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What Changed
Risk factors · Apr 1, 2025 → Mar 31, 2026
134 added · 141 removed between the two most recent 10-Ks. The risks a company starts — or stops — disclosing are often the story.
Newly disclosed
Our outlook assumes a 15% tariff rate on goods 35 coming into the U.S. effective February 24, 2026 and assumes that U.S. inventory receipts prior to that include the tariff rates that were in place for each applicable country prior to the Supreme Court ruling.
The following actions, transactions and events have impacted our results of operations and the comparability among the years, including our full year 2026 expectations, as discussed below: • We recorded pre-tax noncash goodwill and other intangible asset impairment charges of $480 million in the first quarter of 2025 in conjunction with interim goodwill and other intangible assets impairment tests.
Fiscal 2026 Compared to Fiscal 2025 We currently expect that gross margin in 2026 will be up slightly compared to 2025, despite (i) the approximately 215 basis point gross negative impact in 2026 of the tariffs on goods coming into the United States which reflects an assumed 15% tariff rate effective February 24, 2026 and the tariff rates previously in place for each applicable country prior to the Supreme Court ruling, compared to the approximately 80 basis point gross negative impact in 2025 and (ii) the approximately 50 basis point decline expected in connection with the above-mentioned transition of previously licensed product categories into our directly operated wholesale business.
Goodwill and Other Intangible Asset Impairments We recorded noncash impairment charges of $480 million during the first quarter of 2025 in conjunction with interim goodwill and other intangible assets impairment tests, including $426 million related to goodwill and $54 million related to our Australia reacquired perpetual license rights, which were primarily due to a significant increase in discount rates.
The 80 basis point decrease was primarily driven by an increase in SG&A expenses as a percentage of revenue driven by the deleveraging of expenses resulting from the decline in revenue partially offset by a slight increase in gross margin. • Licensing – Income before interest and taxes was $357 million in 2025, compared to $352 million in 2024. • Corporate and other costs were $859 million in 2025, an increase of $7 million compared to $852 million in 2024, primarily due to an increase in global brands costs, partially offset by a decrease in corporate costs which includes savings resulting from the Growth Driver 5 Actions along with other efficiencies. • Restructuring and other items included $560 million of net expenses in 2025, including (i) $480 million of noncash goodwill and other intangible asset impairment charges and (ii) $93 million of restructuring costs in connection with the Growth Driver 5 Actions, partially offset by (iii) a $13 million actuarial gain on retirement plans.
Our effective income tax rate for 2025 was 83.3% primarily due to the impact of the $480 million pre-tax noncash goodwill and other intangible asset impairment charges that were recorded during the first quarter of 2025, which were non-deductible for tax purposes and factored into our annualized effective income tax rate, and resulted in a 60.8% increase to our effective income tax rate.
Approximately 6 % and 20% of our revenue and income before interest and taxes (excluding goodwill and other intangible asset impairment charges recorded in 2025), respectively, were generated in China in each of 2024 and 2025.
We do not expect the enacted changes to materially affect our 2026 estimated annual effective tax rate and we will continue to monitor future guidance related to the OBBBA.
Investigation by China’s Ministry of Commerce In September 2024, MOFCOM announced that it had initiated an investigation into our business under the UEL Provisions .
A description of the plan can be seen in Item 1 of this report under the heading “Our Business Strategy.” RESULTS OF OPERATIONS Macroeconomic Environment The conflict in the Middle East, which began in March 2026, has resulted in increased fuel and oil costs, the strengthening of the United States dollar against other currencies, in particular the euro, and volatility in world financial markets.
Beginning in the first quarter of 2025, the United States government announced additional tariffs on goods imported into the United States, with incremental tariffs on products imported from most countries and economic unions, and the potential for further increases and revisions or terminations to existing trade agreements.
The increased tariffs for goods entering the United States had a net negative impact on our full year 2025 gross profit, including a gross impact of approximately $69 million and a partially offsetting impact from mitigation actions which began in the third quarter and more significantly took effect in the fourth quarter.
No longer disclosed
A description of the plan can be seen in Item 1 of this report under the heading “Our Business Strategy.” RESULTS OF OPERATIONS Investigation by China’s Ministry of Commerce In September 2024, MOFCOM announced that it had initiated an investigation into our business under the UEL Provisions .
Please see Note 16, “Exit Activity Costs,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. • We recorded a pre-tax noncash goodwill impairment charge of $417 million during 2022 in conjunction with our annual goodwill and other indefinite-lived intangible asset impairment testing.
Please see Note 9, “Derivative Financial Instruments,” in the Notes to Consolidated Financial Statements included in Item 8 of this report for further discussion. 37 The following table summarizes our statements of operations in 2024, 2023 and 2022: 2024 2023 2022 (Dollars in millions) Net sales $ 8,203 $ 8,752 $ 8,545 Royalty revenue 361 368 372 Advertising and other revenue 89 98 107 Total revenue 8,653 9,218 9,024 Gross profit 5,143 5,363 5,123 % of total revenue 59.4 % 58.2 % 56.8 % SG&A expenses 4,411 4,543 4,377 % of total revenue 51.0 % 49.3 % 48.5 % Goodwill impairment — — 417 Non-service related pension and postretirement (cost) income (27) 47 92 Other gain 20 15 — Equity in net income of unconsolidated affiliates 48 46 50 Income before interest and taxes 772 929 471 Interest expense 90 99 90 Interest income 23 11 7 Income before taxes 706 841 388 Income tax expense 107 177 188 Net income $ 599 $ 664 $ 200 Total Revenue Total revenue was $8.653 billion in 2024, $9.218 billion in 2023, and $9.024 billion in 2022.
Our expectation for 2025 does not include restructuring costs expected to be incurred in 2025 in connection with Growth Driver 5 Actions as these costs cannot be quantified at this time. 40 Goodwill Impairment We recorded a pre-tax noncash goodwill impairment charge of $417 million during 2022 in conjunction with our annual goodwill and other indefinite-lived intangible asset impairment testing.
Our 2022 effective income tax rate included the impact of the $417 million noncash goodwill impairment charge recorded in 2022, which was non-deductible and resulted in an increase to our effective income tax rate of 22.3%.
The first step is to evaluate the tax position for recognition by determining if available evidence indicates it is more likely than not that the tax position will be fully sustained upon review by taxing authorities, including resolution of related appeals or litigation processes, if any.
Goodwill and other intangible assets —Goodwill and other indefinite-lived intangible assets are tested for impairment annually, at the beginning of the third quarter of each fiscal year, and between annual tests if an event occurs or circumstances change that would indicate that it is more likely than not that the carrying amount may be impaired.
Adverse changes in future market conditions or weaker operating results compared to our expectations may impact our projected cash flows and estimates of weighted average cost of capital, which could result in a potential impairment charge if we are unable to recover the carrying value of our goodwill and other indefinite-lived intangible assets.
Israel-Hamas War, Supply Chain Disruptions and War in Ukraine The Israel-Hamas war, which began in October 2023, did not have a material impact on our business in 2023 and 2024 and is not expected to have a material impact on our business in 2025.
Attacks on commercial shipping vessels in the Red Sea that began in the fourth quarter of 2023 have led to disruption and instability in global supply chains, which have resulted in shipment delays that are impacting, and could continue to impact, our inventory and sales volume.
Such impacts did not have a material impact on our business in 2023 and 2024 and are not expected to have a material impact on our business in 2025. 34 As a result of the war in Ukraine, we announced in March 2022 that we were temporarily closing stores and pausing commercial activities in Russia and Belarus.
We recorded net pre-tax costs of $43 million in 2022 in connection with our decision to exit from the Russia business, consisting of (i) $44 million of noncash asset impairments, (ii) $5 million of contract termination and other costs and (iii) $2 million of severance, partially offset by (iv) an $8 million gain related to the early termination of certain store lease agreements in Russia.