Q3 2022 VF Corp Earnings Call
Hello, and welcome to the VF Corporation third quarter fiscal 2022 conference call. At this time, all participants are in listen only mode.
And answer session will follow the formal presentation.
As a reminder, this conference is being recorded.
My pleasure to turn the call over to Allegra Perry Vice President Investor Relations. Please go ahead, good morning, and welcome to VF Corporation's third quarter fiscal 2022 conference call participants on today's call. We'll make forward looking statements. These statements are based on current expectations and are subject to uncertainties that could.
Cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC.
Unless otherwise noted amounts referred to on today's call will be on an adjusted constant dollar basis, which we defined in the press release that was issued this morning.
We use adjusted constant dollar amounts as lead numbers in our discussion because we believe they more accurately represent the true operational performance and underlying results of our business you may hear us refer to reported amounts which are in accordance with U S. GAAP reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the press release.
Let's identify and quantify all excluded items and provide management's view of why this information is useful to investors.
The significant impact of the coronavirus pandemic on prior year figures today's call will also contain certain comparisons to the same period in fiscal 2020 for additional context. These comparisons are all on a reported dollar basis.
On June 28, 2021, the company completed the sale of the occupational Workwear business. Accordingly, the company has reported the related held for sale assets and liabilities of this business as assets and liabilities of discontinued operations and included the operating results and cash flows of this business in discontinued operations for all periods through the day.
Eight of the sale unless otherwise noted results presented on today's call are based on continuing operations. Joining me on the call will be Vf's, Chairman, President and Chief Executive Officer, Steve Rendell and EVP and CFO , Matt bucket. Following our prepared remarks, we'll open the call for questions Steve.
Thank you Allegra and good morning, everyone welcome to our third quarter call.
We delivered strong results in Q3 with organic revenue growth of 16% and organic earnings growth of 32% amidst continuing macro headwinds.
Our business is strong and healthy we achieved our Q3 plan driven by our robust holiday performance and an exceptional quarter from the north face, which gained further momentum and surpassed $1 2 billion in revenue a record in its history.
I continue to be inspired by the incredible efforts of our teams are making across the globe to advance our transformation strategy, while navigating unprecedented challenges.
We've come a long way during a difficult 24 months continuing to invest in the business to generate exciting broad based momentum across the portfolio, while maintaining financial discipline.
I am confident we are well positioned for accelerated growth moving forward.
Start off my prepared remarks, with a brief update on the consumer environment.
Globally, we continue to see robust demand for outdoor enacted categories.
Outdoor participation continues to grow supported by secular trends towards more active healthy lifestyle.
Across the Americas, and EMEA regions consumers started the holiday season early and we're returning to in store shopping prior to surges in the omicron variant, which negatively impacted retail store traffic later in the quarter.
Given the more pronounced macro disruption, we've seen unfolding in the APAC region for consecutive quarters I want to spend some time unpacking the situation in China and what our teams are actively doing to navigate these headwinds.
Following a strong rebound in the first half of 2021, the Chinese economy has seen slowing growth, reflecting the government's aggressive policy response to virus surges pressuring consumption in the back half of the calendar year.
To mitigate these headwinds our teams are maximizing new social commerce opportunities to offset lower traffic uncertain digital tightened platforms with plans to amplify key festival activation with new targeted marketing stories and product drops.
We're focused on increasing conversion and owned and partner brick and mortar stores through operational enhancements, while improving partner inventory levels.
I'm confident in the capabilities, we are building to advance our transformation and growth strategy in China.
The move of our brand leadership to Shanghai, our teams are focused on increasing product relevance and evolving channel and product segmentation.
Embracing new emerging channels, elevating store formats and Omnichannel integration.
Longer term, we continue to see significant distribution and brand awareness opportunity in China with a rapidly growing consumer base and outsized interest in our core categories I remain confident in our strategy to generate profitable growth in this important region.
Moving into our brand highlights for the quarter.
I'll start with aerospace our largest brand this quarter representing over a third of DFS Q3 revenues.
She would have delivered the largest quarter in its history, surpassing 1 billion for the first time with revenues of over $1 2 billion in the period.
This was truly fantastic performance during the brand's highest volume quarter of the year.
Global TNF revenues grew 27% above pre pandemic levels with continued broad based strength across regions channels and product categories.
The north face also delivered significant improvements in profitability with strong brand positioning driving higher quality sales. All regions were ahead of plan and surpassed prior peak levels.
We continue to see broad based growth across categories with snow sports sportswear and logo wear all growing over 20%.
On mountain products grew strongly particularly in product offering key technologies.
Second and future like continued to resonate with consumers and footwear and outerwear in the athletic inspired wander collection continues to see significant growth.
Off mountain lifestyle products also showed ongoing strong momentum.
The newly launched Tech where line mountain inspired clothes designed for the city had sell through in excess of 60%.
<unk> grew over 60% and lifestyle footwear grew 30%.
<unk> is truly driving broad based strength across categories.
Limited edition releases continued to drive brand heat.
The second chapter of the TNF Gucci collaboration has generated over 2 billion impressions since launching in December and the campaign, it's more than a jacket launch this fall, which has been one of the most successful campaigns in terms of audience reach and engagement.
Nearly 200 media placements and driving 1 billion impressions spurred by celebrity and Influencer endorsement.
The campaign included strong product stories, including Conrad anchors three piece collection dropped which is nearly 100% sell through.
Explore pass loyalty program group exponentially this quarter, adding one 1 million new members and 33% more sign ups during holiday weeks relative to last year driven by the digital channel.
Membership is now approaching 9 million growing about 30% fiscal year to date highly engaged loyalty members and continue to drive higher <unk> versus non members with higher order frequency and and now represent the majority of revenue in each D to C channel.
We remain encouraged by the brand's broad based momentum fueled by innovation, increasing year round relevancy and ongoing tailwind for the outdoor marketplace.
Looking ahead following the strong holiday outperformance of TNF, we're raising our full year 2022 outlook.
Growth of 29% to 30%, representing 18%, 19% growth relative to fiscal 'twenty. This compares to our previous expectation of 16% to 18% growth versus fiscal 'twenty.
Before moving onto vans I want to take a moment to address the TNF leadership change underway as we announced earlier this month steep areas retiring and will be replaced by Nicole Auto later this summer.
The call is experience and deep understanding of consumer engagement strategies.
Daily students take the helm and further accelerate growth.
We're excited to welcome her to the <unk> family.
And of course, thank you Steve Murray for all that you've accomplished during your long successful career at VF Youre, leaving TNF with exceptionally strong brand momentum.
Yeah.
Moving on to vans, which grew 8% in Q3, representing modest growth relative to pre pandemic levels.
Global digital growth continues to be strong up 54% relative to fiscal 'twenty, driving 9% DTC growth relative to pre pandemic levels.
In the first nine months of the year vans generated an additional $232 million revenue across its digital platforms relative to fiscal 'twenty.
While we've made great progress in certain regions and products on a global basis vans did not meet expectations in Q3 with mixed holiday performance, reflecting heightened disruption across China, and a slower than expected recovery in classics footwear humira.
The Americas business was a highlight delivering a sequential improvement with the U S market posting its first positive growth versus fiscal 'twenty since the start of the pandemic fueled by digital growth of approximately 50%.
Global Classics footwear showed encouraging sequential improvement, but remains below pre pandemic levels.
While we were making strides to reignite. This category, we are simultaneously driving growth in other areas of the brand, which are gaining share within the mix. We continue to see broad based strength across the progression footwear line highlighted by MTBE up 56% and ultra range up 30% relative to fiscal 'twenty levels progression now.
Represents nearly a quarter of the van footwear mix.
Apparel grew 29% in Q3, representing 12% growth versus fiscal 'twenty.
Broad based diversified growth across customer segments, including increased traction and youth.
Vans continues to develop exciting product stories, which will launch in coming months.
<unk> story will be the Lindsay the first signature shoe from a limit for Olympic athlete busier Monto reinforcing the brand's leadership position and escape and womens sport.
Lindsay will incorporate equal Kush cushioning and the new <unk> through a cap toe for increased durability micro waffle tread and six thick rubber for maximum grip.
The progression pipeline is also strong with several key launches ready for fiscal 'twenty, three including circle be launching next month.
This is a new silhouette for vans and as the brand's first shoe designed around the concept of circularity.
Consumers remain highly engaged with the brand vans family membership is approaching $21 billion globally, increasing nearly 50% over the past 12 months with growing activations across all regions.
While we are encouraged by the sequential improvement for the business fundamentals, we acknowledged at the vans brand continues to perform below the expectation set in May 'twenty one.
Our teams are focused on three drivers of the weaker than expected performance, China classics footwear and brand heat.
Starting with China, we are delivering China relevant product and content through a greater level of localization evolving our digital strategy, including leveraging social commerce opportunities.
Elevating our in store environment and operations to drive traffic and conversion.
Deepening community engagement with our growing customer base, including Vance family initiatives, where we now have close to 2 million members added since launch in July .
Moving to classics, we are returning to an always on classics demand creation model with a higher degree of innovation and design supported by enhanced and targeted marketing support with a dedicated campaign launching globally throughout this year, starting with the U S market next month applying the learnings from escape high campaign, which launched during back to school and has led.
Over 20% growth over the past few quarters from that silhouette.
And finally brand heat well vans brand health is strong its brand heat remains below pre pandemic levels and has significant potential and scope to be reignited.
To address this we are focused on increasing the flow of innovation and product stories, increasing wearing occasions for existing consumers and investing in attracting and retaining new consumers.
We remain encouraged by the early results of our 52 week dropped strategy, which we are leveraging to reward our loyalty members with early access to new product stories and to drive energy and engagement with new and existing consumers.
We believe that pivot in our classic marketing underway will play a key role here as well.
He has a long history of success with a rich heritage and strong brand equity I am confident there is a long runway ahead for future growth.
Timberland delivered 11% growth in Q3 led by a very strong sellout season with key accounts in the U S.
With our own channel.
Key wholesale partners continue to rebuild inventory levels as retailers and consumers remain hungry for the brand's iconic product.
This demand pull dynamic continues to support strong margin performance across the business.
We continued to see strength from the green straight innovation platform, which drove strong sell through across all regions globally.
We've also seen encouraging performance in womens across core hiking and heritage boots apparel growth has accelerated globally led by newness highlighted by approximately 90% growth in the Americas.
In addition to these bright spots successful collaborations continue to deliver brand heat highlighted by timberlands Supreme who sold out globally $40 across all skus. So.
Recent collaboration with Tommy Hilfiger also drove strong engagement through unique storytelling around sustainability and progressive authentic style.
We are pleased with the building momentum with timberland and looking ahead, we remain confident in the brand's long term potential for profitable growth.
Moving to Dickies, which grew 14% versus fiscal 'twenty levels, driven by continued strength in the Americas.
Elevated sell through and strong demand signals indicated the brands evolving integrated marketplace segmentation is delivering as planned and the brand continues to see growth from both the workwear and work inspired segment.
We're also pleased to see the brand profitability continuing to improve ahead of plan.
Finally, the Supreme brand continues to see strong demand and sell through both online and in its stores.
The brand delivered nearly $200 million in revenue in Q3, despite closing doors globally at various stages due to pandemic surges.
We had a strong close to the fall season is the Supreme teams partnering with VF supply chain, we're able to align inventory flow with their revised drop schedule.
The Supreme team remains highly focused on their store that geographic expansion strategy is a key element and showcasing the brand and its unique collection.
The brand opened two stores in Europe , this year in Milan, and Berlin executing against its international expansion strategy.
The team continues to stay the course and create brand awareness and an intentional and authentic way.
Excited about <unk> longer term potential is a key brand within the VF portfolio.
I'm proud of how our organization continues to manage through this uncertain environment I'm pleased with the continued resiliency of our people and our operating model our fiscal 'twenty two outlook today is stronger both top and bottom line relative to our initial commitment at the beginning of the year, despite facing new challenges in the macro environment.
Following significant reshaping over the past five years, our business is sharper than ever we delivered a strong quarter and maintained our earnings outlook for the year as a result of broad based momentum achieved across our diversified family of brands. We are well positioned to continue driving profitable growth and elevated returns to our shareholders.
And now I will turn it over to Matt.
Thanks, Steve Good morning, everyone.
I want to start by welcoming a laggard to the team.
Great to have you on board and I'm excited about this opportunity for you to help us refine our communication approach and drive our overall investor engagement strategy welcome to you.
I'm pleased with our overall performance during the key holiday quarter, we delivered strong organic top line and EPS growth relative to pre pandemic levels and ahead of our outlook leveraging our unique capabilities to overcome ongoing macro pressures.
And as a reminder, this was against a record holiday season for VF back in fiscal 2020.
I continue to be hugely impressed by the resiliency of our people in our organization, which have continued to adapt with agility and speed to ongoing challenges.
A major focus during my first year as CFO has been on managing the P&L, which we've achieved during this volatile period.
Profitability recovery in fiscal 'twenty, two is a major highlight for VF.
Testament to the resiliency and Optionality of our model.
We expect gross margins to approach pre pandemic levels. This year, an amazing feat considering the significant additional costs incurred from expedited freight higher underlying freight rates and currency headwinds.
We've also been able to flex SG&A, while distorting investment into areas, where we have the opportunity to accelerate growth and accelerate our digital transformation.
Our actions coupled with the strength of our model are leading to profitability in line with our strong pre pandemic levels, despite higher demand creation spend and significant macro headwinds.
Moving into the operating environment update across regions.
First I'll start with the supply chain, our teams continued to be resourceful and optimizing our extensive supply chain platform capabilities to act with agility creativity and speed in order to best manage a challenging environment.
Our teams continue to diversify our supply footprint and are making earlier commitments on raw materials and inventory purchases to optimize supply moving forward.
Logistics network remains under pressure as our teams continue to face unprecedented port congestion labor shortages and equipment constraints.
We expect these logistics challenges will remain with us throughout most if not all of 2022.
However, we're taking active measures to mitigate the impacts leveraging our relationships to secure additional capacity and equipment utilizing more importance and more carriers and even chartering full sized jetliners when economically.
Our D C associates continue to work tirelessly to deliver on strong consumer demand.
Stephen I had the pleasure of visiting some of our Dcs. This quarter. It is exciting to see our investments in robotics and automation in action within these critical facilities.
Our distribution network is a key component of our digital value chain.
We executed best in class delivery times with click to deliver times, averaging three business days during the recent holiday peak.
Our teams throughout the supply chain remain adaptive resourceful and deeply committed to execution. The supply chain has and will continue to be a key competitive advantage for VF supporting and enabling growth as we move forward.
Moving onto the Americas region.
We're coming lower foot traffic the U S.
Broadly delivered a record holiday season, driven by a healthy and resilient U S consumer.
The Americas region grew 18% organically, representing mid single digit growth relative to fiscal 'twenty.
Our business saw a strong early start to the season. However, the fast spread of the omicron variant during the quarter impacted retail store traffic and consumer confidence, particularly in December overall.
Overall, a strong holiday performance in clean inventory levels across channels will support continued momentum in the region during fiscal 'twenty three and beyond.
The EMEA region continued to show great momentum this quarter with our business delivering 25% organic growth versus last year, and 23% growth relative to fiscal 'twenty.
With strength across all key markets.
The latest virus surge has spurred new restrictions across Europe , namely in Austria, The Netherlands, Germany and the UK.
This has contributed to the declining consumer confidence deteriorating traffic and stretched retail staff in our stores.
Our DTC brick and mortar business was able to deliver positive growth above prior peak levels. Despite the deterioration in traffic to 40% below fiscal 'twenty fiscal 'twenty levels. During the final weeks of the quarter. This is a clear testament to strong consumer demand and our ability to continue executing in store with high levels of conversion.
Yeah.
Moving on to the APAC region.
Steve covered our teams are actively working to navigate a more challenging than anticipated environment in China as Covid related Lockdowns continued to drive volatility in retail traffic.
Outside of China other markets in Asia performed better.
Recording positive growth this quarter as restrictions are gradually lifted in Malaysia, Taiwan in Northern Asia.
<unk> seen a nice acceleration in Korea, and double digit growth in Japan.
When we set our APAC outlook in October we expected to see an improving environment as we entered the fourth quarter. This timing is now less certain and we expect the Chinese new year holiday to be impacted by constrained travel and consumption.
As a result, we now expect low single digit growth for China in fiscal 'twenty, two with China, representing about 8% of <unk> revenue this fiscal year.
We remain very confident in <unk> long term growth prospects in China, and the broader APAC region. We're confident the business is well positioned to accelerate beyond this disruptive period.
Now moving into the highlights from our third quarter I'm pleased with our execution and our ability to deliver against our outlook provided in October amidst a more challenging than anticipated environment.
VF revenue increased 22% in Q3, representing 16% organic growth or 9% organic growth relative to fiscal 2020.
DTC and wholesale each surpassed pre pandemic levels digital grew 61% organically relative to fiscal 'twenty driven by strength across across our largest brands and outsize digital growth from our emerging brands group.
When combined with digital wholesale Vf's total digital penetration was roughly 30% as compared to about 20% in fiscal 'twenty, reflecting investments made in digital infrastructure and talent.
Hence merchandising capabilities and Omnichannel services.
Gross margins expanded 60 basis points to 56, 3%, including a 20 basis point benefit from Supreme.
Relative to pre pandemic levels underlying organic gross margins expanded 150 basis points offset by 260 basis points of expedited freight and FX.
This strong underlying performance highlights of full price realization.
A testament to the health of our brands in the marketplace.
Including stream operating margin was 17, 7% in.
In Q3, representing modest expansion relative to pre pandemic levels, while increasing organic strategic investment by 12% versus fiscal 'twenty, a strong achievement overcoming meaningful headwinds from the disrupted supply chain.
And the drag from weaker near term store productivity.
We delivered EPS of $1 35 in Q3, representing 45% earnings growth relative to last year or high single digit organic EPS growth relative to strong pre pandemic levels, a significant recovery in a challenging environment and a testament to our robust operating model.
Before moving into our revised fiscal 'twenty to outlook I want to provide a few quick updates on our balance sheet.
We successfully renewed our 225 billion revolver in the quarter extending the term to 2026 and redeemed $500 million in term debt, which was due later this calendar year.
During the quarter, we executed about $300 million in share repurchases a signal to our confidence in our plan and commitment to continued return of cash to shareholders.
Bind with our dividend, we returned nearly $500 million to shareholders this quarter.
We maintain a strong cash and liquidity position with $1 3 billion in cash and $3 6 billion in liquidity available at the end of the quarter, we still expect to end the year with net leverage.
Two five and three times, providing us with meaningful capital allocation Optionality.
There are no changes to our capital allocation priorities, we're focused on investing in our organic business, while continuously looking for ways to optimize our brand portfolio.
We remain committed to our strong dividend and we will opportunistically deploy share repurchases to return excess cash to shareholders.
Now moving into a revised fiscal 'twenty two outlook.
As you saw in this morning's release, we are adjusting the shape of our fiscal 'twenty two outlook in light of the changes in the operating environment since our call in October .
Bottom line, our earnings outlook is unchanged and certain areas of the business have performed better than expected and others are still recovering a unique balance which gives evidence of the strength of our diversified portfolio.
What form.
At a high level the reduction in our sales and gross margin guidance is entirely driven by macro factors, namely China, the additional air freight and FX.
Our new outlook is for VF revenue to approximate $11 85 billion, representing 28% growth relative to fiscal 'twenty, one and 13% growth relative to fiscal 'twenty. This implies a Q4 outlook of about 10% growth relative to last year.
By brand, we're raising our outlook for the north face to 29% to 30% growth in adjusting our outlook for vans to 21%, 22% growth by region. We are adjusting our EMEA growth to 28% to 30%.
Reflecting FX and pandemic related disruptions, including some shipments that shifted out of Q4 into Q1 of next year.
We are reducing our APAC outlook to high single digit growth driven entirely by the environment changes in China, we've discussed today.
By channel, we are adjusting our DTC outlook to 32% to 34% growth, primarily reflecting the challenges in the China market.
These digital growth is now expected to exceed 15%.
We now expect gross margin to exceed 55% approaching prior peak levels. The reduction in gross margin outlook from our prior guidance reflects incremental FX and expedited freight headwinds relative to our expectations in October .
We are raising our operating Mt operating margin outlook to at least 13% a strong testament to our commitment to SG&A control in the Optionality within our model. This is being achieved amidst continued pandemic related disruptions and less than ideal business mix with fans in China performing below potential.
We expect the DTC ecosystem to deliver stronger margins than we had in fiscal 'twenty supported by the mixed shift to digital we anticipate this mix shift will continue to be a structurally accretive profitability driver over the long term.
Finally, we are holding EPS guidance unchanged at $3 20.
Supported by the resiliency in our operating margin performance and a slightly more favorable expected tax rate of about 14%.
This represents organic EPS growth of 128% versus last year and double digit growth versus pre pandemic earnings.
Our fiscal 'twenty two has evolved differently than we expected back in May.
2021, the recovery has not been linear and parts of the vans business with.
The China market has been challenging and we've seen more pressure on the supply chain network than we anticipated.
But our teams are navigating this.
The value of our diversified portfolio is fully on display in a disrupted year like this where certain parts of our business over delivering offsetting pressures in other areas.
TNF is our biggest contributor during the quarter, having seen a significant a significant acceleration across regions and delivering a record quarter.
With timberland Dickies have delivered meaningful improvements in profitability well ahead of schedule.
<unk>, despite all of the unforeseeable challenges our fiscal 'twenty two guidance today is stronger both top and bottom line relative to where it was at the onset of the year.
I am proud of how our teams have effectively managed and driven our business through uncertainty I am pleased with our control over the P&L and I'm confident that our broad based momentum across the portfolio will enable us to continue to deliver against our strategy into fiscal 'twenty three.
Let's open the line for your questions.
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The interest of time, Yes, you. Please ask one question and one follow up military to the Q1 moment. Please while we poll for questions.
First question today is coming from Michael Binetti.
From credit Suisse. Your line is that life.
Hey, guys. Thanks for taking my questions here.
Let me ask you just a couple.
Quick ones on vans in the U S and then I think.
The bigger picture.
Picture question, it looks like U S D to C stores for Dan starting to recover while it's been a really tough part of the thesis for several quarters.
And I see the two year accelerated in the quarter nicely. There what are you seeing there in stores I know that's been difficult and then on vans on the wholesale side.
I'm curious how much of that you think of the supply chain disruption and what visibility you have on that.
Thought it was interesting that wholesale Suzanne was still down, but you know north face wholesale picked up I'm sure you had made some decisions because of north based off really needs to be at market in the winter and maybe Dan or brands like bands can move around a little bit but I'm wondering.
If we get past that period does wholesale from vans start to pick up to look.
Closer to the north face as we as we go forward from here.
And then just bigger picture Steve free.
I'm trying to think as we look out to next year I know you gave us some shape for 'twenty three but.
Unaffected Etfs this year, if we tried to take out some of the supply chain costs and the virus and everything.
I would have been higher than the 320, maybe we can do some math to figure it out but is it safe to say you can guide closer to the algorithm for next year.
Often been unaffected number this year or how would you tell us at this point, knowing what we know that to think about the shape for next year.
Hey, Michael Good morning that.
That was a lot.
I appreciate the question. So let me try it let me start with vans and the Americas part and then we'll we'll move from there. So yes brick and mortar I guess first of all really really happy to see the progress there and our overall direct to consumer business in the Americas for vans was.
Inflected positively versus pre pandemic levels, I think up sort of mid single digits in the quarter and brick and mortar has been.
A driver of that in terms of the recovery that we're seeing there in the business.
As we've anticipated really all through.
Through the last several quarters, we expect a sequential improvement.
For a number of reasons as consumers continue to come back in stores as we get a little bit better positioned from an inventory standpoint, and obviously as the work that we've been doing around around demand creation begins to against the impacts. So we've seen it we've seen a nice consistent recovery in that part of the business, which is which we're really happy about.
And we're seeing the same obviously flow through from a profitability standpoint, as those stores recover we're still not not all the way back, but but really encouraged with where we are and honestly were probably a little bit ahead of plan. If you look at our sort of year to date performance and our and our brick and mortar business and vans.
Both both globally, but but really in the Americas in particular.
In terms of wholesale.
Again, I would say, we're generally sort of on our plans and where we thought would occur.
I wouldn't get too hung up on a quarter to quarter.
The progression that we expected to see has been there there has been some choppiness for sure related to some of the supply chain challenges and choices that we've had to make.
I've had to have made through through through this.
Certainly as we think.
Full transparency and as Steve alluded to in his prepared remarks. There is there are some challenges.
Relative to the classics the core classics part of the business that we'd like to see that.
Moving a little faster than some of the brand heat behind that and I think we feel confident we've identified those issues and we're working really aggressively.
And pretty tactically around fixing that and beginning to move that but certainly there is some impact there in that wholesale business as a result of that.
And then good morning, Michael on your on your question towards next year and the Algo you can expect.
You can see already we're back to our <unk> topline this year.
And the earnings growth that we were able to maintain I think should give you confidence that we.
We have.
Line of sight based on a broad based success of the portfolio the strength that we see in our north face business Dickies and timberland.
Picking up momentum.
And in vans will continue to see sequential improvement, we're very comfortable with our ability to to maintain that long term algorithm.
How that will manifest itself in next year's plan, which we'll be talking to you here in may.
<unk>.
Yeah Michael.
Yes, and maybe just one thing there to add as I've said, a couple of times and I'll say it again here given given the question is we certainly expect.
Expanding gross margins next year, the structural benefits that we've enjoyed and continue to enjoy from a mix standpoint will be there. There's clearly some puts and takes in terms of headwinds and <unk> that we're all facing but overall, we expect margins to expand and we've proven this year that we can drive SG&A leverage in our model and at the same.
Time continued to to make the really important and critical investments in our in our brands and in our strategy. So we're confident I'm not going to get into the pieces in the parts, but we're.
We're confident the VF level in our ability to drive both revenue and earnings in line with our LLP.
Thanks, a lot guys I know I asked a lot I appreciate the help.
Great. Thank you Michael.
Thank you. Our next question today is coming from Matthew Boss from Jpmorgan. Your line is now live.
Great. Thanks, So maybe to follow up on vans as we think about the reduction to 3% to 4% growth from seven to nine.
I guess, if we dumb it down what percentage of this do you believe is tied to increased disruption in the APAC region, maybe relative to the classics category and then Steve What's the timeline you see for an overall fix here as you did cite the brand heat or is there any change to double digit growth advance, which you cited on the last call for next year.
Let me unpack the <unk>.
Outlook change there real quick and hopefully answer that part of it Matt and good morning, and then I'll turn to Steve. So you are right. The majority of the change in the vans outlook is coming from the APAC region in particular in principally China.
Obviously, it's a pretty challenging environment there.
And we expect that.
Continue for us through through Q4 and to some degree into next year in some ways.
EMEA has had some impact on the <unk>.
Production, both at the <unk> level.
And certainly for brands.
Couple of things there currency.
Our assumptions on the euro for the back half of the year.
Have proven to be a little aggressive with sort of the strength of strengthening of the dollar that occurred back.
Last couple of months.
There's a little bit of timing shifts that's the one region, where we're seeing a little bit of timing shifting out of Q4 into Q1 next year.
And then as I said, the omicron impacts have been theres been a little bit choppiness, there, particularly in the European markets and I talked about some of that on the prepared remarks.
And then so on a longer.
To your broader question on vans, I guess I'd start out Matthew I mean, theres strong trends outside of China. If you look at the rest of the world is on plan or.
Our EMEA business was up low double digits versus fiscal 'twenty.
That region continues to be a strong performer and an important performer our Americas business returned to pre COVID-19 levels for the first time.
And I think a good marker here as the global DTC is sequentially, improving we're up high single digits versus versus fiscal 'twenty.
Again supported by EMEA, and North America, but that global digital number up 54% to fiscal 'twenty.
And the dollars that had been added year to date I think just as validation that the brand is.
It remains strong.
What we called out in my prepared remarks is the recent brand heat, particularly tied to classics.
And most importantly, the core classics portion of the line.
Is the issue that the team is very very focused on today and there's a sense of urgency here.
We're dialing up additional marketing.
Last two quarters, you've heard us talk about the success of skate high.
Up.
With over 20% each quarter.
And that's where they have been applying their marketing dollars as well as some innovation there were four new skate high styles launched over those two quarters.
All at higher MSRP than the than the core item and we've seen strong consumer acceptance and demand and with the always on marketing that we will begin to elevate now, but you'll really start to see it pick up in March and the rest of the year.
Just a heightened focus on classics.
The innovation engine of happening within progression the success, we see with MTGE and ultra range.
Pro skate, which has a direct impact on classics overtime.
That's a lot of really positive energy, there and strong growth in in fact.
If you go back to Beaver Creek, we talked about the need to diversify the product offer and to elevate those styles within progression elevate apparel and you get a more balanced offer and we really see that coming to life today.
Progression is now this quarter about 25% of total revenue.
So this confidence here in the brand, we see the issues with classics, and China and China is related.
To a large degree to the larger macroeconomic issues tied to COVID-19 .
In.
I think the.
Work that we're doing there to become more local for local you see that in the north face results, we understand the playbook there.
But I think the key here is classics and with classics comes brand heat.
But we also will continue to innovate new styles within progression and Theres four new offers coming this year, one of which is directly linked back to a classic style.
So as I said, there is a sense of urgency here. This is an important brand to VF.
It's not the only brand and.
As we look at the broad based performance of the other two.
For top five there's a lot of confidence here in our ability to maintain that LLP.
Great and then Matt just to put these margin pieces that you cited together is there any change to your gross margin forecast for at least 50 basis points expansion next year and then is the long term target for low teens earnings growth is that still reasonable for next year.
Yes, I would say, Matt I'd say, yes to both of those questions.
Okay, Great best of luck.
Thank you. Our next question is coming from Erinn Murphy from Piper Sandler Your line is now live.
Great. Thank you good morning, and welcome to <unk> I, just one follow up on vans on the profitability of just the overall active segment EBIT margins are down about 500 basis points versus pre pandemic, whereas if you referenced sales are up. So just curious if you can talk a little bit more about what's going on under the hood from a promotional activity perspective.
Any other kind of key investments or input cost, we need to be thinking about for that segment.
When do you expect profitability to be back on par with the pre pandemic level for that segment.
Yeah, Hey, Aaron good morning.
Sure.
First of all maybe discounts and promotional activity is in line with prior year. So I think that's an important point to get out there. We're not we're not being more promotional which I'll remind you is not a lot, but we don't promote a lot in this brand. So I think that that's the first thing.
Certainly there has been some pressure on the profitability I would say, there's a couple of things there to consider.
First of all the China business, which has been more challenged as a very profitable business right. So from a mix standpoint, there is a little bit of an impact there.
Our brick and mortar profitability, while while improving and.
Quite strong actually in terms of the absolute numbers, it's still a little bit below where it was where it was pre pandemic, but recovering really nicely and we expect that we'll be back sort of in line as we move into.
Into next year, and then and then the other thing is the impact of the supply chain challenges the air freight in particular.
Has the store on a year to date basis, our EBIT margins in the segment and particularly in vans, which is probably obviously, we are interested certainly a little bit lower than historical levels, but I would remind you that we're really proud of is that the overall operating margins are right in line or will be in line. This year with where we were pre pandemic.
Despite some challenges there in the active segment, we've seen really nice progression of profitability in both the outdoor in the work segment and obviously were shown showing the ability to leverage SG&A across across the enterprise.
Great. That's very helpful. And then just my follow up is on the Omicron variant and the pressure you saw in the latter part of December has that pressure continued into January and then what's the baseline that youre using for your implied fourth quarter outlook for traffic and just store closures and any other kind of environmental things, we need to be mindful of that thank you.
Yeah, Yeah, I think it certainly has continued a little bit I think we've probably.
Gradually see that maybe maybe.
Having a little bit of a less impact also you got to remember that.
Store volumes are much are much lower.
Okay.
January and February than where they are in.
November and December so just relatively speaking, maybe a little bit of a less a lesser impact in that regard from a mixed standpoint.
Certainly, China, though I think it's probably.
Maybe thats a different answer for China, we continue to see.
A lot of variability there in terms of government reactions. In these lockdowns are micro shutdowns of shutdowns of cities and certainly restrictions on travel we expect the Chinese new year kind of environment is going to be going to be pretty muted in terms of travel and consumption versus what it would be in a normal year as it relate.
For Q4, we've assumed.
Maybe the easiest way to say that as we've assumed comparable kind of performance that as to what we saw in Q3.
Great. Thank you so much.
Thank you next question today is coming from the one vessel that is true from BNP Paribas I've seen your line is now live.
Good morning, Thank you very much for taking my question.
Gratulation regarding Nicole's Onboarding as TNF first female global brand President Steve can you talk about her vision for the brand, especially since she is coming from Nike should we see a further push into greater spring and summer categories, maybe efforts on DTC on the innovation front, you've launched future like that but should we.
Expect more innovation platforms under Nick close watch for FY 'twenty three.
Hey, good morning, Laura Thank you for this question.
Let me first say.
We're really excited with the appointment of Nicole for the reasons that you called out.
So she brings an industry experience and an understanding of consumer engagement.
Yes.
It's very unique and very applicable to where we're north faces today.
I think it's early to be able to talk about her vision she'll be here in June and at that point, we will.
We're able to start to articulate that and Youll.
<unk> heard our Investor day.
But I think the.
The success that you see happening with the north face today we.
We will be things that you know.
She'll build on but this is the work that Steve <unk> been doing and Thats to get the brand to be more of a 365 relevant brand.
The comment around spring summer.
We see very strong results with our core sportswear our logo wear.
Bags all of that has applicability into that spring summer season, as well as footwear. The vector launched this last year has really given the north face a platform to build from and there's a lot of energy behind that I think what youll see her focus on.
Is the is the elevation of <unk> to see the focus on the digital aspect of DTC, but really that omni connectivity.
And how to continue the work that the TNF team has been doing to get a higher frequency of flow with stronger storytelling and.
To drive that engagement, leveraging the consumer insights and building that loyalty program.
So I think the foundation that Steve has been able to really solidify and.
In hand to Nicole her skills and background are are really well suited and.
On the right leader coming in it at the right time to continue the momentum you see really taking place in a broad based manner across regions channels and end product categories for sure.
That's great to hear and then Matt some modeling questions here, but.
I think in <unk>, you had about $200 million shifted into Q3 Q due to supply chain constraints. I think you said in your prepared remarks, there was some.
We should anticipate some shift from <unk> to <unk> could you, possibly quantify if there was a shift from <unk> to <unk> and <unk> and then.
On freight how do we think about the implied for Q GM in terms of the bridge to.
To get to the full year gross margin.
Yes, so first in terms of timing shift there was some shift from Q3 into Q4, a much much smaller number probably probably even maybe a little less than 25% of what we saw in Q2 to Q3.
Something but a much more modest number.
I would tell you as it relates to <unk>.
The outlook, what's implied in the outlook relative to Q4 into Q1 around 20% of that reduction.
Is $150 million total around 20% or so of that I think.
I'd say, it's timing related much of which by the way is in the European region.
So thats the thing there in terms of in terms of gross margins in Q4, I would say.
Most of the change is really related to the vast majority is related to additional air freight.
That we've that we've now that we now have line of sight to to support will continue to be really strong demand signals in the business in particular in the outdoor segment, so more air freight implied.
And then there's obviously a little bit of headwind from from mix as it relates to China being the driver of an internationally generally being the driver of.
The reduction.
Very helpful. Thank you very much and best of luck.
Thank you Ralph.
Thank you. Your next question today is coming from Jim Duffy from Stifel. Your line is that lives.
Hello, Thanks, Good morning, guys.
I wanted to ask about the moderation of the DTC and digital outlook I'm curious is that.
Flexion of tens or youre seeing in China and trends in the vans brand.
The components that are weighing on that relative to your previous expectations.
Yes, Jim it's really all China.
It's probably the simplest way to say that.
Yes.
I talked a little bit about some choppiness in terms of traffic related to omicron and Thats true.
But offsetting that we've seen we've seen really good performance a little bit ahead of where we thought we would be as I said, even if maybe then even in the vans Americas brick and mortar business the north face business.
In the U S.
Generally across both channels has been a little bit better, which is which has helped to offset again, some choppiness that we've seen related to <unk>.
In Europe , and obviously, the China, the China story, though is really the driver of the change.
And China is the pressure on the digital welcome Matt Yes. It is yes.
Okay. Thank you.
Thank you Jim.
Thank you. Our next question today is coming from <unk> <unk> from BTG provided her life.
Thank you good morning, everyone.
I have a couple of questions I guess the first one just taking on the China theme here.
Given what's going on in the athletic sector.
And then move towards more domestic brands and favorable.
Global brands is there some of that that's also playing out with vans and if that's the case is there any visibility or any traction that you've seen.
We expect to see on how that can.
Improved.
And then my second question is more on the U S side.
With TNF in timberland, given how strong the two brands performed this quarter.
Any sort of commentary that you provided with respect to how order patterns. Our arms holdings for next year and how you think about.
Applying.
Very lean.
Panel inventories.
But still maintaining brand heat.
Helpful. Thank you.
Yeah I'll take the first question and Matt can grab the second one so on your question around.
The Chinese consumer.
What we see going on there are a few things.
Certainly theres been quite a bit of impact to consumer behavior consumer sentiment and retail traffic guy to the macroeconomic impacts of Covid to matts earlier comments.
There is a higher percent of closures today than there were three months ago.
That is that's a point in time that won't last forever, but that's having an impact for sure.
Yes.
I think as you think about that.
The consumers thinking about this rise of nationalism has talked about.
There is something there, but from a brand standpoint within our portfolio.
You've heard us talk about this and we monitor week by weak consumer sentiment.
A link to brand origin, and we've not seen any impact there or more any uptick in sentiment change based on where our brands really are anchored.
And I think why that's important is in.
This is a core part of our go forward strategy is really speaking to the Chinese consumer as the Chinese consumer and elevating our local for local product creation demand creation, and really tailoring events that are relevant to them and.
And their needs.
Theres also.
You can see this with our north face business quite a bit of momentum and tailwind in the outdoor space and the investments that Chinese government is making for.
Young people to get outdoors, and certainly the Olympics as a catalyst there, but theres a lot of energy in the outdoor space.
Maybe lesser energy and some of the athletic space, but.
There is a rise in Chinese consumers' focus on health and wellbeing and anything to do with activity.
We will be central to how our teams there in China are thinking about driving their businesses forward and this is this is where our moving our teams to Shanghai.
The appointment of Winnie Mas, our as our leader and.
Just the deep understanding.
And skill capability locally within China.
Is paying dividends, our north face team has been domiciled there for.
Many years.
I think they've been the ones that have been able to really react and.
And and pivot to more direct.
Local for local presentation of our product offer and our demand creation.
And then as it relates to.
To your question on Timberland and North face in the U S market I think in particular, probably.
If you're just looking at channel checks I'm sure here I'm sure you're hearing that the inventories are really clean and lean in and probably in some cases clamoring for more inventory in both of those brands. So that's really good I mean, we met our commitments for what we got delivered in fall and holiday.
And put us in a better overall assortment position during that during the last quarter than where we've been in the first half of the year, but those commitments were constrained a little bit.
In terms of probably not being able to deliver everything that some of the accounts may have liked and certainly.
It could have could have supported more reorder demand if we'd had the inventory so.
Really strong probably historically high sell through levels in both of those brands. So that's really really encouraging and yes. It does set us up well for next year right in terms of the.
To get into the details there of the order books, but you can be assured that the.
They both look pretty strong even starting in spring and as we head to the all important.
Paul Holiday season next year, we're in a really good position with those brands and from a supply chain perspective, I think we've done a lot of work to from a sourcing perspective as well as on the logistics side to ensure we're better equipped and better positioned to support the business next year.
And so I think we'll be well.
We're ready and excited about what's to come next year for those two brands.
Thanks, so much for that.
Steve if I could follow up just on the.
Maybe not too just on the vans I think last quarter.
There was discussion that there was an opportunity to take advantage of.
Empty shelves, where competitors were just not in an inventory position to meet that demand is that still the case and I think that that was predominantly a U S comment, but if that's happening elsewhere around the world I'd be curious to hear your thoughts there.
Yes that yes, there has been some of that and we've been able to to support.
I think parts of that for sure I mean thats the <unk>.
Fly chain challenges maybe maybe.
Or that a bit but that's been predominantly in what I'll call. The sports inspired channels within the U S market, it's where we've seen that.
Which is which is obviously really good news that it speaks I would say to some of Steve's earlier comments to the increasing strength of the progression part of the footwear line a lot of those products are performing really well in those channels and driving really strong growth in that part of the line, which is a good thing we've talked about classics.
We're really focused there on reigniting that and beginning to drive growth as we always have and we're confident we will do that but importantly during this disruptive time, we've seen the progression part of the footwear line as well as the apparel part of the business.
Really be strong and so is the whole thing comes back together here it puts us in a really good position from a diversification standpoint, as you think about moving forward.
Great. Thanks, so much good luck.
No.
Thank you next question today is coming from Ike <unk> from Wells Fargo. Your line is now live.
Hey, guys two for me maybe both for Matt just we talked a lot about the band the vans margin I guess I wanted to ask more about.
North face given the.
Momentum you're seeing there I believe that business was low double digit margin roughly pre COVID-19 can you comment on kind of where that brand is today or your aspiration for where that margin trajectory can go.
Are your aspirations moving up based on what Youre seeing just kind of curious how you kind of frame that up on.
On a positive note and then you've given us some building blocks for next year, which is super helpful.
Shape of the year first half back half.
Should one of those.
Outpace the other any kind of meaningful way as we kind of start to think about the model. Thanks.
Yeah. So.
Yes, let me let me start with the second part of your question.
In terms of the shape of next year I would suggest that.
Just think it's a little bit tricky, probably because you've got you've got COVID-19 impacting this year and you've got supply disruptions and you've got timing of shipments and all that but I would say generally speaking I would expect a little bit stronger growth in half one.
And then moderating probably in half two as the business has normalized a lot more in this year's half two so I think I think it would be relatively consistent maybe a little bit stronger than the first half of the year. Overall is probably the way I would determine that in terms of TNF profitability. Yes, we're really happy there I don't know that it's changed our long term expectations are.
We think the potential is here, which I would say as we've said is sort of high teens.
In that range I will tell you this year, we're going to be north of 15%.
Great. Thanks, Matt.
Thank you. Our next question today is coming from Jonathan Komp from Baird. Your line is now live.
Yes, hi, Thank you can I just ask a follow up question on some of the margin levers for this year I mean, it looks like you are.
Raise the operating margin target for this year slightly despite the lower gross margin. So could you just.
Maybe a little more specifically talk about the SG&A levers and then.
From the actions this year anything that sort of temporary versus structural and sustainable within some of those actions.
Yes, so great question.
I think what we've seen in first of all.
I've said and we've proven.
That our model will drive SG&A leverage and we've talked about all year, the ability to do that and our expectation we'd exit the year and that kind of position and certainly that's what we're doing.
Nothing that we're doing I would say is our one offs.
What are going to swing back and hit us in the face necessarily next year. So I think that's probably important.
What are we doing I think it's a sharp prioritization towards the most important strategic choices.
We continue to invest in our digital transformation, we certainly make the investments that are necessary to continue to drive our direct to consumer business, which I think we're really pleased with that and from a penetration standpoint demand creation is actually up a little bit.
From a percent of revenue standpoint than where we were pre COVID-19 and certainly in product and innovation.
We've talked a lot about some of the innovations that are out there and coming.
Speaker 1: You know, we haven't talked a whole lot about it necessarily, but we launched our ENABLE program last year, which was a 125 million target over three years, and we're well on track. We're sort of a year and a half into that. We're well on track in terms of generating those savings, which were really high-do efficiencies and how we work and beginning to ensure that we're transitioning all of our business functions to support this move toward a more direct-to-consumer business.
We haven't we haven't talked a whole lot about it.
Necessarily but we launched our enable program last year.
Which was $125 million kind of target over three years, and we're well on track for a year and a half into that we're well on track in terms of generating those savings, which were really tied to efficiencies and how we work and beginning to ensure that we're transitioning all of our business functions to support this move toward a more direct to consumer business.
Speaker 1: And then probably the last thing is just, you know, throughout COVID, we had to get really, we had to get really efficient, we had to get really smart. And I think we've learned some things there that are will be with us moving forward. Sometimes, you know,
And then probably the last thing is just through Covid, we had to get really we had to get really efficient we have to get really smart and I think we've learned some things there that are will be with us moving forward.
Sometimes.
Speaker 1: Iron sharpens iron in a way, right? We had to really be pretty aggressive and some of those things have created some learnings for us. You know, maybe from a tactical standpoint, we're getting benefits from digital product creation.
Iron Sharpens iron in a way right and we had to really be pretty aggressive in some of those things. It's created some learnings for us.
From a tactical standpoint, we're getting benefits from digital product creation.
Speaker 1: We've talked a lot about that from an investment. You think about reduced sample calls. You think about more meetings that you can do virtually versus always having to be together. You know, prototypes, all those things, some savings there. Certainly through the pandemic, we've been more aggressive about closing underperforming brick and mortar doors that were a bit of a drag on profitability and certainly higher STNA ratios. And we've all set that with much larger digital business.
<unk> talked a lot about that from an investment you think about reduced sample calls do you think about more meetings that you can do virtually versus always having to be together.
Prototypes, all those things some savings there certainly through through the pandemic, we have been more aggressive about closing underperforming brick and mortar doors that were a bit of a drag on profitability and certainly higher SG&A ratios and we've offset that with them.
With much larger digital businesses.
Speaker 1: Lease negotiations throughout the fleet, lease negotiations and then evaluating our overall footprint at a BF level. All those kinds of things I would say John come into that and we're really happy with what we've been able to get done. And most importantly we're happy that we've been able to ensure that we're making the right investment against our brands and supporting the growth that we have today and what we expect moving forward.
Lease negotiations throughout the fleet lease negotiations and in evaluating our overall footprint at a <unk> level all of those kinds of things I would say John come into that.
So we're really happy with what we've been able to get done and most importantly, we're happy that we've been able to ensure that we're making the right investments against our brands and supporting and supporting the growth that we have today and what we expect moving forward.
Speaker 2: yeah that's really helpful Matt thank you and then just one other follow up on vans is like could i think uh... i think that classic's or heritage for where business at epic was something above seventy percent of sales for the brand it's wondering if you work to get back to heat and and build the classics back uh...
Yes, that's really helpful. Matt. Thank you and then just one other follow up on vans, if I could I think.
I think the classics are heritage footwear business at peak was something above 70% of sales for the brand.
Just wondering as you work to get back the heat and filled the classics back.
Speaker 2: Some of that peak was driven by a customer that you think you've lost or do you think you can win them back? And then as you look at inventory across the channel, is there any headwinds or sort of pockets of excess that you're still working through?
Some of that peak was that driven by a customer that you think you've lost or do you think it can win them back and then as you look at inventory across the channel and is there any headwinds or sort of pockets of excess that youre still working through.
Speaker 3: Great. I'll go ahead and grab that question. And I appreciate it.
Thank you.
Okay great.
Oh, great and grab that question.
I appreciate it.
Speaker 3: When a brand is hot, and as hot as the brand was pre-COVID, you have new consumers coming in for sure. And those are consumers that you hope to be able to take from early purchasers to loyal consumers, but in reality, that's not always the case.
Thank you.
When a brand is hot.
And as hard as the brand was pre COVID-19 .
Have new consumers coming in for sure.
And those are consumers that you hope to be able to take from.
Early purchasers to.
To loyal consumers, but in reality.
That's not always the case and.
Speaker 3: I think the proof here for us as we look to reignite classics and the icon management approach that has really been the discipline that Vans has utilized over the years.
Yeah.
The proof here for us.
As we look to.
Reignite classics.
And in the icon management approach that has really been the discipline. The advance is utilized over the years is to stay very focused on the flow of the core classics, how we complement that with seasonal classics, but more importantly, we continue to innovate in the progression area.
Speaker 3: is to stay very focused on the flow of the core classics, you know, how we complement that with seasonal classics. But more importantly, how we continue to innovate in the progression area. And I mentioned there's four new styles coming in this next year, too, we'll land in that back to school area. And some of those that write squarely in, you know, those...
I mentioned, there is four new styles coming.
In this next year or two will land in that back to school area and.
Some of those fit right squarely in those those ultra categories MTGE, but one will also be more pointed towards classics.
Speaker 3: those ultra categories, MPE, but one will also be more pointed towards class.
Speaker 3: Our job is to innovate and give consumers new reasons to purchase.
We our job is to innovate and give consumers new reasons to purchase.
Speaker 3: The VAN's family growth, you know, up over 50% this year, I think is a proof of over 20 million individuals now part of the VAN's family. They have a higher frequency, higher AOV, and and are just a much, you know, loyal consumer and the work that's going on with the 52-week drop program is to really speak to them. You provide them access and visibility to what's coming.
Vance family growth up over 50% this year.
I think as a proof of over 20 million individuals now part of the vans family.
They have a higher frequency higher.
And just a much.
Loyal consumer and the work that's going on with the 52 week drop program is to really speak to them provide them access and visibility to what's coming.
Speaker 3: and give them kind of first shot at being able to consume these new styles. And we've seen really strong success.
And give them kind of first shot at being able to consume these new styles and we've seen really strong success.
Speaker 3: with the early reads of the 52 week drop. So to your question, yes, there are some of those consumers that we don't see today, but we continue to see a lot of new consumers come in and become part of that band's family loyalty program.
With the early reads of the 52 week drop so to your question. Yes. There are some of those consumers that we don't see today.
But we continue to see a lot of new.
New consumers come in and become part of the advanced family loyalty program.
Speaker 1: In terms of inventory, I think it's a specific advance, was your question there. No real big issues there. I mean, in fact, there's still places where we're pretty lean, especially in Europe and the US. I mean, you can imagine we're probably a little bit higher than what we'd like to be in China, given what we've seen. They're pretty precipitous change in the trajectory of that business over the last couple of quarters.
In terms of inventory.
Specific to vans was your question there no no no real big issues. There I mean in fact, there's still places, where we're pretty lean, especially especially in Europe and the U S. I mean, you can imagine, we're probably a little bit higher than where we'd like to be in China, given given what we've seen there pretty pretty precipitous change in the trajectory of that business over the last couple of <unk>.
Speaker 1: But nothing that's not manageable. And I will say our supply chain teams have done a terrific job of actually repositioning some inventory and rerouting things, so to speak, from a future production standpoint to get more inventory to the Western world and as we rebalance things. So overall, we're comfortable with who we are from an inventory standpoint, both within.
<unk>.
But.
Nothing thats not not manageable and I will say our supply chain teams have done a terrific job of actually repositioning some inventory and re.
Rerouting things so to speak.
From a future production standpoint to get more inventory to the western world and as we rebalance things. So overall, we're comfortable with where we are from an inventory standpoint, both within within bands and then globally.
Speaker 1: within vans and then globally, with probably the idea that we could probably use a little more in TNF and Timberland in particular in the US.
Probably the idea that we could probably use a little more in TNF in timberland in particular in the U S.
Great. Thank you very much.
Speaker 4: Thank you. We reached out to our question and answer session. I'd like to turn the floor back over for any further closing.
Thank you we reset of our question and answer session I would like to turn the floor back over for any further or closing comments.
Speaker 3: Great. Well, thank everybody for joining us today. I'm very pleased with the robust and broad-based results we delivered here in Q3. You know, these results, you know, really...
Great well. Thank you everybody for joining us today I'm I'm very pleased with the robust and broad based results. We delivered here in Q3. These results.
Really position us.
Speaker 3: for an even stronger fiscal 22 outlook than we started the year with.
For an even stronger fiscal 'twenty two outlook than we started the year with.
Speaker 3: Today, our business is more agile, more diversified than ever, and our teams have demonstrated the passion and commitment and adaptability that's gotten us here. I'm confident in our near and long-term future, we'll continue to invest in driving long-term profitable growth to generate those elevated returns for our shareholders. So again, thank you for joining us, and we look forward to speaking to you again at the end of the year.
Today, our business is more agile more diversified than ever and our teams have demonstrated the passion and commitment and adaptability that has gotten us here.
I am confident in our near and long term future. We will continue to invest in driving long term profitable growth to generate two to generate those elevated returns for our shareholders.
Again, thank you for joining us and we look forward to.
Seeking to you again at the end of the year.
Speaker 4: And that does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation.
Thank you that does conclude today's teleconference and webcast you may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.