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In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors contained in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended January 31, 2026 (the “Annual Report”), which could materially affect our business, financial condition and/or future results. Other than the risk factors set forth below relating to the proposed acquisition of the Marc Jacobs business, there have been no material changes in our risk factors from those set forth in the Annual Report. The risks described in the Annual Report are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or future results.
The Marc Jacobs Acquisition may not be completed within the expected timeframe, or at all, and the failure to complete the Marc Jacobs Acquisition could have a material adverse effect on our future business and financial results.
There can be no assurance that the Marc Jacobs Acquisition will be completed in the expected timeframe, or at all. The Marc Jacobs Acquisition is governed by multiple agreements, including the Unit Purchase Agreement, the Equity Commitment Letter, the Equity Purchase and Distribution Agreement and other ancillary agreements (collectively, the “Transaction Agreements”). The closing of the Unit Purchase Agreement is subject to customary conditions, including the accuracy of certain representations and warranties, absence of legal prohibitions and receipt of required antitrust approvals. In addition, the Company’s obligation to fund its equity contribution to IPCo under the Equity Commitment Letter is subject to the substantially concurrent funding of the WHP debt and equity financing and consummation of the Closing. There can be no assurance that all closing conditions will be satisfied (or waived, if applicable). Many of the conditions to completion of the Marc Jacobs Acquisition are not within our control, and we cannot predict when or if these conditions will be satisfied (or waived, as applicable).
If the Marc Jacobs Acquisition is not completed, our ongoing business and financial results may be adversely affected and we will be subject to a number of risks, including the following:
● we have dedicated significant time and resources, financial and otherwise, in planning for the Marc Jacobs Acquisition and the associated transition of the business, of which we would lose the benefit if the Marc Jacobs Acquisition is not completed;
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● certain transaction costs relating to the Marc Jacobs Acquisition, including regulatory filing costs and certain costs relating to representation and warranty insurance, will have been incurred whether or not the Marc Jacobs Acquisition is completed;
● the Marc Jacobs Acquisition requires us to fund approximately $500 million using a combination of cash on hand and borrowings under our revolving credit facility, and the reservation of such capital may reduce our financial flexibility and our ability to pursue other strategic opportunities pending the closing; and
● matters relating to the Marc Jacobs Acquisition (including transition planning) may require substantial commitments of time and resources by our management, whether or not the Marc Jacobs Acquisition is completed, which could otherwise have been devoted to other opportunities that may have been beneficial to us.
In addition, if the Marc Jacobs Acquisition is not completed, we may experience negative reactions from the financial markets and from our customers and employees. We also may be subject to litigation related to any failure to complete the Marc Jacobs Acquisition or to enforcement proceedings commenced against us to perform our obligations under the Transaction Agreements. If the Marc Jacobs Acquisition is not completed, these risks may materialize and may adversely affect our business, financial results and financial condition.
Our interest in the Marc Jacobs intellectual property is held through a non-controlled joint venture, and our ability to operate the Marc Jacobs business depends on a license agreement that is terminable under certain circumstances.
The Marc Jacobs Acquisition is structured through IPCo, a joint venture in which we will own 50% of the membership interests and an affiliate of WHP Global (“WHP”) will own the remaining 50%. IPCo will retain ownership of the Marc Jacobs intellectual property. We will operate the Marc Jacobs business pursuant to a license from IPCo providing an exclusive right to use the Marc Jacobs brands in the United States, Canada, Mexico and Western Europe for specified product categories. The initial term of the license agreement runs through December 2041, and we have 10 successive options to renew the license agreement for periods of 5 years. The license agreement is terminable by IPCo if we fail to make required payments or otherwise materially breach the agreement, in each case subject to an opportunity to cure within a specified period of time.
IPCo will be governed by a board of managers initially consisting of five managers, with two managers appointed by us and three appointed by WHP, which is subject to change in the future based on the relative ownership percentages of us and WHP in IPCo, and other circumstances provided in the amended and restated operating agreement which will govern the IPCo. Subject to those potential changes or circumstances, WHP controls the board of IPCo. Certain significant decisions, including amendments to the operating agreement, mergers, acquisitions, dispositions, incurrence of indebtedness above certain thresholds, related party transactions and bankruptcy, require approval of both members for so long as they continue to own certain ownership percentages. Disagreements with WHP regarding the management or direction of IPCo or the Marc Jacobs intellectual property could adversely affect our ability to operate the Marc Jacobs business effectively. In addition, we and WHP generally may not transfer our membership interests in IPCo prior to the third anniversary of closing, other than to permitted transferees or with the prior written consent of the other member, and any transfer after the third anniversary is subject to a right of first offer and tag along right in favor of the other party, which may limit our ability to exit or monetize our investment on favorable terms.
We may be unable to successfully transition and operate the Marc Jacobs business, and we may not realize the anticipated benefits of the Marc Jacobs Acquisition.
Following the closing, we will be required to transition the Marc Jacobs operating business away from the infrastructure and support systems currently provided by LVMH. Pursuant to a Transition Services Agreement to be entered into at closing, LVMH and/or third-party providers will provide certain transition services to Marc Jacobs International, L.L.C. and its subsidiaries for a limited period following the closing. Under the Transition Services Agreement, we will guarantee the due, prompt and full performance by Marc Jacobs International and its subsidiaries of all of their payment and indemnification obligations thereunder. Our ability to realize the expected benefits of the Marc Jacobs Acquisition is subject to a number of risks, including:
● our ability to build standalone operational capabilities for functions currently provided by LVMH prior to the expiration of the transition services;
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● difficulties in retaining key creative, design and management personnel who may be critical to the brand’s identity and market position; and
● to the extent certain operating assets and liabilities in China and Japan are sold to third-party buyers or retained by IPCo at closing, we will have no control over the operation of the Marc Jacobs brand in those markets, which could affect global brand perception and the value of the Marc Jacobs intellectual property.
We will incur substantial expenses in connection with the Marc Jacobs Acquisition and the transition of the business. Even if we are able to successfully transition and operate the Marc Jacobs business, the anticipated benefits may not be realized fully, or at all, or may take longer to realize than expected, which could adversely impact our business, results of operations and financial condition.