ITEM 1. BUSINESS

Tapestry, Inc., previously known as Coach, Inc., 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, the brands that make up our house 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 fashion landscape for over 25 years.

GENERAL DEVELOPMENT OF BUSINESS

Founded in 1941, Coach, Inc., the predecessor company to Tapestry, Inc., was acquired by Sara Lee Corporation (“Sara Lee”) in 1985. In June 2000, Coach, Inc. was incorporated in the state of Maryland. In October 2000, Coach, Inc. was listed on the New York Stock Exchange and sold approximately 19.5% of the then outstanding shares. In April 2001, Sara Lee completed a distribution of its remaining ownership in Coach, Inc. via an exchange offer, which allowed Sara Lee stockholders to tender Sara Lee common stock for Coach, Inc. common stock.

Since October 2000, the Company's international expansion strategy for Coach has been to enter into joint ventures and establish distributor relationships to build market presence and capability. To further accelerate brand awareness, aggressively grow market share and to exercise greater control of our brand, the Company has historically acquired its joint venture partner’s interests or distributor rights in these international regions. Such regions include Japan, Greater China, Singapore, Taiwan, Malaysia, South Korea and Europe. During the third quarter of fiscal 2018, the Company acquired designated assets of its Coach distributor in Australia and New Zealand.

During fiscal 2015, the Company acquired Stuart Weitzman Holdings LLC, a luxury women's footwear company, to complement its leadership position in premium handbags and accessories. During fiscal 2016, the Company acquired the Stuart Weitzman Canadian retail distributor. During the third quarter of fiscal 2018, the Company acquired designated assets of its Stuart Weitzman distributor in Northern China.

During the first quarter of fiscal 2018, the Company completed its acquisition of Kate Spade & Company, a lifestyle accessories and ready-to-wear company, for $18.50 per share in cash for a total of $2.4 billion. As a result of this acquisition, on October 31, 2017, the Company changed its name to Tapestry, Inc., a leading luxury lifestyle company with a diverse multi-brand portfolio supported by significant expertise in handbag design, merchandising, supply chain and retail operations as well as solid financial acumen. During the third quarter of fiscal 2018, the Company entered into an agreement to take operational control of the KS China Co., Limited and KS HMT Co., Limited joint ventures ("Kate Spade Joint Ventures") that operate in mainland China, Hong Kong, Macau and Taiwan in which the Company has 50% interest.

OUR BRANDS

Prior to fiscal 2018, the Company had three reportable segments: North America (Coach brand), International (Coach brand) and Stuart Weitzman. Beginning in fiscal 2018 and as a result of the Kate Spade acquisition, the Company aligned its reportable segments with the new structure of its business. As a result, the Company has three reportable segments:

• Coach includes global sales of Coach brand 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. This segment represented 71.8% of total net sales in fiscal 2018.

• Kate Spade includes global sales primarily of kate spade new york brand products to customers through Kate Spade operated stores, including the Internet, to wholesale customers, through concession shop-in-shops and through independent third party distributors. This segment represented 21.8% of total net sales in fiscal 2018.

• Stuart Weitzman includes global sales of Stuart Weitzman brand products primarily through Stuart Weitzman operated stores, including the Internet, to wholesale customers and through numerous independent third party distributors. This segment represented 6.4% of total net sales in fiscal 2018.

Corporate, which is not a reportable segment, represents certain costs that are not directly attributable to a brand. These costs primarily include administrative and information systems expense.

Coach

Coach is a leading design house of modern luxury accessories and lifestyle collections, with a long-standing reputation built on quality craftsmanship. As a pioneer in the leather goods and accessories space, the brand established itself as the original American house of leather. Coach remains inspired by its rich heritage, with the spirit of innovation it has had for more than 75 years. Defined by a free-spirited, all-American attitude, the brand approaches design with a modern vision, reimagining luxury for today with an authenticity that is uniquely Coach. All over the world, the Coach name is synonymous with effortless New York style. We present a sophisticated, modern and inviting environment, both in bricks & mortar stores and online, to showcase our product assortment and reinforce a consistent brand positioning.

Stores — Coach operates freestanding flagship, retail, outlet stores and concession shop-in-shop locations. These stores are located in regional shopping centers, metropolitan areas throughout the world and established outlet centers.

Coach flagship stores, which offer the fullest expression of the Coach brand, are located in tourist-heavy, densely populated cities globally. Retail stores carry an assortment of products depending on their size, location and customer preferences. Coach outlet stores serve as an efficient means to sell manufactured-for-outlet product and discontinued retail inventory outside the retail channel. The outlet store design, visual presentations and customer service levels support and reinforce the brand's image. Through these outlet stores, we target value-oriented customers in established outlet centers that are close to major markets.

The change in the number of Coach stores and their total and average square footage is shown in the following table:

	Coach
	North America		International⁽¹⁾		Total
Store Count
Fiscal 2018	402		585		987
Net change vs. prior year	(17	)	42		25
% change vs. prior year	(4.1	)%	7.7	%	2.6	%

Fiscal 2017	419		543		962
Net change vs. prior year	(13	)	21		8
% change vs. prior year	(3.0	)%	4.0	%	0.8	%

Fiscal 2016	432		522		954
Net change vs. prior year	(30	)	19		(11	)
% change vs. prior year	(6.5	)%	3.8	%	(1.1	)%

Square Footage
Fiscal 2018	1,835,543		1,256,525		3,092,068
Net change vs. prior year	(48,661	)	89,605		40,944
% change vs. prior year	(2.6	)%	7.7	%	1.3	%

Fiscal 2017	1,884,204		1,166,920		3,051,124
Net change vs. prior year	(7,942	)	80,605		72,663
% change vs. prior year	(0.4	)%	7.4	%	2.4	%

Fiscal 2016	1,892,146		1,086,315		2,978,461
Net change vs. prior year	(25,705	)	55,620		29,915
% change vs. prior year	(1.3	)%	5.4	%	1.0	%

Average Square Footage
Fiscal 2018	4,566		2,148		3,133
Fiscal 2017	4,497		2,149		3,172
Fiscal 2016	4,380		2,081		3,122

(1) Fiscal 2018 includes the addition of 21 retail stores acquired as a result of the Coach distributor acquisition in Australia and New Zealand completed during the third quarter of fiscal 2018.

In fiscal 2019, we expect to close a select number of stores in North America. We expect to modestly grow our store count over the next few years, particularly within Greater China. Furthermore, we expect to continue investing in the elevation of our existing store environments.

Internet — We view our www.coach.com website as a key communications vehicle for the brand to promote traffic in retail stores and department store locations and build brand awareness, as well as an additional channel to sell Coach brand products

directly to customers. Consumers also have the ability to place e-commerce orders through point-of-sale mobile devices located within our retail stores. Our online store provides a showcase environment where consumers can browse through a selected offering of the latest styles and colors. To a lesser extent, our e-commerce programs also include our invitation-only outlet flash sales site.

Wholesale — Coach began as a U.S. wholesaler to department stores, and this channel continues to remain a part of our overall consumer reach. Today, we work closely with our partners to ensure a clear and consistent product presentation. We enhance our presentation through the creation of shop-in-shops with proprietary Coach brand fixtures within the department store environment. We custom tailor our assortments through wholesale product planning and allocation processes to match the attributes of our department store consumers in each local market. We continue to closely manage inventories in this channel given the current highly promotional environment at point-of-sale. We utilize automatic replenishment with major accounts in an effort to optimize inventory levels across wholesale doors.

As of June 30, 2018, Coach's products are sold in approximately 1,630 wholesale and distributor locations globally. Coach's most significant wholesale partnerships are with department stores including Macy's (including Bloomingdale's), Dillard's, Hudson's Bay Company (including Lord & Taylor and Saks 5th Ave), Nordstrom, Zappos, Von Maur, The Bay and Neiman Marcus. Coach products are also available on these customers' websites.

Coach has developed relationships with a select group of distributors who sell Coach products through travel retail locations and in certain international countries where Coach does not have directly operated retail locations. As of June 30, 2018, Coach's most significant distributors are the DFS Group, King Power Thailand, Ever Rich Duty Free and Al Tayer Insignia.

As of June 30, 2018 and July 1, 2017, Coach did not have any customers who individually accounted for more than 10% of the segment's total net sales.

Kate Spade

Established in 1993, the Kate Spade brand is known for its crisp color, graphic prints and playful sophistication. The brand's exuberant approach to the everyday encourages personal style with a dash of incandescent charm. From handbags and clothing to decor and fragrance our products invite women around the world to live every day uniquely and to the fullest.

Stores — Kate Spade operates freestanding flagship, specialty retail, outlet stores and concession shop-in-shops. These stores are located in regional shopping centers, metropolitan areas throughout the world and established outlet centers.

Kate Spade flagship locations, which offer the fullest expression of the Kate Spade brand, are located in high-visibility locations. Retail stores carry an assortment of products depending on their size, location and customer preferences. Kate Spade outlet stores serve as an efficient means to sell manufactured-for-outlet product and discontinued retail inventory outside the retail channel. Through these outlet stores, we target value-oriented customers in established outlet centers that are close to major markets.

The number of Kate Spade stores as of June 30, 2018 and their total and average square footage is shown in the following table:

	Kate Spade
	North America	International⁽²⁾	Total
Store Count
Fiscal 2018⁽¹⁾	200	142	342

Square Footage
Fiscal 2018⁽¹⁾	495,121	171,754	666,875

Average Square Footage
Fiscal 2018⁽¹⁾	2,476	1,210	1,950

(1) The Kate Spade business was acquired in the first quarter of fiscal 2018 which included the addition of 180 stores in North America and 95 international stores.

(2) Includes the addition of 50 retail stores related to taking operational control of the Kate Spade Joint Ventures that operate in mainland China, Hong Kong, Macau and Taiwan in the third quarter of fiscal 2018.

We expect to modestly grow the number of North America stores in fiscal 2019, as we continue to optimize our real estate position. Furthermore, we expect to continue investing in the elevation of our existing store environments. Internationally, we expect to continue to modestly grow in store count over the next few years, particularly within mainland China and Europe.

Internet — We view our www.katespade.com website as a key communications vehicle for the brand to promote traffic in retail stores and department store locations and build brand awareness, as well as an additional channel to sell Kate Spade brand products directly to customers. Consumers also have the ability to place e-commerce orders through point-of-sale mobile devices located within our retail stores. To a lesser extent, our e-commerce programs also include our invitation-only outlet flash sales site.

Wholesale — As of June 30, 2018, Kate Spade brand's products are sold in approximately 1,260 wholesale and distributor locations, primarily in the U.S, Canada and Europe. The most significant wholesale partnerships primarily include sales of kate spade new york products. These partnerships include Nordstrom, The TJX Companies Inc., Macy's (including Bloomingdale's), Dillard's and Hudson's Bay Company (including Lord & Taylor and Saks 5th Ave). Kate Spade products are also available on these customers' websites.

Kate Spade has developed relationships with a select group of distributors who sell Kate Spade products through travel retail locations and in certain international countries where Kate Spade does not have directly operated retail locations. As of June 30, 2018, Kate Spade's most significant distributors are Valiram Group, Al-Futtaim Group, Luxury Concept Limited, Pangea and Stores Specialists, Inc.

As of June 30, 2018, Kate Spade did not have any customers who individually accounted for more than 10% of the segment's total net sales.

Stuart Weitzman

Stuart Weitzman offers beautiful shoes that combine form and function. For more than 30 years, every pair has been handcrafted using the finest materials and meticulously engineered for a flawless fit. The brand is one of the most recognizable names in footwear; its award-winning shoes are worn by stylish women around the globe and by celebrities both on and off the red carpet. Stuart Weitzman is currently evolving into a multi-category accessories brand with the expansion of handbags and introduction of jewelry.

Stores —Stuart Weitzman products are also sold in freestanding flagship, retail and outlet stores located in North America, Europe and Northern China.

The following table shows the number of Stuart Weitzman directly-operated locations and their total and average square footage:

	Stuart Weitzman
	North America⁽¹⁾		International⁽²⁾		Total
Store Count
Fiscal 2018	68		35		103
Net change vs. prior year	(1	)	23		22
% change vs. prior year	(1.4	)%	191.7	%	27.2	%

Fiscal 2017	69		12		81
Net change vs. prior year	5		1		6
% change vs. prior year	7.8	%	9.1	%	8.0	%

Fiscal 2016	64		11		75
Net change vs. prior year	18		3		21
% change vs. prior year	39.1	%	37.5	%	38.9	%

Square Footage
Fiscal 2018	117,869		47,498		165,367
Net change vs. prior year	(75	)	28,690		28,615
% change vs. prior year	(0.1	)%	152.5	%	20.9	%

Fiscal 2017	117,944		18,808		136,752
Net change vs. prior year	12,680		6,252		18,932
% change vs. prior year	12.0	%	49.8	%	16.1	%

Fiscal 2016	105,264		12,556		117,820
Net change vs. prior year	23,387		3,332		26,719
% change vs. prior year	28.6	%	36.1	%	29.3	%

Average Square Footage
Fiscal 2018	1,733		1,357		1,606
Fiscal 2017	1,709		1,567		1,688
Fiscal 2016	1,645		1,141		1,571

⁽¹⁾ Includes the addition of 14 retail stores related to the Canadian retail distributor acquisition in the fourth quarter of fiscal 2016.

⁽²⁾ Includes the addition of 20 retail stores related to the Northern China distributor acquisition in the third quarter of fiscal 2018.

In fiscal 2019, we expect modest growth in North America store count and square footage. Furthermore, we expect to continue to grow the store count and square footage over the next few years as we grow our business internationally.

Internet — We view our www.stuartweitzman.com website as a key communications vehicle for the brand to promote traffic in retail stores and department store locations and build brand awareness, as well as an additional channel to sell Stuart Weitzman brand products directly to customers.

Wholesale — Stuart Weitzman brand products are primarily sold through approximately 620 wholesale and distributor locations globally. Stuart Weitzman's most significant wholesale partnerships include Nordstrom, Saks 5th Ave, Bloomingdale's (including Macy's) and Neiman Marcus.

Stuart Weitzman has developed relationships with a select group of distributors who sell Stuart Weitzman products through travel retail locations and in certain international countries where Stuart Weitzman does not have directly operated retail locations. As of June 30, 2018, Stuart Weitzman's most significant distributors are Pedder Group and Hermanns Imports.

As of June 30, 2018, Stuart Weitzman did not have any customers who individually accounted for more than 10% of the segment's total net sales.

Refer to Note 16, "Segment Information," for further information about the Company's segments.

LICENSING

Our brands take an active role in the design process and control the marketing and distribution of products in our worldwide licensing relationships. Licensing revenue for the Company was $53.6 million and $40.4 million in fiscal 2018 and fiscal 2017, respectively. Our key licensing relationships as of June 30, 2018 are as follows:

Brand	Category	Partner	Expiration
Coach	Eyewear	Luxottica	2020
Coach	Watches	Movado	2020
Coach	Fragrance	Interparfums	2026
Kate Spade	Fashion Bedding	HTA	2019
Kate Spade	Eyewear	Safilo	2020
Kate Spade	Footwear	Steve Madden	2020
Kate Spade	Tableware	Lenox	2020
Kate Spade	Stationery and Gift	Lifeguard Press	2020
Kate Spade	Tech Accessories	Incipio	2021
Kate Spade	Watches	Fossil	2025

Products made under license are, in most cases, sold through stores and wholesale channels and, with the Company's approval, the licensees have the right to distribute products selectively through other venues, which provide additional, yet controlled, exposure of our brands. Our licensing partners pay royalties on their net sales of our branded products. Such royalties currently comprise approximately 1% of Tapestry's total net sales. The licensing agreements generally give our brands the right to terminate the license if specified sales targets are not achieved.

PRODUCTS

The following table shows net sales for each of our product categories by segment:

	Fiscal Year Ended
	June 30, 2018				July 1, 2017				July 2, 2016
	(millions)
	Amount		% of total net sales		Amount		% of total net sales		Amount		% of total net sales
Coach:
Women's Handbags	$	2,298.2	39	%	$	2,308.0	52	%	$	2,392.9	53	%
Men's	844.6		14		808.0		18		725.7		16
Women's Accessories	747.1		13		721.0		16		721.6		16
Other Products	331.6		6		277.7		6		306.9		7
Total Coach	$	4,221.5	72	%	$	4,114.7	92	%	$	4,147.1	92	%
Kate Spade:⁽¹⁾
Women's Handbags	$	703.4	12	%	$	—	—	%	$	—	—	%
Other Products	311.6		5		—		—		—		—
Women's Accessories	269.7		5		—		—		—		—
Total Kate Spade	$	1,284.7	22	%	$	—	—	%	$	—	—	%
Stuart Weitzman⁽²⁾	$	373.8	6	%	$	373.6	8	%	$	344.7	8	%
Total Net Sales	$	5,880.0	100	%	$	4,488.3	100	%	$	4,491.8	100	%

(1) On July 11, 2017, the Company completed its acquisition of Kate Spade. The operating results of the Kate Spade brand have been consolidated in the Company's operating results commencing on July 11, 2017.

(2) The significant majority of sales for Stuart Weitzman is attributable to women's footwear.

Women’s Handbags — Women’s handbag collections feature classically inspired designs as well as fashion designs. These collections are designed to meet the fashion and functional requirements of our broad and diverse consumer base.

Women’s Accessories — Women’s accessories include small leather goods, which complement our handbags, including wallets, money pieces, wristlets and cosmetic cases. Also included in this category are novelty accessories (including address books, time management accessories, travel accessories, sketchbooks and portfolios), key rings and charms.

Men’s — Men’s includes bag collections (including business cases, computer bags, messenger-style bags, backpacks and totes), small leather goods (including wallets, card cases, travel organizers and belts), footwear, watches, sunglasses, novelty accessories and ready-to-wear.

Other Products — These products primarily include women's footwear, eyewear (such as sunglasses), jewelry (including bracelets, necklaces, rings and earrings), fragrances, watches, certain women's seasonal lifestyle apparel collections, including outerwear, ready-to-wear and cold weather accessories, such as gloves, scarves and hats. In addition, Kate Spade brand kids ready-to-wear items, housewares and home accessories, such as fashion bedding and tableware, and stationery and gifts are included in this category.

DESIGN AND MERCHANDISING

Our creative leaders are responsible for conceptualizing and implementing the design direction for our brands across the consumer touchpoints of product, stores and marketing. At Tapestry, each brand has a dedicated design and merchandising team; this ensures that Coach, Kate Spade and Stuart Weitzman speak to their customers with a voice and positioning unique to their brand. Designers have access to the brands' extensive archives of product designs, which are a valuable resource for new product concepts. Our designers are also supported by strong merchandising teams that analyze sales, market trends and consumer preferences to identify market opportunities that help guide each season's design process and create a globally relevant product assortment. Merchandisers also manage the product life cycle to maximize sales and profitability across all channels. The product category teams, each comprised of design, merchandising, product development and sourcing specialists help each brand execute design concepts that are consistent with the brand's strategic direction.

Our design and merchandising teams also work in close collaboration with all of our licensing partners to ensure that the licensed products are conceptualized and designed to address the intended market opportunity and convey the distinctive perspective and lifestyle associated with our brands.

MARKETING

We use a 360-degree approach to marketing for each of our brands, synchronizing our efforts across all channels to ensure consistency at every touchpoint. Our global marketing strategy is to deliver a consistent, relevant and multi-layered message every time the consumer comes in contact with our brands through our communications and visual merchandising. Each brand's distinctive positioning is communicated by our creative marketing, visual merchandising and public relations teams, as well as outside creative agencies. We also have a sophisticated consumer and market research capability, which helps us assess consumer attitudes and trends.

We engage in several consumer communication initiatives globally, including direct marketing activities at a national, regional and local level. Total expenses attributable to the Company's marketing-related events in fiscal 2018 were $228.4 million, or approximately 4% of net sales, compared to $178.3 million in fiscal 2017, or approximately 4% of net sales.

Our wide range of marketing activities include direct mail tiered to our database of best, new, lapsed and prospective customers. In addition, to drive engagement and build awareness, we utilize a variety of media, including print, digital, social and out-of-home. Our respective brand websites serve as effective communication vehicles by providing an immersive brand experience, showcasing the fullest expression across all product categories.

As part of our direct marketing strategy, we use databases of consumers to generate personalized communications. Email contacts and direct mail pieces are an important part of our communication and are sent to selected consumers to stimulate consumer purchases and build brand awareness. Visitors to our e-commerce sites provide an opportunity to increase the size of these databases, as well as point of transactions globally, except where restricted. For Coach, we have e-commerce sites in certain countries throughout the world, including the U.S., Canada, Japan, mainland China, several throughout Europe, and South Korea. For Kate Spade, we have e-commerce sites in the U.S., Canada, Japan, mainland China and throughout Europe. For Stuart Weitzman, we have e-commerce sites in the U.S, Canada, Europe, Hong Kong and mainland China.

In fiscal 2018, Coach had informational websites in Hong Kong, Korea, Malaysia, Singapore and Taiwan, as well as a global informational website where customers from other countries are directed. In fiscal 2018, Kate Spade had an informational website in mainland China. The Company utilizes and continues to explore digital technologies such as blogs and social media websites,

including Twitter, Facebook, Instagram, Pinterest, WeChat and Sina Weibo, as a cost effective consumer communication opportunity to increase on-line and store sales, acquire new customers and build brand awareness.

MANUFACTURING

Tapestry carefully balances its commitments to a limited number of “better brand” partners that have demonstrated integrity, quality and reliable delivery. The Company continues to evaluate new manufacturing sources and geographies to deliver the finest quality products at the best cost and to mitigate the impact of manufacturing in inflationary markets.

Before partnering with a new vendor, the Company evaluates each facility by conducting a quality and business practice standards audit. Periodic evaluations of existing, previously approved facilities are conducted on a recurring basis. We believe that our manufacturing partners are in material compliance with the Company’s integrity standards.

These independent manufacturers each or in aggregate support a broad mix of product types, materials and a seasonal influx of new, fashion-oriented styles, which allows us to meet shifts in marketplace demand and changes in consumer preferences.

Our raw material suppliers, independent manufacturers and licensing partners must achieve and maintain high quality standards, which are an integral part of our brands' identity. One of our keys to success lies in the rigorous selection of raw materials. We have longstanding relationships with purveyors of fine leathers and hardware. Although our products are manufactured by independent manufacturers, we maintain a strong level of oversight in the selection of the raw materials that are used in all of our products. Compliance with quality control standards is monitored through on-site quality inspections at independent manufacturing facilities.

We maintain control of the supply chain process for each of our brands from design through manufacture. We are able to do this by maintaining sourcing management offices in Vietnam, mainland China, Hong Kong, the Philippines, Singapore and Spain that work closely with our independent manufacturers. This broad-based, global manufacturing strategy is designed to optimize the mix of cost, lead times and construction capabilities.

Manufacturers of Coach products were primarily located in Vietnam, the Philippines, mainland China and India. During fiscal 2018, Coach had one vendor, located in Vietnam, who individually provided over 10% of the brand's total units (or approximately 15% in the aggregate). During fiscal 2018, Kate Spade products were manufactured primarily in mainland China, Vietnam and the Philippines. Kate Spade had one vendor, located in Vietnam, who individually provided over 10% of the brand's total units (or approximately 13% in the aggregate). The Company expects that the level of products manufactured in each country will change during fiscal 2019 as it continues to further diversify the brand’s supply chain globally. Stuart Weitzman products were primarily manufactured in Spain. During fiscal 2018, Stuart Weitzman had three vendors, all located in Spain, who individually provided over 10% of the brands total units (or approximately 40% in the aggregate).

DISTRIBUTION

Each brand's products are shipped from manufacturers to distribution centers around the world for inspection, storage, order processing and shipment. These facilities for our brands use a bar code scanning warehouse management system. Our distribution center employees use handheld scanners to read product bar codes, which allow accurate storage and the various steps to process orders and generally provide excellent service to their customers. Each brand's products are primarily shipped to the retail stores and wholesale customers via express delivery providers and common carriers. The facilities also ship direct to consumer orders.

In North America, the Company operates an 850,000 square foot distribution and consumer care facility in Jacksonville, Florida for Coach brand products. For Coach, North America product fulfillment is facilitated by our automated warehouse management system and electronic data interchange system, while the unique requirements of the Internet business are supported by Coach's order management and e-commerce sites. Outside of North America, the Company has established regional distribution centers through third-parties for each brand. For Coach brand products, these centers are located in mainland China and Netherlands. Additional facilities are located in Japan, Hong Kong, mainland China, Macau, South Korea, Taiwan, Malaysia and Singapore to support directly operated local markets.

The Company distributes Kate Spade brand products through facilities that are operated by third parties in the United States. For Kate Spade, product fulfillment in North America is facilitated by our automated warehouse management system and electronic data interchange system, while the unique requirements of the Internet business are supported by selective warehouse and distribution systems operated by third-parties. Furthermore, Kate Spade product is distributed through a third party regional distribution center in the U.K. The Company also operates local distribution centers through third-parties in Japan and Hong Kong for Kate Spade brand product.

The Company distributes Stuart Weitzman brand products through facilities that are operated by third parties globally. These facilities are located in the United States, Canada, Spain, Italy and mainland China.

INFORMATION SYSTEMS

Each of our brands currently operates on their respective legacy systems that support finance and accounting, procurement, inventory control, point-of-sale transactions, store replenishment, supply chain management which support product development, procurement, inventory planning and reporting functions. In the fourth quarter of fiscal 2016, the Company announced a series of operational efficiency initiatives focused on creating an agile and scalable business model, including the replacing and updating of our core technology platforms and the retirement of certain information systems. Efforts are currently underway to harmonize and consolidate these systems across the current three brands, as well as serving as a common platform for future acquisitions. This project is a key area of focus and priority and is expected to be substantially completed during fiscal 2019. The Company expects to incur charges of approximately $10-15 million in fiscal 2019 related to this project.

During fiscal 2018, the Company implemented a global consolidation system which provides a common platform for financial reporting. The Company also began 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. This system began rolling out for Coach in North America, and will be extended to other brands and regions in the future.

Refer to Item 1A. "Risk Factors," for further information as it relates to the Company's Enterprise Resource Planning ("ERP") system implementation efforts.

TRADEMARKS AND PATENTS

Tapestry owns all of the material worldwide trademark rights used in connection with the production, marketing, distribution and sale of all branded products for Coach, Stuart Weitzman and Kate Spade. In addition, it licenses trademarks and copyrights used in connection with the production, marketing and distribution of certain categories of goods and limited edition collaborative special projects. Tapestry also owns and maintains worldwide registrations for trademarks in relevant classes of products in each of the countries in which its products are sold. Major trademarks include TAPESTRY, COACH, STUART WEITZMAN, KATE SPADE and kate spade new york. It also owns brand-specific trademarks such as COACH and Horse & Carriage Design, COACH and Story Patch Design, COACH and Lozenge Design, COACH and Tag Design, Signature C Design, COACH EST. 1941 and Design for the COACH brand; kate spade new york and Spade Design, live colorfully, Walk on Air and In Full Bloom for the kate spade new york brand; and In Our Shoes and SW Logo for the Stuart Weitzman brand. Tapestry is not dependent on any one particular trademark or design patent although Tapestry believes that the Coach, Stuart Weitzman and Kate Spade names are important for its business. In addition, Tapestry owns several design patents and utility patents for its branded products. Tapestry aggressively polices its trademarks and trade dress, and pursues infringers both domestically and internationally. It also pursues counterfeiters domestically and internationally through leads generated internally, as well as through its network of investigators, the respective online reporting tools for each brand, the Tapestry hotline and business partners around the world.

The Company expects that its material trademarks will remain in full force and effect for as long as we continue to use and renew them.

SEASONALITY

The Company's results are typically affected by seasonal trends. During the first fiscal quarter, we 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 adverse weather conditions or other macroeconomic events.

GOVERNMENT REGULATION

Most of the Company's imported products are subject to duties, indirect taxes, quotas and non-tariff trade barriers that may limit the quantity of products that we may import into the U.S. and other countries or may impact the cost of such products. The Company is not materially restricted by quotas or other government restrictions in the operation of its business, however customs duties do represent a component of total product cost. To maximize opportunities, the Company operates complex supply chains through foreign trade zones, bonded logistic parks and other strategic initiatives such as free trade agreements. Additionally, the Company operates a direct import business in many countries worldwide. As a result, the Company is subject to stringent government regulations and restrictions with respect to its cross-border activity either by the various customs and border protection agencies or by other government agencies which control the quality and safety of the Company’s products. The Company maintains an internal global trade, customs and product compliance organization to help manage its import/export and regulatory affairs activity.

COMPETITION

The global premium women's and men's handbag, accessories and footwear categories are highly competitive. Tapestry, Inc. competes primarily with European and American luxury and accessible luxury brands as well as private label retailers. Over the last several years these industries have grown, encouraging the entry of new competitors as well as increasing the competition from existing competitors. This increased competition drives interest in these brand loyal categories.

EMPLOYEES

As of June 30, 2018, the Company employed approximately 20,800 globally, including both full and part time employees, but excluding seasonal and temporary employees. Of these employees, approximately 9,400 and 7,800 were full time and part time employees, respectively, in the global retail field.

The Company believes that its relations with its employees are good, and has never encountered a strike or work stoppage.

FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

Refer to Note 16, "Segment Information," presented in the Notes to the Consolidated Financial Statements for geographic information.

AVAILABLE INFORMATION

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge on our investor website, located at www.tapestry.com/investors under the caption “SEC Filings,” as soon as reasonably practicable after they are filed with or furnished to the Securities and Exchange Commission. These reports are also available on the Securities and Exchange Commission’s website at www.sec.gov. No information contained on any of our websites is intended to be included as part of, or incorporated by reference into, this Annual Report on Form 10-K.

The Company has included the Chief Executive Officer (“CEO”) and Chief Financial Officer certifications regarding its public disclosure required by Section 302 of the Sarbanes-Oxley Act of 2002 as Exhibit 31.1 to this Form 10-K. Additionally, the Company filed with the New York Stock Exchange (“NYSE”) the CEO’s certification regarding the Company’s compliance with the NYSE’s Corporate Governance Listing Standards (“Listing Standards”) pursuant to Section 303A.12(a) of the Listing Standards, which indicated that the CEO was not aware of any violations of the Listing Standards by the Company.

TPR - Tapestry, Inc.