VFC - Earnings call transcript Q4 2019

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Operator

Greetings, and welcome to the V.F. Corporation Fourth Quarter Fiscal 2019 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].

conference recorded. this reminder, a is being As It Alkire, Vice pleasure to host, Joe introduce your President is now of Investor Relations. sir. ahead, go Please

Joe Alkire

its Good to today's V.F. earnings will to SEC. based on statements. to are morning, define materially. the quarter results release Brands in and issued are could and the that fiscal VF entity, VF’s Brands of the view results this documents results, XXXX are of cause not Brands, expectations fiscal was results call context results business. excluding subject Kontoor and the These after These Corporation's on the is as Jeans of Kontoor RIGGS with referred of amounts statements amounts uncertainties representative of brand In not call. separation that will Kontoor call Brands Wrangler standalone fourth Kontoor the detailed reportable review complete. on current a discontinued consolidated make on uncertainties forward-looking constant Participants Outlet are results Unless segment, differ The in indicative of welcome exclude adjusted noted, to press morning. XXXX are regularly otherwise excluding an dollar VF’s of be today's of filed actual operations VF's basis, we and which

VF’s may the of operational constant use and believe Brands of as XXXX Kontoor with in on Brands of discussion separation our lead reflecting information amounts accurately true is Kontoor performance adjustments. we analysis subject Brands best management’s outlook and excluding and been underlying discontinued Kontoor has of to dollar to business more results the the Brands. because on XXXX post fiscal the information separation provides change. Kontoor basis, our represent outlook numbers a We they addition, not adjusted adjusted separation release of along XXXX In the estimates of VF’s other fiscal impact operations financial have fiscal completed

for GAAP. You items GAAP in which to to in view quantify amounts In us provide US adjusted VF, a which useful with the reported discontinued XX, of to and date Reconciliations why no included later may XXXX, information on operations supplemental investors. with financial of periods. X-K, is its May will illustrating U.S. found connection current release, on this accordance of excluded Brands file XXXX, XX, historical distribution Kontoor a include press hear measures and amounts GAAP information basis certain identify which tables Form on supplemental be all May financial also than management's will VF refer the report are under in can

first During Company business. completed brand of quarter the XXXX, Nautica sale of the the fiscal its

LSG dates has call on of results otherwise business collegiate results LSG During Sports its or executed business on the businesses in the the the respective operations and licensing to of quarter continuing completed XXXX, VF the of are brand the sale discontinued of these quarter Group first sale. In Company with plan included sale Licensed its assets Company divestiture, of presented Accordingly, in conjunction of the JanSport the of the fourth completed fiscal business. based operating operations. exit the today's to their XXXX. the Unless noted,

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

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

Steven Rendle

and creating value the of of the of morning, through sound another tax-free shareholders fundamentals a and results lens. history, broadly represented and spin-off SG&A culminating the as everyone. and have to to purpose-led, deliver I’m significant ago. our milestones on growth delivered quartile good leverage intense Kontoor managed to in a report VF's key brands, with even you, and placed has actions one we’re It transformative billion made reshaped $X this Thank just Joe, margin largest we top capabilities, took of Since time, And to proud further that enterprise. purpose The a in out steadfast years portfolio, year laid Brands. work accelerated expansion returned and in our strong we tremendous our in two periods been financial driven load an we amount last to our teams strides commitment shareholders. XXXX path and year delivered returns most are all significant we years. performance XXX-year Boston two be with in a change, We Fiscal that driven investments bust along gross year

Excluding XXXX with or XX% include international results XX% growth bounced basis and on brands, XX%, by of Direct-to-consumer revenue Vans organic Kontoor The increased XX% XX% which and an in highlights led by North our basis, X% business growth. XX% Brands, increased organic Face, Work our digital, in X% grew on two respectively, growth growth EMEA. from and and and increased XX% an growth largest in with XX% our broad-based driven growth fiscal China

strong. fundamentals Our remain

delivered Kontoor As this drive VF to Brands shareholders quartile points momentum. million growth. year organically model, XXXX. with TSR strategy and And fiscal of EPS balance VF of gross yet us XX a our sustain invest margin, fuel period years increased in expanded And earnings excluding in an Boston stronger. $XX Kontoor of our the key providing to XX% the to accelerate and launching returns cash with our returns. $X.XX, basis the investment over required strong over Including another annualized notably, was both XX% even driver Since to EPS XXXX just growth delivered strategy to including top of TSR growth our value capabilities growth in ago, XX% to has incremental creation of finally continue two Brands,

moment has market as become conditions current Let more geopolitical weeks. take a recent me in to the uncertain address environment

business our minimal. our disrupt and impact date business potential consumers has around to to been to globe, have the While current the events our the

closely quite such more U.K., in consumer our certain markets and the -- where most backdrop monitoring businesses solid. China conditions overall the as Our remains

has the to of tariffs minimis. impact trade, relates As been to date it de

the We continue plans outcomes. situation to potential for contingency and closely developing are monitor

and beginning of growth. that areas. and year fiscal our attention we For XXXX, we Kontoor I’m X% sold cost throughout impact of is tariffs. we progress context, the where our continue post made actions fuel to China At each will and goods Brands, the the the of these pleased enable would directly U.S total sourced to financial to our I on our strategy substantial shared key areas of spin-off of dampen three focus from implement to to mitigating incremental investments report

focusing and we enabling reenergizing protecting Timberland, Vans, positive to our in while reshaping North optimizing First, shepherding The the portfolio, America. North and in Face growth and committed the of growth on momentum explosive

a company in independent morning. As beginning an tomorrow become publicly the August, we separation result, our announced traded will which of business, jeans

we spin, other the -- actions to to portfolio. addition brand In took action optimize our notable

We continue and of diversification to Icebreaker We Nautica, single-digit progress influential in growth and integrating growth position in importantly, well as by growth with Williamson-Dickie strength revenue XX% brands growth driven Reef is and of strategy reclaiming North explosive single-digit regions Altra completed the -- world's growth enable from the channels, the with as and sale America. most into high footwear, leadership the made its at the as brand significant and footwear we Van non-classics Vans VF of brand brands The in Moer $X the the adding top for double-digit with And X-year XX% of apparel of most America growth in ahead the largest last target outdoor in billion North one mid growth over September. delivered revenue across billion laid in the Face tracking on well year $X.X classics stabilization North Timberland importantly, our increased we demonstrating with period. working. XXXX, X% fiscal growing business, Vans out rightful is and incremental the XX% businesses.

to centric distort continue work transformation against transformation. consumer Second, digital our we committed platform and our our DXC and to resources

strategy. As The increased from and North we XX% XX% including than a operating metabolic Digital majority increase grew of investment million the consumer that of at speed XX% to $XX with finally, And greater Face more agility. XX% its comps. with and basis, committed our Timberland. growth DXC XX% enable by centric an And our a and result, a both rate goal from with incremental on growth capabilities Vans directed we organic

of excellence unlock operational drive and lean strategic investment growth to continue We our a culture fund capacity to initiatives.

perseverance on a The Our company business management sharply results, associates are dedication transformation our remained have a journey. standards. delivering ethical that while is team on our in has that brought by task important we Equally our business focused did and the operating purpose leading also example world the we VF led to around demonstrate remarkable. how it. achieved focus is relentless results the continued with to highest lead associates and through word

recognitions XXth Institute third-party During one the admired standards the of received most most Ethisphere the ethical year. for our industry were commitment to due including Magazine to leading world's consecutive also We world's and continued of recognized companies business to quarter, ethical Fortune practices. by as the one recognized we by companies the

As priorities areas advance of our promising consistent our we opportunity. most we remain enter fiscal XXXX, as to continue

and after closes The to as of they or to grateful are I the in business bright design creation will new Carolina. histories and Kontoor Exchange defining teams approved of VF growth on as proposition And Jeanswear KTB Brands. for well our future by are symbol our purpose finally our a priorities ahead the continuing VF deliver a begin time centric performance has for while across confident of the purpose that and focus and service our Kontoor for woven supply business and market. to April, and on like enabling rich cultural a our merchandising, thank together market company. Board collaboration our increasing on Jeans everyone Kontoor to York behaviors journey to We're consumer coming Brands clear trading of required would Kontoor end particular together VF to the further expect New accelerate product separation denim of VF's creating organization following an and employee the Tomorrow culture Brands history our Corporation embark Directors independent their between and our on the include: maximizing the them speed North led the under Kontoor distribution At their as value of in Stock we strategy. activation year top with value chain, optimizing development Our wish work transformation that the portfolio, Brands. today. and businesses and

more strong Now a excited what's our positive year about as for that, and to and the sets our VF, proud journey could be not And solid past accomplished as enterprise of next chapter. turn ahead. I'm to with we've be come another all the focused one Fiscal XXXX will we very and with more over will I agile it that a undoubtedly And tone continue I for over our Scott. that year. years

Scott Roe

morning, Steve, everyone. Thanks, good and

Before year. over the moment our financial into few outlook, and diving and we of like milestones the achieved XXXX a to major a reflect on take results I'd XXXX past

First, acquisition we’ve Williamson-Dickie, made significant progress largest Timberland. since integrating our

We capital of from perspective ahead growth ahead spin. profit more and even is a opportunities what on plan acquisition return Kontoor our our are brand post for the and fourth gross largest the that about now lie excited

to Second, provide we portfolio. profitability and transparency changed greater enhance year-end segments growth reportable and our our and the volatility visibility, our of reduce drivers into fiscal realigned

greater a and simplified goal finally, to reshape organization North footprint and functions. with and continue Third, speed, collaboration And agility we and accelerating across greater redesigned with brands and our of innovation we portfolio. operating the unlocking our American

effectively Kontoor Nautica, of the and acquired divested XX Altra, past place completed one and Moer months, tomorrow. we Brands XXXX the most have Van and transformational history. was in Reef VF's estimated indeed of take the to spin years Over have Icebreaker Fiscal

years progress of and incredibly launch In It's two it's creation businesses we through make we've revenue all bought sharply proud the fact, profits, on sold reshaping exciting of XX than billion. how team annual plan ago, $X and made strong underneath with since purpose results our management our only lens. and we these And combined of the I'm more that making our about not matters. a portfolio. value delivering remain team XXXX them changes, our focused

our of and and more tangible accelerated to returns strong build and delivering long the focused into commitments. Our our a results fundamentals growth we're track tracking better top Altogether, XXXX. the well fiscal our ahead we itself, with momentum of continue diversity The our exceptionally executing into business post our VF stronger record the version carry Kontoor quartile needed to and investments XXXX and on positioned is has make are strong. and to shareholders. of growth of capabilities I'm to pleased of growth and quality we very our are transitioning sustain

reported to fourth fiscal XXXX Turning for our Brands. XXXX remember of fiscal and are results, full-year Kontoor numbers there quarter including

However, portfolio. I'll focus on today the performance of of majority the commentary the my RemainCo

basis let's to begin an fourth Revenue organic the core perform well. as with continue So our XX% on growth quarter. engines increased

Our North XX% China. remained brands by Face. Vans and XX% growth geography, strong The and with By growth. three at grew more XX% XX% growth XX% led XX% increased digital growth big led XX% than Direct-to-consumer increased international in by at

across points more Total more Our region. Timberland from XX.X%. our brand, Europe This gross XX in diversity than basis backdrop Mix challenging margin basis geography business also to our Work the largest the X% and quarter the non-U.S strong XX somewhat reflects brands channel. of And XX%. grew increased points and growth growth XX%, mainly despite across PRO. of with a Dickies business increased including Americas broad-based the timing distress VF was sales. expanded portfolio, due negative the to two performance by

the benefit XX of our basis XXXX mix points. was benefit second However, of in our half with line full-year in

as points was Excluding capabilities flexibility long-term of Kontoor Brands, driver to about organic opportunity increased $XX and XX be to the a gross needed million accelerate value flat, margin to margin growth. investments. expansion the on continues investment approximately profit basis providing significant Operating and gross including an sustain incremental us, for basis

operating margin increased and driven basis growth model, and almost resulting SG&A investments margin gross margin And nearly half expansion XXX points leverage. gross Second margin operating capabilities both our and by funding expansion operating that’s to profit XX% drive increased expansion. in

with organic to U.S in both fiscal growth basis internationally an across and now DXC full-year channels. Moving our the increased wholesale XXXX. and on Revenue XX% both double-digit and

driver mid our and a growth a strategy, focus increased teen for long-term digital rate. Our wholesale key business, at strategic

international at at Our DXC a a at and Vans three XX% and big XX%, increased reflection comp Face. grew growth brands XX% brick-and-mortar vision By against on in rate our increased growth investment slightly our digitally in to become enterprise. including Digital of China. a geography, comp XX%, XX%, stores. XX% increased total enabled long-term above combined a a strategic our led XX%, more by by North The target, growth X% of focus our led XX%

excluding basis XXX The remain fundamentals Americas our by channels all with basis. broad-based resilient. brands, of solid region Kontoor growth XX -- Work growth including an non-U.S geographies portfolio on as than our sector bps Brands to Europe increased business margin with Our X% operating more X% or across XX.X%. expanded profit basis and growth was and increased brands portfolio and diversified our XX XX% XX%. points Gross increased performance across in margin by operating margin organic expanded Operating points the

fiscal SG&A expansion, EPS leverage was for XXXX strong investments growth of Brands, long-term addition strategy. our despite reflecting significant Including In support to or margin gross also top operating an per in of our drove for and Brands. Kontoor Kontoor million line decline fiscal including X% includes profit EPS on basis investments share. growth of incremental and $XX XXXX of $X.XX the organic a XX% $X.XX,

We So ended turning and about Xx. increasing sheet, on with the capital fiscal balance X% over remains ratio $X.X to expectations the nearly prior ops with just a We line tightly was of from generated our billion leverage controlled, adjusted XX%. inventory in cash of year. return flow XXXX over

essentially So levels. our pre-acquisition balance returned sheet leverage has to

We dividends. through approximately repos $XXX million also returned shareholders share to and

another of strong brands, with to diversified are And portfolio enter more is year exceptional as deliver value quartile and geographies momentum yet model in we XXXX business we multiple creation. focused top our a and across ability confident delivering with Our results channels.

to XXXX turn outlook. now fiscal Let's

Kontoor reminder, As Brands a following. the and outlook our includes excludes

compared Moer to We year be of expect to growth range representing X% X% and Reef growth half. basis. revenue to X% dollar to in to growth constant in revenue billion on the and earnings billion, $XX.X will the of standpoint, FX bigger our the at and prior $XX.X approximately X% a an From divestitures impact have on Van first organic a both shaping

dollar well last impact its XXXX from a for on ahead double-digit business Note outlook reach to plan by negative call, As grow a surpassing at on low we billion that our XXXX. Vans billion of $X $X Vans expect previewed rate in a constant in tracking basis, to model changes our America. includes and South

We The both in North into first anticipate in expect with half. balanced growth and high to momentum second XXXX single-digit growth Face continue and still the

from growth single-digit Dickies including the in negative America impact changes XXXX. single-digit from low South expect mid from We business Timberland, model growth and in

growth international to We model highlighted South business X% single-digit We of Europe. high our teen mid from in Asia our America. impact by anticipate the in for expect adjusted business high planned changes single-digit non-U.S from growth and business growth in X% Americas growth

previously region process distributor or model. of our we're As to direct the announced, licensed the in converting business in a

While for the teams these and operating model CASA. focus markets the represent are to our our in continue brands opportunity of over the given the we the to our volatility narrowing taking region and in opportunities derisk management simplify long-term, growth

mix XX.X%, roughly representing be EPS expansion the to on Kontoor of prior points as constant on approximately an growth XX% to basis margin growth in despite to basis representing growth is by $X.XX, compared or year is outlook, to to and incremental expect XX% the XX% wholesale. shift $X.XX as well XX% expected businesses. from operating dollar separation. double-digit to growth single-digit led by to We channel to XX%, investments XX margin basis. dyssynergies expansion, XX% organic XX points in driven approximately about our reach Moving low expected primarily we towards Gross of DXC in digital mid higher-margin our growth ongoing anticipate

outlook dilution. share repos XXXX offset assumes Our

and significant be drive to cash Brands, And plan. for pay-off $X remains at $X.X Kontoor be mind our capacity which cash from M&A to at operations on ratio on the billion a intend M&A, of we With addition about to will end from the is Kontoor organic priority. have our basis. our from value were leverage strength flow the of repos, of regarding Now we in borrowings, billion respect gives expected opportunistic the million least back to Brands, with your allocation XXXX. proceeds the our short-term we likely creation incremental anticipate top question while adjusted at Xx Cash which capital us fiscal to $XXX an to opportunity

outlook ops excludes connection XXXX as On items change. timing in in line as just be roughly basis, investments to Our of expected well for is a is a the XXXX cash Brands Kontoor under flow expected to growth. normalized our as for primarily of impact earnings. $XXX million year-end related result driven from with infrastructure flow fiscal grow with cash CapEx by our

$XXX our CapEx forward basis rate expect million. normal We about to run a on be going

in performance has and team summary, the our short management of So, been business strong world-class this execution nothing is of amazing.

better much is as we year. portfolio positioned head next Our into

creating while story our and the progress across most the part started. are are we of investments with exciting strong we is globe pleased demand our date, to just Our are getting

the value and for to will it looking next operator now Kontoor, back the we the forward chapter spin-off we questions. creation of of I VF. today, With your are the will completed be for open to call expected to turn

Operator

from Murphy Our Erinn is question [Operator today Jaffray. you. coming Piper Thank from first Instructions]

live. is now line Your

Erinn Murphy

my question morning. first Good Vans. Thanks. Great. on is guess, I

dollar South just billion lighter model little was some Can If Asia, target. the $X we slower. just down the are changes [indiscernible] speak impact the You see from it the was to into ahead quarters. guys six And dollar last nicely thinking growth business tackling the what XXXX, you in American you drill it Vans? ahead in talked to long-term the than of quarter, what’s to then of the drivers a bit about

Scott Roe

Yes.

is morning. So, Erinn, This Scott. good

in are that's picture, So, we first Vans, different the modest really you're landing guess is big don't I on seeing that of and all, soft deceleration, the remember we a big anything overall picture and that see fundamentally trajectory. talking

still QX So see growth business as timing. factors it and There's social some those Vans, And business the rates, signs we channel those as that's one. positive checks, a while moderating very strong remain to we are high. relates leave that's media, wholesale the whether number is all off

was I Asia, you strong. exceptionally think you you third like, call recall the quarter might that if

anything of nothing You’ve some got that you there's know business. fundamentally if or a about add we want here feel Steve, timing the we to anything I standpoint. quarter-to-quarter, noise but changes trajectory the from see don’t that Vans

Steven Rendle

no. No,

it. hit you think I

Scott Roe

then then to as for point asked we CASA, it's And -- Vans the a $XXX has impact. as growth than distributor about less these give direct obviously And some Kontoor that relates change you is but the the or impact, in to shape a business. a a few business either model worth of that, from about a million total, to on just of in you countries it top a line X licensee,

standpoint, think modestly bottom-line will be Although this from a we actually time. over positive

Erinn Murphy

And Thank we incremental talk you Got as you the for investment That’s how on the $XX just investment. of I And I talked level have unpack guess shaping was investments, about XXXX ongoing so you you then, and about helpful. of question my for the of the biggest million think investment? much. of some about it is XXXX ongoing planning kind should Can it. this what did components, your guide those Scott been? buckets think second then, another quarter,

Scott Roe

a Erinn, behind of question. Yes, so things are I think your that couple

so first that's think all, of modest if says And it question. leverage implied you So I look your of SG&A at our part guidance

me broadly. answer let So that more

both still algorithm operating We’ve those standpoint, margin gross our portfolio absolutely expansion. expansion we those line things and think pricing, all margin the margin also gross place. power, and the we of and mix innovation single-digit thing made As all some all moves other a about we've growth, talked long-term top talk high -- of the about in through about frankly it and some from driving is

brands strategic capabilities consistently from said think giving a priorities are around continue As that one set our reasons are because our we our I us of growth the investments, to that investing in. are of is it key the and really invest our of and plan think would separation competitive point and that those to backwards and we driving those we've capabilities to we’ve opportunistically range relates we going some of we long some say of ahead been of

mean, DXC, about particular, the that them, with demand way which both insights SG&A margin we've by it, component been It's as talked digital, we’ve analytics, Some about, the creation. in things manufacturing, drives and talking same gross comes also that I areas, advanced an Erinn.

Now as -- the first other thing I listen, would just the is this year. point for out the is, guidance

strong As giving can are we have imagine, in. you guidance you we that confidence

As the we But are to growth. street. XX% see margin are expansion, we believe say again, to reasons sure we’re our to opportunities why to business street we fulfill that make commitments to Don't the is we from we investments earnings the those seeing our an of that will the to into up the XX%. we're we’re are going forget XX% earnings to commitment back success that our XX% going I delivering continue one are make our once area that investments. and

Erinn Murphy

Great. guys the Thank and you, best. all

Scott Roe

Erinn. Thanks,

Steven Rendle

Thanks, Erinn.

Operator

Thank you.

Drbul from coming Guggenheim Securities. is question next Our from Bob

now live. Your line is

Robert Drbul

it's or the Hi. changes through to the like Good to Are the is changes? now, a Because you everything? to think really: going breath portfolio think little done model are break you complicated. serious, Do where that are first When I from the want morning, all where not? guys. go to with have a try you this you’re question next and take but a you you’re going I we one, guess you I’m be to from about portfolio chapter? right guys take

Steven Rendle

this. you Bob. tremendous long-term over what very This leave our but the portfolio me I reshape with had intend And XX negotiate, think last to is purposeful you with growth you We've the -- aspirations. align Yes, let to today see number Steve. be. changes we apologize been is of to months who We for you all to our

M&A allocation number priority Now capital have. the remains that one we

that. We have to means the do

tell And we quarters. you get a people as as would the mindful opportunities for will and very very it But We our around we would very our to move, would will us. to dust the you at as disciplined. settle, just love look few execute be we continue would thoughtful rigorous, if much M&A be let I

Robert Drbul

it. Got

from guys when recently are And over the any recently outperforming, going other pullbacks retail the including have just your wholesale books -- bit by we’ve businesses your tougher then, the of last about how on few been question so months can or guess the a but a the far? spring environment strengthen Okay. for And you materialized just have you is you into basis? definitely some is there I have step take gotten customers, I they talk wholesale little back at and fall for a just have what order seen the reports most

Scott Roe

brands the see positive. strong has Yes, at big Bob. Scott partners key here. general least been we order books our our -- in and and I guess the picture is seen we’ve sentiment

a inventories in where general mean, got, and been are least of retail there's has a But at play as -- is not there. been pretty part rule, we shape. universally, exceptions With always good sell-through are too pretty out year. good good Now at I pretty in that we shape, it's

frankly. So of change, a we see wouldn't we Better confidence. coming half. seen or of the second see I big worse, the continuation out support we've say that

Steven Rendle

by in penetration position to focused that to parts over be key we collaboratively last provider we of that And in are supported our marketplace with drive the moves partners the putting a sell-through. the account efforts that we and to quality would better consumer of of result that we have the a I is get have products made strong And us the middle have more be market. better wholesale portion would away from that the and better XX retail minded of way Bob also that months, say I quality where we've the able stories add traffic navigated to wholesale are our really portfolio

Robert Drbul

Great. with everything. guys. Good it. Got very much, Thanks luck

Steven Rendle

Bob. Thanks,

Scott Roe

Bob. Thanks,

Operator

Thank you.

Suisse. next from Binetti from Michael Our coming is Credit question

Your line live. is now

Michael Binetti

guess, get us? I to you is all here. would for desk, Thanks out my our back could -- that get guys. and when reply way the help question. and it Scott model you to question Thanks is of your the Hey, back taking first sent That to modeling for update help.

You’ve you the of added about -- base line I think rate. to dyssynergies million $XX added

you’ve a but myriad stranded to on to of -- that related lot think some gone the incurred dispositions that is XX costs brand related of So months. over have I

about looked of guidance stuck work with, guidance $X.XX, with you whether a with away at the whether the this us for and those you you look that's can to in that, some start how away, for year cost going $X.XX around did As taking with think year? you’re revenues the as you start

Scott Roe

Sure. will kudos all, ring, get it's just a that. a but been I yet, so it don’t through you you sent Joe all decoder of help if will this received first Yes, give I out. teasing know for

So I the think of think it's to what group, the benefit for a -- everybody. I good reset just time

XXXX some our it's and reported indeed But our and the in implied on base dyssynergy make, at number. sent, assumptions then the be right, exactly And was take the you it to look million implied then work you’re you that backwards you VF we consolidated. bifurcation the is of depending different, results you $XX Michael, the under growth prepared between rates you're going and is that range. that a that if look guidance, the you RemainCo $X.XX, there as So take in Kontoor materials we $X.XX, --

we've I you talking can two about dyssynergies. for been day we internally years. this up so guys we’ve you imagine didn't talking to and wake got guess on We've as So for Say and one or been a year transaction going just

to So these what the which business. largely was is coming. sight the we unique line And to of majority Kontoor technology. technology relate platform of The had great to

to for plans on underway So years the up system. to and been is those work At going we've us, that is stand with for than cost on those of get to going are the couple we talked kind is Agreement, of our this publicly, as own that period, Kontoor to by of they’re a be way they’ve X-year this of costs that of TSA mitigate Transition out and period. more already costs half reimbursed end that they’re about little -- the working and they X-year us Services a systems their helps

And made past not at or either not always be to I've two they a to a sight go-forward going said not VF. they’re VF. So response from they're about in to the standpoint basis that we material comments as over a on line in the the significant it significant of out we And to those cost on net dyssynergies, have basis, look of next years. are, get scheme in I've yes structural of

So hopefully helps. that

Michael Binetti

does. That

So it in that dyssynergy the going we today, the forward. can looks the -- 'XX I that in see a we number through work guess model and fiscal bit overstated

Scott Roe

the have it -- against it's largest by saying technology that mitigate number. is overstated, from the say going wouldn’t comprises you far an what piece to And that but is is. cost that. I coming from you’re That Well, business. a of just the have I'm offset What technology, similar Kontoor the to not TSA's

year-on-year you there. that's is means that dyssynergy guidance into implied you in XXXX will lesser look as and the a what have So

Michael Binetti

in on X% the improvement for much arc seen Face then, X% growth to we’ve from doesn’t North year described bake been on from has to brands of same here could just in follow-up Timberland years, the but few If the gave results. what recent while similar you a the development this past I rev as

Where accelerate So Fifth Champion we’ve for this redesign. think an ideas the pop disconnect over up holiday, to year? between website seen on do the saw guidance expectation we like and interesting Avenue, we the for brand the the tie-in you saw was that is

Scott Roe

start, Michael. me let Yes,

before. although the see in in Remember, you showing zoom and guidance, and So, it you business within expected that Also entered strength, the things improve And the -- all some out showed the to going this would outdoor we drag click first that be businesses go that profitability, essentially appears it quarter the the CASA as would modest focus is we is year. one say, year. mentioned probably a be of kind some which next but we on fundamentally trajectory improve really if that results of the saw signs as I we is XXXX you'll about of is of but got flat to say we you where improving you year. see improvement, impact, which encouragement, modestly on of Timberland next improvement, fourth of indications overall

line. that's of Some at of top cost the

at For stores are which example, underperforming some their are going to the end lease of be close.

guidance. when growth about factors is that point the there's together, of So two you hidden put those implied a in

improvement North back to out very should last those focusing you click, game similar over say on that -- we're as years. plan of modest plan think Face again, fundamentals, looking is I several So The the zooming

Steven Rendle

I try bit a along little here. just will Michael, And, a

place we’ve last calls, the brand. for growth think couple that in I Timberland said we're low of single-digit in

we'd but that diversification talking it's We working. little be, where about the are a behind like been we've to bit strategy

and those the a with seeing we will its are all that double-digit business for to non-classic We growth And had the dependence continue long history. change such across as of our regions of classics grow, waiting this brand styles. part

seeing peril. good are with our We growth

focusing merchandising brand, the that trial work elevating creativity. to of brand we also brand and fall. that We’ve on design has pop you'll of brand mentioned testing elevating new and a continues us on team on the the this elevating of business. how into -- the taking that elements and we’re all the and create Fifth about thoughtfully, aspects Avenue rollout to But on, focus and Raeburn the informed the addition talked Christopher design You the continue did up prototype learning see that

bit in are at to growth we'd potential a be very where little still but behind mid with a intend like the be, We single-digit we where we out remain years. optimistic to

Michael Binetti

help, all for Thanks Okay. the guys.

Scott Roe

Okay, Michael.

Operator

Thanks.

Komp from from next Jonathan question Baird. coming Your is

live. Your line is now

Jonathan Komp

wanted in on Hi, and the of on to cost the Yes. may XX I’m couple now I today? you. a changes, ago wondering just structure, the out G&A piece, the And all changes be for thank tie know investment plan just years model which stands well to the the ratio. you obviously business question I goal but the XX.X% G&A as follow-up given as and just put target where that dyssynergies

Scott Roe

Jonathan, because spin, you mentioned, those Kontoor Yes, acquisitions -- -- are of exactly the disposition. what many factors obviously, the the so changed and of

on parameters. shouldn't rates The those that to to example, to those Number lower with we basic what the from of margin and I said intend from a way and model you at point this we things. margin would think the I general that the gross algorithm say this other thing is need fall that all time. in the to some to an the things growth host And will we is all fall, to two will recognize we’re leverage operating we business used ahead our shape reset you've this we driving you that's given of is terms general SG&A continue the we big businesses Investor in to. we the will way But range do and in change. I'd gross long take reset same away Day ability with new margin and that for bought our been plan invest function. one, the and the going and that operating guess, over you point So, I’d business to margins of the in see mix

trajectory. For in example, any don't change I our margin gross see

to going are operating continue see expand to We time. over margins

see will We what reshape margin in model have, be we or We of that this the leverage. SG&A and need fall that's just to gross business that light about. will new

Jonathan Komp

you follow-up I maybe if Okay. results touched either or sitting and show rate to fiscal little the it's incremental of I at for that already. think pace about the Is margin. close with on just been incremental investment even it strategic bit Makes almost year-ago sense. sales upside of amount, reinvestment by look earnings wondering you investments. here maybe I’m of that's But the we target gross a beat as know a 'XX, how just the the kind or the what to will XX% the same original significant was the and that? pretty the And should a extent

Scott Roe

because at question that's Yes, from look don't answer formulaic a it a hard we standpoint. to

and where to are we to rack incremental we create on margins, we difference. of a the point is a that. think meaningful about we to to those literally, true solid impact would that's all firm want these, we they're at are that as do just and look is what on -- a say it's investments, not at expand investments, business at I look and stack to look the we shareholders. going going first what And thing create really is or payback we The and And them I reiterate, rock opportunities, commitment, are to deliver how decisions going perfect. going the those our we be, are And I Steve commitment make this our

to of we’re you a on We overall haven't That Again, at return looking trajectory, at over made and our year. confidence back. where XX% job pretty capital but a XXX%, look point done continue will guidance on I examples our good couple will growth that you we've just and the gives us last are demand us to good in specific making I the we we give propelling these XXXX a burning, that's pretty general creation. decisions implied around gives brands. we're think in that confidence feed that fires the

last in of and of years, Vans the $X.X brought top business grown are long plans. two we within growth the that range we example, still our billion over For on growth

consumers we pretty to bar and minute, the is around of Think think So a that in growth. growth X-year cumulative up. that going this like grow. idea on that's Think years consolidating time really rate we ComfyCush, products stack three a innovation that's business, into the just really franchise high good top from I’m want that we to to where continue that just all on a new back moment about consolidate those a about and

business. Vans think industry. this is brought, TNF a another time, give think changer. and taking in think around we So the moment advantage it's because of in the in to in disruptive which team FutureLight is time I’d a example, invest like meaningful game moment are to where you it's We we We opportunities, that. we that are going this of innovation invest point we a difference ComfyCush, see as think the going where have we we a in that brilliant

So see opportunities like we're that, where to those take we going advantages.

or be we I not. year, don't know same that thing they'll to know don't should available if type do is this better if I investment Now that be if of going

se can't -- whether on the say I invest not, per we situation. or what would it So depends we would

Jonathan Komp

just could, last, year? helpful. I shaping Very color on And a the currency margin I if line, you. expansion margin the throughout couple expansion? any Thank pieces in the any you but gave of around color of top Okay. in know

Scott Roe

Sure.

-- driven other related that half year, more second frankly, next favorable components, you and the So as our Against a about have we see in. those, in the XX labor think bps overhead talked those some cotton, hedges and first pressure currency roll just synthetics, tailwind cost as half is that the largely area. the by are and as we you'll about mix. than polymers, And petrochemical

So see see to net if is positive to those net and driver a we small primary mix. the you really then the related

today. on based in margin part see first the gross more little a see will we you the So of year what

Jonathan Komp

much. Okay. Thank you very

Scott Roe

Yes, thank you.

Operator

question coming next The today Macquarie. Thanks. is Vasilescu Laurent from from

now Your live. line is

Laurent Vasilescu

morning. for my Good Thanks question. taking

market? key year Investor that was year driver China for this you kind impressive expect of out should that and for market seen growth Day. that Can driving called XXXX the we what growth You’ve as as what in fiscal last a should brand dimensionalize in growth be

Scott Roe

will I Yes, a it. number put on

it in So, XX. looking would be Asia, north general, at we China mid-teens, of in are in

that strength think we similar in but pace So talk China been momentum business don’t continuing a that's XX XXXX. in talked guidance. the we in for that plus we about specifically the China Asia, see China, at see we implied I has in didn’t we which continuing -- specifically range about

Steven Rendle

the business Timberland specifically the good that in know be Face, we driving present us Asia in that North the really The the majority that that and marketplace, look, the Laurent, But top for brands brands carrying line of Vans, will Kipling And also growth. market China. have a are that you brands

Laurent Vasilescu

follow-up And questions to Okay. Erinn's Very I helpful. then wanted on Vans. on

I think, gave a lot detail. you obviously of

growth And I about wholesale How in overall? dimensionalization any think on Vans half, the second TNF. for first versus you equal at for we guys out half. growth called the in then growth should think maybe retail

Scott Roe

that Yes, will one. take Laurent, I

half second in guidance. So, stronger half the implied general, our be than first in will the

and soft so DXC place we're again, So to a larger the but And year. as moderation both the a landing about shape that relatively see over wholesale, of kind take wholesale in thinking decline estimated percentage. business you'll occurs and in that

I about was thinking a we’re a So the DXC And that single-digit well. prepared wholesale standpoint. high in standpoint, think from low from as teen materials

Laurent Vasilescu

Okay. Thank luck. you and best very much of

Scott Roe

Laurent. thanks, Yes,

Operator

you. Thank

Sachs. is from Our Walvis Goldman coming question next from Alexandra

live. now is line Your

Alexandra Walvis

Good for Thanks morning. taking questions the here.

First question business. is on the Work

back just with the X% segment the segment guiding segment. Red in breakdown that pass You’re Bulwark, and step could you through kind to with now markets? that wonder expected to X% that some end the there and of acquisition, forth. us to of different I you growth to ask could growth know to that brands, reduced end us the of share of rough rate that the if you mid was to so sorry, help wonder perhaps wanted color And growth other that -- markets. the rates know the talked if X% Dickies about I about of the cyclical but Williamson-Dickie on single-digit brand. exposure Kap share expectation. then, in embedded big I are I some for brands any of I

Scott Roe

Yes, sure.

a so like the seeing we’ve to and and So we're etcetera the of businesses the resiliency. around and I we to think the exposed cyclicality, business to the XX% oil what would part of gas, of exposure is real of market, the call third XX% question roughly cyclical the parts about was the said

we're and Dickies where in in particularly trajectory side go the as frankly Dickies that prepared the really really fact from outsized in the and whatever and at constant in our frankly XX% maker for of expectations but think it a we like over work the see digits is acquisition we we believe north seen our our kind The really That that Asia is we I probably plan and particular and example the currency, growth work the that we -- a the exceeding is forward. work X% of and that in year, opportunity are us similar work that goals to in bought we're we're my going last Work great end upper that, we’ve for exciting where at mid-single Remember, ahead zone, right and at of I thing we larger that when of of call grounding said important see in you lifestyle high-end brand. of inspired, acquisition interesting category. remarks segment inspired that to inspired a community seeing growth. in market X%, is in term

Steven Rendle

some opportunity to in business has to able really high pile take opportunities front our Bulwark Red on. beyond and real more brand well playbook -- rate move doing well of and well in just lifestyle see is into property, we as in being but core plays with their And Red nicely PRO piece. of same Williamson-Dickie. I well also extremely growing that see we Kap as the sectors quick, then following work And respective brand in Kap that that that those very consumer it is beyond Timberland Williamson-Dickie Clearly, Dickies center but large single-digit work will segments,

driving So that team proud the very optimistic portfolio the we we've remain that’s and business. of assembled and

Alexandra Walvis

you. Thank

Scott Roe

I assume that and of see just widespread rates that publicly. the we mentioned overall are would question said that range growth that Yes would was saying from haven't think on a that our and in that -- standpoint. was if growth be and comment your -- this pretty that brands -- you can around I we to specific sorry, brands part we X% X% say you growth

Alexandra Walvis

second division. active you. question was the My on Thank

you’re trends growth just if those been of that has there. to growth I you and weak for think been other the growth there, deliver implied moment that’s rates spot on continue but rate that a of So could you expected some has brands division very some forward. brands think that seeing the in strong reasonably in going the I Vans, wonder and I spend Eastpak, and the Napapijri JanSport a

that what’s on So division? dragging really

Scott Roe

one and not that's is, in it's remember, a operation, thing that's discontinued sold not the so Yes, guidance material Reef we enough.

really that the couple weighing the spring quarters So impact on very that was particularly business oriented. because in is of sector, the first

of it's So to really in business, the but along our A packs row of you're and Napapijri our high single-digit. Eastpak put the nice business, of double-digit into outs, business years really comping our if single-digit growth with couple high have don't the look in majority VF, of we that but even more their mid we they several call to a which you these are going the but talk about they’re And grow future. growth. hear They're profitability they jewels they much profitable exciting in that these and large brands, about that think to and are real continue do in and not the brands you’re well. scheme

Steven Rendle

Eastpak result of are of and got we're mentioned for things vision really stand brands driving And we're that’s a styles for, a and greater mean, few to strong elevation the the new brand our work. both creative around to ideas these that on stories growth. learn Napa able where focusing I brands big really test outsized clarity really that are of many rationalization of and markets growth these of and point, what and a building and And that that doing

scale So think do our learn, and benefit of test these certainly and that the they're of as but but our themselves portfolio as certainly receiving parts they’re work. important for drivers, smaller, growth ability good they to

Alexandra Walvis

Fantastic. Thanks very much.

Operator

from today from Boss Matthew next JPMorgan. Your coming question is

now is live. line Your

Matthew Boss

nice Thanks and quarter. a on congrats

Scott Roe

Thanks, Matt.

Steven Rendle

you. Thank

Matthew Boss

drivers comparisons? accelerated potential X% constant and past digits from the currency X% structural double you growth year the this Face, to So conservatism Anything the brands year The the growth versus at North can of year? to tougher moderation next maybe walk through aside or profile behind over

Scott Roe

this the jump you I just don’t look should The on Face. numbers. at North a I think in as will deceleration of

Steven Rendle

my stole starting point. You

Scott Roe

sorry. Oh,

Steven Rendle

ahead. go No,

Scott Roe

not Yes, I think sure. decelerating, is it I'm

is The business lot innovating strong work marketplace and put core its I North the amidst very a their first that cleaning growth really growth Urban And region. their very, management the that each years, over broad-based return the you of Exploration. think and that’s one Mountain of business up couple of America's team the products. some to the last across product standing and seeing from elements this creation up all the Lifestyle we're Mountain team across a business has each starting with in the brand to

beginning standpoint, of each forward, from group. the rightful really are that about proud we We one those this product doing that the time from from seeing at growth really only a of we're to FutureLight, being its returning this single-digit and as outlook. stand not really confident consumer of purpose expressions of are to separate a is a from brand brand. solid and leadership positioning where lot strong position this And in peer this led see And from able going a talk we brand innovations particular brand high year things a with the a experience is aspect, we

Matthew Boss

the of fair together Great. to EBIT and I to just get put the is follow-up at path no comments it maybe maybe some Day. SG&A given And different there's portfolio major changes a target, that a 'XX your say there outlined to then targets -- guess the to gross just despite some X-year margin the margin XX% regarding Investor reshaping?

Scott Roe

Yes, unchanged, pieces say I our is pieces the to when you fact but reset would you XX% put and other in, the I that take think out base. mean, I aspiration remains

is there. So expansion that margin

that's Day all horizon, Investor to And talking we're it's this think right? about pieces. fall reset I the important think I really why just

operating Kontoor that and take and, the out changes business, you the that math example, higher and, For margin and.

that same like margin is would bring operating the that important to basic The you the margin that. point expansion. with I back and examples expansion is gross many most there's So algorithm

clean you changed. it's up takeaway fall. not meantime -- we it's will this that So not for the the In really

Matthew Boss

Great. Best luck. of

Scott Roe

you. thank Yes,

Operator

Thanks.

Sole from Jay coming UBS. is question from next Our

live. Your now line is

Jay Sole

Great. could just about portfolio, been and question Thanks brands smaller, less like of those help the of what's Altra talked like some acquired? first you’ve brands Steve, so understand Maybe, other Icebreaker. much. and that development is you us My the

Steven Rendle

category lot continues to first purpose acquisition inside fitting growth ours, strong being continue product and double-digit We enough don't last had as processes about into year them. having amidst Icebreaker to Great. delivered strong their innovate apparel of that VF Sure. year, our core and really a a adapt with their to talk led and be culture integrated bullish. our being a to rate very we and low in Merino

strong brand of a have building relocation well. we’ve Altra, You -- this brand been really retail extremely will had as evolve continue see some to They, look representation Denver endure the they’ve we as exciting through things part coming to integration. -- that and of from this we’ve brand On too, component. their they’ve year come to our

well new forefront extremely that the with that consumer. specialty core trail and there. running And it running, continues thing As they’re us, do of innovating at got very core the a running brand in now being and to our new always retailers that them set not connect of leader for some small to team will we’ve Denver. solidly a easiest interesting that’s through able admiration to We’ve products that keep and work great with

Jay Sole

I reabsorbed ask dyssynergies million can Scott, then Kontoor. that as from And it. Got $XX if maybe, overhead you’ve about that you

finding talk just how coming about can the you on, you doing ways by becoming -- million little you’ve As bit you’re a years, detail and releverage us you operationally? $XX more much about more touched of over maybe give to how that can that efficient eliminate

Scott Roe

Sure. that will it. Well, care when we of take buy something

mentioned, my business that -- relates of going Kontoor platform technology unique that the business. we the operates that’s too First to deep on is not the I But technology to as fairly are of the flip into the and component answer. all, largest Kontoor

maintenance out of will They contracts is company, happen period out right? end -- that and all the out come the And center. at what so system this come of our will our cost cost and of of of the effectively, will the come that of

So there it's is cost. line that really sight of to eliminate

and we -- lean on terms of being all when time in net course, of at all all the the initiatives of Of you as other more impact have going of looking this an the organization, we we at It's a but of overall quickly. the it that will quickly. model, and size relatively we the that the pretty the number into in grow pretty have this grow small activities we have, growth VF and look into

Jay Sole

Thanks Got it. Great. much. so

Scott Roe

the to it But there's questions that nothing as know going some get There's $XX I areas. we’re just other I’m if in biggest it there. that follow-up, want it of the else. our guidance, get know, the on add I -- implied that come Joe ending up -- modeling think the Kontoor you proceeds so benefits end will below to and will You implied income, is $XX didn't pay help the just the of record from to the of if we is two chunk as get to that we getting from to and in about going other call, go you'll as on are because I really operating benefit The line interest plus million, to the see the and call be debt. down there EPS million --

load, and going to see benefit. less be to year-on-year you’re going average debt obviously that is Our

but as showing don’t will model piece we that you'll other you pension line. about guidance we so this benefits that our a talked is that forget that The pension, need you also And in froze see have. the that’s morning, up we haven't

invest we’ve ask a investments, away this about I of to working talked general other talked the comment XX% would on saw a line optionality. the been remember, income XX% over obviously say, on coming. initiatives. operating call you other these of to off. that those We deliver areas have years from We’ve We have would and word is we’ve we top XX% that return I in couple that we’ve this SG&A, capital been last talked The for take of year. just back ability these of to Remember have sight about paying think to on about lot we know a some and

are -- from these the deliver That’s believe it winning going sense. are an standpoint -- we're we we standpoint. more and investments that could continue key an that absolutely where are makes we So But earnings to our earnings. winning our doing brands a from to and option reason

Operator

like question-and-answer this back you. does floor to at time. to our session. turn the That conclude would management Thank I over

Steven Rendle

would everybody to for I joining Great. like us just thank this on call.

We into a year fiscal very transformation is exceptional an where finished just a we strong significant find going ourselves have of position. in year, 'XX

of will performance are leaner, creating We strong on driven just continued as focused more see think and I led performance what ourselves is we operating focus our a version model. purpose value you

many first and in here our with too you catching we a forward thank look weeks you we So up not quarter. up finish to as

Operator

Thank you. That today’s teleconference. does conclude

lines wonderful for You a this We may your you today. your time, and thank day. participation at have disconnect

V.F. (VFC) 22 May 192019 Q4 Earnings call transcript