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Summary of Significant Accounting Policies | 6 Months Ended
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Sep. 26, 2020
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Revenue Recognition The Company recognizes revenue across all channels of the business when it satisfies its performance obligations by transferring control of promised products or services to its customers, which occurs either at a point in time or over time, depending on 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 considers terms of sale that create variability in the amount of consideration that the Company ultimately expects to be entitled to in exchange for the products or services, and is subject to an overall constraint that a significant revenue reversal will not occur in future periods. Sales and other related taxes collected from customers and remitted to government authorities are excluded from revenue. Revenue from the Company's retail business is recognized when the customer takes physical possession of the products, which occurs either at the point of sale for merchandise purchased at the Company's retail stores and concession-based shop-within-shops, or upon receipt of shipment for merchandise ordered through direct-to-consumer digital commerce sites. Such revenues are recorded net of estimated returns based on historical trends. Payment is due at the point of sale. Gift cards issued to customers by the Company are recorded as a liability until they are redeemed, at which point revenue is recognized. The Company also estimates and recognizes revenue for gift card balances not expected to ever be redeemed (referred to as "breakage") to the extent that it does not have a legal obligation to remit the value of such unredeemed gift cards to the relevant jurisdiction as unclaimed or abandoned property. Such estimates are based upon historical redemption trends, with breakage income recognized in proportion to the pattern of actual customer redemptions. Revenue from the Company's wholesale business is generally recognized upon shipment of products, at which point title passes and risk of loss is transferred to the customer. In certain arrangements where the Company retains the risk of loss during shipment, revenue is recognized upon receipt of products by the customer. Wholesale revenue is recorded net of estimates of returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances. Returns and allowances require pre-approval from management and discounts are based on trade terms. Estimates for end-of-season markdown reserves are based on historical trends, actual and forecasted seasonal results, an evaluation of current economic and market conditions, retailer performance, and, in certain cases, contractual terms. Estimates for operational chargebacks are based on actual customer notifications of order fulfillment discrepancies and historical trends. The Company reviews and refines these estimates on at least a quarterly basis. The Company's historical estimates of these amounts have not differed materially from actual results. Revenue from the Company's licensing arrangements is recognized over time during the period that licensees are provided access to the Company's trademarks (i.e., symbolic intellectual property) and benefit from such access through their sales of licensed products. These arrangements require licensees to pay a sales-based royalty which, for most arrangements, may be subject to a contractually-guaranteed minimum royalty amount. Payments are generally due quarterly and, depending on time of receipt, may be recorded as a liability until recognized as revenue. The Company recognizes revenue for sales-based royalty arrangements (including those for which the royalty exceeds any contractually-guaranteed minimum royalty amount) as licensed products are sold by the licensee. If a sales-based royalty is not ultimately expected to exceed a contractually-guaranteed minimum royalty amount, the minimum is generally recognized as revenue ratably over the respective contractual period. This sales-based output measure of progress and pattern of recognition best represents the value transferred to the licensee over the term of the arrangement, as well as the amount of consideration that the Company is entitled to receive in exchange for providing access to its trademarks. As of September 26, 2020, contractually-guaranteed minimum royalty amounts expected to be recognized as revenue during future periods were as follows:
|  | Contractually-Guaranteed Minimum Royalties(a)
|  | (millions)
Remainder of Fiscal 2021 |  | $ | 36.4 |
Fiscal 2022 |  | 68.4 |
Fiscal 2023 |  | 44.4 |
Fiscal 2024 |  | 26.6 |
Fiscal 2025 and thereafter |  | 1.1 |
Total |  | $ | 176.9 |
(a) | Amounts presented do not contemplate anticipated contract renewals or royalties earned in excess of the contractually-guaranteed minimums.
Disaggregated Net Revenues The following tables disaggregate the Company's net revenues into categories that depict how the nature, amount, timing, and uncertainty of revenues and cash flows are affected by economic factors for the fiscal periods presented:
|  | Three Months Ended
|  | September 26, 2020 |  | September 28, 2019
|  | North America |  | Europe |  | Asia |  | Other |  | Total |  | North America |  | Europe |  | Asia |  | Other |  | Total
|  | (millions)
Sales Channel(a): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 314.7 |  |  | $ | 174.2 |  |  | $ | 219.3 |  |  | $ | 21.1 |  |  | $ | 729.3 |  |  | $ | 457.9 |  |  | $ | 238.6 |  |  | $ | 233.3 |  |  | $ | 45.4 |  |  | $ | 975.2 |
Wholesale |  | 228.2 |  |  | 185.3 |  |  | 17.3 |  |  | 2.3 |  |  | 433.1 |  |  | 423.3 |  |  | 241.6 |  |  | 22.0 |  |  | 1.9 |  |  | 688.8 |
Licensing |  | — |  |  | — |  |  | — |  |  | 31.1 |  |  | 31.1 |  |  | — |  |  | — |  |  | — |  |  | 42.2 |  |  | 42.2 |
Total |  | $ | 542.9 |  |  | $ | 359.5 |  |  | $ | 236.6 |  |  | $ | 54.5 |  |  | $ | 1,193.5 |  |  | $ | 881.2 |  |  | $ | 480.2 |  |  | $ | 255.3 |  |  | $ | 89.5 |  |  | $ | 1,706.2 |
|  | Six Months Ended
|  | September 26, 2020 |  | September 28, 2019
|  | North America |  | Europe |  | Asia |  | Other |  | Total |  | North America |  | Europe |  | Asia |  | Other |  | Total
|  | (millions)
Sales Channel(a): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 457.3 |  |  | $ | 253.4 |  |  | $ | 385.8 |  |  | $ | 27.6 |  |  | $ | 1,124.1 |  |  | $ | 861.0 |  |  | $ | 457.1 |  |  | $ | 479.8 |  |  | $ | 94.9 |  |  | $ | 1,892.8 |
Wholesale |  | 250.7 |  |  | 226.8 |  |  | 22.7 |  |  | 2.8 |  |  | 503.0 |  |  | 739.6 |  |  | 383.9 |  |  | 34.1 |  |  | 3.7 |  |  | 1,161.3 |
Licensing |  | — |  |  | — |  |  | — |  |  | 53.9 |  |  | 53.9 |  |  | — |  |  | — |  |  | — |  |  | 80.9 |  |  | 80.9 |
Total |  | $ | 708.0 |  |  | $ | 480.2 |  |  | $ | 408.5 |  |  | $ | 84.3 |  |  | $ | 1,681.0 |  |  | $ | 1,600.6 |  |  | $ | 841.0 |  |  | $ | 513.9 |  |  | $ | 179.5 |  |  | $ | 3,135.0 |
(a) | Net revenues from the Company's retail and wholesale businesses are recognized at a point in time. Net revenues from the Company's licensing business are recognized over time.
Deferred Income Deferred income represents cash payments received in advance of the Company's transfer of control of products or services to its customers and is generally comprised of unredeemed gift cards, net of breakage, and advance royalty payments from licensees. The Company's deferred income balances were $13.2 million and $14.6 million as of September 26, 2020 and March 28, 2020, respectively, and were primarily recorded within accrued expenses and other current liabilities within the consolidated balance sheets. During the three-month and six-month periods ended September 26, 2020, the Company recognized $2.5 million and $5.9 million, respectively, of net revenues from amounts recorded as deferred income as of March 28, 2020. The majority of the deferred income balance as of September 26, 2020 is expected to be recognized as revenue within the next twelve months. Shipping and Handling Costs Costs associated with shipping goods to the Company's customers are accounted for as fulfillment activities and reflected as a component of selling, general, and administrative ("SG&A") expenses in the consolidated statements of operations. Costs of preparing merchandise for sale, such as picking, packing, warehousing, and order charges ("handling costs"), are also included in SG&A expenses. Shipping and handling costs billed to customers are included in revenue. A summary of shipping and handling costs for the fiscal periods presented is as follows:
|  | Three Months Ended |  | Six Months Ended
|  | September 26, 2020 |  | September 28, 2019 |  | September 26, 2020 |  | September 28, 2019
|  | (millions)
Shipping costs |  | $ | 12.2 |  |  | $ | 12.5 |  |  | $ | 20.6 |  |  | $ | 22.4 |
Handling costs |  | 33.3 |  |  | 39.5 |  |  | 59.8 |  |  | 75.7 |
Net Income (Loss) per Common Share Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shares by the weighted-average number of common shares outstanding during the period. Weighted-average common shares include shares of the Company's Class A and Class B common stock. Diluted net income (loss) per common share adjusts basic net income (loss) per common share for the dilutive effects of outstanding restricted stock units ("RSUs"), stock options, and any other potentially dilutive instruments, only in the periods in which such effects are dilutive. The weighted-average number of common shares outstanding used to calculate basic net income (loss) per common share is reconciled to shares used to calculate diluted net income (loss) per common share as follows:
|  | Three Months Ended |  | Six Months Ended
|  | September 26, 2020 |  | September 28, 2019 |  | September 26, 2020 |  | September 28, 2019
|  | (millions)
Basic shares |  | 73.5 |  |  | 76.7 |  |  | 73.3 |  |  | 77.4 |
Dilutive effect of RSUs and stock options |  | — |  | (a) | 1.2 |  |  | — |  | (a) | 1.5 |
Diluted shares |  | 73.5 |  |  | 77.9 |  |  | 73.3 |  |  | 78.9 |
(a) | Incremental shares of 0.9 million and 1.2 million attributable to outstanding RSUs were excluded from the computation of diluted shares for the three-month and six-month periods ended September 26, 2020, respectively, as such shares would not be dilutive as a result of the net losses incurred.
All earnings per share amounts have been calculated using unrounded numbers. The Company has outstanding performance-based and market-based RSUs, which are included in the computation of diluted shares only to the extent that the underlying performance or market conditions (i) have been satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the reporting period were the end of the related contingency period and the result would be dilutive. In addition, options to purchase shares of the Company's Class A common stock at an exercise price greater than the average market price of the common stock during the reporting period are anti-dilutive and therefore not included in the computation of diluted net income (loss) per common share. As of September 26, 2020 and September 28, 2019, there were 0.6 million and 1.1 million, respectively, of additional shares issuable contingent upon vesting of performance-based RSUs and upon exercise of anti-dilutive stock options, that were excluded from the diluted shares calculations. Accounts Receivable In the normal course of business, the Company extends credit to wholesale customers that satisfy defined credit criteria. Payment is generally due within 30 to 120 days and does not include a significant financing component. Accounts receivable is recorded at amortized cost, which approximates fair value, and is presented in the Company's consolidated balance sheets net of certain reserves and allowances. These reserves and allowances consist of (i) reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances (see the "Revenue Recognition" section above for further discussion of related accounting policies) and (ii) allowances for doubtful accounts. A rollforward of the activity in the Company's reserves for returns, discounts, end-of-season markdowns, operational chargebacks, and certain cooperative advertising allowances is presented below:
|  | Three Months Ended |  | Six Months Ended
|  | September 26, 2020 |  | September 28, 2019 |  | September 26, 2020 |  | September 28, 2019
|  | (millions)
Beginning reserve balance |  | $ | 184.0 |  |  | $ | 165.5 |  |  | $ | 204.7 |  |  | $ | 176.5 |
Amount charged against revenue to increase reserve |  | 72.6 |  |  | 168.6 |  |  | 83.9 |  |  | 282.5 |
Amount credited against customer accounts to decrease reserve |  | (88.2 | ) |  | (135.8 | ) |  | (122.1 | ) |  | (261.7 | )
Foreign currency translation |  | 3.5 |  |  | (2.8 | ) |  | 5.4 |  |  | (1.8 | )
Ending reserve balance |  | $ | 171.9 |  |  | $ | 195.5 |  |  | $ | 171.9 |  |  | $ | 195.5 |
An allowance for doubtful accounts is determined through analysis of accounts receivable aging, assessments of collectability based on evaluation of historical trends, the financial condition of the Company's customers and their ability to withstand prolonged periods of adverse economic conditions, and evaluation of the impact of current and forecasted economic and market conditions over the related asset's contractual life, among other factors. The Company's estimated allowance for doubtful accounts as of September 26, 2020 reflects impacts associated with COVID-19 business disruptions, which include declines in retail traffic, tourism, and consumer spending on discretionary items. A rollforward of the activity in the Company's allowance for doubtful accounts is presented below:
|  | Three Months Ended |  | Six Months Ended
|  | September 26, 2020 |  | September 28, 2019 |  | September 26, 2020 |  | September 28, 2019
|  | (millions)
Beginning reserve balance |  | $ | 55.9 |  |  | $ | 15.0 |  |  | $ | 71.5 |  |  | $ | 15.7 |
Amount recorded to expense to increase (decrease) reserve(a) |  | (8.9 | ) |  | 1.4 |  |  | (25.4 | ) |  | 1.5 |
Amount written-off against customer accounts to decrease reserve |  | (1.6 | ) |  | (0.4 | ) |  | (1.6 | ) |  | (1.4 | )
Foreign currency translation |  | 0.9 |  |  | (0.4 | ) |  | 1.8 |  |  | (0.2 | )
Ending reserve balance |  | $ | 46.3 |  |  | $ | 15.6 |  |  | $ | 46.3 |  |  | $ | 15.6 |
(a) | Amounts recorded to bad debt expense are included within SG&A expenses in the consolidated statements of operations.
Concentration of Credit Risk The Company sells its wholesale merchandise primarily to major department stores, specialty stores, and third-party digital partners around the world, and extends credit based on an evaluation of each customer's financial capacity and condition, usually without requiring collateral. In the Company's wholesale business, concentration of credit risk is relatively limited due to the large number of customers and their dispersion across many geographic areas. However, the Company has three key wholesale customers that generate significant sales volume. During Fiscal 2020, the Company's sales to its three largest wholesale customers accounted for approximately 18% of total net revenues. Substantially all of the Company's sales to its three largest wholesale customers related to its North America segment. As of September 26, 2020, these three key wholesale customers constituted approximately 29% of total gross accounts receivable. Inventories The Company holds inventory that is sold in its retail stores and digital commerce sites directly to consumers. The Company also holds inventory that is sold through wholesale distribution channels to major department stores, specialty stores, and third-party digital partners. Substantially all of the Company's inventories consist of finished goods, which are stated at the lower of cost or estimated realizable value, with cost determined on a weighted-average cost basis. Inventory held by the Company totaled $887.0 million, $736.2 million, and $1.013 billion as of September 26, 2020, March 28, 2020, and September 28, 2019, respectively. Implementation Costs Incurred in Cloud Computing Arrangements For cloud computing arrangements that are a service contract, the Company capitalizes certain implementation costs incurred (depending on their nature) during the application development stage of the related project, and expenses costs during the preliminary project and post-implementation stages as they are incurred. Capitalized implementation costs are expensed on a straight-line basis over the reasonably certain term of the hosting arrangement, beginning when the module is ready for its intended use. The Company's cloud computing arrangements relate to various areas, including certain retail store and digital commerce operations, and corporate and administrative functions. Capitalized amounts related to such arrangements are recorded within prepaid expenses and other current assets and within other non-current assets in the consolidated balance sheets (see Note 6). Capitalized implementation costs expensed during the three-month and six-month periods ended September 26, 2020 were $1.2 million and $3.7 million, respectively, and $0.8 million and $1.6 million during the three-month and six-month periods ended September 28, 2019, respectively, and were recorded in SG&A expenses in the consolidated statements of operations. See Note 4 for discussion of the Company's adoption of a new accounting standard related to implementation costs incurred in connection with cloud computing arrangements that are a service contract as of the beginning of Fiscal 2021. Derivative Financial Instruments The Company records derivative financial instruments on its consolidated balance sheets at fair value. Changes in the fair value of derivative instruments that are designated and qualify for hedge accounting are either (i) offset through earnings against the changes in fair value of the related hedged assets, liabilities, or firm commitments or (ii) recognized in equity as a component of accumulated other comprehensive income (loss) ("AOCI") until the hedged item is recognized in earnings, depending on whether the instrument is hedging against changes in fair value or cash flows and net investments, respectively. Each derivative instrument that qualifies for hedge accounting is expected to be highly effective in offsetting the risk associated with the related exposure. For each instrument that is designated as a hedge, the Company documents the related risk management objective and strategy, including identification of the hedging instrument, the hedged item, and the risk exposure, as well as how hedge effectiveness will be assessed over the instrument's term. To assess hedge effectiveness at the inception of a hedging relationship, the Company generally uses regression analysis, a statistical method, to compare changes in the fair value of the derivative instrument to changes in the fair value or cash flows of the related hedged item. The extent to which a hedging instrument has been and is expected to remain highly effective in achieving offsetting changes in fair value or cash flows is assessed by the Company on at least a quarterly basis. Given its use of derivative instruments, the Company is exposed to the risk that counterparties to such contracts will fail to meet their contractual obligations. To mitigate such counterparty credit risk, the Company has a policy of only entering into contracts with carefully selected financial institutions based upon an evaluation of their credit ratings and certain other factors, adhering to established limits for credit exposure. The Company's established policies and procedures for mitigating credit risk from derivative transactions include ongoing review and assessment of its counterparties' creditworthiness. The Company also enters into master netting arrangements with counterparties, when possible, to further mitigate credit risk. In the event of default or termination (as such terms are defined within the respective master netting arrangement), these arrangements allow the Company to net-settle amounts payable and receivable related to multiple derivative transactions with the same counterparty. The master netting arrangements specify a number of events of default and termination, including the failure to make timely payments. The fair values of the Company's derivative instruments are recorded on its consolidated balance sheets on a gross basis. For cash flow reporting purposes, proceeds received or amounts paid upon the settlement of a derivative instrument are classified in the same manner as the related item being hedged, primarily within cash flows from operating activities for its forward foreign exchange contracts and within cash flows from investing activities for its cross-currency swap contracts, both as discussed below. Cash Flow Hedges The Company uses forward foreign currency exchange contracts to mitigate its risk related to exchange rate fluctuations on inventory transactions made in an entity's non-functional currency. To the extent designated as cash flow hedges, related gains or losses on such instruments are initially deferred in equity as a component of AOCI and are subsequently recognized within cost of goods sold in the consolidated statements of operations when the related inventory is sold. If a derivative instrument is dedesignated or if hedge accounting is discontinued because the instrument is not expected to be highly effective in hedging the designated exposure, any further gains (losses) are recognized in earnings each period within other income (expense), net. Upon discontinuance of hedge accounting, the cumulative change in fair value of the derivative instrument recorded in AOCI is recognized in earnings when the related hedged item affects earnings, consistent with the hedging strategy, unless the related forecasted transaction is probable of not occurring, in which case the accumulated amount is immediately recognized within other income (expense), net. Hedges of Net Investments in Foreign Operations The Company periodically uses cross-currency swap contracts to reduce risk associated with exchange rate fluctuations on certain of its net investments in foreign subsidiaries. Changes in the fair values of such derivative instruments that are designated as hedges of net investments in foreign operations are recorded in equity as a component of AOCI in the same manner as foreign currency translation adjustments. In assessing the effectiveness of such hedges, the Company uses a method based on changes in spot rates to measure the impact of foreign currency exchange rate fluctuations on both its foreign subsidiary net investment and the related hedging instrument. Under this method, changes in the fair value of the hedging instrument other than those due to changes in the spot rate are initially recorded in AOCI as a translation adjustment and are amortized into earnings as interest expense using a systematic and rational method over the instrument's term. Changes in fair value associated with the effective portion (i.e., those due to changes in the spot rate) are recorded in AOCI as a translation adjustment and are released and recognized in earnings only upon the sale or liquidation of the hedged net investment. Fair Value Hedges Changes in the fair value of a derivative instrument that is designated as a fair value hedge, along with offsetting changes in the fair value of the related hedged item attributable to the hedged risk, are recorded in earnings. To the extent that the change in the fair value of the hedged item does not fully offset the change in the fair value of the hedging instrument, the resulting net impact is reflected in earnings within the income statement line item associated with the hedged item. Undesignated Hedges The Company uses undesignated hedges primarily to hedge foreign currency exchange rate risk related to third-party and intercompany balances and exposures. Changes in the fair value of undesignated derivative instruments are recognized in earnings each period within other income (expense), net. See Note 12 for further discussion of the Company's derivative financial instruments. Refer to Note 3 of the Fiscal 2020 10-K for a summary of all of the Company's significant accounting policies.

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