VFC - Earnings call transcript Q2 2020

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Operator

Greetings and welcome to the V.F. Corporation Second Quarter Fiscal 2020 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.

pleasure Investor your Relations. my Vice Joe now of President is to host, introduce Alkire, It Thank sir. you,

You may begin.

Joe Alkire

call statements. Good are These morning, current could earnings regularly today’s cause XXXX filed second expectations detailed quarter make and welcome to the to with to in call. V.F. and are actual Participants documents uncertainties based results statements uncertainties are These Corporation’s subject fiscal will SEC. on forward-looking that on materially. differ

be to of press lead referred adjusted adjusted on true issued amounts on noted, we performance will we the an amounts numbers underlying dollar call in this business. otherwise because the discussion release operational and believe which basis, as our Unless our constant dollar use constant more today’s they represent was results in morning. defined We that accurately

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

today’s on noted, business included all of liabilities for business on Jeans company the Unless discontinued which this and and as the the well first XXXX, of above, the presented. the the fiscal results in assets Jeans under Brands. V.F. Outlet the periods presented the the included the the Rock independent call removed continuing has as Lee otherwise business, traded company name operating of an date During Wrangler, & of based company publicly noted of Republic its as operations. completed and quarter spin-off brands, into are Accordingly, results operations business Kontoor

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

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

Steve Rendle

results, second quality driven brands and strength morning, platforms. you, our I’m Thank by the DXC our International Joe pleased largest everyone. of with and quarter and and good our

the Our results we right geopolitical for more both in line a the the second uncertain delivered environment. of and despite our behind while our And macroeconomic and quarter with these of results more impact investing first year were half priorities growth absorbing and expectations.

in We resiliency to a value enterprise, more V.F. steadfast diversified our power, commitment are and of the and transform our consistency, continue and evolve results to consumer-minded demonstrate creation into our model. retail-centric

at momentum X% by and balanced was strength strong XX% a respectively for by our Face, brand diversified channels North our business of which overall in geographies, across largest remains The was The or as both strong XX%, organic quarter and growth driven and brands product on The back-to-school Vans Looking brand’s categories. continued. season. Vans basis. and grew detail. our second our the Revenue more Growth X% and fueled increased two an brands, well

of we growth XX% increasing performance visibility for increased again target. outlook expect second year, We slightly our quarter the ahead our Based the on While in continues the apparel growth, ComfyCush grew growth almost core generate accessories, momentum in in by are footwear, strong and continued XX% the and Vans full the year, part XX%. our franchise full to to XX% for and to by growth new the we encouraged driven progression growth heritage almost brand’s double-digit now which business brand. long-term particularly are

to beyond Lifestyle Exploration growth attract capitalize and and territories quarter in the driven as Urban momentum consumers growth, achieved its The brand’s core strength performing executes well Mountain regions. new across Face double-digit Sports. results strong back-to-school North the as Similarly product all opportunities on The second brand in against are continued the by and Mountain brand strategy

sell-through and Face X, North four than nearly The have launched weeks demand and expected. in, October been FutureLight On stronger

XXXX fiscal to the in the – innovation opportunity is product FutureLight second brand. when the of looking casting consumers somewhat year the strong half will impact limited, portfolio. assortment life to and creation broader investments experience for We��re the the to is have the forward a halo disruptive be FutureLight, demand financial specifically come of a the While in across

Based line Timberland and increased X% now for year, again were on Face visibility full X% for long-term the ahead our target. we to the our brand’s up XX% respectively. the of second and are and slightly down brand. performance, quarter Dickies growth year, with We increasing North expectations, outlook growth full growth In expect our The X%, to

in growth planned were by business growth negatively EMEA. Similar U.S. to in mixed model X%. and globe last the offset across solid were impacted softness as South revenue changes global Timberland’s APAC revenue in by the quarter, results Notably, America

expect For including the growth the brand, year, for continue we global to full in Europe. improvement sequential low-single-digit Timberland

The Dickies performance in ago. the shipments to of its mass second the compared quarter the of timing impacted the a year brand in was by channel U.S.

digital globally, and DXC all growth by five in for growth next X% brand driven the Excluding lifestyle, the increased drivers timing solid issue, wholesale, over the years. key revenue China,

mid-single-digit the the year, globally. we continue Dickies to brand for For growth full expect

France. growth comp a total growth growth increased in growth from in X%, XX%, GAS China, with and Americas at International Direct-to-consumer nearly X% in increased our non-U.S. and X% the X% Europe, growth strengths XX% Looking platforms. including including XX% region, Italy digital. in nearly and

reached a continue to And required margin, momentum. of strong second EPS value sustain our providing key quarter investment XX.X%, the to increased the our fuel drive gross to creation model, capabilities lastly, adjusted Our the growth as in fundamentals $X.XX. us X% and remained to driver

points by the X%, quality and increased year. XX% The recap sound. gross versus briefly expanded XXX results, business fundamentals EPS are of our revenue To prior our first and increased basis to XX.X% half margin

is fueling growth executing into of broad-based head our portfolio the second are transformation well we year. We the and as across half the

the in of confident provided trajectory outlook We business our in the today. are and updated

largely disruption mainly the several underlying tariffs uncertain but our business environment the operational last cover of more in several since we in over strength outlook the the have Scott factors However, July. FX, ongoing will become has a past Kong provided our Hong details the offset and moment, months. in

they individually, weighing XXXX. opportunities the just collectively, While upside are of fiscal our mentioned for are all of performance remainder the small on items for

business In retail holiday Unemployment the environment past the months, more across cyclical portfolio. in work U.S. the expect sectors fall strong. we growth resulting of contrast, tempered season. and remains across a somewhat relatively healthy low expectations parts is Regarding our over industrial conditions consumer globe, weakened and the and have manufacturing few more

head to related despite resulting solid the generally a EMEA, APAC, to fall holiday. tension. brands well In uncertainty we the performance China. Hong meaningful consumer Europe, our Brexit very a our the continued of we perform result modestly To deceleration to change In been a rest in rhetoric, in has Kong consumer date, in impacted in of experienced regional impact Across slight trade UK in has market. confidence, continues into have as as performance. our situation Further, behavior not

aspects continue as to evaluate events business will We of unfold. all our continue to

Springs Turning our join leadership to team date to pleased Denver months I’ve and nearly summer move point, Icebreaker business have American from to this progress The area. we our that at to the the been I’m corporate in XXXX, our have rest essentially five here And we’re the and began who and now metro since across Collectively, brands business report in relocation. Denver Smartwool seen excited working approximately complete. move is has are the North Denver. and associates, in our living Steamboat of amazing. us and our collaboration XXX

We top when and the information sense opportunities Finally, between Creek, regional purpose, in individual supply on with Day balance as overviews chain Day shared Colorado of in organizations. Power Investor late are strike aware, theme a of Beaver global about which hosted The our we September. ahead of integrated see shareholders. and also we evolved strategy, strategies, emphasizes have technology while was The many you delivering sharply digital strong business quartile returns our deep an our Investor our results the business of to remaining working focused And, and we brand

reinforced on our to also transforming consumer-minded, hyper-digital and enterprise. focus a continued more We retail-centric

webcast. attend, to If able encourage to you the you’re to not listen I

evolution our our while redesigned we the optimism and our introduced we conveying confidence spirit focus for always ourselves, have To better Day history, and of our also branding also version honors a future. the capture event, on energy, of logo and at Investor XXX-year the that becoming a

company logo features evolved Our are and performance-driven. clearly of continue communicates we new will to a be, purpose-led, type the tag line that

updated important how design, is associates This it’s our and corporate it’s an elevating marks first more engage logo in years, to XX our but new about note our our just outside than with and stakeholders. about company position we much update that brand

communication new sets and we world. become and logo purposeful We a branding tone forward, for powerful enhanced more the and will our more As communication sharper, consistent the positioning. around move believe

line in We So term, investing year, in year remain to our right our committed deliver remain and halfway our long top-quartile shareholders. another with confident is expectations. of the through and summary, performing our returns ability our in business to outlook we the our brands for for in

with it Scott. over And to turn I’ll that,

Scott Roe

Steve. Thanks,

XXX margin were expectations. are and basis year-to-date gross our The X%, of in expansion our results first business revenue fundamentals quarter second points of with half Our right growth. XX% and strong EPS growth and of solid, line by highlighted

the on intensely key as driving year. into the against platforms and engines objectives our focused we head We executing of are half growth and strategic our second

become more the uncertain As Steve mentioned days. over in the remarks, his XX has past opening environment

or consumer we in business TSR portfolio returns. believe algorithm deliver the our conditions, changes and top-quartile capacity predict to impossible it’s consistently to give While diversified us

throughout those ability Day commitments. and our portfolio themes key at us further you our that deliver resiliency against optionality month, joined were and our presentation For long-term last support of to Investor the

half Before second tax will fiscal during our quarter tax the GAAP most and in quarter the for approved recent our which $XXX approximately enacted point positions this the benefit. resulting include provisions of were quarter, My Swiss by impacted comments reported deferred focus Certain of forward $X.XX. excluding quarter second the positively out legislation, recently first on one-time Swiss going should tax getting of to results, the XXXX. that of reform into EPS figures impact adjustments results, our million adjusted recent I

quarter let’s second X% across by results. Revenue growth our brands led platforms. increased strategic recap So our largest our organically now

X all grew mid-teen Wholesale increased and Big at including high across growth. rate, Big geographic generated growth digital double-digit our and balanced brands X by growth X% Our comp collectively, in DXC XX% regions. driven single-digit brands a growth,

XX% product XX% Vans commitment. XX%, first the XX% strong are brand’s remains well Vans’ of outlook growth, range categories. season. channels, well growth again slightly we balanced as the to into by geographic long-term regions as Growth increased a full Based strong a visibility to across driven half year, with our another the quarter increasing back-to-school delivered on in and our above

we successful year, globally, into the largest a supports FutureLight reminder, XX%, delivered to and growth which brands exceed at our X% generated in growth as full giving of to outlook channels. strong. of Face is on has and commitments. Based meet half the confidence XXXX. five momentum another as to year North heat expected the And the XX% covered our Vans bullish and a back quarter in beginning years commitment. further of double-digit from the launch Face, next regions or long-term month and above brand The come of first in brand’s The growth across the our our range back increasing into us strong fiscal ability slightly our two TNF’s are increased The of we our high strength the XX% the And heading is earlier, this to North balanced over have the Steve again outlook brand, our visibility for into half with

North partially expectations growth America low Timberland with single-digit in Strength performed softness and was Europe. offset with in the in Asia line in by quarter.

low-single-digit We stronger this brand’s European half improve. year, business as growth continue second to begins in expect for slightly including Timberland to the the growth

timing impacted North was the shipments in revenue Dickies America. by of this quarter

we global target and lifestyle at Excluding fiscal DXC, work are X% this by apparel, and all in led brand full in The DXC key month Day well, digital increased for growth. the timing, XX% X% to drivers and performing China XX% our outlined confidence Investor have brand’s last Asia global revenue X%, growth growth XXXX.

X% grew growth, globe. business and and comp. growth North digital DXC Our digital the Vans driven by around Wholesale Face our wholesale by with a digital X% well double with XX% growth XX% partners also in XX%, and in led growth total performed The

and and the transformation continues fuel in to strategic ongoing DXC both portfolio broad-based growth the across channels. Our the hyper-digital focus wholesale

in in Europe. to Revenue by growth, growth non-U.S. on X Big the and Outside growth Americas and X% our increased brands. with of balanced across growth Moving each our U.S., was XX% at XX% growth in China X% channels the both balanced in performance and geographic of X% performance strong U.S. with region. remained Asia, internationally. particularly double-digit including

by XX.X%, toward Gross transaction profitability. and favorable to timing continued mix now XX Turning currency primarily margin shift foreign to this quarter by basis driven expanded of gains. businesses points the higher-margin

Our was the first up half gross by margin points. for basis XXX

Investor basis second in Consistent to the laid our model. delivering growth first to accelerate expanded same Day, points use the DXC, our including were our time chain. product we structural out gross and including with at demand strategic investment margin both And XX.X%, priorities, at double-digit earnings and for algorithm growth. earnings able half, operating by XX margin quarter the that’s to investment, Operating supply dollar and the expansion XX% we while technology creation, our

were as tax by year the quarter. slightly expense earnings EPS increased and in interest XX% rate the operating X% prior lower higher offset growth a compared to

increased in our to line earnings our plans low-teen first of the long-range XX% half, For internal growth, EPS ahead target XX%. operating of XX%, with and including

Turning up XX% quarter, holiday to Inventories forward revenue we balance sheet. season. the this the slightly of key were enter outlook as ahead our

inventory partners in retail our remain owned as levels as shape. at Our inventory well good

forward growth more We in XXXX. and inventory line exit we fall revenue season be growth expectations as with holiday our expect enter to fiscal

Adjusted times, pursue are capacity maintaining significant X levels below so have leverage just to targeted we powder and our dry under agenda. M&A remains at

committed saw And dividend Beaver quarterly diversified $X.XX to of TSR our $X.XX covered raised As we’re model. growth by key dividend balanced, you per in we double-digit we’ve you likely as component in release, representing our XX% Creek, with a share, growth. our as to

So year, into our to quarter visibility now following. Based performance second XXXX XXXX fiscal half includes our the moving fiscal outlook. updated now our first on the our increased outlook and full and

represents X%. revenue constant expect impacted in than approximately as $XX outlook the approximate X% representing to approximately On more to to dollar growth have billion, an negatively basis, unfavorable provided $XX.X foreign our we organic relative million of revenue continue now We rates outlook growth reported this by July. currency

increase underlying Face. and FX, strength impact driven Vans the continued operational by The the in of is North Excluding our largely outlook at

are XX% target slightly dollar ahead brand our growth XX%, Vans outlook the a raising On constant momentum basis, the for to of as for to continues. we broad-based long-range

slightly X% target ahead in The X% the brand. to XX%, We’re of raising Face for our prior outlook We versus our also remains outlook growth, our the North expectation of X% prior expectation solid Dickies long-range growth to X% X%. to expect for the growth at brand And Timberland to X% our to X% for again now X% to X% to which growth. compares of

expect at expected strategic our digital. our DXC previously X% And is XX%, in expected growth of is high now of DXC and be including and X%. to platforms, the between International international increase end to ranges. growth the to XX% XX% We increase about and between communicated

Moving the down P&L.

for about of XX the year, FX We half points of expansion from the are Relative expect of gross by first year. expansion prior back XX compared we the about which primarily to year, half, XX.X%, full basis target points smaller the in half our transaction to basis the a benefit of the in maintaining driven second implies mix. margin including

of continue implies operating for SG&A leverage XX the fiscal quarter. in XX.X%, We for pronounced basis we anticipate second full to half most expansion fourth which the which of for year points be expect to the will including year, margin the be XXXX,

of is $X.XX impacted still FX relative organic basis, outlook have to On to $X.XX, the an outlook as now EPS be expected by July. our XX% XX% constant we exceed dollar EPS the provided representing expected negatively in is to reported in about XX% rates EPS growth unfavorable to range to $X.XX growth.

by earlier moment like I’d impacting to and in fiscal few days other and uncertain the impacted our talked and second address relative in our ago. negatively about specifically, half. take full to the $X.XX outlook items an provided incremental XXXX July. XX FX, versus particularly disruption a environment XXXX Kong outlook More outlook have increasingly a our we year ongoing tariffs We Hong about

isolation, are X the they outlook. in relative mentioned of are EPS by points our collectively, impacting fiscal prior these to material XXXX about none percentage items growth While just

optionality headwinds. As despite incremental further to of reaffirming $X.XX are we EPS $X.XX, portfolio and testament our to guidance the fiscal themes resiliency, of XXXX these

While in macro immune we we’re confident not the remain deliver and factors, of growth to strength in geopolitical our commitments. our and and quality underlying TSR ability business and to our on

of of the the at midpoint with in performance we’re portfolio. pleased So summary, XXXX, our fiscal

are fundamentals well strong. head fall the we our holiday and platforms Our positioned growth And into core engines season. as are

balance accelerate to business, V.F.’s growth allocation positioned investing We the our on pursuing our and and in is and enhance momentum capitalizing further plan. to are priorities our purposefully strength organic M&A other sustain opportunities well of reinvesting sheet continue capital to

to like the questions. to open your I’d operator up now call And and the turn back for

Operator

Thank you. [Operator Credit proceed question. your Please of line the with Michael Instructions] Our first Binetti question Suisse. comes with from

Michael Binetti

guys, On our here. on it’s of of A big Obviously, growth we’ve couple much that’s Vans, been morning. the Hey how questions a the deceleration. Thanks brands. obviously you driven. given for all for good taking sort the watching driver

You the And are to how was said there plan. spoken your about XQ glide internal it path right you with in guys I guys know to have line it. down you thinking and relative

are You further we slowdown that or you for XXXX in reason into Vans? U.S. get But from probably plan out the decelerate the that mean away way the to and call break here continue I confidence any in in gives obviously that anything compares don’t why. EU the to XH, unusual

then you’re And growth slightly the forecasting above noted that this Face, now targets North revenue you on year. long-term

question, first had have innovation the the brand, platform consumer talk us work why given the done study, to begs the it half. Thanks. FutureLight being you guys there years? the and does slow in could you’ve here, big several that then for So implied you Maybe the about slowdown North to from I rebase second guess Face

Scott Roe

Scott it’s here. Michael, Yes,

all, we’ve actually on increased a go-forward Vans our And on remind the we’re see Vans question, you Face, I’ll today annual of First North and both than for we on in that basis. yes, line, can we’re tracking guidance strength what modestly we’re – better. based the The

in say expectation from So I’d even better slightly those both an on brands line standpoint. of and

cost structural Also, drag as modest the a second unprofitable it did relates some one the Vans have half, and both to our in remember, markets thing to half. Timberland business, we and now in second exiting just changes in some of

I somewhere growth impact think half something to brands. both on of the like a a X those half half, point second between in

Steve Rendle

Michael, out XX%. Yes. in to on actually confident just FutureLight and increased the through couple on Day, of tracking guidance our innovation Arne that brand your laid our Face, halo the that’s question And that we the launch over the been importantly increased an We bringing But North brand or of yes, consumers remain in marketing. the we’ve more of front strategy X% in to platform. extremely reconfirmed a more the Investor as casting digits.

confident – North wouldn’t of be prospects guess, I Face. seeing We we’re a I very, to characterize in continue slowdown. growth the long-term very I that wouldn’t

work to the confident there’s today results we to continued this we’re early about talked we but done are seeing work improvement. we’ve in put done seen been more position, be to and today. couldn’t where more journey. of our A solid We’re a lot be has really brand We’ve a with lot a in

Michael Binetti

half guys. Scott. far the up on could could year? follow be I Seem you the help you’ve as Any for – guidance versus cadence embedded Thanks, help Any XQ like where left second helpful. XQ the help of think would Okay. about as us one, if

Scott Roe

Yes. guess Michael, two point I’d things, I out.

the from about and about gross second margin in more the It’s that half, So expansion we mix. structural. XX bps is talked

those on the talked to So quarter do expect linear Particularly a year more are heart, last against This last I also I we because evenly incremental near fairly you throughout second basis. in year, some up investments your half, the terms big did remember, the you, in year. investments in that we’re listen know SG&A in dear about fourth of fourth year. to some spread And Michael. the can in we that pretty quarter. particularly QX leverage and

a quarter quarter. on increase profit relatively you’ll the So to fourth quarter-by-quarter third compared basis, in larger the see a

Michael Binetti

a Thanks a the guys. lot Have all one. good for help,

Scott Roe

Yes, Michael.

Steve Rendle

you, Michael. See

Operator

Thank you.

from question. your Jay UBS. Our next with proceed Sole live. line is question Jay, with Please your is

questions. with proceed may You your

Jay Sole

Hi.

margin Sorry about showed to just investments fiscal slide Scott, XXXX it bit then you operating it the is entire basis that you did the impact in operating margins margin you you were? about What I deck. that terms slide? only little that ask help made maybe strategic in that the bridge point in Or points? what And that have in shows impacted of that. XX impact wanted a the those in it of Was a can us basis piece the the that? on investments more

Scott Roe

Yes.

entire of you all, in you’re amount. accurate way characterize that that, First the the is

same that that It’s it’s point our and to And difference things DXC our creation. Creek Beaver meaningful things are we invest powerful brands. It’s agenda. things. in those are to platforms we’ve believe Jay. demand So we these It’s innovation It’s the for and just of a intend in digital. highlighted the continue creating that we been talking about, same

Jay Sole

Is of Do tariffs, tariffs ways as post you work a or when the go on expect $X.XX, that to $X.XX you on number sort that plan about to work the of year everything pre-mitigation? it’s sort Got maybe through that sounds like impact. it. of that as doing? And able we you you to sort it offset talk lower be

Scott Roe

said we amount. we the as We’ve this No, of I actions. our mitigating forward, came of X% example, mean, U.S. the year. talked gross some for from sourcing about, look about that’s China But remember

more next like be year. to X% We expect that

tariffs So effect. knock-on came a so there’s mid-year, the

hand, mitigating you look impact other the the as forward. going we’re On

long a that’s So saying. way of

tweet or basis come much series forward, ongoing you that another from of shouldn’t there’s an look we in, tariffs unless As to another relative expect tariffs.

Jay Sole

total number. a the about XX Investor last you And Day gross in one Okay. to maybe mostly month, but basis me, points And that is X% of was mix. within maybe talked sounded X% nice at coming leverage then that margin the last shareholder quarter for margin return from expansion, the of like

sales So drive to to you’ll of gross the of growth to margin costs continue on top what deliver to get what the from you of sales in obviously growth, quarter. What’s mix? the level you fixed X% leverage on had to need level comp of continue sort

Scott Roe

Yes. is Well, And all. modest structural long-term the leverage, and reinvest. out it’s we said, just advantage we gross laid expansion allows some a So that X% we that’s so comes expectation, engine to of operating have. X% maybe implied margin that algorithm, our that’s first margin in us And that right? also but really essentially, to our that from

this So our that look I way in in Day. at in I spoke the though, lot it. Investor there the say about change again, model. we would a optionality is no

So we’ve don’t meet commitments today, fundamentally expenses we should to different levers we should we from the a environment, which and way, see modulate standpoint. by see the pull we but earnings that environment, different made can are there fundamentally an a

Jay Sole

so you Thank it. Got much.

Operator

question from with Sam next The your Please proceed you. Poser Thank is question. with Susquehanna.

Sam Poser

to morning. you some you detail taking of, I’m questions. then get the spoke smaller Investor on some brand, the the wanted color my category Thank brands that at Good more really for in work and Day. Dickies

little and more us business? could Work smaller you of those on a some give timing sort the issue color on If of then brands color this on momentum

Scott Roe

Yes. Maybe I’ll of just the start, Sam, this. side on numbers

customer first one going so. quarter, a And about But was we the talk to in I then what last X% reset obviously about Dickies ours. quarter, other of or in I’m is be mean about fill. the exclude year American half of all, of which That brand of tough. get is Dickies, the customer, And this that pipe by remember we the the you of XX% large timing grew ago, would which comp particular is to we’ve a guess portion very talked quarter. factors, Interestingly, that large makes if talked couple largest set pretty by floor particular impacted a in quarter the last the of we Work. about Japan. So North about had which first the

look an Work And – even long the term more the year, outlook despite about But cyclical of modest as at business. to part of we full that’s more X% just in our line the importantly, some four X%, is the talked expectations. which at pressures with on we

unique with international And And at in that the half. and was to the it the mitigation – XX% So Work as China the second second half the the look year. accelerate Europe And lifestyle. business, has remember, we Japan reset. impact have too particularly of don’t Dickies year, us or you behind a aspect of the to That’s lifestyle in significant throughout growth see balance in the in also in that continue QX, that business. expect we over to we the in of the and

the we’ve overall of to traditional relatively the those rest exposure the the say we again of more that more about half. Work XX% which Timberland half. little we business slightly to second but part the second X% And of more modest half And even with in on actually slowdown, or some have portfolio, seen in got if in the the PRO acceleration better due of we grew the we about similar shape primarily expect the cyclical that, in A business, first Work businesses. sits

Sam. hopefully, going on, a So you of it, the on numbers insight little into side gives that what’s

Steve Rendle

me let on on the really Dickies, emerging add I’ll Yes. Sam, your answer quickly question just brands. and

We brand. in are Dickies really the confident

be China. that Lifestyle piece foremost that Denny a the Investor what really expand is towards seen have our we’ll have first there. that You platforms, DXC how greater through in lot that we’ve about well impact spoke And impact globe our a digital in able that And environment. – growth Day. brand on traditional mixing and long strong our we really – evolves beyond our see term very platforms the across And watch that come and will will really own we’ll represent on work to that Work a to life this and

to committed brands excited to at brands, share date brands our We to in commitments. seen emerging with the Day. that those double those is digits those On performance in line everybody with we’re growing low we’ve Investor

those we’re give that those Our But and excitement a to is but brands Creek. into emerging Beaver is opportunity, share insight share breakout doing. and basis, to periodically when at you believe plan not sitting we how together we confident I those you a were an we quarter-by-quarter you, hence, inside brands our very remain and with update on tell

Scott Roe

short unpacked. have don’t Steve can but they North relatively to just and And Beaver both we That And these become brands a that’s that in there, more that we standpoint strategic and add where the the longer relevance said be numbers a believe, and tomorrow. team make The term, those from really Creek, term, on a the impactful. as term managing we Face in the impact of as about think Vans shorter it big

Sam Poser

very guys you the Thank much. Continue success.

Scott Roe

Thanks, Sam.

Steve Rendle

Thanks, Sam.

Operator

you. Thank

with Erinn question from Please next is Our with proceed Jaffray. Piper your Murphy question.

Erinn Murphy

And anything holiday? feel seeing landscape? you helpful. the Thank stepping Can you with interacting into want be consumer. do consumer European you thanks. going What start Good you the It the into global expound pond, conversation from okay, I holiday. how across feel Great, like I referencing with that? then promotional little about on are guess sounded to the a you. were vendors, really consumer, retailers just level, relatively morning. with still are U.S. how just currently said Steve, what higher you the would upon consumer the about That the

Steve Rendle

Sure. both my change could There’s the spending consumer That DXC did I our in marketplace our to any don’t to time why continue results, I said, that Yes, thinking, really front purpose-led putting we lot consumers brands paying in-store how changes and positive brands. attention. with in of online our of significant behavior see think our in that’s consumers a that. And but that we the traffic them part are are of Erinn, rhetoric conversion from really a a in and we’re in definitely our say support be journey. inviting light remarks,

as and no look there, change at no really wholesale in partners, we there. change So behavior our

confident for in part this our as season. season, holiday the ability well head are our partners. the deliver are cold to set retailers with now fall of we into we Our And

Italian you German, bit in across as jump Swiss, see little UK we strength the our say, in softness is Austria, business. a we As would pond, our There of marketplaces. French,

a to and a we starts with the there a is we there, come be flagship. we flagship point time with seen We Creek, Beaver along settle think mentioned flagship a in environments. well in we’ll rhetoric kind a market to positioned. And traffic. opening new this slight have where there brands think life is as and very We in our London for path the truly very forward, reduction Vans as Timberland critical store of is are

term, about the we long navigate We in to feel in So UK. good these interesting times our need opportunities some of Europe. just

Scott Roe

Erinn, on just on put numbers to Yes, too. it,

Kong going our guidance a Just did it, to we are seen on take international the also up Steve even and reminder, on what’s but Hong may Asia, up train, what Europe while in despite you we or have relative EMEA China. mentioned Brexit despite took and we

the international markets. we strength in So do see

Erinn Murphy

I was I just kind So there. can brands, think share you your a the that in your just relatively saw little bit obviously Can And a of bit maybe, during press negative specifically quarter? point, to Kong? China of of what there’s with still Vans you some little been what particular resilient. overall to end, seeing about mean, Scott, more in even Hong you’re relation you to just share

So Thank any kind between the help two? of on you. flow

Scott Roe

has talk an as there specifically It’s been Kong elsewhere of market, relative China, keep this. Hong is elements Yes, of impact in Kong part just maybe the as Kong definitely not Hong bit specifically enough have Steve but China the Hong on really we both to city in mind and relatively to total a is and but pointed But impact, impact little strong a impacted. we large I about our the overall a business VF. out, see small huge

Steve Rendle

bring I up largely see what and in Hong we’ve what think the on Vans there. results we And China seen Kong on And you that see are going going offsetting in today. we

that And well in an bring creative artist it a in even doesn’t around doing very and that – all we think self-expression. and remain the enabling if but of Culture about just on just individual coming supporting our committed in forward purpose really very brand is remains really focuses Vans way that the to really very anything, driving of really apolitical very individual we’re important committed to really way. a sense creative self-expression. artists brand our that across their and note in, operating navigating politics and stronger I that And commitment Vans And remains the competition of purpose Custom regions.

Erinn Murphy

Is of something just me for more going be are you potential that one the talk into, now Vans. skateboarding XXXX? about just opportunity on Japan then guys an kind incremental into you see we sport? Olympic go Can that as And you to is the how playing given

Steve Rendle

tell point is sponsor key brand is part about team. our speak very that’s around North Olympic see very countries that will time you’ll climbing well. For in brand’s expression important creative part self-expression. I time. there And why you us will globe’s And of think of be of different a is sure. also a skateboarding climbing well Games, why Olympics. how a you that confidently I Erinn, the would they of the And as authentic Doug around Japan number true hear the so very, represented Yes, – Face it activate of

Erinn Murphy

Great. Thank you much. so

Operator

Thank you.

Boss next JPMorgan. Please question. your Our from Matthew question with is with proceed

Matthew Boss

thanks. Great,

basis brand, prior The of Face, opportunity? of at phasing So we’ll maybe the on to close to here? points Face FutureLight, returning North profitability to structural And to impediment best that how the at from The XXX think operating peak equate on I North shipments of about brand think to see would which the margins any

Steve Rendle

will happily of then I second take Scott part question. the I’ll FutureLight, let handle Matt, your So that

four about markets sell-through premium over these silhouettes we earlier, mountaineering and more these strong seeing phasing, ahead mentioned the And And expectations. into brand. North actually we’re launch. Europe to really I ski FutureLight a halo where the and response, strong strong And advertising America are of of date, weeks core in especially casting is So the is life. FutureLight come to

we’re now really – we as point in into that time. Phasing,

phasing into in globe see own those in it fourth and how assorted across deliveries those the our key of well quarter very us where Third And assorted strongest. very their at and stores are is specialty carries quarter well retailers. you the

see now of right full representation. heat is launch. what in you at retail the we’re So the and this online And

I Series But that is important to our this really everybody remind Series, think Steep Flight a it’s and very in limited Summit launch Series.

very number not that’s a of styles. So large

You’ll we the replace as we as the and to fall see XXXX spring that begins waterproof, leap current as with FutureLight technologies another brand breathable forward move move into XXXX the into grow platform.

Scott Roe

relative the see drivers North are Face can’t as the why Matt, to we outdoor expand. line margin And is reason the really no structural both remember bottom and top standpoint, well. line reminded like margin, just driven standpoint. outsized we top operating from and operating you Vans The that continue That’s from There to

margins We’re the outdoor going continued path in it don’t to outdoor the see. We I’ll return sector. progress this in operating that any more can’t approach year, we growth mid-teens and call to, the we that’s reason earnings along historical-type a sector see why

and relative to halo. then the opportunity And to a an had quite remember. about quarter FutureLight even full year. one, for as campaign is putting because we quarter we this and the to a looking a growth marketing big where You’re at for the work. ago idea really strong things big and is probably Number what talked couple creates embedded the A brand, of already a money expect as we not more

the is And certainly in so profitability current the the impacting through of spread is but profitability, balance quarter. that year,

Matthew Boss

of ACE How know then success than the a rank little shifts demand microcosm, any heard you point, price maybe to further $XXX pro with any other that from learnings timing on opportunities would bit there. I And out broaden as higher some later a launch, just here? reach the this Vans, back-to-school in year? at of maybe from And Great. from is your We’ve which others brand the some launches. the recent of

Steve Rendle

I – would product part standpoint that’s the from on So a personally, phasing think of you of know key take and learnings ACE couple out I’ll that – colorways remind that point. launch, And last that a the there, higher-than-normal me middle. I as we that’s a think almost that But I don’t at sold there’s in specifically. your call think question, the anything immediately. out price AUR

new so AURs points, part we price this that the core demand way innovative strategy And higher there’s beyond brand the is Vans for progression term. to So long push a of significant those driving able is product being as ideas, that’s styles. why of important, heritage forward know go a new

I’m part important really that really, question? the validation based very And So particular and the middle platform. on strong of sorry,

Matthew Boss

just answered to further the of of kind brand. was You It opportunities reach it. broaden the

Steve Rendle

parts the to around continue very, really the it No, it’s is the They apparel participate about of occasions wearing very and just Okay. in expanding are strong accessories. brand. footwear, consumers to and growth drive opportunities progression, for and important the

Matthew Boss

Best of luck. color. Great

Steve Rendle

Thanks, Matt.

Operator

Thank you.

question. proceed Our Group. question with Laurent Vasilescu Macquarie from Please with next is your

Laurent Vasilescu

X%, about the but for my timing X%. should think morning. consider? excluding the we Thanks there right Scott, was were timing for I follow Dickies quarters. the shift? wanted Is $XX million on other for up number other And taking timing was between down brands question. to the to that any Good big shifts up the timing, it shifts

Scott Roe

Yes.

your think So about and I’ll go back to have math.

You’re second ballpark, confirm probably I the answer – me the part. big the other that – let’s but knowing No you’re offline. number in really. timing you, guess bigger let shifts

growth, first Although listen, had so we if EPS look first – you quarter, And half, the our XX%. for XX% right?

there’s of saw shift course So QX. timing we between some and that QX

bigger too is, get particular right? think picture I quarter, the on don’t any here isolated

half XX% in grew for an line line, standpoint. on bottom line. on our Our actually and we the guidance from top a the implied top second We’ve got the earnings accelerating half, first similar X%

very the actually look at out Creek. and of it, yes, So quarter-to-quarter and at But year Beaver that as a this if solid laid a big just in you we look guidance zoom little we out bit is of ahead noise. picture, the

Laurent Vasilescu

Very then Thank follow up Okay. on wanted helpful. I to M&A. And you.

willing on remarks, the prepared if back the the give to How sized right And rating? would M&A about want term? under dry agenda. how you in longer you credit be much talked think pursue time two willing you issue just equity much target – you take us Can powder to to to I to would it would your maintain your deal? that’s for times, leverage remind to you’re

Scott Roe

Okay.

rating, to at is all, EBITDA it’s our times is. current of first our target – So debt is two what

little now. that of We’re right south a

depends as that, leverage at or obviously that our as rate more that. shows the on to say I We long there’s other willingness and as capacity. less, it’s no year it So period, us that history agencies fair back as we’ve with to long couple up number, lever depends even showed asset, there’s on rating gone general, glide on There’s in have a path. it circumstances. absolute But to the think got within get reasonable we a a could

is, downgrade. think I us. still to lot BBB with they would investment one-step we yes, still a CP, capacity. we’re That We’ve stay that but And have issue credibility At right take about also willing then said obviously takes X.X plus, the you grade, equity willing access a more of to debt finally, in terms capacity. last for to up of the element deal. turns we’re

big really and it could all together do says deal. put we So that a

Laurent Vasilescu

And of luck. you guys. Thank much, very helpful. best Very

Operator

you. Thank

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

Bob Drbul

Hey, morning. Good guys.

especially I is Just a all ask the little wholesale that the wondering differences, Americas piece? you the help And especially Timberland? questions European just Timberland. When bit on better, the UK Europe, weakness and us of can couple you if look regional a could understand versus like at performances in

Steve Rendle

Sure.

but the see seeing here where North of – also number bringing we’re footwear baseline we’re in our we’re is seen Europe. we of little that on we’ve Timberland new But on good So seeing a being America, business good diversification both performance also sell-through at our with a contemporary improvement But – bit is more the of really classic of a styling. number category those a in America, there the where ago. foundation. some performance quarters specifically And a in apparel North vectors, newer stabilized

and these our to in start brown see with category. apparel focus more move consumer getting to diversification heritage to boots, tools move younger beyond beyond going footwear, just to on for elements. the with Bob, but brand to unlock this footwear, put within and place really starting Starting the elevate some there, in So with that proper shoe than we we’re the classification really to the presence just more what apparel continues pleased of lifestyle

In impacting our what really see Europe, the endured, the a some the apparel And UK our year, of of issue, we of that’s yes, the business. of the conditions you is men’s results. footwear in that there – part But weather XXXX. down. it’s we well, enhancements represented but it’s as Beaver last are with see come spring for part women’s to significant business the slowed that online, product book And Creek, through line footwear, Martino well. our as doing order sight those start And

to term just on footwear, marketplace place get come men’s to the plan get consumer the have We’re we will that the confident that It long drive growth we across these response. start see take things. time that And our right we’re the to products will confident in to projections. sell-through as us working we’re

Bob Drbul

trying just number was there are you to there the there inventory you little in any your and big side? inventory it. that I that shape. in are concerned within But look up of on Are said inventory, think is pockets I Or owned Got ask bit partners on And – front-load just And you a took your a Thanks. good better. inventory if the forward, could terms inventory about? XX%. as understand

Scott Roe

a little Yes, from about standpoint. largest a inventory. Bob. bit We season is, our a service did not up answer That’s been build The coming into short priority. we’re concerned

you for we And long about think brand, time. partners particular been our have our Vans, a in that expect. chasing or largest at the level service As frankly, this we been our hasn’t

North standpoint. going bit right? to hay a is little to good back what fall/winter a that particular ready well season, make we when as for from bringing So is being in normal we of a be puts This pressure Face as think

look any to we and from rate end inventory of we don’t But it’s look bit to inventory little see we So when forward. relative an importantly, yes, the year, the growth a going expect issues we at up at quality this where standpoint. the

to into we there and in issues told was you do. good issues. the as season, out everybody pockets As relates relates partners, read we at there. know All retail, you it inventories things pretty to of is can don’t We I it are particular coming see same brands our I say the shape. our

a think off to as fall, bit start about U.S. in it Now a get worth of is slow we noting did the

in to reverse. seen from standpoint. sell-through activity a that seen recent month, we’ve from we’ve improvement though, most retail that Importantly the and we’ve seen a starting And

Bob Drbul

Thanks, Great. Scott.

Operator

Thank you.

with with from proceed comes Our Please next question Baird. Komp your Jonathan question.

Jonathan Komp

ago, you. Hong incremental picture that Yes, of of to and of tariffs relative the Maybe some pressures other you the hi. bigger Thank a related in uncertainties. question the called days $X.XX out to some XX Kong just

embedded maybe out And assumptions laid curious still going forward? be factors those forward. healthily pretty how up to Just in those that set environment, on assumptions you’ve Like barring made going continue? you have you’ve you deliver any changes the what would

Scott Roe

look get at try Yes. mean in We don’t front we know most to what what’s the try and in Jonathan. the recent trends, we to of I us. we in factor prediction business,

those we’re we’ve in, as on think call, I go-forward the a expecting But for in with tariffs. actions. not as example, mitigating we earlier that the basis, factored mentioned tariffs about, I well more know

we’re with We a and fundamentally point in place. we’re remember not $X.XX I different different think don’t actually making we is the that the important in that thing were on a to place. believe

really to guide our trying heard were see our make, there that reiterating the place from absorbed that the because we’re that guidance different and by point environment. was we the absorbing guide to $X.XX. not. holding mention and fundamentally by point $X.XX we’re reported strengthened The that at in we was You operationally Steve our consumer, a not overall That how $X.XX. We’ve operational

Jonathan Komp

kind Okay. the near there’s just when next one certainly like think couple term looks quarters, follow-up, categories. about you maybe across Great. maybe And of more diverging of trends

you impacts forward you pieces, kind the so the be holiday? some between from some think look do may your inventory, Some And then of the heavier and losers of divergences winners how And other as and of tariffs would even just thoughts much. to any on appreciated. varying about the categories, be there not

Steve Rendle

context. and on losers. Maybe some question the some brand that clarity a that just retailer Just is Is or question? winners

Jonathan Komp

pockets frankly. could there It positioned certain seem are maybe But where certainly, retailers both, inventory be portfolio. some your And seems brands lesser and heavier. Yes. than

you’re other your if I So if of that the potentially weaknesses. there’s there’s and how impact spillover brands, context I’m viewing pockets just of any, curious within mean,

Steve Rendle

Sure.

portfolio inviting I consumers really Those to experiences. think get what are we Those the innovative winners. well the X.X positioned the years be ourselves positioned. with kind And this see strong doing are is powerful brands we feel are those part products, that compete behavior. to very we’ve continue in well stronger. to The consumer place, of last moments. work of brands to put our over brand bringing driving They’re been very

the from those hourglass parts in us of work the the bit last that some over lack and tension standpoint, differentiation. of there has been X.X doing what away retailer we From years a system again, the a the really of is positioned middle market, that where of kind of quite we’ve the call

helps experiences, where really, products stores, own strategy. retail-centric the to becoming our moment as our way for product key our through that today for better pockets not positioned the that our well, a consumer-minded, margins own and accounts our positive working in our the across amount and We’re partners of ourselves key in big accounts of able and succeeding. focus ourselves time digital drive shift on but partner the in just for to our in wholesale year, deliver is that the particular a part that’s portfolio. this more our globe, go-forward platforms, see right at for of those provider be proper market that is you is And in of both And retail a

Jonathan Komp

very great. Thank That’s hear. helpful you. Okay, to

Scott Roe

Thank you.

Operator

Thank you.

Group. proceed final Advisory the Dana question with from Our question. of Telsey your Telsey line comes Please with

Dana Telsey

Good morning, everyone.

about think stores for about from X% by of them year? half base back brand direct-to-consumer, and you. the had, you the you’re do the full And the you seeing As see you line on what what And you factory today and with it’s going? how are and seeing stores? direct-to-consumer comp and the think you where of wholesale where factory Thank channels,

Steve Rendle

Okay.

of of are from go-forward as part So we’ve brand, This increase presence DXC work XX% towards of own big we our strategy trend really from really the direct-to-consumer as these wholesale our the by – been to doing in I and our to of now a revenue a is move have where low level toward we’re representation a think authentic our XX% that important brand is our a place environments. able coming stores, very shifts. we strong

lot partners their consistent within we’re our And environments as stores. own portfolio, operate into about collaboratively our our portfolio, we’re well. But with brands wholesale direct and ability the take is we able in it our as those accounts in a have across our talk we And what with and the – represent to that key where a brands we evolve the permission doing to really learnings manner.

be well. and us DXC mix better partner a that helps So on focus as wholesale

Scott Roe

fleet. for owned falls actual it of stores, you consider like doors But when XX%. more Yes, just and about Also, a is strategy. It’s outlets growth reminder, partner a our mono-branded one-third not us to Dana. consumer-facing

So we’re to one-fifth think of And points only it that our of going are retail from continue of sale to about standpoint. consumer-facing outlet.

outlet it to best play the don’t not probably because answer overall we a in in So we’re way. the environment meaningful

Dana Telsey

you. Thank

Steve Rendle

Thank you, Dana.

Scott Roe

you. Thank

Operator

Thank you.

of to back floor I’d any end to comments. so session, over additional the reached have like Rendle our pass concluding the question-and-answer for Mr. We

Steve Rendle

you. joining this us thank morning. Thank for you Hey everybody, Great.

and strength is another underlying line full against plan, And XX% our our our and plan. think, our in ability data And half earnings. of X% – just point with right and really just business of second long-range our commitment with the quality strong. – The our our confidence year, to pleased I in is first our our deliver was of reaffirmation We’re our our quarter in results. up

consumer-minded, a to coming how committed retail-centric, connect our powerful portfolio, to are but continue more to into We in how years. enterprise, consumers our much businesses and hyper-digital like really ours operate as drive very operate brands only we not evolve position our the with more ourselves, forward a putting

you So for in joining the with to look all and forward you quarters to thank us. talking coming

Operator

teleconference. this time. participation your you Ladies gentlemen, does conclude you disconnect lines and for this may thank and Again, today’s at we your

V.F. (VFC) 25 Oct 192020 Q2 Earnings call transcript