VFC - Earnings call transcript Q3 2017

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Operator

Greetings, and welcome to VF Corporation Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode, a question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Joe Alkire, Vice President of Investor Relations. Thank you, you may begin.

Joe Alkire

to third welcome call. XXXX and morning, VF quarter Corporation's earnings Good on forward-looking make call Participants will statements. today's materially. actual statements These are to cause to based and differ results expectations are on subject that uncertainties current could SEC. These uncertainties are in documents with filed regularly detailed the noted, the refer on Unless was this press will release amounts today's which terms, our and morning. adjusted that in currency-neutral that we call participants otherwise to be defined in issued they our adjusted accurately and as discussion currency-neutral true because performance represent more in operational of believe use the We our results lead we amounts underlying numbers and business.

included us view You can the may amounts useful measures of identify which also management's which to all press hear of to is adjusted investors. U.S. to refer be with found in items release, GAAP. GAAP in Reconciliations and quantify are provide tables and why accordance in currency-neutral amounts, excluded information the and this reported financial supplemental

these Group its licensing VF business. plan LSG quarter and as for the brand Accordingly, comprises of LSG completed businesses. divestiture, entirely Company Sports executed Company held second of conjunction classified which the In the exit Licensed the presented. the to During XXXX, in with periods JanSport sale all or the of liabilities business, its and the of for collegiate has sale these results included assets operations the the businesses and businesses LSG discontinued

the continuing sale results operations today’s completed held presented. has third as of noted, are its presented the and Brands classified liabilities During discontinued and for Unless the based Brands call sale, of assets Contemporary businesses. for in periods of company the on on the otherwise included the operations. XXXX, Contemporary all Accordingly, company quarter results businesses

and call today’s Scott Financial Officer, Rendle; Chief me and Joining Steve will be Executive Roe. President Officer, Chief VF’s on

prepared we’ll the Steve? call questions. our for Following open remarks,

Steven Rendle

everyone. call. conference good Welcome third our and Joe, morning, Thanks to quarter XXXX

core across based direct-to-consumer, big than bit growth three expected. our With Workwear. quarter brands strength third stronger results were a and engines. Our broad International,

driving and pillars portfolio. accelerated investment focus strategies key value our and XXXX our growth Our creation in across support of of

that are retail sometimes We earlier we dynamic the early while this consumer environment world and of journey strategic this connect and to the in strong embedded around growth began more fuel we are confident rapidly brands predict, landscape is year the capabilities difficult changing our global our plan to and phases accelerated consumers strategic with choices of the in deeply enable diverse portfolio growth. will and

X% momentum to increased revenue quarter our continued as accelerate. Third

reminder, fall to reduced a timing the the which call. due of As during we our in our by was rate growth last about quarter shift X% our during order book, discussed

big Face quarter. three the Timberland, Vans, combined rate grew X% brands, and North of The in a at Our

with digital. international Direct-to-consumer in XX% in business grew XX% growth X% growth increased Our than in growth China. XX% and XX%, Europe including more

our Our power our raising at of year, and excluding again XX in in increasing our confidence additional in strategy full driver VF $XX growth. now we is million to the diversified on performance in discipline initial additional the ahead outlook, relative our Workwear the accounts the our year dividend basis in increased grew investment improved quarter, during we points $XX XX% Gross February. business digital million XXX for next range announced and outlook impact for wholesale the a fuel XXth more basis committing margin a key Combined years XX%. than the in points same negative growth a strong to we FX. to quarter with committed the $XX place have in focus of July, from and an our time, once July. outlook EPS balance provided $X.XX Based we are we in XX% third This row, Adjusted demonstrates of the million our the behind growth. year gross and of continued the model strength increased margin quarter. The the quality five our while of

We more and centric. evolve become brands consumer continue and to our retail to will VF

and life in to beginning beginning stress results. to see I that are You comes our

portfolio We we made will not brand creation our align catalysts years several ourselves we welcomed you know, you to forward And reshape on see ignite VF into with aspirations. accelerated we the next Xnd. the and before on family progress. updating to We growth formally finished. during look our and Williamson-Dickie specific in to far getting financial results, finally, XXXX, thus our unique progress but value We’ve are many October and as

thank the teams matter a extend integration those teams sincere I and a in support you. have transaction. collaborative Our announced worked since that The them, we

lets While, I within our brands, quarter deeper teams that decreased pleased by creation and shift with order have during Sportswear. it’s with With five our be the call. synergies, confident and brand, within VF. that the great discussed the revenue more primarily even dive into it’s early, part Face people see book prior global more existing Williamson-Dickie Workwear North of platform, we expected to couldn’t third about value chemistry results our Workwear the driven timing as and top review the The X% Beginning our we

launched decrease were have than the basis and was at down would wholesale growth normalized mid-single with a the more single by more Americas Climbing influenced the partnered increased As was shift, wholesale world was North climbing down inspire Walls increased accessories lifestyle, however products piece and as August and fall brand climb low its digit Without gyms book revenue XX% in global increased performance, new Meant as high DXC In on such athletes revenue order in and around Face expected lightweight rate for growth Turning a growth to generated product than transition quarter. and at order with digital, rainwear from to and to X%. a results low shift, expected solid strong climbing, heights Are rate. the the including sport spirit the revenue The XX% explore X% high of growth the mid-teen a double-digit X% revenue and comps Americas digit growth digit of campaign with momentum more about By the unite DXC communities the in of book single XX% in shift. intended campaign brand’s continued excluding Europe the Face embodiment is which by digital more outdoors. wholesale including than global The in DXC. In exploration declined region, of growth teen North growth mid offset wholesale in XX%, to in was perfect to The teen our

for Face brand was the urban results strong North now with remains product XX% business have categories, all than digital Consumer across strong double in on across in and through the exploration product exceptionally select more in particularly building been growing Our our exceptional. demand Europe initial Asia growth region success and territories markets across the digit sell quarter. The major

we XXXX. momentum the in growth further region we broad-based have accelerate the Given as the we and into expect move to quarter into fourth

growth Asia up expected, XX% at and increased with returned As DXC low rate at digit almost a was X%. rate. growth to single a mid-teen and digital wholesale increased from

start our from urban off is fall season the a product Our solid GORE exploration territory. and with strength jacket the to

brand full accelerated as North end be to remains China expect fourth is mid-single the highly as outlook outdoor market There Face into we the to we expect move the to year digit we strong in promotional for of range. no quarter. growth brand growth the at The Now continue our and is our change high

including DXC increased channels all growing Now XX% the XX% regions, mid-single growth and to Americas including XX% almost digital brand and exceeded consistency internationally. school The increased with record ongoing growth is and performance old with momentum and our in more in offer achieved of around price. congratulations designs Americas more comp through than largest with across the grew brand's our Europe increased fastest than quarter. growth growth at Vans our Revenue checkerboard to growth higher Pacific strength Revenue black XX% depth Vans categories. and brand which more XX% Vans icons the than behind energy through XX% franchises. in Wholesale all the the world. XX%. the business. setting to sell We and period digit nearly continues quarter. new remarkable. expectations and franchise our and big in and Vans, in in about XX%, Asia the truly the with XX% Ultra team launch average selling increased range and sell across even in School DXC to with grow wholesale, grew product product XX% XX% strong doubled the Back white The The

our accelerated to helping Europe, in our X.X on launched also region. We digital platform growth in platform Customs the ignite

platform Customs all showcases you about, created build is which quarter, The consumers communities with the product everything General pair it as This and well Vans store, samples exemplifies custom opened During space the new need with aspirational of as Vans Vans self-expression in what Brooklyn, a serves. its elevated Vans. fabric to a inspiring, else boutique in

this growth may of wondering you Some of for Vans is level be sustainable. whether

are brand all we inventory been assortment shape with brand just is product ever inventory great and we management, our high. in largest it respect levels me and is the Let across than Retail to say, disciplined has in growth confidence The planning. stronger and categories. have regions, broad-based remain with channels merchandising

Vans again is a this over we year-over-year difficult. past move be into While years, brand going at the XXXX, for as rate. mid-teen brand has growth a grown comparisons we see trajectory Then the six the strong to

order expect So, of quarter the Vans X% in XXXX, the growth we range. the the Face from low of the brand. now well Based that have Timberland, Switching declined comparisons of the driven up XX% fourth as our fall book timing in strength at impacted always performance, third global expectations the our for difficult. shift to as the same outlook by North somewhat prior growth on end increased double-digit The quarter, high revenue brand for been about

XX% high reduced the DXC, in decline wholesale. X% expected single in in growth the revenue than X%. offset mid-single digit As a including by brand more revenue timing than growth in digital quarter, Timberland the digit by approximately more was declined shift in Americas global

diversification at normalized previously as strategy digit in basis, product single low digit was decline From single our DXC a mentioned. However, wholesale on increased rate to in to digit perspective, hold. low begins a by order non-classics timing rate. single a take offset a growth book business high High our shift at the revenue double-digit a due increased

Our brand revenue and low DXC increased Europe, single were the of a was XX% driven wholesale. new timing book. growth our to And XX% consumers SensorFlex XX% continues our saw business in PRO more such appeal more remained platforms strong growth women's and influenced with product order growth growth X% which and Timberland digit fall In to in in also Results than growth. by shift mid-teen with as Timberland than DXC. AeroCore also very by in

business digital very locally our Our than new results from with more designed increasing strong was platform. strong women's XX%

Our with across region in momentum digit teen driven double-digit X% across the was broad-based both is a growth business shipments. Asia and high single decline by Timberland and footwear growth growth declined our Mid-single offset DXC the apparel. of timing low wholesale. in by low strong to

outerwear which includes growth high change supported is Our by for Jacket There quarter. growth digit our brand fourth single outlook campaign. single was to digit MXX the particularly XXXX, the the Timberland in low no strong in

in high-teen X% Moving weakness to and Asia declined Europe because Americas during the with declined wholesale. increased XX% increased of the in mid-single brand, Revenue growth and in in revenue digit India. the growth X% in Wrangler X% DXC the revenue ongoing while quarter

brand business sell-through that partners, as Wrangler remains initiatives third well term. Our strength success. in U.S. the the we which early are digital the our in quarter in wrangler.com said the than third at quarter-to-quarter to quarter late continue improved our however, wholesale key results of expectations, our expect and From near That the in line confidence a perspective, us a in across for business, we’re own by low giving Jeanswear the signs increased retail visibility digital were more customer our place put showing XX%. seen variability with as

continue and stores efforts channels, brand may ongoing the retail, new also more Our to into such as gain elevate extend traction. specialty department to deeply

our and exceptionally the outlook done [indiscernible] designer our There fourth have Turning hopefully collaboration features our XXXX Wrangler Herald capsules with in low-single digit these collection, featured ready release no And from in unique to front to pieces, to some brand born celebrated Max. includes is collaborations which it’s Wrangler's are in Peter heritage limited product, our store brand, of well prominently a change the which Square. for Wrangler quarter. growth rich

Americas a wholesale was offset Now continues was pressures low-double-digit business with and decline by The the Revenue growth to brand to consolidation. declined as channel than in the wholesale. ongoing Lee grapple X% Lee XX% in as down brand. DXC more XX%,

our up denim strong is at was Comfort Extreme performing In khakis Asia, Xtreme business XX% a DXC, in in rate than was by more growth business from rate. Denim While, and and revenue remains a challenged, well Lee our X% weakness with products. including in India. our Europe driven mid-single-digit men’s including up Wholesale performance continuing increased digital. growth X% women’s XX% high-single-digit at Motion declined

than in BODY for double-digit we OPTIX without powered business at full well platforms. revising expect Lee’s a quarter our to China increased previous women’s Fusion revenue. year revenue We now are revenue modestly our expectations Based as flat expected fourth outlook quarter, Our and rate outlook for our Jade growth performance on the by slightly versus weaker innovation decline XXXX third as Jeanswear.

image Revenue of in sale X% to to was as had returned importantly up Imagewear. business revenue up Bulwark core and sector was industrial the connected red continues. to now of recovery jersey the cap in another the strong X% growth quarter the excluding the quarter; Turning LSG. impact the

at XX% from more our Wrangler up which and Wrangler Pro growth. accelerated image includes and growth largest brands. generated Bulwark increased well Workwear growth RIGGS XX% as Timberland Workwear double-digit was platform, three Looking with Timberland footwear business, XX% our RIGGS revenue as Pro than XX%, our

We to mid expect Workwear Imagewear businesses and in rate high-single-digit respectively and XXXX. increase at continue a our to

worked Americas Revenue business turn wholesale to about growth. at for with it improvements efforts are we The continues you And hard Thank Kipling while place restoring to team earlier Sportswear. has put and showing clearly everybody with that, low-single-digit flat, business the on over this Looking and management at year across Nautica in profitability their results. Scott. The achieved was Nautica to stabilize team. DXC. I’ll new the the

Scott Roe

Thanks, Steve.

that results. review influenced started, third get reported few I our let’s items a Before housekeeping quarter

reduce intangible of the First, the in we took determined carrying recent to performance, the resulted impaired of related brand. goodwill Nautica non-cash assets million which value $XXX pre-tax assessment the to charge charge. related Despite impairment financial and strategic the to improvements assets brand be our the

million On items the pre-tax a negatively Second, two transaction. associated acquisition-related basis, we incurred about reported $X by mentioned expenses $X.XX. Williamson-Dickie combine impacted with just earnings of our the

and our related adjusted our review results expenses focus quarter will mentioned. results, let’s excluding Now, the third impairment just my comments on acquisition

exceptional us truly from to underlying emotional nature X% The gets passion coupled Vans basis tribal by will is which with Vans with continue platforms, international a the up and underlying in were for direct-to-consumer family shift brands Timberland approximately unique. What sports Face outdoor big performance. was Workwear. Vans three the the $X.X Our very of broad and combined brands, drive strong strong was deep third X% results across up this XX%. growth Revenue quarter to action for and results our Revenue The based timing increased strength globe is on most the across how for excited and was our led connection rate billion excluding North X%. order book

these don’t stellar the in we results Boston. we give the targets laid confidence these rates we brand maintain While to indefinitely, for in growth have growth out expect and vision this us

As Timberland brands X% North X% expected, The and and respectively. Face declined

However, the both order shift. single-digit low book brands for grew normalizing at a timing rate

returned to International sequentially continues importantly our our growth which driven Wrangler quarter up by and Workwear XX% increased and the to business Jeanswear to as collation X%. improve Our accelerate. was continued increased growth in XX%

high particularly low big we wholesale in XX%, teen the mark, growth XX% just digital achieve Our put including was brands XX% strength major teen than three growth up rate from Direct-to-consumer increased Europe at context are seeing to we business every XX%, including and digital almost partners. at in a Europe, double-digit more up across was growth strong, our rate some a our and almost around grew market. every

was structure in an Our with you is X% most all will enables European The efficient see so combined XXXX, up European we and China base a and firing platforms, into cylinders drive strength the across one our broad particular strong clearly with region to business digital. as significant on value remain big when and to us strength team. DXC of tax creation. carry profitable Vans, the thank

up was digital. than business growth XX% by direct-to-consumer in Our led more XX%

and Action all high double-digit brick global in businesses comps our motor Outdoor Jeanswear at teen Sports, Our business. least with international achieved growth and

accounts the Our growth wholesale last excluding with efforts and remains was neutral impact to our XX.X% line XXX the rate. while grew productivity results. basis results. wholesale from Wholesale margin in shift, book our showing basis however year, an currency revenue Gross low International at much XXX fleet point order point than the a XX [steward] pretty digital at investment basis that digital store points increase more delivered in our are towards changes first focusing high line a is FX, in which single-digit and up was which is XX%. includes single-digit strong negative with experience up on half wholesale of

margin better gross was expected than and priced stronger of favorable a result mix Our more sell-through. full

is XXX quality a Our and opportunities. to creation value SG&A accelerate our focused our us quarter. growth. and margin Gross basis by-product of revenue flexibility XX.X% a approach margin disciplined behind largest and percentage provides points in growth on as and gross drive diversified of investments expansion fuel core to model the the element our is up was of

bit book by basis ratio was order points timing distorted deleverage. Our XX of resulted about which shift, little the a in

now than in was technology. walk and that remainder investments minutes product demand a through you the and creation, More half Let increase. of innovation increase me DXC, by SG&A and driven take few of our

to is higher we've accounted ago, in coupled when momentum compared than year digital, more increased additional weaker was is performance with addition and of announced a have Based for on stronger a confidence, in in and to incentive and we've increase where priorities last change. year. the which particularly In strategic and we our this fact, committed DXC of of million million demand profitability, an investments compensation That XX% the we most $XX $XX our quarter. creation the in

relative to centric $XX to dollars agile, enabled So we the an million committed in digitally outlook into provided organization. transform consumer VF initial February we’ve

There or likely operating more Boston growth question a do SG&A of change is a excluding the and SG&A, mind, answer to XXXX. today. our Williamson-Dickie, head these communicated impact sit to our we expect Now we no your long-term more we're pace here into if moderate as QX of in in as ability confident targets achieve in anything, even margin and in we targets we on

Third quarter negative point adjusted margin XX.X% operating FX. an in points to impact including basis XXX from declined XX changes basis

an XX% from EPS on tax provided and benefited So, adjusted quarter to increased we FX range Relative about by basis, our $X.XX. earnings July, the $X.XX a third to rate. in lower

to inventory X%. Turning our balance sheet, our increased

from and Our days are to good in shape inventory the perspective, line. outstanding starting in come it’s back

and quarter strong the growth once full balance raising our Given again we our year third results trajectory outlook. of for are XXXX, increased we see

the a X%, on expectation up Our updated $XX.XX currency neutral about to That our previous billion. compares revenue of X.X% includes approximately expected Reported be to outlook billion. now following. is basis $XX.X to

our Sports, engines, revenue particularly Our core outlook strength Vans, most is international DXC, across Outdoor and business. our & driven digital increased broad-based notably Action by growth

XX million the operating the an relative basis in changes FX. as includes from Our XX.X% a $XX from basis of of represents as approximate to outlook point Williamson-Dickie. is XX.X%. about XX.X%. outlook point This to FX impact XX continues margin our Adjusted expected well negative to investment. from previous versus includes estimate expected point to million contemplate which This Gross revenue be XX% margin now impact additional headwind is about improvement $XXX of basis contribution XX previous

X% $X.XX. Williamson-Dickie, impact margin neutral adjusted we currency EPS be about expected the on reported adjusted of operating EPS Excluding or the on $X.XX, XXXX Adjusted basis, expect XX.X%. up to up is a relative be a X% now of to our to basis

from of $X.XX includes $X.XX contribution outlook as Williamson-Dickie. well the investment, Our additional as a

a As $X.XX. our prior reminder, outlook was

remain dividend expect a Board to cash consecutive to with based key strategic the components and returns have increase yield $X.XX, to XX% increase cash calendar marks on this in about year, diversified flow returning per share increased compared dividend. share a Directors shareholders cash repurchase on billion. model. of an and With shareholders the creation combined committed dividend the we’ll are Based cap. our our our annual $X.X from to We Finally, confidence our XXXX $X.X quarterly and market approved $X.XX in program growth our we in billion, of that’s repurchase, share. our plan, we our our our reach now value our reach performance approach This XXXX will we’ve year. prior dividend, XXth with to current our XX% X% the operations increase When

we confident us, are our fourth behind and quarters into outlook the momentum three with strong we have in increased So, quarter. move as growth

margin behind our growth and I’ll our engines With are fundamentals back growth momentum money are and strong, putting cash we’re core growth, the growth shareholders. have for is work future questions. to open double-digit are investing Our and we’ll given to while operator to gross our your platforms, in delivering our additional returning it the largest and our brands that, call the plan, turn in confidence in our we we intact

Operator

we’ll conducting Instructions]. time, [Operator be Thank this a question-and-answer session. At you.

is state question. your question Laurent Vasilescu Group. first Our from Please Macquarie with

Laurent Vasilescu

next an for the quarter. quarter? will I year’s for revenues, the basis Besides digits wholesale $XXX from we wholesale on follow-up be mid-single organic fourth shift the business should secondly any year-over-year? want XQ, XQ sub fourth there Williamson-Dickie’s the are stripping quarter shift into up assume And to and fourth then between quarter million revenues on the additional out

Scott Roe

That’s about right.

rate. about QX. other QX no big between book timing up part that And order is there the question it than should shifts other Laurent, of On no, second be your and

Laurent Vasilescu

you all-cash to the much you share to since gained was wanted then know the in can transaction, leverage you an how Williamson-Dickie if if And pursue take acquisition Williamson-Dickie might I remind want additional us, curious acquisition. August, then on, to to acquisition? call. on on an Since was want finally announced you And choose additional the you to any follow-up learnings

Scott Roe

that second Steve before learned. the We that take two two which of guarding times. rating, EBITDA, first said what our we’re I’ll times and we’ve is debt-to-EBITDA, So, generally part comments on

we’re opportunity. stretch to even right of However, had the for to point we acquisition willing that the step rate, one right down the if

you imply, So, that do math, of ought to lot a the if capacity.

other our cash pretty thing snap The is with strong metrics line here. quick into back flow, our

So, today and we’re really of contribution at as from the we we portfolio, even -- in powder have dry and of our manner. the rest Williamson-Dickie kind very historical look rapid levels we’re a backing in

Steven Rendle

Laurent, what still so but on with couldn’t I early be we’re learned at far, then And mean we’ve really Williamson-Dickie we here.

there teams are we’re are team. that team fitted out that we’ve integrating think XX learning Brands States Dickie’s beginning across and like as and the it the we’re excited major looks and our that globally, streams with and what Imagewear after from and with [indiscernible] we in getting what have broader a great, absolutely and synergies United acts exactly. We the just Workwear a called and team about VF are committed the well lot very down the we here passionate really working do about committed can there work

Operator

Group. is with Telsey Telsey Next your Please state question. Dana from Advisory question

Dana Telsey

Good and congratulations. morning

Is how strength or puts about your Thank about how of think they the lastly it. on and that just the collation you for lasting to do that’s takes? that for? brand As note watch outlook and by can on going, where think seasoned investments going could the be you. anything the margin, color you there incremental forward any are should And we gross

Scott Roe

good Dana. Yeah, morning

highest margin mix saw its our the results But which fast-growing of things we on and digital have So, continue, this to in margin right. related change The hasn’t particular those and on you coupled and gross margin margin. a that forward, that we gross couple the DXC and is really particularly look expect to quarter. are as in strength mix same drivers Europe the in popped businesses gross story with quarter really gross international

long in forward a our see the a down all for in was exaggerated we’ve because overall, also we third little for the little but next timing the business driving talked bit was the mix the So, it quarter beyond. from standpoint, at reasons wholesale that and year time

Steven Rendle

QX And and demand how on investments Dana of the at also this are broader brand DXC, year about that but that’s platform, on digital we’re but towards investments, the deployed our driving then and our on you’ve wholesale only very looking QX specifically the half much that our creation broader benefits brand seen around -- awareness is partners. demand focused not

clearly investing our what with analytics, that some roadmaps advanced investments there also of on on innovation place we brands. big in of we’re have digital We’re our strategic going priorities, and capability the specifically data put manufacturing we’ve our and around in doing many dollars platform, the pushing are there towards around work design within our

Scott Roe

holiday a we’re holiday, our from standpoint. what’s the what outlook about seeing asked also in Dana,

Steven Rendle

enough. Fair

Okay.

a Dana, really but as see North weather start So, a comment. I’d the saw in our favor, America and turn we we acceleration that’s very seen bit little much October say slow we’ve

that’s on think to floors help demand really that it's good the the driving creation really that forward put to wholesale Asia and that with we’re sell setting check, States, and here order Europe we’ve true got partners also where in in that. time, now up our book are bullish, We’re really assortment how demand, how in sitting it’s our are that’s consumer good has United investment their line and but through at floors the more drive thinking reflects right been you working about and about inventories

Operator

ISI. question. from with Our next take Evercore Saad Omar your question is Please

Omar Saad

question. Thank Thanks my taking you. Good for morning.

bit performance are of So, really working, out to a how go deeper there Maybe you’re if such as you generate to and assets media, the in learnings And element to of Thanks. could mean, important Vans that social consistent talk strategies globally that performance know. a and strong apply that stands little you little brand then the in I bit about other more what’s Vans, you there your a if you can in if detail on some going executing tie broad-based portfolio? that around with way? in digital some maybe an developing can are you’re the that

Scott Roe

our Great, performance you and the out congratulations put Omar. team. to fantastic is Vans'

consumer So, that is deeper expressive platform. them who lot them I our on social it one this reasons important is the primary their is in what intense works about who primary creator -- and brand think understanding about know how creation, team focus their to a is. this they what's digital the really talk and doing And media our demand reach the and so the of and of across globe the well, we that the are, brand to and with

things season launched to we to would that further natural stories own I that completely these move new And really product, within the continuing we you, manages with strength brands DXC through are new I right appropriate range is locations. I this that there, how in newness, business think placing higher the the ways], it’s amount the Omar, its single our environments. tell our our our way really things it of collabs the our products season, or product, that lands, path. told be driving it, [color the probably fall the brand point, price then think Ultra franchises marketplace, and and team results, are it starts integrated do appropriate the down product, key are

the in start come and to boutiques us how to to in we that that a and Brooklyn You front we New in really area, the think, bring really strategic complements the that and as storytelling of how street that digital segmented that globe and can around digital here improving we those links the see a tell connectivity meet the about see with digital really very are is that mall-based well-oiled all stores The our we focused consumer the across starting is of deep that machine, it one and U.S. approach to It General and platform. together understanding is mature and advantages. and platform to our key

Steven Rendle

a grow platform Omar that be investments, Yeah. entire all, we and these brand individually lot this choices that of portfolio -- where the is power kind that we the across how about can we capability of of absolutely organization. of in as close but where Vans, we I making [via And will enterprise. piloted strategic would not so this made can applied] digital that the one you the a again as out continuing advantage and A that we of that's investment we when we're to this throughout for to the our we're Vans of approach this and have for think the our we outlined our our in hard make and fund It lot investments team, any has customs be key learning inspiration see, of -- platforms, but kind investments, just add-on we've to investing enterprise also is it. is one that of wider that when the in that applicable And come platform, relation as think things. take Boston.

Operator

is Our next your state question Please from question. Lyon Genuity. Camilo Canaccord with

Camilo Lyon

last a quarter large was pretty the about a frame you like continue the big help relates component about could swing there a little quarter from gets how swing that overall XXXX it impact. us as basis positive. was talk into could year to to that Could bag since for this I thinking benefit been should hoping bit guide we Seems pretty points FX as it to that’s you and be [indiscernible]. XXX how about the

Scott Roe

Yes.

we just basket year balance the knowledge, currency. that, for and We to get essentially obviously, try and cues currency relates is of a don’t as So to that the first got of reflective and best talked call it of where at the we about. looking of our we we’re that’s all, outlook it

I Number one long out into look XX XX we’re to here, tail so we you pretty with a that couple months. had guess things. going remember of As ’XX,

one rates of from So, baked year, on of standpoint, next right. already that’s a been wherever I not you as right be also that slightly now, to has at that are you hopefully different this much caution the a lot just you that. factor, currencies focus Also tailwind, like, will a look course the too to remember would got case. into looks so translation just

giving next of quarter, the but the at bit for XXXX into point looks and tailwind, like, into currency picture cost a year, we’re the to at that little you it’s look As see in next got at year. not a balanced guidance up we example, look point. is Yes, knock fourth this for we’ll

Camilo Lyon

capabilities, next just of incremental to two to business. should should can how you’re you’re level Should benefit a you’d gets Number the pull to And the other see those manufacturing likely initiatives the this this from we higher broadly consider that when advanced quick about back to, just us, initiatives? after even level And and speaking one, expect expense that on forward this you investments is like and then see more able into questions. year. where book start just speed more of faster, -- manufacturing we adding or investments planned that resetting remind of free start some then a deliver we

Scott Roe

take Yes. the first Camilo, that. I’ll part of

a think Boston, would the behind Here to and if a roadmap about investments laid more about going to accelerate. to And top-line see relative loaded a say continue that we investments. And you’re that strategy is general, in at what we I out little to plan in our and of you strategy talked see the front remember, we’re shape going investments. the

so are faster moving not it’s we a path. So, down Yes, much.

invest to priorities. to to is continue intent around Our these invest,

not a those making customs, to be demand we for when about and platform event So, in on, plans said invest sure, a investments that the we that creation and while, is discretionary mobility, the sales. exact increase that to to we’re should there thing, continue to one, but we to to demand creation, as in always it could. our continue intent whether have as payback think and thing, could digital lot to choice of the you it think very a these is investment in make our a relates about a creation willing same may investment going is that next in three-signal innovation than judging stop sides we and to there demand if are a we it don’t your we’re can twice, be number We make investments. [MROI] different the you sales innovations demand make grow creation, faster two we intend is will we at question are Also, that in right, example, we initiatives, be percentage to place, of fact have our it do look

continue, that is our to intention is a that fundamental market, anticipate we will change we there but modulate. intent So, to variability don’t obviously our should have nor in if the be

Steven Rendle

this in-depth fairly your the we question. an on a of to consider mean and our area But much doing to be because proprietary. Camilo portion manufacturing and think analysis innovation for fair have little we’ve timeline of around is bring degree to advance really of what we and end-to-end those I go a down exciting And bit, and and it’s not us efficiency breaking talked creation product great here I we’re continue through gone say, affectedness. through elements improve total really speed, where

is very So, speed. timeline finishing already things piece to improvements looking standing lot and here bit total the Carolina our and how would our highly you out it less is had tell on to the can can, closer black at we then other efficient key there development material But automated, North into but the in technology we’re of where here about Americas is capabilities going chain production to really at do to efficiency. bring a around manufacturing in our with manufacturing production of design prove host little whole up speed the technologies and Jeanswear facilities of our be were looking there, up partners. closely think box test our time go material a we improve production, in But scale upstream adjacent as side, do than which and really automated that if as you’d half it the that’s to where breakdown marry that advance finishing, see improving can the inside things we a is our at theories, especially model. at on really facilities We we produced. of I you only facilities supply material not we and a improve our we we’re and within looking to own can to

Scott Roe

One final Camilo, as whether first right. And shareholder, commitments future about advance is shareholder on and we basis. or priorities, ongoing be made investments too an stake always all other we’re our the we’ve against big to those commitments delivering to balance growth. that’s that manufacturing commitment you thought these think ensure we’re and to And trying conversation our delivering our part the advancing a and with of

Camilo Lyon

of would a starts or that those initiatives a benefit benefit there get focusing that it manufacturing to brand on the as front portfolio Is frontend the is on that rollout? you’re complete

Scott Roe

broadly the themselves right focused focus, to learn as and We’re marry but at scale the categories big particularly are of well and Camilo, certain There incubators are there us produced the test, this to back three. that looking footwear to sure three. biggest of we that big in we’ll breaking for now other, pretty across look product see before lend point, within portfolio suited We’ll our then the for are to phases our some our brands more down really is portfolio but how the that equipment. more apparel, than we’re on probably

Operator

Our next your question Please is Susquehanna. question. with from Sam say Poser

Samuel Poser

for Morning. Good taking Thanks my question.

couple more of a or any When to should acquisition? creating just are segment that you things. Just look are with housekeeping, into year, to going restate we we’ll -- the next be of this sort about is thinking how everything Dickies you Workware

Scott Roe

made of decision. changes. At we Yeah, decided looking of at we're reporting ongoing this point, segments, change evaluations a line Sam, at to we portfolio point that our that haven't that's this obviously haven't any

Samuel Poser

seeing, North work Could how on. part and you of so products that? one stuff things doing are you’re getting placement then, color of reported of you. Is just Paris Week Can Thank there? to was some direction secondly, Face that sort you that, And The exploit a you with news in talk I whole was give about the that and Fashion you city China? us of due out some the of some

Steven Rendle

use the and of Sam. really exploration education that's But four exciting, Yes, down urban What that's coming our urban part individual consumer, jackets, into core really of but technical have North technical breaking express the also the is making you made the as broad Face, part you in at segment The you the they exploration is elements. right read of China, innovative, their Sam territory, Fashion group Paris from themselves the was some Asia also we our in see on bringing in a lens through consumers Week individually. But to allows of brand Japanese standards. to partners, stay lengths sure mountain actually and [indiscernible] are the with long performance, a takes but what speak that all and through look to and heritage team true that collaboration really consumer you to with in saw called it that of a our what and our ability partnership heritage the there our is, product

Samuel Poser

of you following with spoke expanding, States and become in when -- about see and when of you in does it broader up the the about broader, it general a last talked -- the quote, the year, at you that sense? to sort Just Investor earlier do that a that Day sort roll

Scott Roe

Absolutely.

environment. start stores that where year. bigger urban We exploration placing we're an Europe within But you’ll mean test where markets store point team environment year. and on can in our many environments Francisco you'll collection. U.S work brand something in in a prepared that a this in we're that we've see do to here within I think here expressed We a bit ways remarks, mentioned piece we So, in the there's next think there and San a of Asian come can urban coming now the of pick we do that that. specifically, out We day-to-day so retail expression move work the are basis. with in up little the with see coming we our fall. start all really a each have to But own some into DXC component to is got But how our -- our next we've way I that's more regions, our comfortable really

Operator

question with Please Bob from is Securities. next question. state Guggenheim Drbul Our your

Bob Drbul

morning. Good

sort is, the trial first in guess On terms Face Face, an I of North planning question today. where And North update second stands the within of that is. you're the can the the a on question you zone that give us

brand performance what the the are in do where at retail, North throughout channels? right retail think inventories the now Face it for With you levels is, Americas the the

Scott Roe

does so into first, it’s the take very I the can thoughtful. looks offer Early, integrated question speak How would fit brand Bob, to consumer market your Great. tell see. that of being both Amazon within early. good. Amazon would it what’s And we’re that this that you, has, at be to used and like environment segmented strategy, right to the that sell-through us rates

We’re the having that site many brands dynamics unauthorized pricing helping on of clean market and dealt the dealers up significant the progress have that some in are in with. ways, been

your shopping those exited they’re they been To a really with the product has outdoor Face inventory retail, sure. confident, venture over we’re this of for specifically and little long-term And North better global it’s the focused, industry an we last where a partner at really relatively are on for on for Retailers particular ways to basis consumer partner, the early, on product. product is for on ourselves before. based floor than clean. months, important it’s along categories a XX year year bringing have So,

feel are. we’re inventories very So, -- really where good the about,

last looking at year it’s and versus really good year. about a positive in this of We’re merchandise feeling the flow -- manner very are

Vans, environmental on should to really territories specific where North really is consumer can seasonal these conditions there round about well demand specific team flowing I them, into earnings year tapping how the is which given the is and out business, really North from a based and of flow, been four with designing lot we season and the were as very contrast a Face, which brand paying succeed. think lot that as you need each Face we’re to of contrast our the and a has through now if be Jeanswear on attention of collections

Bob Drbul

to you season? the QX, high meet about going to business to And from I manufacturing think been inventory, flow, Got QX when adjust demand the that the guess plans have on Vans just, the able it. you the acceleration holiday of into the

Scott Roe

short answer is The Yes. yes.

relates relatively a lead as time shorter it to footwear. have We

We diversified have a chain those and really categories. around well developed supply

other were that comment, saw we a seeing We right. stronger gone coming. the we of second this of the It’s was what past, And on inventory in saw it years half. we half, acceleration some we’re saw. part thing than But first saw for the little those of through we’ve so, remember, fighting the most Europe, couple for and the even still balances in acceleration have and a in bit that

but done it’s call to So, anybody real chain would for teed is in I we given up I putting a keep had meeting with supply our up. just are this job They’ve to problem those our at fantastic our am to guys against have, demands delivering, give high-class it a industry, a challenge people and a they out. up because right.

and in demand results. We’re see we meeting it the

Operator

Next question. with Please Stifel. question Duffy from is state Jim your

Jim Duffy

Couple of questions for me.

X,XXX some of e-commerce maybe DXC in accelerating numbers globe. respect the is some comment with to between highlight great what and Can the differences comp with conversion retail positive on regions guys seeing the and the First, you imply the strength traffic outdoors and and the you’re across business, at brands?

Steven Rendle

not traffic, driving where a investing businesses it strategic in it’s our and is are part absolutely of scale. investments Yeah, well. captured big DXC Jim our behind only strong but operational that creating you that’s focus, we

with some the quickly our on gains quality right businesses our advances business. good to each traffic consumers to lot really of we’re But the in to up getting of and at your the conversion of think are is stores a question going our in-store in I really the on product ability we service traffic, on So, from sales and traffic European the having time specifically experience certainly in see efficiently. productivity of right year-over-year, seeing performance

store, of are a So, one really those across to to the look product operational the and purchase in that commerce I that that would but starting simplify both, really our at piece, really combination just it’s tell decision we’re to results. also conversion it’s of that’s return store, in an that we’re all of pickup in, in purchase, that tension doing and out the you that’s that online, take consumers that platform driving it’s allowing investment formats that we’re traffic, driving making

Scott Roe

the years. editing add-on about half about the of year previous improving the we X,XXX we’ve the different the ago and out on the more a opening of initiatives is our little little just approach But we’re performance. what that, stores. net less you like-for-like thinking actions part of just XX been of I’d have you’re the a over just numbers the that mentioned slightly a slowed aggressively number take the than based more up with that’s fleet Jim said bit underneath stores on we outlined. fleet came what hundred also quality seeing And we’re still running within around Steve that We, and we’re or to about our openings, --

compared sequentially the our down actually time prior quarter quarter. to for first quarter, prior the the compared versus up number by by ago, is down year fact, third In the stores two to in the but of two

Steven Rendle

looking to and they the also to that formats, type mean around bring the it’s in those the to of communities Each opening Brooklyn that a example then of consumer environment at the Vans more live. product right market to being store the looking standard our are but the build And that smaller the the connection, we what consumer street in types on regions, brands mall move is productivity a smaller the a type great on our of these that stores Jim. boutique footage open, retail really thoughtful are now store. a I across front based increasing very longer build modeling of square each tailoring are locations, it’s on a to starting appropriate businesses of the that box sufficient stores no to really take profitability. that and And locations have of

Jim Duffy

wholesale seeing the of Is and categories wholesale specific any deemphasize is volumes or next related you’re partner forward? DXC deeming to going you’re question My less any strategic channels effort the strength in the specific which challenges that there or with landscape. some with Great.

Scott Roe

wholesale underneath look I’m your but Yeah. a question, I North wholesale and flat just America don’t laid wholesale growth answering our on coming growth we outside you wholesale as overall there’s basis out lot we be net the if really, that, our view, you at I’ll directly of growth said, with when of would remind know we digital that is in the substantial. said, not

single five with that means years. to the America expecting be within winning we’re Jim, the over winning in low what formats. wholesale But next digits down So, North we’re that, is,

We difficult position. There's that are have more big with great in partners little they're us customers growing. we're and others are a growing, that

generally hourglass where five because over So, bottom the top that's remember look see portions we years. yeah, as were that minimizing But, portfolio exposure the troubled we’re moving hourglass emphasis. the relative our the distribution more and channels that of through to general, of and that focused next the we're our the we through -- that, of just higher in where We're areas. some on growth of that some of that placing

Operator

question. with Please question Wells Our state your next Ike is Fargo. from Boruchow

Ike Boruchow

Hi, good morning, everyone.

QX. for or you, Scott, I either within so, plan like is hit for Let add me this looks you think closing Jeanswear the it congrats. my, your beat

So, you nicely bounced Can explain from to bit I'm understand more last Lee that Wrangler you the while you QX, worsened run what saw point. on conservative you just that help be that to quarter? little why in maybe rate further in a the segment back see to trying U.S. causes

Scott Roe

Yeah.

nice first we To in see on the seem in it’s of Lee be and than side. honest is real particularly performance best that our a Wrangler the visibility. improvement the as the and and through different plan in no and areas, this be expected, moving yeah, [indiscernible] a would we all, And change despite But, to I women's So, we situation. couple expected as sequential thing had say, business to tougher generally of tough for that reasons. said

remarks. business Our prepared in I Steve strength, men's mentioned think is real showing that the

And and forward, quarter and But the styles of look partially that of really some a our is fourth see a QX more are it's some we own results we we have women's We several some going the us. that the a channel we picture related, on been of as well cautious based on side, innovation as tougher what in resonating but view frankly. forward, forward. going that is saw reflecting in took issues, in for

Ike Boruchow

higher about inflation think you quarter, the first half. about give more Can the need for bit a that the AUC is costing said color a year? you you I next a in side, follow-up, that is maybe Scott, just -- I tailwind we it's is it. in was to quick And first the commented this time to was dynamics it Got ahead while, I today, a think there's think think the on little coming, the where that

Scott Roe

Yeah.

it just starting in half, turned tailwinds real first year. back we But, largest headwind, into remember, zoom was frankly beginning of going had this -- and a balance, year, you year. the talked to that the relative the the factor QX to would of about isn’t if So, through be cost the we in some cost said we on QX, zero QX and from a for big a standpoint net

commitments also make So, arrears. in remember we that

thinking about P&L leather like or so committed. you're were when or So, those today, that six things in seeing [loose], months cotton commitments the commitments are we previously that

from be see So, on are caution can going too today, I But now expect you much cost I not based wouldn’t those a hover to to what right on again, predict. to forward. major issue hard where costs factors. I

this currency we’re we’re our longer making appropriate hedging, commitments, it’s think good we’re pricing about discussion. costs, our looking and into we’re balancing -- a think as as reminder, it’s about all Just, term at you and where merchandising and you

we we’re that in I that’s way of fundamental you would balancing margins. look mix, the trajectory change as don’t it. suggest any our So, And see the at should

Operator

question with your Please state next Pivotal Research. Mitch question. Our from is Kummetz

Mitch Kummetz

Two questions.

First for business, Steve, just distribution. wholesale on the the Vans

Vans call of curious think I’m accounts. overexposing with managing more you expansion mentioned they’ve brand Americas how of maybe what types from, up for you’re recently of or mid-single-digit. out those I with any I them. retailers. as kind concerns would traditional strong guys called kind any retailers, was more that athletic the like brand traditional Did alienating Any a

of those types with If growing retailers? you are

Steven Rendle

better across choices strategy amount tremendous than thinking how they that different Vans about. they Our distribution most. The This have. they is business thoughtfulness is the product into that put they segment that a and something their spend of time

open We are all boutique we’re assortment? the based from consumer, sell broader footwear, to managing the thoughtful are right to great is, of what’s to not really broad that are looking and in lifestyle sell-through. our around the right the in partner what Vans partner with we those doors. being aggressively think the the consumer who application doors, But I athletic the And very footwear. then very retailers And athletic about thinking footwear up

we keep newness the right to those forward doors level So, flowing to growth. that into of can drive continue

Scott Roe

to based on, really geography, It’s And by broad by just If the apparel. product categories mentioned. behind it’s by going Mitch. numbers it’s and add multiple as including look growth, too, channels Steve at it’s this we, we when

gives particular we style that’s forward. really driving based, And not it’s confidence group us one in it’s the that’s see broad So, broad brand look really based. broad, entire the as or entire you’re

Mitch Kummetz

then you a the if from mean do EBIT I say, impact you probably about it growth maybe talked could that being on from there EBIT way any can Is have we an speak that. a profile sense forward of to how overall the on a assume continue kind I DXC way to operating would an benefit elaborate on my digital hoping, standpoint. as and can as go in was your to margin margin right, from standpoint, of and math a digital some the to that you want the I’m And essentially impacts was DXC that the the to know, your that all margin big I basis DXC, of you margin expect be top-line? gross I I Scott standpoint. third driver kind of to margin. of quarter, more or

Steven Rendle

we is to in there brick-and-mortar lot but you Particularly has our we focus in as gross growth we’re our that as obvious and more we margin on side which brick-and-mortar open will as operating imagine bit, operate. a come profit. is can moderated our not at expansion our a Yes. I’d specific say single digital got profitable never quite relative that DXC rate profit just relates so past, XXXX talking from most to format I’m continue remember have digital about on on conversion haven’t we as it we’ve comes and the the in comp the stores our disclosed SG&A focusing and on of and With we profitability,

a think about to will you my from our know I’m again to our standpoint it’s with not continue it that we you answer, on fastest at to capital a fully most as just which and satisfy going question. forward, return mix probably it’s So, our great is versus profitable look return accretive when growing up component that digital you format.

Operator

our call remarks. session. have like the the we back I for turn and closing end of Rendle reached gentlemen, Ladies would to question-and-answer to Steve

Steven Rendle

All right.

of really, things. quickly Just couple

approach I’m to global you personally XX,XXX-person thoughtful exciting past as as As be friendship thank us We you you past much Eric, his listening to Wiseman and chapter leadership that the we so for the he’s vision XX from of and I incredible years Board his here over our with effective Directors together. will leading remember, XX wish thankful you’re retire a gave all to our provided and mentorship all very and for VF. worth sure next to of along ethic to Eric moment again to owe enterprise. his would success like of all like to and his years Eric your our are, take October at fulfilling if VF. XX. I’m

for thank all you of to like I’d that, with call So, today. joining our

transform We into and nine are centric to agile journey consumer now enterprise. more VF our months into

confident that and quarter. we’re the are increased into in carrying our momentum fourth outlook We the

core delivering double-digit engines growth. are Our growth

fundamentals are operating our is intact. margin strong gross and Our

investing we on focus shareholders. to remain behind We’re delivering roadmaps and thoughtfully our value intently strategic our

So you and February. to we all in talking again, forward you again thank look

Operator

you. today’s concludes Thank This conference.

you for You this may thank participation. disconnect And your at your time. lines

V.F. (VFC) 23 Oct 172017 Q3 Earnings call transcript