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SECURITIES AND EXCHANGE COMMISSION

Commission file number 000-21543

Registrant’s telephone number, including area code: (763) 391-4000

Common stock, $.01 par value

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x         No o

     Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Act.)    Yes x         No o

     The aggregate market value of the voting common equity held by non-affiliates of the registrant was $44,896,383 based on the closing sale price for the common stock on April 21, 2003 as reported by the Nasdaq National Market. For purposes of determining such aggregate market value, all executive officers and directors of the registrant are considered to be affiliates of the registrant, as well as shareholders holding 10% or more of the outstanding common stock as reflected on Schedules 13D or 13G filed with the registrant. This number is provided only for the purpose of this report on Form 10-K and does not represent an admission by either the registrant or any such person as to the status of such person.

     The number of shares outstanding of the registrant’s common stock, $.01 par value, was 20,613,085 at April 21, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive Proxy Statement of Wilsons The Leather Experts Inc. for the Annual Meeting of Shareholders to be held on June 11, 2003 (the Proxy Statement), which will be filed within 120 days after the registrant’s fiscal year ended February 1, 2003, are incorporated by reference into Part III of this Annual Report on Form 10-K (Form 10-K). (The Compensation Committee Report, the Audit Committee Report, and the stock performance graph contained in the registrant’s Proxy Statement are expressly not incorporated by reference in this Form 10-K.)

WILSONS THE LEATHER EXPERTS INC.

FORM 10-K

For the fiscal year ended February 1, 2003

TABLE OF CONTENTS

PART I

      When we refer to “we,” “our,” “us” or “Wilsons Leather,” we mean Wilsons The Leather Experts Inc. and its subsidiaries, including its predecessor companies. Unless otherwise indicated, references to our fiscal year mean the year ended on the Saturday closest to January 31, which for the most recent fiscal year end was February 1, 2003, and references to 2003, 2002, 2001 and 2000 refer to the fiscal year ending January 31, 2004, and the fiscal years ended February 1, 2003, February 2, 2002, and February 3, 2001, respectively.

Item 1.     Business

Disclosure Regarding Forward-Looking Statements

      The information presented in this Form 10-K under the headings “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Such forward-looking statements are based on the beliefs of our management as well as on assumptions made by and information currently available to us at the time such statements were made. Although we believe these statements are reasonable, readers of this Form 10-K should be aware that actual results could differ materially from those projected by such forward-looking statements as a result of a number of factors, many of which are outside of our control, including those set forth under “—Risk Factors,” beginning on page 10 of this Form 10-K. Readers of this Form 10-K should consider carefully the factors listed under “—Risk Factors,” as well as the other information and data contained in this Form 10-K. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements set forth under “—Risk Factors” in this section. When used in this Form 10-K, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as they relate to us, are intended to identify such forward-looking statements.

Overview

      We are the leading specialty retailer of quality leather outerwear, accessories and apparel in the United States. Our multi-channel store locations are designed to target a broad customer base with a superior level of customer service. Through our worldwide leather sourcing network and in-house design capabilities, we are able to consistently provide our customers high-quality, fashionable merchandise at attractive prices. Our business structure results in shorter lead times, allowing us to react quickly to popular and emerging fashion trends and customer preferences, rapidly replenish fast-selling merchandise and minimize fashion risk.

      As of February 1, 2003, we operated a total of 618 stores located in 45 states, the District of Columbia, and Canada, including 483 mall stores, 110 outlet stores and 25 airport locations. Each year we supplement our permanent stores with temporary seasonal stores during our peak selling season, which totaled 284 in 2002. Our mall stores average approximately 2,600 total leased square feet and feature a large assortment of classic and contemporary leather outerwear, accessories and apparel. Our outlet stores are operated primarily under the Wilsons Leather Outlet name, average approximately 3,900 total leased square feet and offer a combination of clearance merchandise from our mall stores, special outlet-only merchandise and key in-season goods. Our airport stores average approximately 700 total leased square feet, feature travel-related products as well as leather accessories and provide us the opportunity to showcase our products and the Wilsons Leather brand to millions of potential customers each year in some of the busiest airports. Our proprietary labels, including M. Julian®, Maxima®, Pelle Studio® and Wilsons Leather^TM, are positioned to appeal to identified customer lifestyle segments.

      Wilsons House of Suede, Inc., one of our predecessor companies, was founded in the late 1940s and developed a strategy to sell quality leather products at affordable prices to the average consumer. In 1982, CVS New York, Inc. (“CVS”) acquired Wilsons House of Suede, Inc. Following this acquisition, CVS engaged in other strategic acquisitions, and in 1988 acquired Bermans The Leather Experts, Inc. to become a leading specialty retailer of leather apparel and accessories with expertise in all areas of the leather apparel business. By the time CVS acquired Georgetown Leather Design in 1993, our predecessor companies had

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Discontinued Operations

      On October 31, 2000, we acquired the El Portal Group, Inc. (“El Portal”), a specialty retailer of premium travel products and accessories with 38 stores based in Las Vegas, Nevada. On April 14, 2001, we acquired Bentley’s Luggage Corp., including its subsidiary, Florida Luggage Corp., (collectively “Bentley’s”) a specialty retailer of travel products with 106 stores based in Miami, Florida. We operated these two chains for 24 and 19 months, respectively with unsatisfactory financial results, and as a result, on November 19, 2002, we announced the liquidation of all 135 stores operated by El Portal and Bentley’s (the “Travel Subsidiaries”). The Travel Subsidiaries business is classified as discontinued operations in our consolidated financial statements and in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Fiscal years 2001 and 2000 have been reclassified to present discontinued operations for the Travel Subsidiaries. As a result of the significance of these reclassifications related to our discontinued operations for the Travel Subsidiaries, our 2001 and 2000 consolidated financial statements, which were previously audited by other independent auditors who have ceased operations, have been re-audited by our current independent auditors.

Restatement

      During 2001, the Company recorded a pre-tax, net adjustment of $5.4 million to cost of sales that related to $11.1 million of under-absorbed freight charges offset by reserve reversals of $5.7 million. In 2002, upon further analysis of this adjustment, and in consultation with KPMG, we determined that the timing of the recording of this adjustment in 2001 was incorrect and that $5.3 million of the $5.4 million net adjustment should have been reflected in our 2000 consolidated financial statements. Additionally, $3.2 million and $1.1 million of the $5.7 million reserve reversals should have been classified as an adjustment to tax expense and selling, general and administrative expense, respectively, rather than cost of goods sold.

      The effect of the correction of this error was to increase income from continuing operations and diluted earnings per share from continuing operations in 2001 by $3.2 million and $0.19, respectively, and to decrease income from continuing operations and diluted earnings per share from continuing operations in 2000 by $1.5 million and $0.09, respectively.

      The consolidated financial statements as of February 2, 2002, and February 3, 2001, and for the fiscal years ended February 2, 2002, and February 3, 2001, and notes thereto included in this Annual Report on Form 10-K have been restated to include the effects of the change of the timing of recording the adjustment for under-absorbed freight charges and the associated reclassifications.

Business Strategy

      The elements of our business strategy combine to create an assortment of labels and products that appeal to consumers from a broad range of socio-economic, demographic and cultural profiles. We completed internal market research during 2002, which took an even closer look at our demographics. We expect that our strategy will continue to position us as the leading specialty retailer of quality leather outerwear, accessories and apparel. The principal elements of our business strategy include:

      Pursue Multiple Store Formats. Our distribution network of multiple store formats allows us to specifically tailor our stores with a wide selection of merchandise at multiple price points and to optimize raw materials usage, inventory flow and sales across all channels. We operate our Wilsons Leather selling formats in malls, outlet centers, airports and an e-commerce site. We also operate temporary seasonal stores in malls and outlet centers during our peak selling season to complement our existing store base. These units provide us with opportunities to drive incremental sales, test new markets and further strengthen the Wilsons Leather brand nationally.

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      Grow Brand Recognition. Our goal is to promote our proprietary labels and enhance their recognition among consumers. Our proprietary labels target specific customer segments: (i) M. Julian® and Maxima® for fashion-savvy young men and women, (ii) Pelle Studio® for the more sophisticated, confident and fashion-aware segment and (iii) Wilsons Leather^TM for the classic, traditional, value-conscious segment. In addition to our national network of stores, we promote the Wilsons Leather brand through a variety of in-store visual presentations, radio and magazine advertising, direct mail promotions and on our e-commerce site. Reflecting our strength as a mass-market retailer, we are expanding the power of the Wilsons Leather brand by focusing our marketing and merchandising on classic and contemporary styles designed to reach a much broader market. We will continue to market to our customers’ ethnic backgrounds, ages, income levels and fashion requirements through our unique lifestyle sub-brands.

      Target Core Customer Base. Our primary focus this year will be on using our distinct proprietary labels to tailor price points and levels of sophistication to grow with customers throughout their lives. We are targeting customers 18-45 years old and we are working to ensure that we are assorting our stores with the products they want. Our recently completed market research indicated that our high-potential, high-volume core customer is 26-37 years old.

      Increase the Merchandising of Accessories. We are focused on maintaining our accessories business within our retail concepts with an added emphasis on handbags. To support our objective of generating demand and sales throughout the year, we have expanded the accessories assortment in our stores. Through the development of new product styles and other merchandising activities, we plan to utilize accessories as an additional way of attracting customers into our stores. These products complement our outerwear and apparel selection and lead to higher “add-on” sales. Our accessories business has proven to be less seasonal and is consistently one of the highest margin categories in our stores.

      Capitalize on Worldwide Sourcing Network. We are able to leverage our worldwide sourcing network to benefit our Wilsons Leather stores. Our staff of in-house designers combines industry experience with the latest fashion trends to produce product lines that are both classic and fashion-forward. We have established strong relationships with suppliers globally and our design team works closely with our suppliers to ensure seamless development of leather colors and finishes. We have a staff of 45 professionals in Pacific Rim countries and South America to ensure that our designs are manufactured quickly with consistent, high-quality standards. Our control of design and sourcing results in shorter lead times than our competitors, reducing inventory requirements and fashion risk and permitting in-season reorders.

      Continue to Enhance Operations. In 2002, we consolidated our marketing, merchandising and sales functions under one fully integrated organization to accelerate improvements in the core business and maximize operating margins. In 2003, we intend to focus on improving store productivity, maximizing sales volume and margins in our various channels and enhancing our supply chain process to strategically control inventory levels. Our focus is on improving store productivity rather than aggressive store growth. We will continue to look for opportunities to close stores that are not meeting profitability targets. During 2003, we will continue to streamline our organization and look for alternative strategies to run our business more efficiently.

      Improve Balance Sheet and Enhance Cash Position. We are focused on conserving cash through tight expense controls throughout the organization, improved inventory management and limiting new store growth until we improve the profitability of our current store base. Capital expenditures for 2003 are capped at $10 million, with the majority of the funds being allocated to certain fully obligated store remodels.

      Rationalize Store Count. We had a net reduction of one store in 2002. In 2003, we will preserve capital and plan to limit store growth. We plan to open 10-15 stores where we have pre-existing commitments and close approximately 40-45 other locations for a net reduction of 30-35 stores. Beyond 2003, we will continue to analyze our store profitability on a market-by-market basis and will work to close unprofitable stores. We will opportunistically open stores in markets where we see growth prospects.

      Emphasize Quality of Product and Value to Customer. Our reputation was built by offering consumers a large selection of high-quality leather products at attractive prices. We are improving our quality, simplifying our store merchandise presentation and offering fashion-right products for our core customer group.

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      Tighten Store Assortment. We are tightening our store assortment and stringently controlling inventories via an accelerated supply chain improvement initiative. We plan to reduce our outerwear stock keeping unit (SKU) count by approximately 50% this fall. We will do this by emphasizing key styles in each of our store formats. This will allow the best products to have a prominent presence in our stores. We plan to more effectively utilize our outlet channel to clear mall merchandise in order to keep the stores fresh and up to date.

Product Design and Merchandising

      Our mission is to tailor our merchandising to a targeted customer base by offering a broad selection of high-quality merchandise at attractive prices. Our merchandising staff, including buyers and designers, continuously monitors emerging trends and changing consumer preferences and utilizes information provided by our customers to ensure that we maintain a consistent and up-to-date selection of products. To further minimize our inventory risk and maximize our sales performance, our merchandising team utilizes an advanced management information system to test new merchandise in many of our stores before making large commitments and purchase orders with our suppliers.

      Our stores offer a large selection of leather outerwear, accessories and apparel. Accessories consist primarily of gloves, handbags, wallets, briefcases, computer cases, planners, belts, at attractive prices. We offer more than 3,500  styles of leather outerwear, accessories, and apparel throughout our Wilsons Leather stores.

      We believe that our integrated worldwide sourcing and in-house design capabilities enable us to gain numerous competitive advantages. As new market trends are identified, we make merchandise design decisions to ensure that key features of fashion merchandise are incorporated in future designs. Our in-house design staff will create and develop merchandise designs to ensure a consistent quality, theme and image. As part of the design process, we also consider the anticipated retail prices and profit margins of the merchandise, the availability of leather and raw materials and the capabilities of the factories that will manufacture the merchandise.

      Some key elements for merchandising our stores include:

	•	identifying customer lifestyle segments based on demographic factors such as age, fashion awareness, purchasing behavior, income, location and ethnicity;
	•	building strong brand recognition and utilizing our proprietary labels to target customer lifestyle segments;
	•	driving accessories growth through new styles designed to attract customers into our stores; and
	•	actively managing pricing to maintain value for the largest possible customer base.

      We believe that the name and reputation of the Wilsons Leather brand assures customers they are purchasing high-quality and fashionable merchandise. Over 90 percent of the merchandise in our stores is designed and sold under our proprietary labels: M. Julian®, Maxima®, Pelle Studio®, and Wilsons Leather^TM.

      Each of our labels is supplemented with in-store promotions and visual presentations to further emphasize customer lifestyle segmentation. We additionally offer a limited selection of other designer brands such as Kenneth Cole® and Andrew Marc® in our stores to highlight the value of our proprietary labels.

      The following table sets forth the percentages of net sales by major merchandise category from 2000 to 2002:

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Sourcing and Quality Control

      Throughout our history we have developed strong and long-standing relationships with our manufacturers and tanneries. In 2002, approximately 85.8% of our leather garments and 52.4% of our accessories were manufactured by 41 independently owned manufacturing facilities in China. We purchased 3.6 million leather garments and 8.9 million accessories in 2002. Our relationships, coupled with our significant purchasing power, enable us to achieve economies of scale and ensure that we can consistently obtain sufficient manufacturing capacity when needed.

      We believe that our extensive knowledge of the world’s leather markets is critical in mitigating price fluctuations in the cost of raw leather during times of high volatility. While we do not normally obtain possession of a significant level of raw material, we assist tanneries and factories in sourcing raw material from all over the world, ensuring broad access to the marketplace. However, from time to time we purchase supplies of leather to take advantage of market opportunities to ensure reserves of quality materials at acceptable prices. Raw leather is primarily sourced in Italy and South Korea, with additional product sourced from South America, Australia and New Zealand. Our buying strategies coupled with our expertise in leather development enable us to purchase entire lots of raw leather and use varying grades of raw leather in different products, providing us with significant price advantages.

      Our sourcing infrastructure and strong relationships with our suppliers allow us to effectively control merchandise production without owning manufacturing facilities. Our designers and buyers work closely with our sourcing team to identify and develop leather colors and finishes. We have a staff of 45 professionals located in China, India, Hong Kong, South Korea, Thailand and South America who are primarily responsible for overseeing the production and quality control process in overseas factories and are supervised by the sourcing team at Wilsons Leather’s headquarters in Minnesota. Their responsibilities include inspecting leather at the tanneries, coordinating the production capacity, matching product samples to our technical specifications and providing technical assistance and quality control through inspection in the factories.

      Our merchandising department works closely with our overseas personnel to coordinate order fulfillment. We have consistently maintained our merchandise production cycle at approximately 90 days. We believe our merchandise production cycle is shorter than our competitors, and allows us to control our production needs and reorder faster-selling merchandise during our peak selling season. Our management believes that this strategy results in more effective and efficient inventory management and gives us the ability to tightly control our inventory and manage production as the business climate changes, thus reducing our need for markdowns on merchandise at the end of our peak selling season.

Store Formats and Locations

      As of February 1, 2003, we operated 618 retail stores located in 45 states, the District of Columbia, and Canada, including 483 mall stores, 110 outlet stores and 25 airport locations. We regularly supplement our permanent mall stores with temporary seasonal stores during our peak selling season. From October 2002 through January 2003, we operated 284 seasonal stores.

      Our e-commerce site at www.wilsonsleather.com offers leather outerwear, accessories and apparel, as well as company background and financial information.

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      Site Selection. We utilize a detailed process to identify favorable store locations in existing or new markets. Within each targeted market, we identify potential sites for new and replacement stores by evaluating market dynamics. Our site selection criteria include:

	•	customer segment and demographic data derived from our point-of-sale network and outside sources;
	•	information relating to population density in concentric circles surrounding the mall;
	•	the performance of past seasonal stores within the mall;
	•	the proposed location within the mall; and
	•	projected profitability, cost, return on investment and cash-flow objectives.

      Our cross-functional review committee approves proposed store projects, including new sites and lease renewals. We continually evaluate our stores to assess the needs for remodeling or the timing of possible closure based on economic factors. We use our knowledge of market areas and rely upon the familiarity of our name and our national reputation with landlords to enhance our ability to obtain prime store locations and negotiate favorable lease terms.

      We maintain a dedicated staff with extensive experience in opening and closing our temporary seasonal stores, which we leverage in our other concepts. Once a seasonal store site is selected and the lease is executed, we are able to open a store within three days after we are allowed to occupy the space in the mall.

      Our real estate, store planning and executive management teams continually analyze the performance and profitability of our stores and markets to assess the potential for new and replacement stores and to identify underperforming stores. We estimate that our average net investment in our Wilsons Leather permanent mall stores is approximately $261,000 and approximately $288,000 for our outlet stores, including inventory and capital investment, net of landlord contributions. In 2003, we expect these stores to generate a three-year internal rate of return of approximately 15% and have an average discounted payback period of two-to-three years. We cannot ensure that our future store openings will have similar results to those experienced in the past.

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      The following chart highlights the number of stores, by format, opened in each of the last three years: