of impairment charges
related to store assets, inclusive of lease assets as well as purchase
commitments. Impairment charges recorded in the first quarter related to an
accounting policy change made in conjunction with the adoption of the new lease
accounting standard, whereas the impairment charges recorded in the third and
fourth quarter were primarily driven by lower cash flows due to Covid-19. Refer
to Note 12, "Fair Value Measurements," and Note 18, "Segment Information," for
further information.
During fiscal 2020, the Company recorded $104.0 million of increases in
inventory reserves, similarly driven by current and expected changes to
operations as a result of Covid-19.
ERP Implementation
In fiscal 2020, the Company completed its multi-year Enterprise Resource
Planning ("ERP") implementation. Key milestones were achieved as follows:
•     Fiscal 2018: Implementation of a global consolidation system which provided
      a common platform for financial reporting.


•     Fiscal 2019: Deployment of global finance and accounting systems for

Corporate, Coach and Stuart Weitzman and global finance, accounting, supply

      chain and human resource information systems for Kate Spade.


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


The Company is also implementing a point-of-sale system which supports all
in-store transactions, distributes management reporting for each store, and
collects sales and payroll information on a daily basis. This daily collection
of store sales and inventory information results in early identification of
business trends and provides a detailed baseline for store inventory
replenishment. The implementation is complete for Coach stores in North America
and Europe and expected to be implemented for Stuart Weitzman stores in North
America in fiscal 2021 and Kate Spade North America in fiscal 2022.
Organization-related and Integration Costs
During fiscal 2019, the Company acquired certain distributors for the Kate Spade
and Stuart Weitzman brands. During fiscal 2018, the Company acquired Kate Spade
& Company, certain distributors for the Coach and Stuart Weitzman brands and
obtained operational control of the Kate Spade Joint Ventures. The operating
results of the respective entities have been consolidated in the Company's
operating results commencing on the date of each acquisition. As a result of
these acquisitions, the Company incurred charges related to the integration and
acquisition of the businesses. These charges are primarily associated with
organization-related costs, professional fees, one-time write-off of inventory
and limited life purchase accounting adjustments. The Company does not expect
there to be any charges in fiscal 2021. Refer to Note 6, "Integration," Note 4,
"Acquisitions," and the "GAAP to Non-GAAP Reconciliation," herein, for further
information.
Chief Executive Officer and Chief Financial Officer Changes
On September 4, 2019, the Company announced that Victor Luis departed as the
Company's Chief Executive Officer and resigned from the Board of Directors,
effective as of September 3, 2019. On September 4, 2019, the Company named Jide
Zeitlin, Chairman of the Board of Directors, as the Company's Chief Executive
Officer. In connection with Mr. Luis's departure, the Company and Mr. Luis
entered into a separation and mutual release agreement.
On July 21, 2020, the Company announced that Jide Zeitlin resigned as the
Company's Chairman, Chief Executive Officer and from the Company's Board of
Directors, effective July 20, 2020. Effective July 21, 2020, the Company
appointed Joanne Crevoiserat, the Company's Chief Financial Officer, as Interim
Chief Executive Officer. The Company also appointed Andrea Shaw Resnick, the
Company's Global Head of Investor Relations and Corporate Communications, as
Interim Chief Financial Officer. Refer to Note 22, "Subsequent Events," for
further information.

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Current Trends and Outlook
The environment in which we operate is subject to a number of different factors
driving global consumer spending. Consumer preferences, macroeconomic
conditions, foreign currency fluctuations and geopolitical events continue to
impact overall levels of consumer travel and spending on discretionary items,
with inconsistent patterns across channels and geographies.
As previously noted, Covid-19 was officially declared a global pandemic by the
World Health Organization in March 2020. The virus has impacted regions all
around the world, resulting in restrictions and shutdowns implemented by
national, state, and local authorities. These requirements have resulted in full
and partial store closures globally, causing a significant reduction in sales
starting in the third quarter of fiscal 2020. While the vast majority of the
Company's stores have reopened for either in-store or curb-side service as of
the end of the fiscal year, stores may be required to close again for an
extended period of time due to the possibility of a "second wave" of increased
infections. Covid-19 may also cause disruptions in the Company's supply chain,
resulting in facility closures, labor instability, potential inability to source
raw materials and disrupted operating procedures in attempts to curb the spread
of Covid-19 within our third-party manufacturers, distribution centers, and
other vendors. The Company's e-commerce sites continue to operate, subject to
the local guidance related to Covid-19 surrounding our distribution centers.
The disruptions related to Covid-19 have materially adversely impacted our
operations, cash flow, and liquidity. There is uncertainty around the duration
of these disruptions and the possibility of other effects on the business. We
will continue to monitor the rapidly evolving situation pertaining to the
Covid-19 outbreak, including guidance from international and domestic
authorities. In these circumstances, the Company will need to make adjustments
to our operating plan. Refer to Part I, Item 1A. "Risk Factors" for further
information.
Several organizations that monitor the world's economy, including the
International Monetary Fund, observed that global expansion has declined
significantly in the last year and the outbreak of the Covid-19 pandemic has
negatively shocked the global economy, contributing to further anticipated
declines for the remainder of calendar 2020. These organizations expect recovery
to be more gradual than initially anticipated based on the economic activity
displayed by economies with declining infection rates. Economic activity has
been marked by persistent social distancing and declines in productivity as
businesses struggle to ramp up operations in response to risks and regulations
related to Covid-19. For economies that struggle with infection control, the
negative impacts will be amplified due to lengthier lockdown provisions. While
intensifying uncertainty surrounds future economic growth, multilateral
cooperation and support from local policymakers is pivotal in shaping the
economic outlook.
Furthermore, currency volatility, political instability and potential changes to
trade agreements may contribute to a worsening of the macroeconomic environment.
During fiscal 2020, Hong Kong SAR, China has been the subject of worsening
political unrest, as demonstrated through ongoing public demonstrations and
protests, which has impacted and is expected to continue to impact our business.
In addition, during fiscal 2019 and continuing into fiscal 2020, the Trump
Administration and China have both imposed new tariffs on the importation of
certain product categories into the respective country. Continued increases in
trade tensions could impact the Company's ability to grow its business with the
Chinese consumer globally.
Additional macroeconomic impacts include but are not limited to the United
Kingdom ("U.K.") voting to leave the European Union ("E.U."), commonly known as
"Brexit." On March 29, 2017, the U.K. triggered Article 50 of the Lisbon Treaty
formally starting a 2 year negotiation period with the E.U., which was
subsequently extended to January 31, 2020. The U.K. officially terminated its
membership of the E.U. on January 31, 2020 under the terms of a withdrawal
agreement concluded between the U.K. and E.U. and has now entered into a
transition phase until December 31, 2020. During the transition phase, the U.K.
will generally continue operating as if it were still a member of the E.U. Trade
talks between the E.U. and U.K., to determine their future relationship, are
still underway. The U.K. passed on the opportunity to extend the transition
phase beyond December 31, 2020, and as such, if a trade deal is not reached by
December 31, 2020, the U.K. can expect checks and tariffs on products going to
and coming from the E.U. beginning on January 1, 2021.
We will continue to monitor these trends and evaluate and adjust our operating
strategies and cost management opportunities to mitigate the related impact on
our results of operations, while remaining focused on the long-term growth of
our business and protecting the value of our brands.
Furthermore, refer to Part I, Item 1 - "Business" for additional discussion on
our expected store openings and closures within each of our segments. For a
detailed discussion of significant risk factors that have the potential to cause
our actual results to differ materially from our expectations, refer to Part I,
Item 1A - "Risk Factors".

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FISCAL 2020 COMPARED TO FISCAL 2019
The following table summarizes results of operations for fiscal 2020 compared to
fiscal 2019. All percentages shown in the tables below and the related
discussion that follows have been calculated using unrounded numbers.
                                                            Fiscal Year Ended
                                  June 27, 2020              June 29, 2019                 Variance
                                                    (millions, except per share data)
                                              % of                       % of
                               Amount      net sales      Amount      net sales       Amount          %
Net sales                    $ 4,961.4       100.0  %   $ 6,027.1        100.0 %   $ (1,065.7 )     (17.7 )%
Gross profit                   3,239.3        65.3        4,053.7         67.3         (814.4 )     (20.1 )
SG&A expenses                  3,790.1        76.4        3,234.0         53.7          556.1       (17.2 )
Operating income (loss)         (550.8 )     (11.1 )        819.7         13.6       (1,370.5 )        NM
Interest expense, net             60.1         1.2           47.9          0.8           12.2       (25.2 )
Other expense (income)            13.3         0.3            5.6          0.1            7.7          NM
Income (Loss) before
provision for income taxes      (624.2 )     (12.6 )        766.2         12.7       (1,390.4 )        NM
Provision for income taxes        27.9         0.7          122.8          2.0          (94.9 )     (77.3 )
Net income (loss)               (652.1 )     (13.1 )        643.4         10.7       (1,295.5 )        NM
Net income (loss) per share:
   Basic                     $   (2.34 )$    2.22$    (4.56 )        NM
   Diluted                   $   (2.34 )$    2.21$    (4.55 )        NM





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 2020 and fiscal 2019 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.

                                       38
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Fiscal 2020 Items

Fiscal Year Ended June 27, 2020

Items affecting comparability

                                                                                                                                             Non-GAAP
                                                                                                                                              Basis
                               GAAP Basis                                 Organization-related &                         Acceleration       (Excluding
                             (As Reported)      ERP Implementation           Integration costs          Impairment          Program           Items)
                                                                         (millions, except per share data)
Coach                              2,411.6                     -                         (0.1 )              (61.9 )               -          2,473.6
Kate Spade                           682.9                     -                         (1.2 )              (32.3 )               -            716.4
Stuart Weitzman                      144.8                     -                         (4.3 )               (9.8 )            (8.4 )          167.3
Gross profit(1)             $      3,239.3     $               -       $                 (5.6 )        $    (104.0 )$        (8.4 )$  3,357.3

Coach                              1,822.2                     -                          0.5                116.7              18.5          1,686.5
Kate Spade                           782.2                     -                          0.1                 92.9              13.6            675.6
Stuart Weitzman                      766.2                     -                         (2.0 )              526.7              17.6            223.9
Corporate                            419.5                  28.5                         29.2                    -              28.9            332.9
SG&A expenses               $      3,790.1     $            28.5       $                 27.8          $     736.3$        78.6$  2,918.9

Coach                                589.4                     -                         (0.6 )             (178.6 )           (18.5 )          787.1
Kate Spade                           (99.3 )                   -                         (1.3 )             (125.2 )           (13.6 )           40.8
Stuart Weitzman                     (621.4 )                   -                         (2.3 )             (536.5 )           (26.0 )          (56.6 )
Corporate                           (419.5 )               (28.5 )                      (29.2 )                  -             (28.9 )         (332.9 )
Operating income (loss)     $       (550.8 )   $           (28.5 )     $                (33.4 )        $    (840.3 )$       (87.0 )$    438.4

Provision for income taxes            27.9                  (6.0 )                        3.8                (55.3 )            (8.4 )           93.8
Net income (loss)           $       (652.1 )   $           (22.5 )     $                (37.2 )        $    (785.0 )$       (78.6 )$    271.2
Net income (loss) per
diluted common share        $        (2.34 )   $           (0.08 )     $                (0.13 )        $     (2.82 )$       (0.28 )$     0.97

(1)Adjustments within Gross profit are recorded within Cost of sales. In fiscal 2020 the Company incurred charges as follows: • ERP Implementation - Total charges represent technology implementation

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


•     Organization-related & Integration Costs - Total charges represent
      integration costs primarily related to professional fees. Refer to the
      "Executive Overview" herein and Note 6, "Integration," for more
      information.

• Impairment - Total charges are primarily due to impairment charges on the

indefinite-lived brand intangible asset and goodwill for Stuart Weitzman,

impairment charges on property and equipment assets and lease ROU assets,

as well as increases in inventory reserves. Refer to Note 12, "Fair Value

Measurements," Note 15, "Goodwill and Other Intangible Assets," and Note

18, "Segment Information," for further information.

• Acceleration Program - Total charges, incurred under the Acceleration

Program, are primarily due to organization-related costs as a result of

severance and store closures charges. Store closure charges represent lease

termination penalties, removal or modification of lease assets and

liabilities established in connection with the adoption of the new lease

accounting standard, establishing inventory reserves, accelerated

depreciation and severance. Refer to the "Executive Overview" and Note 7,

"Restructuring Activities," herein for further information.



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

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Fiscal 2019 Items
                                                               Fiscal Year Ended June 29, 2019
                                                                 Items affecting comparability
                                                                                                                      Non-GAAP
                                                                                                                        Basis
                               GAAP Basis                                  Integration &         Impact of Tax       (Excluding
                             (As Reported)      ERP Implementation          Acquisition           Legislation          Items)
                                                              (millions, except per share data)
Coach                              2,996.4                     -                   (1.9 )                  -            2,998.3
Kate Spade                           863.6                     -                   (6.3 )                  -              869.9
Stuart Weitzman                      193.7                     -                  (19.6 )                  -              213.3
Gross profit(1)             $      4,053.7     $               -       $          (27.8 )      $           -        $   4,081.5

Coach                              1,848.0                     -                    7.1                    -            1,840.9
Kate Spade                           698.2                     -                   14.5                    -              683.7
Stuart Weitzman                      245.2                     -                   15.0                    -              230.2
Corporate                            442.6                  36.9                   30.0                    -              375.7
SG&A expenses               $      3,234.0     $            36.9       $           66.6        $           -        $   3,130.5

Coach                              1,148.4                     -                   (9.0 )                  -            1,157.4
Kate Spade                           165.4                     -                  (20.8 )                  -              186.2
Stuart Weitzman                      (51.5 )                   -                  (34.6 )                  -              (16.9 )
Corporate                           (442.6 )               (36.9 )                (30.0 )                  -             (375.7 )
Operating income (loss)     $        819.7     $           (36.9 )     $          (94.4 )      $           -        $     951.0

Provision for income taxes           122.8                  (9.4 )         
      (25.8 )                9.2              148.8
Net income (loss)           $        643.4     $           (27.5 )     $          (68.6 )      $        (9.2 )$     748.7
Net income (loss) per
diluted common share        $         2.21     $           (0.09 )     $          (0.24 )      $       (0.03 )$      2.57

(1)Adjustments within Gross profit are recorded within Cost of sales. In fiscal 2019 the Company incurred adjustments as follows: • ERP Implementation - Total charges represent technology implementation

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

• Integration & Acquisition - Total charges primarily represent integration

and acquisition costs related to organization-related costs, professional

fees, one-time write-off of inventory and limited life purchase accounting

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


•     Impact of Tax Legislation - Total charges primarily related to the net

impact of the transition tax and re-measurement of deferred tax balances.

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


These actions taken together increased the Company's SG&A expenses by $103.5
million and cost of sales by $27.8 million, decreased the provision for income
taxes by $26.0 million, negatively impacting net income by $105.3 million, or
$0.36 per diluted share.
Tapestry, Inc. Summary - Fiscal 2020
Currency Fluctuation Effects
The change in net sales and gross margin in fiscal 2020 compared to fiscal 2019
has been presented both including and excluding currency fluctuation effects.

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Net Sales
Net sales in fiscal 2020 decreased 17.7% or $1.07 billion to $4.96 billion.
Excluding the effects of foreign currency, net sales decreased by 17.5% or $1.05
billion. This decrease was driven by the impact of the Covid-19 outbreak on our
business.
Gross Profit
Gross profit decreased 20.1% or $814.4 million to $3.24 billion in fiscal 2020
from $4.05 billion in fiscal 2019. Gross margin for fiscal 2020 was 65.3% as
compared to 67.3% in fiscal 2019. Excluding items affecting comparability of
$118.0 million in fiscal 2020 and $27.8 million in fiscal 2019, as discussed in
the "GAAP to Non-GAAP Reconciliation" herein, gross profit decreased 17.7% or
$724.2 million to $3.36 billion in fiscal 2020, and gross margin remained at
67.7% in fiscal 2020 and fiscal 2019. This decrease in gross profit is primarily
driven by decreases in Coach of $524.7 million, in Kate Spade of $153.5 million
and in Stuart Weitzman of $46.0 million.
Selling, General and Administrative Expenses
The Company includes inbound product-related transportation costs from our
service providers within Cost of sales. The Company includes certain
transportation-related costs due to our distribution network in SG&A expenses
rather than in Cost of sales; for this reason, our gross margins may not be
comparable to that of entities that include all costs related to their
distribution network in Cost of sales.
SG&A expenses increased 17.2% or $556.1 million to $3.79 billion in fiscal 2020
as compared to $3.23 billion in fiscal 2019. As a percentage of net sales, SG&A
expenses increased to 76.4% during fiscal 2020 as compared to 53.7% during
fiscal 2019. Excluding items affecting comparability of $871.2 million in fiscal
2020 and $103.5 million in fiscal 2019, SG&A expenses decreased 6.8% or $211.6
million to $2.92 billion from $3.13 billion in fiscal 2019; and SG&A expenses as
a percentage of net sales increased to 58.8% in fiscal 2020 from 51.9% in fiscal
2019. This decrease in SG&A expenses is primarily due to decreases in Coach of
$154.4 million, Corporate expenses of $42.8 million, Kate Spade of $8.1 million
and Stuart Weitzman of $6.3 million.
Corporate expenses, which are included within SG&A expenses discussed above but
are not directly attributable to a reportable segment, decreased 5.2% or $23.1
million to $419.5 million in fiscal 2020 as compared to $442.6 million in fiscal
2019. Excluding items affecting comparability of $86.6 million and $66.9 million
in fiscal 2020 and fiscal 2019, respectively, SG&A expenses decreased 11.4% or
$42.8 million to $332.9 million in fiscal 2020 as compared to $375.7 million in
fiscal 2019. This decrease in SG&A expenses was primarily due to lower
compensation cost mostly related to the cancellation of our Annual Incentive
Plan for fiscal year 2020.
Operating Income (Loss)
Operating income decreased $1.37 billion to an operating loss of $550.8 million
during fiscal 2020 as compared to operating income of $819.7 million in fiscal
2019. Operating margin was (11.1)% in fiscal 2020 as compared to 13.6% in fiscal
2019. Excluding items affecting comparability of $989.2 million in fiscal 2020
and $131.3 million in fiscal 2019, operating income decreased 53.9% or $512.6
million to $438.4 million from $951.0 million in fiscal 2019; and operating
margin was 8.8% in fiscal 2020 as compared to 15.8% in fiscal 2019. This
decrease in operating income is primarily driven by declines in operating income
in Coach of $370.3 million, in Kate Spade of $145.4 million and in Stuart
Weitzman of $39.7 million, partially offset by a decrease in Corporate expenses
of $42.8 million.
Interest Expense, net
Net interest expense increased 25.2% or $12.2 million to $60.1 million in fiscal
2020 as compared to $47.9 million in fiscal 2019. The increase in interest
expense, net is due to lower interest income and the additional interest expense
related to the draw down on the Revolving Credit Facility in the fourth quarter
of the fiscal year.
Other Expense (Income)
Other expense increased $7.7 million to $13.3 million in fiscal 2020 as compared
to $5.6 million in fiscal 2019. This increase in other expense is related to an
increase in foreign exchange losses.
Provision for Income Taxes
The effective tax rate was (4.5)% in fiscal 2020 as compared to 16.0% in fiscal
2019. Excluding items affecting comparability, the effective tax rate was 25.7%
in fiscal 2020 as compared to 16.6% in fiscal 2019. The increase in our
effective tax rate was primarily attributable to impact of permanent tax
adjustments on lower net sales and the geographic mix of earnings.

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Net Income (Loss)
Net income decreased $1.3 billion to a net loss of $652.1 million in fiscal 2020
as compared to a net income of $643.4 million in fiscal 2019. Excluding items
affecting comparability, net income decreased 63.8% or $477.5 million to $271.2
million in fiscal 2020 from $748.7 million in fiscal 2019. This decrease was
primarily due to lower operating income, partially offset by a decrease in the
provision for income taxes.
Net Income (Loss) per Share
Net loss per diluted share was $2.34 in fiscal 2020 as compared to net income
per diluted share of $2.21 in fiscal 2019. Excluding items affecting
comparability, net income per diluted share decreased 62.3% or $1.60 to $0.97 in
fiscal 2020 from $2.57 in fiscal 2019, primarily due to lower net income.
Segment Performance - Fiscal 2020
Coach
                                             Fiscal Year Ended
                      June 27, 2020             June 29, 2019              Variance
                                                (millions)
                                 % of                      % of
                   Amount     net sales      Amount     net sales      Amount        %
Net sales        $ 3,525.7       100.0 %   $ 4,270.9       100.0 %   $ (745.2 )   (17.4 )%
Gross profit       2,411.6        68.4       2,996.4        70.2       (584.8 )   (19.5 )
SG&A expenses      1,822.2        51.7       1,848.0        43.3        (25.8 )    (1.4 )
Operating income     589.4        16.7       1,148.4        26.9       (559.0 )   (48.7 )


Coach Net Sales decreased 17.4% or $745.2 million to $3.53 billion in fiscal
2020. Excluding the impact of foreign currency, net sales decreased 17.2% or
$736.4 million. This decrease was primarily attributed to a net decline of
$661.3 million in bricks and mortar retail sales globally due to the impact of
the Covid-19 outbreak, which was partially offset by an increase in e-commerce
sales globally. Wholesale sales also declined $75.4 million due to lower demand
as a result of the Covid-19 outbreak.
Coach Gross Profit decreased 19.5% or $584.8 million to $2.41 billion in fiscal
2020 from $3.00 billion in fiscal 2019. Gross margin decreased to 68.4% in
fiscal 2020 as compared to 70.2% in fiscal 2019. Excluding items affecting
comparability of $62.0 million and $1.9 million in fiscal 2020 and in fiscal
2019, respectively, Coach gross profit decreased 17.5% or $524.7 million to
$2.47 billion from $3.00 billion in fiscal 2019, and gross margin remained at
70.2% in fiscal 2020 and in fiscal 2019 on a non-GAAP basis. Excluding the
impact of foreign currency in both periods, gross margin increased 30 basis
points.
Coach SG&A expenses decreased 1.4% or $25.8 million to $1.82 billion in fiscal
2020 as compared to $1.85 billion in fiscal 2019. As a percentage of net sales,
SG&A expenses increased to 51.7% in fiscal 2020 as compared to 43.3% in fiscal
2019. Excluding items affecting comparability of $135.7 million and $7.1 million
in fiscal 2020 and fiscal 2019, respectively, SG&A expenses decreased 8.4% or
$154.4 million to $1.69 billion in fiscal 2020 from $1.84 billion in fiscal
2019. SG&A expenses as a percentage of sales increased from 47.8% in fiscal 2020
from 43.1% in fiscal 2019. This decrease in SG&A expenses is primarily due to a
decline in compensation costs, mainly related to the cancellation of the Annual
Incentive Plan for fiscal year 2020, and lower variable selling costs due to
store closures in relation to Covid-19.
Coach Operating Income decreased 48.7% or $559.0 million to $589.4 million in
fiscal 2020, resulting in an operating margin of 16.7%, as compared to $1.15
billion and 26.9%, respectively in fiscal 2019. Excluding items affecting
comparability, Coach operating income decreased 32.0% or $370.3 million to
$787.1 million from $1.16 billion in fiscal 2019; and operating margin was 22.3%
in fiscal 2020 as compared to 27.1% in fiscal 2019. This decrease in operating
income was due to a decrease in gross profit, partially offset by lower SG&A
expenses.

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Kate Spade
                                                    Fiscal Year Ended
                             June 27, 2020              June 29, 2019              Variance
                                                        (millions)
                                         % of                      % of
                          Amount      net sales      Amount     net sales      Amount        %
Net sales               $ 1,149.5       100.0  %   $ 1,366.8       100.0 % 
 $ (217.3 )   (15.9 )%
Gross profit                682.9        59.4          863.6        63.2       (180.7 )   (21.0 )
SG&A expenses               782.2        68.0          698.2        51.1         84.0      12.0
Operating income (loss)     (99.3 )      (8.6 )        165.4        12.1       (264.7 )      NM


Kate Spade Net Sales decreased 15.9% or $217.3 million to $1.15 billion in
fiscal 2020. Excluding the impact of foreign currency, net sales decreased 16.0%
or $218.4 million. This decrease is primarily due to a decline of $190.5 million
in retail sales mainly in North America due to full and partial store closures
related to the Covid-19 outbreak. Furthermore, wholesale sales declined $23.4
million due to lower demand as a result of the Covid-19 outbreak.
Kate Spade Gross Profit decreased 21.0% or $180.7 million to $682.9 million in
fiscal 2020 from $863.6 million in fiscal 2019. Gross margin decreased to 59.4%
in fiscal 2020 from 63.2% in fiscal 2019. Excluding items affecting
comparability of $33.5 million and $6.3 million in fiscal 2020 and fiscal 2019
respectively, Kate Spade gross profit decreased 17.6% or $153.5 million to
$716.4 million from $869.9 million in fiscal 2019, and gross margin decreased
130 basis points to 62.3% from 63.6% in fiscal 2019. The gross margin decrease
of 130 basis points is primarily due to promotional activity, unfavorable
channel mix and the impact of directly operating the footwear business.
Kate Spade SG&A Expenses increased 12.0% or $84.0 million to $782.2 million in
fiscal 2020 from $698.2 million in fiscal 2019. As a percentage of net sales,
SG&A expenses increased to 68.0% during fiscal 2020 as compared to 51.1% in
fiscal 2019. Excluding items affecting comparability of $106.6 million and $14.5
million in fiscal 2020 and fiscal 2019, respectively, SG&A expenses decreased
1.2% or $8.1 million to $675.6 million in fiscal 2020 compared to $683.7 million
in fiscal 2019; and SG&A expenses as a percentage of sales increased to 58.8% in
fiscal 2020 from 50.0% in fiscal 2019. This decrease was due to a decline in
compensation costs, mostly related to the cancellation of the Annual Incentive
Plan for fiscal 2020, and lower variable selling costs due to store closures in
relation to Covid-19, partially offset by new store openings and increased
marketing expenses.
Kate Spade Operating Income decreased $264.7 million to an operating loss of
$99.3 million in fiscal 2020, resulting in an operating margin of (8.6)% as
compared to an operating income of $165.4 million and operating margin of 12.1%
in fiscal 2019. Excluding items affecting comparability, Kate Spade operating
income decreased 78.1% or $145.4 million to $40.8 million from $186.2 million in
fiscal 2019, resulting in an operating margin of 3.6% as compared to 13.6% in
fiscal 2019. The decrease in operating income was due to lower gross profit,
partially offset by lower SG&A expenses.
Stuart Weitzman
                                          Fiscal Year Ended
                   June 27, 2020            June 29, 2019              Variance
                                             (millions)
                              % of                     % of
                Amount     net sales     Amount     net sales      Amount        %
Net sales      $ 286.2        100.0 %   $ 389.4       100.0  %   $ (103.2 )   (26.5 )%
Gross profit     144.8         50.6       193.7        49.8         (48.9 )   (25.3 )
SG&A expenses    766.2           NM       245.2        63.0         521.0        NM
Operating loss  (621.4 )         NM       (51.5 )     (13.2 )      (569.9 )      NM


Stuart Weitzman Net Sales decreased by 26.5% or $103.2 million to $286.2 million
in fiscal 2020. Excluding the impact of foreign currency, net sales decreased
25.6% or $99.5 million. This decrease was primarily due to lower shipments in
the wholesale business of $74.2 million and a decline in the retail business of
$25.3 million as a result of the Covid-19 outbreak partially offset by an
expanded store network.
Stuart Weitzman Gross Profit decreased 25.3% or $48.9 million to $144.8 million
in fiscal 2020 from $193.7 million in fiscal 2019. Gross margin increased 80
basis points to 50.6% in fiscal 2020 from 49.8% in fiscal 2019. Excluding items
affecting comparability of $22.5 million in fiscal 2020 and $19.6 million in
fiscal 2019, Stuart Weitzman gross profit decreased 21.6% or $46.0 million to
$167.3 million from $213.3 million in fiscal 2019, and gross margin increased
370 basis points to 58.5% in fiscal 2020 from 54.8% in fiscal 2019. The year
over year change in gross margin was positively impacted by foreign currency
rates by

                                       43
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120 basis points. Excluding the impact of foreign currency, the increase in
gross margin of 250 basis points is primarily due to favorable channel mix.
Stuart Weitzman SG&A Expenses increased $521.0 million to $766.2 million in
fiscal 2020 as compared to $245.2 million in fiscal 2019. Excluding items
affecting comparability of $542.3 million in fiscal 2020 and $15.0 million in
fiscal 2019, SG&A expenses decreased 2.8% or $6.3 million to $223.9 million in
fiscal 2020 from $230.2 million in fiscal 2019; and SG&A expenses as a
percentage of net sales increased to 78.2% in fiscal 2020 from 59.1% in fiscal
2019. This decrease is primarily due to a decrease in marketing expenses and
compensation costs partially offset by additional store-related costs as a
result of new store openings.
Stuart Weitzman Operating Loss increased $569.9 million to an operating loss of
$621.4 million in fiscal 2020, as compared to an operating loss of $51.5 million
in fiscal 2019. Excluding items affecting comparability, Stuart Weitzman
operating loss increased $39.7 million to an operating loss of $56.6 million
from an operating loss of $16.9 million in fiscal 2019; and operating margin was
(19.8)% in fiscal 2020 as compared to (4.3)% in fiscal 2019. The increase in
operating loss was due to a decrease in gross profit partially offset by lower
SG&A expenses.
FISCAL 2019 COMPARED TO FISCAL 2018
The comparison of fiscal 2019 to 2018 has been omitted from this Form 10-K, but
can be referenced in our Form 10-K for the fiscal year ended June 29, 2019,
filed on August 15, 2019.
NON-GAAP MEASURES
The Company's reported results are presented in accordance with GAAP. The
reported gross profit, SG&A expenses, operating income, provision for income
taxes, net income and earnings per diluted share reflect certain items,
including the impact of the Impairment charges and Acceleration Program costs in
fiscal 2020, ERP Implementation and Organization-related and Integration charges
in fiscal 2020 and 2019, and the impact of Tax Legislation in fiscal 2019. As a
supplement to the Company's reported results, these metrics are also reported on
a non-GAAP basis to exclude the impact of these items, along with a
reconciliation to the most directly comparable GAAP measures.
The Company has historically reported comparable store sales, which reflects
sales performance at stores that have been open for at least 12 months, and
includes sales from the Internet. The Company excludes new stores, including
newly acquired locations, from the comparable store base for the first twelve
months of operation. The Company excludes closed stores from the calculation.
Comparable store sales are not adjusted for store expansions. Due to extensive
full and partial store closures resulting from the Covid-19 pandemic, comparable
store sales are not reported for fiscal year ended June 27, 2020 as the Company
does not believe this metric is currently meaningful to the readers of its
financial statements for this period.
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.

                                       44
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For a detailed discussion on these non-GAAP measures, see Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations".

                                       45
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FINANCIAL CONDITION
Cash Flows - Fiscal 2020 Compared to Fiscal 2019
                                                         Fiscal Year Ended
                                                       June 27,      June 29,
                                                         2020          2019         Change
                                                                    (millions)
Net cash provided by operating activities            $    407.0$   792.4$  (385.4 )
Net cash provided by (used in) investing
activities                                                 44.3        (574.2 )       618.5
Net cash provided by (used in) financing
activities                                                  5.9        (485.6 )       491.5
Effect of exchange rate changes on cash and cash
equivalents                                                (0.1 )        (6.8 )         6.7
Net increase (decrease) in cash and cash
equivalents                                          $    457.1     $  

(274.2 ) $ 731.3



The Company's cash and cash equivalents increased by $457.1 million in fiscal
2020 compared to a decrease of $274.2 million in fiscal 2019, as discussed
below.
Net cash provided by operating activities
Net cash provided by operating activities decreased $385.4 million primarily due
to changes in operating assets and liabilities of $192.3 million, the impact of
non-cash charges of $717.8 million and changes in net income of $1.30 billion.
The $192.3 million change in our operating asset and liability balances was
primarily driven by:
•      Other liabilities changed by $18.0 million. They were a use of cash of

$37.8 million in fiscal 2020 compared to a use of cash of $55.8 million in

fiscal 2019, primarily driven by the application of net operating losses

to reduce the Transition Tax liability partially in fiscal 2019, partially

       offset by a reclass of liability from long-term to short-term.


•      Other assets changed by $107.5 million. They were a source of cash of

$38.3 million in fiscal 2020 as compared to a use of cash of $69.2 million

       in fiscal 2019, primarily driven by timing of tax related payments.


•      Inventories changed by $46.1 million. They were a use of cash of $58.6

million in fiscal 2020 as compared to a use of cash of $104.7 million in

fiscal 2019, primarily driven by increased inventory in transit at the end

of fiscal 2019, and lower than expected sales in fiscal 2020.

• Accrued liabilities changed by $36.4 million. They were a source of cash

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


•      Accounts payable changed by $51.9 million. They were a use of cash of

$91.7 million in fiscal 2020 as compared to a use of cash of $39.8 million

in fiscal 2019, primarily driven by the timing of lower inventory receipts

across all brands.

• Trade accounts receivable changed by $36.2 million. They were a source of

cash of $61.9 million in fiscal 2020 as compared to a source of cash of

$25.7 million in fiscal 2019, primarily driven by a decrease in wholesale

       shipments across all brands and a decrease in retail sales due to store
       closures related to Covid-19.


Net cash provided by (used in) investing activities
Net cash provided by investing activities was $44.3 million in fiscal 2020
compared to a use of cash of $574.2 million in fiscal 2019, resulting in a
$618.5 million increase in net cash provided by investing activities.
The $44.3 million source of cash in fiscal 2020 is primarily due to net cash
proceeds from maturities and sales of investments of $462.1 million. This source
of cash was partially offset by purchases of investments of $212.4 million and
capital expenditures of $205.4 million.
The $574.2 million use of cash in fiscal 2019 is primarily due to purchase of
investments of $415.5 million and capital expenditures of $274.2 million. This
use of cash was partially offset by net cash proceeds from maturities and sales
of investments of $159.0 million.
Net cash provided by (used in) financing activities
Net cash provided by financing activities was $5.9 million in fiscal 2020 as
compared to a use of cash of $485.6 million in fiscal 2019, resulting in a
$491.5 million increase in net cash provided by financing activities.

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The $5.9 million source of cash in fiscal 2020 was primarily due to proceeds
from the draw down on the Revolving Credit Facility of $700.0 million, partially
offset by dividend payments of $380.3 million and repurchases of common stock of
$300.0 million.
The $485.6 million of cash used in fiscal 2019 was primarily due to dividend
payments of $390.7 million and repurchases of common stock of $100.0 million.
Cash Flows - Fiscal 2019 Compared to Fiscal 2018
The comparison of fiscal 2019 to 2018 has been omitted from this Form 10-K, but
can be referenced in our Form 10-K for the fiscal year ended June 29, 2019,
filed on August 15, 2019.

                                       47
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Working Capital and Capital Expenditures
As of June 27, 2020, in addition to our cash flows from operations, our sources
of liquidity and capital resources were comprised of the following:
                                              Sources of         Outstanding       Total Available
                                               Liquidity        Indebtedness         Liquidity(1)
                                                                   (millions)
Cash and cash equivalents(1)                $     1,426.3     $             -     $        1,426.3
Short-term investments(1)                             8.1                   -                  8.1
Revolving Credit Facility(2)                        900.0               700.0                200.0
3.000% Senior Notes due 2022(3)                     400.0               400.0                    -
4.250% Senior Notes due 2025(3)                     600.0               600.0                    -
4.125% Senior Notes due 2027(3)                     600.0               600.0                    -
Total                                       $     3,934.4$       2,300.0$        1,634.4

(1) As of June 27, 2020, approximately 29.4% of our cash and short-term

investments were held outside the United States. In fiscal 2019, we have

analyzed our global working capital and cash requirements, and the potential

     tax liabilities associated with repatriation, and have determined that we
     will likely repatriate some portion of available foreign cash in the
     foreseeable future. The Company has recorded deferred taxes on certain

earnings of non-US subsidiaries that are deemed likely to be repatriated.

See Note 16, "Income Taxes" for more information.

(2) In October 2019, the Company entered into a definitive credit agreement

whereby Bank of America, N.A., as administrative agent, the other agents

party thereto, and a syndicate of banks and financial institutions have made

available to the Company a $900.0 million revolving credit facility,

including sub-facilities for letters of credit, with a maturity date of

October 24, 2024 (the "Revolving Credit Facility"). Borrowings under the

Revolving Credit Facility bear interest at a rate per annum equal to, at the

Borrowers' option, either (a) an alternate base rate (which is a rate equal

to the greatest of (i) the Prime Rate in effect on such day, (ii) the

Federal Funds Effective Rate in effect on such day plus ½ of 1% or (iii) the

Adjusted LIBO Rate for a one month Interest Period on such day plus 1%) or

(b) a rate based on the rates applicable for deposits in the interbank

market for U.S. Dollars or the applicable currency in which the loans are

made plus, in each case, an applicable margin. The applicable margin will be

determined by reference to a grid, defined in the Credit Agreement, based on

the ratio of (a) consolidated debt plus operating lease liability to (b)

consolidated EBITDAR. Additionally, the Company pays a commitment fee at a

rate determined by the reference to the aforementioned pricing grid. On May

19, 2020, the Company entered into Amendment No. 1 (the "Amendment") to the

     Revolving Credit Facility. Under the terms of the Amendment, during the
     period from the Effective Date until October 2, 2021, the Company must
     maintain available liquidity of $700 million (with available liquidity

defined as the sum of unrestricted cash and cash equivalents and available

commitments under credit facilities, including the Revolving Credit

Facility). Following the period from the Effective Date until the compliance

certificate is delivered for the fiscal quarter ending July 3, 2021 (the

"Covenant Relief Period"), the Company must comply on a quarterly basis with

a maximum net leverage ratio of 4.0 to 1.0. In addition, the Amendment

provides that during the Covenant Relief Period, if any two of the Company's

three credit ratings are non-investment grade, the Revolving Credit Facility

will be guaranteed by the Company's material domestic subsidiaries and will

be subject to liens on accounts receivable, inventory and intellectual

property, in each case subject to customary exceptions. The Amendment also

contains negative covenants that limit the ability of the Company and its

subsidiaries to, among other things, incur certain debt, incur certain

liens, dispose of assets, make investments, loans or advances, and engage in

share buybacks during the Covenant Relief Period. An increased interest rate

will be applicable during the Covenant Relief Period when the Company's

gross leverage ratio exceeds 4.0 to 1.0. The $900 million aggregate

commitment amount under the revolving credit facility remains unchanged. As

of June 27, 2020, $700.0 million of borrowings were outstanding under the

Revolving Credit Facility. Refer to Note 13, "Debt," for further information

on our existing debt instruments.

(3) In March 2015, the Company issued $600.0 million aggregate principal amount

of 4.250% senior unsecured notes due April 1, 2025 at 99.445% of par (the

"2025 Senior Notes"). Furthermore, on June 20, 2017, the Company issued

$400.0 million aggregate principal amount of 3.000% senior unsecured notes

due July 15, 2022 at 99.505% of par (the "2022 Senior Notes"), and $600.0

million aggregate principal amount of 4.125% senior unsecured notes due July

15, 2027 at 99.858% of par (the "2027 Senior Notes"). Furthermore, the

indentures for the 2025 Senior Notes, 2022 Senior Notes and 2027 Senior

Notes contain certain covenants limiting the Company's ability to: (i)

create certain liens, (ii) enter into certain sale and leaseback

transactions and (iii) merge, or consolidate or transfer, sell or lease all

or substantially all of the Company's assets. As of June 27, 2020, no known

     events of default have occurred. Refer to Note 13, "Debt," for further
     information on our existing debt instruments.



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We believe that our Revolving Credit Facility is adequately diversified with no
undue concentrations in any one financial institution. As of June 27, 2020,
there were 12 financial institutions participating in the Revolving Credit
Facility, with no one participant maintaining a combined maximum commitment
percentage in excess of 14%. 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 2021 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, which is uncertain as a result of Covid-19, and
to financial, business and other factors, some of which are beyond the Company's
control. The Company expects total capital expenditures to be approximately $150
million in fiscal 2021.
Seasonality
The Company's results are typically affected by seasonal trends. During the
first fiscal quarter, we build inventory for the holiday selling 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
months of November and December.
Fluctuations in net sales, operating income and operating cash flows of the
Company in any fiscal quarter may be affected by the timing of wholesale
shipments and other events affecting retail sales, including adverse weather
conditions or other macroeconomic events, including pandemics such as Covid-19.
Share Repurchase Plan
On May 9, 2019, the Company announced that its Board of Directors had authorized
the repurchase up to $1.00 billion of shares of its outstanding common stock.
Pursuant to this program, purchases of the Company's common stock will be made
subject to market conditions and at prevailing market prices, through open
market purchases. Repurchased shares of common stock will become authorized but
unissued shares. These shares may be issued in the future for general corporate
and other purposes. In addition, the Company may terminate or limit the stock
repurchase program at any time. During fiscal 2020, the Company repurchased
$300.0 million of common stock. As of June 27, 2020, the Company has the
authorization to repurchase up to $600.0 million of additional shares under the
plan. Amendment No. 1 to the Revolving Credit Facility contains negative
covenants that limit the ability of the Company to, among other things, engage
in share buybacks during the Covenant Relief Period. Refer to Part II, Item 5.
"Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities," for further information.

                                       49
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Contractual and Other Obligations
Firm Commitments
As of June 27, 2020, the Company's contractual obligations are as follows:
                                                Fiscal          Fiscal            Fiscal          Fiscal 2026
                                 Total           2021         2022 - 2023       2024 - 2025       and Beyond
                                                                 (millions)
Capital expenditure
commitments                   $     17.0$     17.0     $           -     $           -     $           -
Inventory purchase
obligations                        280.4          280.4                 -                 -                 -
Operating lease obligations      2,614.9          454.6             692.9             493.0             974.4
Finance lease obligations            6.9            1.4               2.8               2.7                 -
Debt repayment                   2,311.5          711.5             400.0             600.0             600.0
Interest on outstanding
debt                               325.0           67.4             113.0              94.1              50.5
Mandatory transition tax
payments(1)                        155.9           11.9              48.7              95.3                 -
Other                               72.8           39.5              33.3                 -                 -
Total                         $  5,784.4$  1,583.7$     1,290.7$     1,285.1$     1,624.9

(1) Mandatory transition tax payments represent our tax obligation incurred in

connection with the deemed repatriation of previously deferred foreign

earnings pursuant to the Tax Legislation. Refer to Note 16, "Income Taxes,"

for further information.



Excluded from the above contractual obligations table is the non-current
liability for unrecognized tax benefits of $77.3 million as of June 27, 2020, as
we cannot make a reliable estimate of the period in which the liability will be
settled, if ever. The above table also excludes amounts included in current
liabilities in the Consolidated Balance Sheet at June 27, 2020 as these items
will be paid within one year and certain long-term liabilities not requiring
cash payments.
Off-Balance Sheet Arrangements
In addition to the commitments included in the table above, we have outstanding
letters of credit, surety bonds and bank guarantees of $33.3 million as of
June 27, 2020, primarily serving to collateralize our obligation to third
parties for duty, leases, insurance claims and materials used in product
manufacturing. These letters of credit expire at various dates through 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 14, "Commitments and Contingencies," for
further information.

                                       50
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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 of the Board.
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.
Internet revenue from sales of products ordered through the Company's e-commerce
sites is recognized upon delivery and receipt of the shipment by its customers
and includes shipping and handling charges paid by customers. Retail and
internet revenues are recorded net of estimated returns, which are estimated by
developing an expected value based on historical experience. Payment is due at
the point of sale.
The Company recognizes revenue within the wholesale channel at the time title
passes and risk of loss is transferred to customers, which is generally at the
point of shipment of products but may occur upon receipt of the shipment by the
customer in certain cases. 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 27, 2020, a 10% change in the allowances for estimated uncollectible
accounts, markdowns and returns would not have resulted in a material change in
the Company's reserves and net sales.
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 27, 2020, a 10% change in the inventory reserve, would not have resulted
in material change in inventory and cost of sales.
Business Combinations
In connection with an acquisition, the Company records all assets acquired and
liabilities assumed of the acquired business at their acquisition date fair
value, including the recognition of contingent consideration at fair value on
the acquisition date. These fair value determinations require judgment and may
involve the use of significant estimates and assumptions, including assumptions
with respect to future cash inflows and outflows, discount rates, asset lives,
and market multiples, among other items. Furthermore, the Company may utilize
independent third-party valuation firms to assist in making these fair value
determinations. If goodwill is identified based upon the valuation of an
acquired business, the goodwill is assigned to the reporting units which will
benefit from the synergies that result from the business combination and
reported within the segment that such reporting units comprise. Refer to Note 4,
"Acquisitions," for detailed disclosures related to our acquisitions.

                                       51
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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.
The Company determined that there was no impairment in fiscal 2019 or fiscal
2018. During the third quarter of fiscal 2020, profitability trends continued to
decline from those that were expected for the Stuart Weitzman brand. The
reduction in both cash from operations and future expected cash flows were
exacerbated by the Covid-19 pandemic, which resulted in a decline in sales
driven by full and partial closures of a significant portion of our stores
globally. As a result of these macroeconomic conditions, the Company concluded
that a triggering event had occurred during the third quarter, resulting in the
need to perform a quantitative interim impairment assessment over the Company's
Stuart Weitzman reporting unit and indefinite-lived brand intangible assets. The
assessment concluded that the fair values of the Stuart Weitzman reporting unit
and indefinite-lived brand intangible asset as of the third quarter did not
exceed their respective carrying values. Accordingly, in the third quarter of
fiscal 2020, the Company recorded a goodwill impairment charge of $210.7
million related to the Stuart Weitzman reporting unit, resulting in a full
impairment. During the third quarter of fiscal 2020, the Company also recorded
an impairment charge of $267.0 million related to the Stuart Weitzman
indefinite-lived brand, resulting in a full impairment. The Company considered
the excess of the fair value over its carrying value for all Coach and Kate
Spade reporting unit and indefinite-lived brand intangibles, management did not
perform an interim assessment for these reporting units.
Based on the annual assessment, the fair values of our Coach brand reporting
units significantly exceeded their respective carrying values. The fair values
of the Kate Spade brand reporting unit and indefinite-lived brand as of the
fiscal 2020 testing date exceeded their respective carrying values by
approximately 13% and 35%, respectively. Several factors could impact the Kate
Spade brand's ability to achieve expected future cash flows, including continued
economic volatility and potential operational challenges related to the Covid-19
pandemic, the reception of new collections in all channels, the success of
international expansion strategies including the direct operation of certain
previous distributor and joint venture businesses, the optimization of the store
fleet productivity, the impact of promotional activity in department stores, and
the simplification of certain corporate overhead structures and other
initiatives aimed at increasing profitability of the business. Given the
relatively small excess of fair value over carrying value as noted above, if
profitability trends decline during fiscal 2021 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.
Valuation of Long-Lived Assets
Long-lived assets, such as property and equipment, 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

                                       52
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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.
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 2020 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 and the 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 16, "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.

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