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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," "Kate Spade" or "kate spade new york" refer only to the referenced brand.
INTRODUCTION
Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as a supplement to the accompanying consolidated financial statements and notes thereto to help provide an understanding of our results of operations, financial condition and liquidity. MD&A is organized as follows:
•Overview. This section provides a general description of the business and brands as well as the Company’s growth strategy.
•Global Economic Conditions and Industry Trends. This section includes a discussion on global economic conditions and industry trends that affect comparability that are important in understanding results of operations and financial condition, and in anticipating future trends.
•Results of Operations. An analysis of our results of operations in fiscal 2026 compared to fiscal 2025.
•Non-GAAP Measures. This section includes non-GAAP measures that are useful to investors and others in evaluating the Company’s ongoing operating and financial results in a manner that is consistent with management's evaluation of business performance and understanding how such results compare with the Company’s historical performance.
•Financial Condition. This section includes a discussion on liquidity and capital resources including an analysis of changes in cash flow as well as working capital and capital expenditures.
•Critical Accounting Policies and Estimates. This section includes any critical accounting policies or estimates that impact the Company.
OVERVIEW
Fiscal 2026, fiscal 2025 and fiscal 2024 were 52-week periods.
Tapestry, Inc. is a global house of iconic accessories and lifestyle brands uniting the magic of Coach and kate spade new york. Together, we stretch what’s possible – advancing brands further than they could go alone, expanding their reach to new geographies and generations. Inspired by our consumers, we create experiences and products that build lasting brand love and elevate everyday life.
The Company has two reportable segments:
•Coach - Includes global sales of primarily Coach brand products to customers through our DTC, wholesale and licensing businesses.
•Kate Spade - Includes global sales primarily of kate spade new york brand products to customers through our DTC, wholesale and licensing businesses.
2028 Growth Strategy
In the first quarter of fiscal 2026, the Company introduced its 2028 growth strategy (“Amplify”), which focuses on four key pillars:
•Build Emotional Connections with Consumers: The Company aims to drive new customer acquisition, with a focus on Gen Z consumers entering the market to build brand love and lifetime value.
•Fueling Fashion Innovation & Product Excellence: The Company aims to lead with handbags and leathergoods with targeted lifestyle expansion in footwear.
•Delivering Compelling Experiences to Drive Global Growth: The Company aims to sustain growth in North America and accelerate momentum in international markets, prioritizing Greater China and Europe.
•Ignite the Power of Our People: The Company aims to future-proof growth by continuing to develop a consumer-obsessed culture that is agile and always looking forward.
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Stuart Weitzman Business Divestiture
On February 16, 2025, the Company entered into a sale and purchase agreement (the “Purchase Agreement”) with Caleres, Inc. (the “Purchaser”) to sell the Stuart Weitzman Business (as defined below). The sale was completed on August 4, 2025 (the "Stuart Weitzman Business Divestiture"). The Purchaser acquired certain assets and liabilities of the Company's global business of designing, manufacturing, promotion, marketing, production, distribution, sales and licensing of Stuart Weitzman branded products (the "Stuart Weitzman Business") for a final aggregate purchase price of $109.1 million, which included customary adjustments for net working capital and indebtedness. Effective in the first quarter of fiscal 2026, following the Stuart Weitzman Business Divestiture, the Company's reportable segments are Coach and Kate Spade. Refer to Note 5, "Acquisitions and Divestitures" for further information.
Capri Holdings Limited Acquisition
On August 10, 2023, the Company entered into the Merger Agreement by and among the Company, Sunrise Merger Sub, Inc., a direct wholly owned subsidiary of Tapestry, and Capri. In order to finance the Capri Acquisition, on November 27, 2023, the Company issued $4.50 billion of U.S. dollar-denominated senior unsecured notes and €1.50 billion of Euro-denominated senior unsecured notes (the "Capri Acquisition Senior Notes") which, together with the $1.40 billion of delayed draw unsecured term loan facilities (the "Capri Acquisition Term Loan Facilities") executed on August 30, 2023, completed the expected financing for the Capri Acquisition. On April 22, 2024, the FTC filed a complaint against the Company and Capri in the United States District Court for the Southern District of New York seeking to enjoin the consummation of the Capri Acquisition, and on October 24, 2024, the Court issued its Opinion and Order granting the FTC's request for a preliminary injunction of the Merger, pending an administrative trial on the merits which was scheduled to begin on December 9, 2024. On November 13, 2024, the Parties entered into a Termination Agreement (the “Termination Agreement”), pursuant to which the Parties agreed to terminate the Merger Agreement, including all schedules and exhibits thereto and all ancillary agreements contemplated thereby or entered pursuant thereto, effective immediately. Pursuant to the Termination Agreement, the Company agreed to reimburse Capri for its expenses in an amount equal to $45.1 million in cash on November 14, 2024. On November 25, 2024, due to the termination of the Merger Agreement and pursuant to the terms of the indenture governing the Capri Acquisition Senior Notes, as supplemented, the Company redeemed all outstanding Capri Acquisition Senior Notes at a redemption price of 101% of the aggregate principal amount of such Capri Acquisition Senior Notes, plus accrued and unpaid interest to, but excluding, the date of redemption. In addition, the Capri Acquisition Term Loan Facilities were terminated concurrently with the execution of the Termination Agreement on November 13, 2024. Refer to Note 5, "Acquisitions and Divestitures" for further information.
GLOBAL ECONOMIC CONDITIONS AND INDUSTRY TRENDS
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 business channels and geographies.
During fiscal 2026, the macroeconomic environment remained challenging and volatile. While certain organizations that monitor the global economy continue to forecast growth, these projections remain subject to uncertainty and have fluctuated in recent periods. Recent forecasts reflect the current volatile environment, including the continuation of trade tensions, financial market volatility, inflationary pressure and the negative economic impacts of geopolitical instability in certain regions of the world.
Import Tariffs
During the second half of fiscal 2025, the U.S. Government announced tariffs on imports from select countries. The majority of the Company's products sold in the U.S. are imported from countries in which these tariffs were announced. Additionally, during the first quarter of fiscal 2026, the President of the United States issued an executive order removing the de minimis exemption for low value shipments imported into the U.S. for all countries beginning August 29, 2025. As a result of these changes in the tariff landscape, during fiscal 2026 the Company's gross margin was negatively impacted by approximately 130 basis points on an adjusted basis.
On February 20, 2026, the U.S. Supreme Court ruled that tariffs collected under the International Emergency Economic Powers Act ("IEEPA") were invalid. The U.S. Court of International Trade ("CIT") subsequently ordered refunds for qualifying customs entries, including applicable interest. U.S. Customs and Border Protection ("CBP") established a phased administrative process for submitting refund claims for certain IEEPA tariffs. The Company paid approximately $117 million in IEEPA tariffs. During the fourth quarter of fiscal 2026, the Company received cash refunds related to the previously paid IEEPA tariffs of $2.1 million, of which $2.0 million was recognized as a reduction to Cost of sales and $0.1 million as a reduction to Selling, general and administrative expenses. In addition, as of June 27, 2026, the Company applied the loss recovery model and determined that the receipt of the remaining refunds of the previously paid but not received IEEPA tariffs was probable. The
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Company estimates the amount of the probable refund to be $114.7 million, of which $96.2 million was recognized as a reduction to Cost of sales, $9.5 million was recorded as Accrued liabilities and $9.0 million was applied as a reduction to tariffs that remained in Inventory.
Following the Supreme Court's decision, the U.S. Administration announced a 10% global tariff under Section 122 of the Trade Act of 1974 which became effective February 24, 2026, for a period of up to 150 days, which expired on July 24, 2026. On May 7, 2026, the CIT ruled the Section 122 tariffs were invalid. The government has appealed the ruling and the Company is awaiting a decision from the U.S. Court of Appeals. On July 23, 2026, the U.S. Administration announced the final remedy in the Section 301 investigations relating to forced labor practices, imposing new tariff rates ranging from 10% to 12.5% on most imports from certain countries, effective upon the expiration of the temporary Section 122 tariffs. The outlook for future trade policy remains uncertain. The Company continues to monitor these developments, assess their potential impact on its business and implement mitigation strategies where possible.
Conflict in the Middle East
The conflict in the Middle East, which began during the third quarter of fiscal 2026, has contributed to heightened geopolitical uncertainty, including impacts to global supply chains and energy prices. The Company does not have directly operated stores in the Middle East and has a minimal distributor business which represented less than 1% of the Company’s total Net sales for fiscal 2026 and fiscal 2025. While the Company has not experienced a material impact to its operations or financial results, the Company continues to closely monitor the situation and the potential impact it may have on consumer sentiment in the Middle East and other geographies across the globe.
Foreign Exchange Impact
In fiscal 2026, the U.S. Dollar continued to fluctuate as compared to foreign currencies in regions where we conduct our business. During fiscal 2026, this trend has resulted in impacts to our business including, but not limited to, increased Net sales of $58.7 million, and a negative impact of approximately 10 basis points to both gross margin and operating margin.
Tax Legislation
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law, with tax provisions primarily focused on implementing a 15% corporate alternative minimum tax (“CAMT”) on global adjusted financial statement income and a 1% excise tax on share repurchases. The CAMT was effective at the beginning of fiscal 2024 and did not have a material impact on the Company’s effective tax rate.
On December 12, 2022, the E.U. member states reached an agreement to implement the Organization for Economic Co-operation and Development’s (“OECD”) reform of international taxation known as Pillar Two Global Anti-Base Erosion Rules (“GloBE”), which broadly mirrors the Inflation Reduction Act by imposing a 15% global minimum tax on multinational companies. These rules subject multinational companies to three possible tax mechanisms individually known as the Income Inclusion Rule (“IIR”), the Undertaxed Profits Rule (“UTPR”) and the Qualified Domestic Minimum Top-up Tax (“QDMTT”). The rules became effective on January 1, 2025. Based on the countries in which we do business, these rule changes started to negatively impact the Company's effective tax rate beginning in fiscal 2026. On January 5, 2026, the OECD published additional guidance regarding the application of GloBE rules to U.S. parented multinational enterprises ("U.S. MNEs"). Most notably, the agreement excludes U.S. MNEs from the UTPR and IIR; however, QDMTT is still in force based on current legislation. Based on the jurisdictions in which we operate and our current assessment of the applicable rules, we do not expect these developments to result in a material increase to the Company's effective tax rate in fiscal 2027 compared to fiscal 2026.
We continue to monitor these global economic conditions and industry trends in order to evaluate and adjust our operating strategies and cost management opportunities to mitigate the related impact on our results of operations, while remaining focused on the long-term growth of our business and protecting the value of our brands. For a detailed discussion of significant risk factors that have the potential to cause our actual results to differ materially from our expectations, see Part I, Item 1A. "Risk Factors."
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RESULTS OF OPERATIONS
FISCAL 2026 COMPARED TO FISCAL 2025
The following table summarizes results of operations for fiscal 2026 compared to fiscal 2025. All percentages shown in the tables below and the related discussion that follows have been calculated using unrounded numbers.
Fiscal Year Ended
June 27, 2026 June 28, 2025 Variance
(millions, except per share data)
Amount % of net sales Amount % of net sales Amount %
Net sales $ 8,004.2 100.0 % $ 7,010.7 100.0 % $ 993.5 14.2 %
Gross profit 6,229.0 77.8 5,288.9 75.4 940.1 17.8
SG&A expenses 4,314.6 53.9 4,873.9 69.5 (559.3) (11.5)
Operating income (loss) 1,914.4 23.9 415.0 5.9 1,499.4 NM
Loss on extinguishment of debt — — 120.1 1.7 (120.1) NM
Interest expense, net 55.2 0.7 85.4 1.2 (30.2) (35.4)
Other expense (income) (1.4) — (6.6) (0.1) 5.2 79.1
Income (loss) before provision for income taxes 1,860.6 23.2 216.1 3.1 1,644.5 NM
Provision (benefit) for income taxes 332.9 4.2 32.9 0.5 300.0 NM
Net income (loss) 1,527.7 19.1 183.2 2.6 1,344.5 NM
Net income (loss) per share:
Basic $ 7.49 $ 0.84 $ 6.65 NM
Diluted $ 7.27 $ 0.82 $ 6.45 NM
NM - Not meaningful
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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 2026 and fiscal 2025 reflect certain items which affect the comparability of our results, as noted in the following tables. Refer to "Non-GAAP Measures" herein for further discussion on the Non-GAAP measures.
Fiscal 2026 Items
Fiscal Year Ended June 27, 2026
Items Affecting Comparability
GAAP Basis (As Reported) Acquisition and Divestiture Costs Organizational Efficiency Costs IEEPA Tariff Refund Distribution Network Optimization Costs Non-GAAP Basis (Excluding Items)
(millions, except per share data)
Coach $ 2,541.2 $ — $ (1.3) $ 66.0 $ — $ 2,476.5
Kate Spade (10.0) — (6.4) 32.2 (8.6) (27.2)
Stuart Weitzman (1.0) (1.0) — — — —
Corporate (615.8) (9.9) (21.3) 0.1 (1.2) (583.5)
Operating income (loss) $ 1,914.4 $ (10.9) $ (29.0) $ 98.3 $ (9.8) $ 1,865.8
Net income (loss) $ 1,527.7 $ (10.1) $ (25.2) $ 90.0 $ (9.0) $ 1,482.0
Net income (loss) per diluted common share $ 7.27 $ (0.05) $ (0.12) $ 0.43 $ (0.04) $ 7.05
In fiscal 2026, the Company incurred charges as follows:
•Acquisition and Divestiture Costs - Total pre-tax charges of $10.9 million related to the Stuart Weitzman Business Divestiture primarily due to professional fees and severance costs, partially offset by income from the transition services agreement ("TSA").
•Organizational Efficiency Costs - Total pre-tax charges of $29.0 million primarily related to technology costs and severance costs.
•IEEPA Tariff Refund - Total pre-tax income of $98.3 million related to recognized IEEPA tariff refunds which were related to products sold in fiscal 2026 net of estimated liabilities.
•Distribution Network Optimization Costs - Total pre-tax charges of $9.8 million primarily related to costs to transition from our Ohio fulfillment center to a third-party facility in Pennsylvania.
These actions taken together positively impacted operating income by $48.6 million and increased the provision for income tax by $2.9 million resulting in a net increase in net income by $45.7 million or $0.22 per diluted share.
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Supplemental Segment Data
Fiscal Year Ended June 27, 2026
Items Affecting Comparability
GAAP Basis (As Reported) Acquisition and Divestiture Costs Organizational Efficiency Costs IEEPA Tariff Refund Distribution Network Optimization Costs Non-GAAP Basis (Excluding Items)
(millions)
Coach $ 5,512.2 $ — $ — $ 66.0 $ — $ 5,446.2
Kate Spade 709.1 — — 32.2 — 676.9
Stuart Weitzman 7.7 7.7 — — — —
Gross Profit $ 6,229.0 $ 7.7 $ — $ 98.2 $ — $ 6,123.1
Fiscal Year Ended June 27, 2026
Items Affecting Comparability
GAAP Basis (As Reported) Acquisition and Divestiture Costs Organizational Efficiency Costs IEEPA Tariff Refund Distribution Network Optimization Costs Non-GAAP Basis (Excluding Items)
(millions)
Coach $ 2,971.0 $ — $ 1.3 $ — $ — $ 2,969.7
Kate Spade 719.1 — 6.4 — 8.6 704.1
Stuart Weitzman 8.7 8.7 — — — —
Corporate 615.8 9.9 21.3 (0.1) 1.2 583.5
SG&A expenses $ 4,314.6 $ 18.6 $ 29.0 $ (0.1) $ 9.8 $ 4,257.3
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Fiscal 2025 Items
Fiscal Year Ended June 28, 2025
Items Affecting Comparability
GAAP Basis (As Reported) Acquisition and Divestiture Costs Organizational Efficiency Costs Impairment Non-GAAP Basis (Excluding Items)
(millions, except per share data)
Coach $ 1,875.3 $ — $ (0.8) $ — $ 1,876.1
Kate Spade (769.2) — (5.7) (854.8) 91.3
Stuart Weitzman (15.4) (0.6) — — (14.8)
Corporate (675.7) (111.9) (10.7) — (553.1)
Operating income (loss) $ 415.0 $ (112.5) $ (17.2) $ (854.8) $ 1,399.5
Net income (loss) $ 183.2 $ (212.0) $ (13.9) $ (725.1) $ 1,134.2
Net income (loss) per diluted common share $ 0.82 $ (0.95) $ (0.06) $ (3.27) $ 5.10
In fiscal 2025, the Company incurred charges as follows:
•Acquisition and Divestiture Costs - Includes costs related to the terminated Capri Acquisition and the Stuart Weitzman Business Divestiture. These charges include:
◦Capri Acquisition Costs: Total pre-tax charges of $268.4 million primarily related to:
▪Loss on extinguishment of debt - $119.4 million primarily related to redemption premiums, as well as unamortized debt issuance costs and discounts, as a result of the redemption of the Capri Acquisition Senior Notes in fiscal 2025 due to the termination of the Capri Acquisition agreement;
▪SG&A expenses - $88.8 million primarily related to expense reimbursement payment made to Capri and professional fees recorded;
▪Interest expense, net - $60.2 million of financing related charges which primarily includes the net impact of the Capri Acquisition Senior Notes; and
◦Stuart Weitzman Business Divestiture Costs: Total pre-tax charges of $23.7 million primarily due to the loss on business held for sale, professional fees, share-based compensation expense and store impairment.
•Organizational Efficiency Costs - Total pre-tax charges of $17.2 million primarily related to severance costs and technology costs.
•Impairment - Total pre-tax charges of $854.8 million primarily due to impairment charges on the indefinite-lived brand intangible asset and goodwill for Kate Spade. Refer to Note 14, "Goodwill and Other Intangible Assets" for further information.
These actions taken together negatively impacted operating income by $984.5 million, increased Loss on extinguishment of debt by $119.4 million, increased interest expense by $60.2 million and reduced the provision for income tax by $213.1 million resulting in a net decrease in net income by $951.0 million or $4.28 per diluted share.
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Supplemental Segment Data
Fiscal Year Ended June 28, 2025
Items Affecting Comparability
GAAP Basis (As Reported) Acquisition and Divestiture Costs Organizational Efficiency Costs Impairment Non-GAAP Basis (Excluding Items)
(millions)
Coach $ 2,497.2 $ — $ 0.8 $ — $ 2,496.4
Kate Spade 1,567.2 — 5.7 854.8 706.7
Stuart Weitzman 133.8 0.6 — — 133.2
Corporate 675.7 111.9 10.7 — 553.1
SG&A expenses $ 4,873.9 $ 112.5 $ 17.2 $ 854.8 $ 3,889.4
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Tapestry, Inc. Summary - Fiscal 2026
Currency Fluctuation Effects
The change in net sales in fiscal 2026 compared to fiscal 2025 has been presented both including and excluding currency fluctuation effects. All percentages shown in the tables below and the discussion that follows have been calculated using unrounded numbers.
Stuart Weitzman Business Divestiture
Effective in the first quarter of fiscal 2026, following the Stuart Weitzman Business Divestiture on August 4, 2025, the Company's reportable segments are Coach and Kate Spade. In fiscal 2026, prior to the completion of the sale on August 4, 2025, Stuart Weitzman Net sales were $14.6 million, Gross profit was $7.7 million and SG&A expenses were $8.7 million resulting in an Operating loss of $1.0 million. These results were considered as items affecting comparability in fiscal 2026. In fiscal 2025, Stuart Weitzman Net sales were $215.1 million, Gross profit was $118.4 million and SG&A expenses were $133.8 million resulting in an Operating loss of $15.4 million. Excluding items affecting comparability, Stuart Weitzman Net sales were $215.1 million, Gross profit was $118.4 million and SG&A expenses were $133.2 million resulting in an Operating loss of $14.8 million in fiscal 2025.
Net Sales
Fiscal Year Ended Variance
June 27, 2026 June 28, 2025 Amount % Constant Currency Change
(millions)
Coach $ 6,914.7 $ 5,598.5 $ 1,316.2 23.5 % 22.5 %
Kate Spade 1,074.9 1,197.1 (122.2) (10.2) (10.5)
Stuart Weitzman 14.6 215.1 (200.5) (93.2) (93.2)
Tapestry $ 8,004.2 $ 7,010.7 $ 993.5 14.2 13.3
Net sales in fiscal 2026 increased 14.2% or $993.5 million to $8.00 billion. Excluding the impact of the Stuart Weitzman Business and foreign currency, net sales increased by 16.7% or $1.14 billion.
•Coach Net Sales increased 23.5% or $1.32 billion to $6.91 billion in fiscal 2026. Excluding the impact of foreign currency, net sales increased 22.5% or $1.26 billion. This increase in net sales was primarily due to an increase of $1.09 billion in DTC sales, mainly driven by North America, Greater China, and Europe.
•Kate Spade Net Sales decreased 10.2% or $122.2 million to $1.07 billion in fiscal 2026. Excluding the impact of foreign currency, net sales decreased 10.5% or $126.2 million. This decrease in net sales was primarily due to a decrease of $120.3 million in DTC sales.
Gross Profit
Fiscal Year Ended
June 27, 2026 June 28, 2025 Variance
(millions)
Amount % of Net Sales Amount % of Net Sales Amount %
Coach(1) $ 5,512.2 79.7 % $ 4,372.5 78.1 % $ 1,139.7 26.1 %
Kate Spade(2) 709.1 66.0 798.0 66.7 (88.9) (11.1)
Stuart Weitzman 7.7 52.3 118.4 55.1 (110.7) (93.5)
Tapestry $ 6,229.0 77.8 $ 5,288.9 75.4 $ 940.1 17.8
Gross profit increased 17.8% or $940.1 million to $6.23 billion in fiscal 2026 from $5.29 billion in fiscal 2025. Gross margin in fiscal 2026 increased 240 basis points to 77.8% as compared to 75.4% in fiscal 2025. Excluding items affecting comparability, gross margin increased 120 basis points to 76.6% in fiscal 2026 from 75.4% in fiscal 2025, which includes a 60 basis point benefit from the divestiture of Stuart Weitzman. The remaining 60 basis point increase in Gross margin was primarily attributed to net pricing improvements and favorable brand mix, partially offset by the impact of higher tariffs. Refer to "Global Economic Conditions and Industry Trends" for further information.
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The Company includes inbound product-related transportation costs from our service providers within Cost of sales. The Company, similar to some companies, includes certain transportation-related costs due to our distribution network in SG&A expenses rather than in Cost of sales; for this reason, our gross margins may not be comparable to that of entities that include all costs related to their distribution network in Cost of sales.
(1)Excluding items affecting comparability, Gross profit increased 24.6% or $1.07 billion to $5.45 billion in fiscal 2026 as compared to $4.37 billion in fiscal 2025. Gross margin increased 70 basis points to 78.8% in fiscal 2026 as compared to 78.1% in fiscal 2025.
(2)Excluding items affecting comparability, Gross profit decreased 15.2% or $121.1 million to $676.9 million in fiscal 2026 as compared to $798.0 million in fiscal 2025. Gross margin decreased 370 basis points to 63.0% in fiscal 2026 as compared to 66.7% in fiscal 2025.
Selling, General and Administrative Expenses ("SG&A")
Fiscal Year Ended
June 27, 2026 June 28, 2025 Variance
(millions)
Amount % of Net Sales Amount % of Net Sales Amount %
Coach(1) $ 2,971.0 43.0 % $ 2,497.2 44.6 % $ 473.8 19.0 %
Kate Spade(2) 719.1 66.9 1,567.2 NM (848.1) (54.1)
Stuart Weitzman 8.7 59.3 133.8 62.2 (125.1) (93.5)
Corporate(3)(4) 615.8 NA 675.7 NA (59.9) (8.9)
Tapestry $ 4,314.6 53.9 $ 4,873.9 69.5 $ (559.3) (11.5)
SG&A expenses decreased 11.5% or $559.3 million to $4.31 billion in fiscal 2026 as compared to $4.87 billion in fiscal 2025. As a percentage of net sales, SG&A expenses decreased to 53.9% during fiscal 2026 as compared to 69.5% during fiscal 2025. Excluding items affecting comparability in fiscal 2026, SG&A expenses increased 9.5% or $367.9 million to $4.26 billion from $3.89 billion in fiscal 2025. SG&A as a percentage of net sales decreased approximately 210 basis points to 53.3% compared to 55.4% in fiscal 2025, which includes a 20 basis point benefit from the divestiture of Stuart Weitzman. The remaining basis point decrease in SG&A as a percentage of net sales was primarily due to leverage of fixed costs on higher net sales and lower distribution costs, partially offset by higher marketing spend.
(1)Excluding items affecting comparability, SG&A expenses increased 19.0% or $473.3 million to $2.97 billion in fiscal 2026 as compared to $2.50 billion in fiscal 2025. SG&A as a percentage of net sales decreased approximately 170 basis points to 42.9% in fiscal 2026 as compared to 44.6% in fiscal 2025.
(2)Excluding items affecting comparability, SG&A expenses decreased 0.4% or $2.6 million to $704.1 million in fiscal 2026 as compared to $706.7 million in fiscal 2025. SG&A as a percentage of net sales increased approximately 640 basis points to 65.5% in fiscal 2026 as compared to 59.1% in fiscal 2025.
(3)Excluding items affecting comparability, SG&A expenses increased 5.5% or $30.4 million to $583.5 million in fiscal 2026 as compared to $553.1 million in fiscal 2025.
(4)Corporate expenses, which are included within SG&A expenses discussed above but are not directly attributable to a reportable segment.
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Operating Income (Loss)
Fiscal Year Ended
June 27, 2026 June 28, 2025 Variance
(millions)
Amount % of Net Sales Amount % of Net Sales Amount %
Coach $ 2,541.2 36.8 % $ 1,875.3 33.5 % $ 665.9 35.5 %
Kate Spade (10.0) (0.9) (769.2) (64.3) 759.2 98.7
Stuart Weitzman (1.0) (7.0) (15.4) (7.1) 14.4 93.4
Corporate (615.8) NA (675.7) NA 59.9 8.9
Tapestry $ 1,914.4 23.9 $ 415.0 5.9 $ 1,499.4 NM
Operating income increased $1.50 billion to $1.91 billion during fiscal 2026 as compared to $415.0 million in fiscal 2025. Operating margin increased to 23.9% in fiscal 2026 as compared to 5.9% in fiscal 2025. Excluding items affecting comparability, operating income increased $466.3 million to $1.87 billion in fiscal 2026 from $1.40 billion in fiscal 2025. Operating margin increased approximately 340 basis points to 23.4% in fiscal 2026 as compared to 20.0% in fiscal 2025, which includes an 80 basis point benefit from the divestiture of Stuart Weitzman. The remaining increase in operating margin was primarily attributed to a 60 basis point increase in Gross margin and a 200 basis point decrease in SG&A as a percentage of sales.
•Coach Operating Income increased $665.9 million to $2.54 billion in fiscal 2026. Operating margin increased 330 basis points to 36.8% in fiscal 2026 as compared to 33.5% in fiscal 2025. Excluding items affecting comparability, operating income increased $600.4 million to $2.48 billion in fiscal 2026 from $1.88 billion in fiscal 2025; and operating margin increased approximately 230 basis points to 35.8% in fiscal 2026 as compared to 33.5% in fiscal 2025. This increase in operating margin was primarily attributed to:
◦Gross Margin, increased 70 basis points mainly due to net pricing improvements, partially offset by the impact of higher tariffs;
◦SG&A expenses as a percentage of net sales, decreased approximately 170 basis points mainly due to leverage of fixed costs on higher net sales and lower distribution costs, partially offset by higher marketing spend.
•Kate Spade Operating Loss decreased $759.2 million to a loss of $10.0 million in fiscal 2026. Operating margin increased to (0.9)% in fiscal 2026 as compared to (64.3)% in fiscal 2025. Excluding items affecting comparability, operating income decreased $118.5 million to a loss of $27.2 million in fiscal 2026 from income of $91.3 million in fiscal 2025; and operating margin decreased to (2.5)% in fiscal 2026 as compared to 7.6% in fiscal 2025. This decrease in operating margin was primarily attributed to:
◦Gross Margin, decreased 370 basis points mainly due to the impact of higher tariffs and unfavorable channel mix, partially offset by net pricing improvements;
◦SG&A expenses as a percentage of net sales, increased approximately 640 basis points mainly driven by higher marketing spend and deleverage of fixed costs on lower net sales.
•Corporate Operating Expenses decreased 8.9% or $59.9 million to $615.8 million in fiscal 2026. Excluding items affecting comparability, Corporate operating expenses increased $30.4 million to $583.5 million from $553.1 million in fiscal 2025. This increase in operating expenses was primarily due to higher compensation costs.
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Loss on Extinguishment of Debt
Loss on extinguishment of debt decreased $120.1 million to $0.0 million in fiscal 2026 as compared to $120.1 million in fiscal 2025. Excluding items affecting comparability, Loss on extinguishment of debt decreased $0.7 million to $0.0 million in fiscal 2026 as compared to $0.7 million in fiscal 2025.
Interest Expense, net
Interest expense, net decreased $30.2 million to $55.2 million in fiscal 2026 as compared to $85.4 million in fiscal 2025. Excluding items affecting comparability, Interest expense, net increased $30.1 million to $55.3 million from $25.2 million in fiscal 2025. This increase in Interest expense, net was mainly due to an increase in bond interest expense as a result of the issuance of the 2030 and 2035 Senior Notes during fiscal 2025 and lower interest income.
Other Expense (Income)
Other income decreased $5.2 million to $1.4 million in fiscal 2026 as compared to $6.6 million in fiscal 2025. Excluding items affecting comparability, Other income decreased $5.1 million to $1.5 million in fiscal 2026 as compared to $6.6 million in fiscal 2025. This decrease in Other income was related to a decrease in foreign exchange gains.
Provision (Benefit) for Income Taxes
The effective tax rate was 17.9% in fiscal 2026 as compared to 15.2% in fiscal 2025. Excluding items affecting comparability, the effective tax rate was 18.2% in fiscal 2026 as compared to 17.8% in fiscal 2025. The increase in effective tax rate was primarily driven by the impact of Pillar Two, partially offset by the lower impact of permanent items due to higher pre-tax income.
Net Income (Loss)
Net income increased $1.34 billion to $1.53 billion in fiscal 2026 as compared to $183.2 million in fiscal 2025. Excluding items affecting comparability, net income increased 30.7% or $347.8 million to $1.48 billion in fiscal 2026 from $1.13 billion in fiscal 2025.
Net Income (Loss) per Share
Net income per diluted share was $7.27 in fiscal 2026 as compared to net income per diluted share of $0.82 in fiscal 2025. Excluding items affecting comparability, net income per diluted share increased $1.95 to $7.05 in fiscal 2026 from $5.10 in fiscal 2025. This increase was primarily due to higher net income and a decrease in shares outstanding.
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FISCAL 2025 COMPARED TO FISCAL 2024
The comparison of fiscal 2025 to fiscal 2024 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended June 28, 2025, filed on August 14, 2025, within Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
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NON-GAAP MEASURES
The Company’s reported results are presented in accordance with GAAP. The Company presents certain non-GAAP measures, including segment operating income (loss), segment SG&A expenses, segment gross profit, SG&A expense ratio, operating margin, Operating Income (loss), Loss on extinguishment of debt, Interest expense, Other expense (income), Provision for income taxes, Net income (loss) and Net Income (loss) per diluted common share, which exclude items affecting comparability.
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 HR Committee of the Company’s Board uses these non-GAAP measures when setting and assessing achievement of incentive compensation goals.
Items affecting comparability in the current or comparable periods, as applicable, include:
•Acquisition and Divestiture Costs - The Company incurred Acquisition and Divestiture items which consist of non-recurring costs related to the Stuart Weitzman Business Divestiture, inclusive of professional fees, one-time severance costs, compensation costs, operating net loss and TSA income as well as financing-related expenses and professional fees from the terminated Capri Acquisition.
•Organizational Efficiency Costs - The Company also incurred Organizational Efficiency Costs which consist of non-recurring costs, primarily from various initiatives aimed at streamlining the organization and optimizing processes. These costs mainly include one-time technology and severance related charges.
•IEEPA Tariff Refund - The Company recognized refunds of IEEPA tariffs which were related to products sold in fiscal 2026 net of estimated liabilities.
•Distribution Network Optimization Costs - The Company incurred Distribution Network Optimization Costs which consist of non-recurring costs, primarily related to optimizing its distribution centers. These costs mainly relate to the transition from our Ohio fulfillment center to a third-party facility in Pennsylvania.
•Impairment Charges - The Company incurred Impairment charges which consist of non-recurring impairment costs related to the Kate Spade indefinite-lived brand intangible assets and goodwill.
Reconciliations between the non-GAAP measure and the most directly comparable GAAP measure are included in the Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section where applicable.
The Company operates on a global basis and reports financial results in U.S. dollars in accordance with GAAP. Fluctuations in foreign currency exchange rates can affect the amounts reported by the Company in U.S. dollars with respect to its foreign revenues and profit. Accordingly, certain material increases and decreases in operating results for the Company and its segments have been presented both including and excluding currency fluctuation effects. These effects occur from translating foreign-denominated amounts into U.S. dollars and comparing to the same period in the prior fiscal year. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. The Company calculates constant currency revenue results by translating current period revenue in local currency using the prior year period's currency conversion rate.
We believe these non-GAAP measures are useful to investors and others in evaluating the Company’s ongoing operating and financial results in a manner that is consistent with management's evaluation of business performance and understanding how such results compare with the Company’s historical performance. Additionally, we believe presenting certain increases and decreases in constant currency provides a framework for assessing the performance of the Company's business outside the United States and helps investors and analysts understand the effect of significant year-over-year currency fluctuations. We believe excluding these items assists investors and others in developing expectations of future performance.
By providing the non-GAAP measures, as a supplement to GAAP information, we believe we are enhancing investors’ understanding of our business and our results of operations. The non-GAAP financial measures are limited in their usefulness and should be considered in addition to, and not in lieu of, GAAP financial measures. Further, these non-GAAP measures may be unique to the Company, as they may be different from non-GAAP measures used by other companies.
For a detailed discussion on these non-GAAP measures, see the GAAP to Non-GAAP Reconciliation discussions above in this Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations."
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FINANCIAL CONDITION
Cash Flows - Fiscal 2026 Compared to Fiscal 2025
Fiscal Year Ended
June 27, 2026 June 28, 2025 Change
(millions)
Net cash provided by (used in) operating activities $ 1,978.5 $ 1,216.6 $ 761.9
Net cash provided by (used in) investing activities (218.3) 914.0 (1,132.3)
Net cash provided by (used in) financing activities (1,860.9) (7,175.2) 5,314.3
Effect of exchange rate changes on cash and cash equivalents (24.6) 26.3 (50.9)
Net increase (decrease) in cash and cash equivalents $ (125.3) $ (5,018.3) $ 4,893.0
The Company’s cash and cash equivalents decreased by $125.3 million in fiscal 2026 compared to a decrease of $5.02 billion in fiscal 2025, as discussed below.
Net cash provided by (used in) operating activities
Net cash provided by operating activities increased $761.9 million primarily due to higher net income of $1.34 billion and changes in operating assets and liabilities of $158.5 million partially offset by a lower impact of non-cash adjustments of $741.1 million primarily related to the impairment of goodwill and intangible assets in the prior year.
The $158.5 million increase in changes in operating asset and liability balances was primarily driven by the following:
•Accounts payable were a source of cash of $131.6 million in fiscal 2026 as compared to a use of cash of $15.0 million in fiscal 2025, primarily driven by an increase in marketing spend and timing of payments compared to the prior year, and lower inventory receipts in the prior year for Kate Spade due to timing.
•Inventories were a source of cash of $35.4 million in fiscal 2026 compared to a use of cash of $108.2 million in fiscal 2025, primarily driven by increased inventory purchases for Coach in the prior year to support sales growth and the strategic decision to pull forward receipts.
•Other assets were a use of cash of $141.5 million in fiscal 2026 compared to a source of cash of $15.2 million in fiscal 2025, primarily driven by the IEEPA tariff refund receivable recorded in the current year and higher prepaid assets when compared to the prior year.
Net cash provided by (used in) investing activities
Net cash used in investing activities was $218.3 million in fiscal 2026 compared to a source of cash of $914.0 million in fiscal 2025, resulting in a $1.13 billion decrease in net cash provided by investing activities.
The $218.3 million use of cash in fiscal 2026 was primarily due to purchases of property and equipment of $166.0 million, and purchases of investments of $163.0 million partially offset by proceeds from the divestiture of the Stuart Weitzman Business of $109.1 million.
The $914.0 million source of cash in fiscal 2025 was primarily due to proceeds from maturities and sales of investments of $2.92 billion, partially offset by purchases of investments of $1.89 billion, mainly related to the proceeds of the Capri Acquisition Senior Notes.
Net cash provided by (used in) financing activities
Net cash used in financing activities was $1.86 billion in fiscal 2026 as compared to a use of cash of $7.18 billion in fiscal 2025, resulting in a $5.31 billion decrease in net cash used in financing activities.
The $1.86 billion use of cash in fiscal 2026 was primarily due to repurchases of common stock of $1.55 billion.
The $7.18 billion use of cash in fiscal 2025 was primarily due to the repayment of debt of $7.16 billion, which mainly included the Capri Acquisition Senior Notes, use of cash of $2.02 billion under the Company's accelerated share repurchase program partially offset by proceeds from the issuance of debt of $2.25 billion.
Effect of exchange rate changes on cash and cash equivalents
Effect of exchange rate changes on cash and cash equivalents was a decrease of $24.6 million as compared to an increase of $26.3 million in fiscal 2025.
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Cash Flows - Fiscal 2025 Compared to Fiscal 2024
The comparison of fiscal 2025 to fiscal 2024 has been omitted from this Form 10-K, but can be referenced in our Form 10-K for the fiscal year ended June 28, 2025, filed on August 14, 2025, within Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations."
Working Capital and Capital Expenditures
The following table presents our financial condition as of June 27, 2026 and June 28, 2025:
June 27, 2026 June 28, 2025 Change
(millions)
Cash and cash equivalents(1) $ 974.7 $ 1,100.0 $ (125.3)
Short-term investments(1) 177.3 19.6 157.7
Current debt(2) — (16.7) 16.7
Long-term debt(2) (2,379.0) (2,377.9) (1.1)
Total, net $ (1,227.0) $ (1,275.0) $ 48.0
(1)As of June 27, 2026, approximately 39% of our Cash and cash equivalents and Short-term investments were held outside the United States.
(2)Refer to Note 12, "Debt" for discussion of the carrying values of our debt.
Sources of Liquidity
Our primary sources of liquidity are the cash flows generated from our operations, our cash and cash equivalents and short-term investments, availability under our credit facilities and other available financing options.
The following table presents the total availability, borrowings outstanding and remaining availability under our credit facilities as of June 27, 2026:
Total Availability Borrowings Outstanding Remaining Availability
(millions)
Amended Revolving Credit Facility and Commercial Paper Program(1)(2) $ 2,000.0 $ — $ 2,000.0
China Credit Facility(1)(3) 36.8 — 36.8
(1)Refer to Note 12, "Debt" for further information on these instruments.
(2)Borrowings under the Commercial Paper Program are supported by the Amended Revolving Credit Facility. Accordingly, aggregate borrowings outstanding under the Commercial Paper Program and the Amended Revolving Credit Facility will not exceed $2.00 billion.
(3)The carrying amounts of the China Credit Facility include the impact of changes in the exchange rate of the United States Dollar against the Renminbi.
We believe that our Amended Revolving Credit Facility is adequately diversified with no undue concentrations in any one financial institution. As of June 27, 2026, there were 18 financial institutions participating in the Amended Revolving Credit Facility, with no one participant maintaining a combined maximum commitment percentage in excess of 10%. We have no reason to believe, at this time, that the participating institutions will be unable to fulfill their obligations to provide financing in accordance with the terms of the facility in the event we elect to draw funds in the foreseeable future.
We have the ability to draw on our credit facilities or access other 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.
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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 2027 and beyond. There can be no assurance that any such capital will be available to the Company on acceptable terms or at all. Our ability to fund working capital needs, planned capital expenditures and scheduled debt payments, as well as to comply with all of the financial covenants under our debt agreements, depends on future operating performance and cash flow. This future operating performance and cash flow are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond the Company's control.
Commercial Paper Program
On July 24, 2025, the Company entered into a commercial paper borrowing program (the "Commercial Paper Program") that provides for the issuance of up to $2.00 billion of unsecured commercial paper notes with maturities up to 365 days. Borrowings under the Commercial Paper Program are supported by the Amended Revolving Credit Facility and may be used to support the Company's general corporate needs. The aggregate amount of borrowings outstanding under the Commercial Paper Program and Amended Revolving Credit Facility will not exceed $2.00 billion. As of June 27, 2026, the Company had no borrowings outstanding under the Commercial Paper Program. Refer to Note 12, "Debt" for further information.
Stuart Weitzman Business Divestiture
On February 16, 2025, the Company entered into a Purchase Agreement to sell the Stuart Weitzman Business for a final aggregate purchase price of $109.1 million, which included customary adjustments for net working capital and indebtedness. The sale was completed on August 4, 2025. Refer to Note 5, "Acquisitions and Divestitures" for further information.
IEEPA Tariff Refund
On February 20, 2026, the U.S. Supreme Court ruled that tariffs collected under the IEEPA were invalid. The CIT subsequently ordered refunds for qualifying customs entries, including applicable interest. CBP established a phased administrative process for submitting refund claims for certain IEEPA tariffs.
During the fourth quarter of fiscal 2026, the Company received cash refunds related to the previously paid IEEPA tariffs of $2.1 million, of which $2.0 million was recognized as a reduction to Cost of sales and $0.1 million as a reduction to Selling, general and administrative expenses. In addition, as of June 27, 2026, the Company applied the loss recovery model and determined that the receipt of the remaining refunds of the previously paid IEEPA tariffs was probable. The Company estimates the amount of the probable refund to be $114.7 million, of which $96.2 million was recognized as a reduction to Cost of sales, $9.5 million was recorded as Accrued liabilities and $9.0 million was applied as a reduction to tariffs that remained in Inventory.
Supply Chain Finance
To improve our working capital efficiency, we make available to certain suppliers, a voluntary supply chain finance (“SCF”) program that enables our suppliers to sell their receivables from the Company to a global financial institution on a non-recourse basis at a rate that leverages our credit rating. We do not have the ability to refinance or modify payment terms to the global financial institution through the SCF program. No guarantees are provided by the Company or any of our subsidiaries under the SCF program. Refer to Note 3, "Significant Accounting Policies," for additional information.
Capital Expenditures
Total capital expenditures and cloud computing implementation costs were $217.1 million in fiscal 2026. Certain cloud computing implementation costs are recognized within Prepaid expenses and Other assets on the Consolidated Balance Sheets.
Seasonality
The Company's results are typically affected by seasonal trends. During the first fiscal quarter, we typically build inventory for the winter and holiday season. In the second fiscal quarter, working capital requirements are reduced substantially as we generate higher net sales and operating income, especially during the holiday season.
Fluctuations in net sales, operating income and operating cash flows of the Company in any fiscal quarter may be affected by the timing of wholesale shipments and other events affecting retail sales, including weather and macroeconomic events.
Stock Repurchase Program
2026 Share Repurchase Program
On September 10, 2025, the Company announced that the Board authorized the Company to repurchase up to $3.00 billion of its outstanding common stock (the "2026 Share Repurchase Program"), replacing the 2022 Share Repurchase Program which had $561.7 million of remaining authorization.
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During the three months ended June 27, 2026, the Company repurchased $300.0 million of common stock. During the fiscal year ended June 27, 2026, the Company repurchased $1.35 billion of common stock, $238.3 million under the 2022 Share Repurchase Program and $1.11 billion under the 2026 Share Repurchase Program. As of June 27, 2026, the Company had $1.89 billion of remaining repurchase authorization under the 2026 Share Repurchase Program.
2025 Share Repurchase Program
On November 13, 2024, the Board authorized the Company to repurchase up to $2.00 billion of outstanding shares of its common stock (the "2025 Share Repurchase Program"). On November 21, 2024, the Company entered into accelerated share repurchase agreements (the “ASR Agreements”) with Bank of America, N.A. and Morgan Stanley & Co. LLC (the “Dealers”) to repurchase an aggregate of up to $2.00 billion of the Company’s shares of common stock. Under the ASR Agreements, the Company paid $2.00 billion to the Dealers and received an initial delivery of 28,363,766 shares of the Company's common stock on November 26, 2024. Final settlement was based on the volume-weighted average price ("VWAP") of the Company's common stock, less a discount, and occurred in four tranches. During the year ended June 28, 2025 and the quarter ended September 27, 2025, as a result of the increase in the VWAP of the Company's common stock, the Company cash-settled $6.6 million related to 92,536 shares of common stock and $195.7 million related to 1,838,270 shares of common stock, respectively, which completed the agreement. The average share price for the 28,363,766 shares received under the ASR Agreements was $77.64.
Contractual and Other Obligations
Firm Commitments
As of June 27, 2026, the Company's contractual obligations are as follows:
Total Fiscal 2027 Fiscal 2028 – 2029 Fiscal 2030 – 2031 Fiscal 2032 and Beyond
(millions)
Capital expenditure & cloud computing implementation commitments $ 45.2 $ 45.2 $ — $ — $ —
Inventory purchase obligations 768.2 768.2 — —
Operating lease obligations 2,037.2 368.8 583.8 382.2 702.4
Debt repayment 2,396.6 — 396.6 750.0 1,250.0
Interest on outstanding debt(1) 640.4 111.1 197.7 151.3 180.3
Other 268.8 107.6 134.3 22.6 4.3
Total $ 6,156.4 $ 1,400.9 $ 1,312.4 $ 1,306.1 $ 2,137.0
(1) Interest on outstanding debt includes fixed interest expenses for unsecured notes. Refer to Note 12, "Debt," for further information.
We expect to fund these firm commitments with operating cash flows generated in the normal course of business and, if necessary, through availability under our credit facilities or other accessible sources of financing. Excluded from the above contractual obligations table is the non-current liability, including related interest and penalties, for unrecognized tax benefits of $150.0 million as of June 27, 2026, as we cannot make a reliable estimate of the period in which the liability will be settled, if ever. Besides the firm commitments noted above, the above table excludes other amounts included in current liabilities in the Consolidated Balance Sheets at June 27, 2026 as these items will be paid within one year and certain long-term liabilities not requiring cash payments.
Off-Balance Sheet Arrangements
In addition to the commitments included in the table above, we have outstanding letters of credit, surety bonds and bank guarantees totaling $38.1 million as of June 27, 2026, primarily serving to collateralize our obligation to third parties for duties, leases, insurance claims and materials used in product manufacturing. These letters of credit expire at various dates through calendar 2039.
We do not maintain any other off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect on our consolidated financial statements. Refer to Note 13, "Commitments and Contingencies," for further information.
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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. The development and selection of the Company’s critical accounting policies and estimates are periodically reviewed with the Audit Committee.
The accounting policies discussed below are considered critical because changes to certain judgments and assumptions inherent in these policies could affect the financial statements. For more information on the Company's accounting policies, please refer to the Notes to Consolidated Financial Statements.
Revenue Recognition
Revenue is recognized when the Company satisfies its performance obligations by transferring control of promised products or services to its customers, which may be at a point in time or over time. Control is transferred when the customer obtains the ability to direct the use of and obtain substantially all of the remaining benefits from the products or services. The amount of revenue recognized is the amount of consideration to which the Company expects to be entitled, including estimation of sale terms that may create variability in the consideration. Revenue subject to variability is constrained to an amount which will not result in a significant reversal in future periods when the contingency that creates variability is resolved.
Retail store and concession shop-in-shop revenues are recognized at the point-of-sale, when the customer obtains physical possession of the products. Digital revenue from sales of products ordered through the Company’s e-commerce sites is recognized upon delivery and receipt of the shipment by its customers and includes shipping and handling charges paid by customers. Retail and digital revenues are recorded net of estimated returns, which are estimated by developing an expected value based on historical experience. Payment is due at the point of sale.
The Company recognizes revenue within the wholesale business at the time title passes and risk of loss is transferred to customers, which is generally at the point of shipment of products but may occur upon receipt of the shipment by the customer in certain cases. Wholesale revenue is recorded net of estimates for returns, discounts, end-of-season markdowns, cooperative advertising allowances and other consideration provided to the customer. The Company's historical estimates of these variable amounts have not differed materially from actual results.
The Company recognizes licensing revenue over time during the contract period in which licensees are granted access to the Company's trademarks. These arrangements require licensees to pay a sales-based royalty and may include a contractually guaranteed minimum royalty amount. Revenue for contractually guaranteed minimum royalty amounts is recognized ratably over the license year and any excess sales-based royalties are recognized as earned once the minimum royalty threshold is achieved.
At June 27, 2026, 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, 2026, a 10% change in the inventory reserve would not have resulted in a material change in inventory and cost of sales.
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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 during the fourth quarter of each fiscal year or if an event occurs that would more likely than not reduce the fair value below its carrying amount. The Company determined that there was no impairment in fiscal 2026 or fiscal 2024. During the fourth quarter of fiscal 2025, the Company performed its annual goodwill and indefinite-lived intangible assets impairment analysis. The assessment concluded that the fair values of the Kate Spade reporting unit and indefinite-lived brand intangible asset did not exceed their respective carrying values due to a reduction in both current and future expected cash flows, which includes an estimated impact of cost increases due to changes in tariff and trade policies. Accordingly, during the fourth quarter of fiscal year 2025, the Company recorded $244.1 million of impairment charges related to goodwill for the Kate Spade reporting unit and $610.7 million of impairment charges related to the Kate Spade indefinite-lived brand intangible. Based on the annual assessment in fiscal 2026, the fair values of our Kate Spade brand reporting unit and brand intangibles exceeded their respective carrying values by approximately 30%.
Several factors could impact the Kate Spade brand's ability to achieve expected future cash flows, including the optimization of the store fleet productivity, the success of international expansion strategies, the impact of promotional activity, continued economic volatility and potential operational challenges related to the macroeconomic factors, the reception of new collections in all business channels and other initiatives aimed at increasing profitability of the business. If profitability trends decline during fiscal 2027 from those that are expected, it is possible that an interim test, or our annual impairment test, could result in an impairment of these assets.
Based on the annual assessment in fiscal 2026 of the Coach brand reporting unit, the Company determined the fair values significantly exceeded their respective carrying values, therefore resulting in no impairment.
Valuation of Long-Lived Assets
Long-lived assets, such as Property and equipment and Operating lease right-of-use ("ROU") assets, are evaluated for impairment whenever events or circumstances indicate that the carrying value of the assets may not be recoverable. In evaluating long-lived assets for recoverability, the Company uses its best estimate of future cash flows expected to result from the use of the related asset group and its eventual disposition. To the extent that estimated future undiscounted net cash flows attributable to the asset are less than its carrying value, an impairment loss is recognized equal to the difference between the carrying value of such asset and its fair value, considering external market participant assumptions.
In determining future cash flows, the Company takes various factors into account, including the effects of macroeconomic trends such as consumer spending, in-store capital investments, promotional cadence, the level of advertising and changes in merchandising strategy. Since the determination of future cash flows is an estimate of future performance, there may be future impairments in the event that future cash flows do not meet expectations.
The Company recorded $7.8 million and $8.8 million of impairment charges within SG&A expense in the Consolidated Statement of Operations in fiscal 2026 and fiscal 2025, respectively.
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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.
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 had a material impact on our fiscal 2026 net income.
Income Taxes
The Company’s effective tax rate is based on pre-tax income, statutory tax rates, tax laws and regulations and tax planning strategies available in the various jurisdictions in which the Company operates. The Company classifies interest and penalties on uncertain tax positions in the Provision for income taxes. The Company records net deferred tax assets to the extent it believes that it is more likely than not that these assets will be realized. In making such determination, the Company considers all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent and expected future results of operation. The Company reduces deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that some amount of deferred tax assets is not expected to be realized. The Company is not permanently reinvested with respect to earnings of a limited number of foreign entities and has recorded the tax consequences of remitting earnings from these entities. The Company is permanently reinvested with respect to all other earnings.
The Company recognizes the impact of tax positions in the financial statements if those positions will more likely than not be sustained on audit, based on the technical merits of the position. Although the Company believes that the estimates and assumptions used are reasonable and legally supportable, the final determination of tax audits could be different than that which is reflected in historical tax provisions and recorded assets and liabilities. Tax authorities periodically audit the Company’s income tax returns; these tax authorities may take a contrary position that could result in a significant impact on the Company's results of operations. Significant management judgment is required in determining the effective tax rate, in evaluating tax positions and in determining the net realizable value of deferred tax assets.
Refer to Note 15, “Income Taxes,” for further information.
Recent Accounting Pronouncements
Refer to Note 3, "Significant Accounting Policies," to the accompanying audited consolidated financial statements for a description of certain recently adopted, issued or proposed accounting standards which may impact our consolidated financial statements in future reporting periods.
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