Q4 2022 VF Corp Earnings Call

Greetings and welcome to the V F Corporation fourth quarter fiscal 2022 conference call.

At this time all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Please note that this conference is being recorded.

I will now turn the conference over to our host Allegra Perry Vice President Investor Relations. Thank you you may begin.

Good afternoon, and welcome to VF Corporation fourth quarter fiscal 2022 conference call participants on today's call. We will make forward looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially.

Uncertainties are detailed in documents filed regularly with the S. E C. 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 afternoon, and which we use as lead numbers in our discussion because we believe they more accurately represent the true operational performance and underlying result.

Of our business.

You May also 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, which identify and quantify all excluded items and provide management's view of why this information is useful to investors.

Due to the significant impact of the COVID-19 pandemic on prior year figures today's call will also contain certain from comparisons to the same period in fiscal 2020 for additional context. These comparisons are on a reported dollar basis.

On June 28, 2021, the company completed the sale of the occupational Workwear business. Accordingly. The company has recorded the related held for sale assets and liabilities of the business.

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 date 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, EVP, and Chief Financial Officer, I'm, not Puckett Global brand President, Dan, Kevin Bailey and global brand President of the North face Steve Murray. This quarters earnings presentation has been designed as a visual aid to our prepared remarks, you have the <unk>.

Option to follow along via the side window in the webcast portal. The presentation is also available to download on our website.

During our prepared remarks, we'll open the call for questions I'll now hand over to Steve.

Good afternoon, everyone and thank you for joining our fourth quarter earnings call, we're happy to be here and to go through our fiscal 'twenty two performance and our growth plans for fiscal 'twenty three.

After I take you through the enterprise portfolio strategy update.

I'll handoff to two of our global brand President's first Steve Murphy from the North face followed by Kevin Daily from band.

We've extended the duration of the call today to give Steve and Kevin and the opportunity to share some additional insights on the brands.

Well lay out in more detail plans for the year ahead.

This will be followed by the financial update for met before we move onto Q&A.

We delivered solid results in a challenging and highly dynamic environment by leveraging our extensive scale relationships talented people and world class brands.

Our results underscore our competitive advantage as an enterprise portfolio company and our strong execution I'm incredibly proud of our teams and what they've been able to achieve.

<unk> revenue of $11 8 billion increased 27%, which represents high single digit organic growth relative to pre pandemic levels.

We achieved this growth despite continued headwinds from Covid impacting Asia Pacific and the emergence of new challenges, including geopolitical tensions and acceleration in inflation and lower consumer sentiment globally.

We generated record sales for five of our brands representing over 70% of our revenue and highlighted by incredible growth the north face.

The group's diversified and broad based performance reflects the strength of our brands and the outstanding efforts of our teams across all core areas of the organization.

The north face revenue grew 32% for the year, surpassing the key 3 billion milestone for the first time with broad based double digit growth across all regions in the year and the fourth quarter.

Business in EMEA passed the 1 billion Mark for the first time.

Globally, we continue to see strong growth across channels and categories with momentum in both on mountain and off mountain product <unk>.

Consumer engagement remains a key focus with the north face loyalty program growing to over 13 million members globally, and representing nearly half of our D to C revenue we.

We have a great pipeline of exciting new products and a strong order book with healthy inventory levels in all our channels, which positions us well for continued strong growth ahead.

You'll hear more details about the north face performance and its plans from Steve.

Timberland grew revenue by 20% in fiscal 'twenty, two representing growth above pre pandemic levels.

Growth during the year was driven by strong sellout trends, particularly in the U S and EMEA, which contributed to a strong significant increase in profitability.

The brand is achieving more balanced growth with apparel being the strongest category in Q4 and up to 20% of quarterly sales.

Footwear men's and women's icons performed well and outdoor in height product further accelerated we saw continued strong sell through on our green stride platform reinforcing our commitment to eco innovation as well as pro driven by the reaction and radius athletic footwear families.

We launched a number of innovation initiatives for the brand, including Timberland and end to end circular design re commerce platform.

We are pleased with the momentum in timberland and are excited about the brands plans and outlook for the coming year as it heads into its 15th anniversary in 2023.

We grew dickies revenue by 19% to $838 million for the year, while also driving strong profit growth and margin expansion. Our work business has been seeing strong double digit growth in men's and women's driven by our iconic $8 74 work van and workshops.

And were inspired to see growth across bottoms, and outerwear and tops.

During the year, we launched the made in Vicky's campaign to celebrate the brands 100 year anniversary, which generated a strong uptick in web sales.

The rise of our three outdoor emerging brands, which play in segments that have enjoyed strong consumer tailwind has been a key driver of profitable growth.

This further underscores the success of our portfolio strategy, including our international platforms and supply chain to add value through balance and diversification.

Ultra accelerated strongly in fiscal 'twenty, two across channels and geographies growing by 57% versus fiscal 'twenty, one up 84% versus fiscal 'twenty, primarily driven by elevated product marketing and marketplace management coming together in fiscal 'twenty two for the first time under the new leadership team.

We are confident in the brand we will continue to increase share in the specialty running segment and is well positioned for continued strong growth in fiscal 'twenty three.

Mark will also continue to gain momentum in fiscal 'twenty, two with revenue up 40% representing strong double digit growth across both the Americas and EMEA.

This was driven by an expanding apparel business, which has been up nearly 60% and now represents approximately 50% of global sales.

The brand is well positioned to continue to accelerate in its key markets leading with apparel.

Icebreaker generated near record revenue in fiscal 'twenty, two and transitioned its headquarters to our <unk> office setting.

Setting the brand up to leverage our significant enterprise capabilities housed there too.

The brand move to natural message and consistent product offering is resonating with a growing consumer base.

Brand is set to accelerate accelerated momentum in fiscal 'twenty three.

Now on to vans, which despite growing by 19% over the full year did not deliver on our initial expectations. During the year. The brand achieved double digit growth in EMEA, 30% growth in progression footwear styles and further growth advanced family, which passed 22 million global members.

These wins, however have not been enough to offset the three key headwinds COVID-19 lockdowns in China, lower brand heat and lower performance in classics, which has sequentially improved but remains negative as a category.

While we are confident in the health of the vans brand, we are not satisfied with current performance.

As you know Kevin Bally has recently returned as brand President and later on the call who will take you through the actions they are putting in place to improve performance and their plans to refresh and refocused the band strategy.

Finally on Supreme the brand's performance was softer than planned reflecting a significant impact from supply chain disruption that said the brand's full price brick and mortar business rose by 35%, partly reflecting the contribution of two new stores in Europe .

Looking ahead, we are excited about the brands outlook in fiscal 'twenty three fueled by the initial contribution of the new creative director to remain Emory's vision.

Relocations and updates to key stores in the U S and in Japan, and new distribution planned and strategic agent cities.

Before turning to an update on key progress on enterprise strategy I'd like to take the opportunity to commend our organization on the consistent execution, we delivered throughout the year.

Our family of brands has strengthened and as a result, we are well positioned to continue to generate strong broad based and sustainable growth.

Our enterprise strategy enabled us to generate another year of strong earnings and margin growth executing against our long range plan targets.

In addition to growing revenue by 27%, we again drove strong execution throughout the P&L, we expanded gross margins by 150 basis points to 54, 8% and operating margins by over 500 basis points to 13, 1% comparable to pre pandemic levels and grew each.

By 143%.

We returned a total of $244 million to shareholders during the quarter, including dividends of $194 million for a total of over $1 1 billion returned to shareholders during the fiscal year.

I'm incredibly proud of our teams and what we've achieved during what was a year of disruption.

To our consistent execution, we have strengthened our brands and we are well positioned to continue to deliver strong broad based and profitable growth.

A key area of investment and portfolio infrastructure as our digital ecosystem, which influences everything we do from how we create and developed product.

To making sure we get the right product in the right place at the right time to providing a seamless and elevated experience for our consumers across all regions and channels.

Consumer data and analytics.

We've made significant progress leveraging data and analytics to better understand our consumers and what they want through standardized engagement social sentiment brand health and consumer based in both value metrics, we were able to capture changes in consumers behavior quickly, enabling us to rapidly adjust as needed to meet their needs.

The north face as fast growing loyalty program. The forecast is a good example of how we're using enhanced data capabilities to drive stronger engagement members have a 60% greater purchase frequency relative to non loyalty members and spend more across every region.

This would go to market, we are transforming how we go to market increasing the level of digitization across product creation merchandising and supply.

Further elevating the output will be coming quicker and more agile with shorter lead times and greater efficiencies our enhanced use of <unk> design across product creation has led to a significant increase in new apparel and footwear styles developed with these technologies.

And in fact, nearly 40% advanced global footwear line is now designed and developed on an automated <unk> configured or.

These are clear examples of actions that will result in both speed and cost benefits.

Consumer experience.

We continue to invest in enhancing the consumer omnichannel experience.

Adding intelligence to the way, we collect connect manage and govern cross channel consumer profiles that provide dynamic segmentation capabilities that serve all direct to consumer channels and marketing solutions at the brands.

This has enabled us to provide a true seamless omnichannel experience, allowing brands to build stronger connections and personalize the way, we communicate with our consumers, which in turn increases satisfaction engagement and conversion.

Our click to deliberate in the U S has improved further to just over two business days.

Investing in our transformation will continue to be a key strategic priority as we look to the future.

Our world class supply chain enables our portfolio to thrive. This critical competitive advantage has never been more apparent than over the last two plus years, Matt will take you through the details but in the meantime, I'd just like to pay tribute to our teams who have successfully leveraged our leading platform to overcome significant obstacles.

And challenges to continue to drive the business forward, while ensuring we are well positioned for future success.

We are leveraging our insights and capabilities to further develop and grow our international business, which accounts for nearly 50% of our revenue.

We continue to sharpen expand and implement our local for local strategy.

Which enables our teams to apply relevant knowledge and relationships to drive decisions from product design to marketing to merchandising to distribution.

EMEA has continued to be a bright spot for VF with revenue up 30% in fiscal 'twenty, two and a significant increase in profitability.

Through strong execution, we further elevated our brand's positioning with higher quality sales strengthened partnerships and leading go to market capabilities supporting a foundation for sustainable and profitable future growth.

We continue to make progress in digital where the digital DTC and digital wholesale partner business combined account for nearly a third of regional revenue.

We are well positioned to continue to build on yet another very successful year in this region.

In Asia Pacific, it's been a challenging year, but we're taking action to manage through the current climate, while ensuring we are poised to accelerate when the market contingent conditions improve.

As part of our local for local approach we've invested in talent growing our teams in Shanghai during the year with a focus on strengthening product design and development as well as marketing capabilities.

Our teams are focused on increasing local product creation and evolving channel and product segmentation embracing new emerging channels.

Elevating store formats, and driving further omnichannel integration.

Longer term, we continue to see significant distribution and brand awareness opportunity in greater China across all of our brands as well as other markets in the region with a rapidly growing consumer base and outsized interest in our core strategies.

In conclusion against the challenging backdrop, we made continued progress progress against our strategic priorities and delivered on our commitments, including achieving robust earnings growth. Our total addressable markets are big and healthy and our portfolio of brands is strong balanced and gaining in momentum, we're continuing to invest to draw.

The business forward and are well positioned for another year of profitable growth in fiscal 'twenty three.

Before I hand, it over to Steve I'd like to thank him for the past two years of intense work at the north face to clarify brand positioning strengthened team enhanced integrated marketplace discipline, and elevate product merchandising and product creation capabilities. The brand's incoming president Nicole auto will be joining US next month is the right skills to <unk>.

Build upon the foundation that Steve is established.

Today, I would ask Steve to talk us through the transformation. He has led at the north face and explain how we lead the brand in a great position for sustainable growth as he hands over the range in the call.

He'll be followed by Kevin Daly was brought back into lead bands about two months ago to steward the brands performance and unlock its future growth potential.

Dave over to you.

Thank you Steve I am pleased with the North face had a great Q4, and the strong and broad based momentum we saw last quarter and all through the previous nine months continued.

As a reminder, Q3 of this fiscal year was the biggest quarter in the brand's history, where our quarterly revenues surpassed $1 billion for the first time and on the back of this the north face has now delivered the biggest Q4 in the brand's history.

Mobile revenues nearly $770 million.

Which is 26% above last year and 59% above the same quarter two years ago.

What was particularly gratifying is the old geographic regions made meaningful contributions with the Americas, particularly strong at 35% above last year, APAC at 22% and EMEA at 18%.

Likewise from a product despite the.

The growth was broad based with our own mountain and off mountain categories, both performing very strongly.

Hedging our activity based performance categories first outerwear and snow sports made up 48% of sales in the quarter and grew by 38% year on year, driven by both the emerging and heritage franchisees such as the North Sea Chemical E. R.

Our freedoms snow collection, and the Torah rain jacket.

The north face caused collaboration which we launched in China in mid January and then other regions. Two weeks later results saw a huge success driving significant brand heat with a near 100% sell through in both e-commerce and wholesale channels within a matter of days.

Our footwear business also grew significantly and nearly 19%.

Driven by combination of effective insulated boots and more traditional hiking shoes.

Our equipment business grew mid single digit despite some fairly serious COVID-19 related supply chain disruption and tents and sleeping bags.

Now off mountain outdoor inspired categories local west momentum continued low double digit growth with short sleeve and lightweight buy now wear now styles in particular driving solid sell throughs.

Sales in all distribution channels grew in the quarter.

Motor scores growing strongest at 51% versus prior year.

Consumers returned at least to some extent to a more normalized post pandemic shopping behaviors.

Before I leave Q4, I should just mention that our current Brian campaigning discover your trial has proven to be one of the most impactful campaigns that we run in recent years.

During the quarter, we signed up an additional 1 million members of our award winning loyalty program export costs, whose membership now stands at more than 13 million global explorers.

If we now look at the full year, the north face grew 32% of fiscal 'twenty, one surpassed $3 billion in annual revenues for the first time in the brand's history and is now 21% ahead of full year pre pandemic annual revenues.

It is worth mentioning that gross margin at the north face.

Priest above pre pandemic levels, while segment profit has also increased significantly.

In terms of patient shape, our strategic objectives of disproportionately increasing our international and digital businesses have been achieved without combined APAC and EMEA regions now accounting for 48% of total worldwide revenues up from 39% two years ago.

Our direct to consumer E Commerce business now representing 18% of total sales up from 12% two years ago.

The third lines, we looked at our business shape through product.

We've made great progress in both reinforcing our performance credentials through activity based on mounting innovations.

So sports Alpinism hike.

Trial, while simultaneously expanding our outdoor inspired off mountain categories, such as logo sportswear and accessories to appeal to a broader base less performance oriented consumer.

Detailed that business on and not an or and we're very satisfied right now with the bonds between our main product categories.

Between our own mountain and off mounting consumer.

Looking at the drivers of the North face you success over the past few years, we'd point to three main strategic pillars.

First an elevated product focus with an emphasis on launching several proprietary technologies such as future life advanced mounting kit effective which underpin our leadership position in the outdoors.

Second our integrated marketplace strategy, which has enabled us to develop specific products and marketing programs.

Specific consumer groups and distribution channels.

And third an enhanced consumer engagement initiative based on knowing our consumer better and targeting specific points of brand engagement to ensure we're showing up in the way our most loyal Brian followers expect and want us to.

We've invested significantly in technology over the past two years and we're excited that this together with several VF level platforms aimed at accelerating our ability to utilize consumer data and enhance our omnichannel capabilities, we will begin to pay significant dividends as we progress through the year.

At the brand level, our objective for the next 12 months pretty simple.

We will continue to Leytonstone trial by Relaunching, our Iconix summit series as well as reinforcing our snowed credentials by launching a new free ride collection aimed at the younger more eclectic snowboarding enthusiasts.

Turing collection to capitalize on the on pace off piece trend currently driving the market in Europe and by expanding our circularity product specifically in the category.

We'll also celebrate 30 years of not safe, while continuing to build on our base camp Duffel franchise, which has been the go to choice for elite level athletes on outdoor expeditions for over three decades now.

We will continue to invest in our 365 day product strategy essentially an initiative to extend our product assortment beyond snow sports and cold weather product to provide apparel footwear and equipment.

<unk> may use these OEM law, including through the hot summer months.

This will be done by capitalizing on current fusion of outdoor athletic and activation trends with an emphasis on designing incredibly versatile product for several different wearing occasions, and by driving energy and water and some products through our growing hiking franchisees.

Lastly, we'll do this by opening up a brand aperture.

Have several initiatives underway aimed at helping to introduce new participants to the outdoors, regardless of where they live and where they play and by making the outdoors more accessible to all.

It's a market leader in this sector, we feel we have a duty and the north face to help bring all the positives from enjoying an outgrowth lifestyle to everyone, whether they live in close proximity to amounts or not.

Long term commitments such as the north slope on our ethnic development program, which is aimed at democratizing. The funding of outdoor creates an expeditions and our annual woong cement the climbing day community Activations are all examples of making the outflows more inclusive.

Helping more people enjoying the lifestyle that we represent and law.

In summary, we've had an incredible journey of transformation over the last couple of years, the north face, which is like the brands to be stronger than ever and we are well positioned to continue to deliver high quality strong momentum going forward.

With that I'll hand over to my good friend and colleague having Bailey to talk about that.

Thanks, Steve it's good to be back in my old chaired vans brand I first joined in 2002 as the head of retail and from 2009 to 2016 served as brand President architects into growth from 800 million to $2 3 billion.

No. This brand understand the consumer and competition and have a clear point of view on our challenges and the opportunities that lie ahead for us to.

To start our vans leadership is not happy with our recent performance. The team does not like to underperform and I have total confidence in the brand's long term growth potential as evidenced by fiscal 'twenty two being a record setting year in terms of top line revenue, specifically, our largest market North America delivered sequential quarterly growth while gross.

Excluding expedited freight exceeded pre pandemic right in the region.

Europe delivered double digit growth progression footwear grew by over 30% year on year and nearly 40% growth in apparel.

Ive been back for nearly two months now and have been impressed by the team their commitment their passion and especially their competitive spirit.

Doug and quickly together and are in the process of refreshing and refocusing Vance strategy, while incorporating our learnings from the last year into our plans.

Validated three primary areas impacting the business core classic performance brand heat and the situation in China.

I'd like to unpack these and then share what we are doing.

First court classics, we just started our focus toward progression footwear, and apparel, which led to strong double digit growth in those areas in fiscal 'twenty, two but we underestimated the level of balance needed to maintain appropriate growth in our classics business, which represents approximately two thirds of our global footwear business.

We have an opportunity with our five classic icons to optimize the consumer trends and plan to use style adaptations to extend the trends.

Next <unk> enjoyed outsized brand heat in its history that we have not emerge from the pandemic with as much philosophy as expected and have lost some momentum.

Several factors have contributed to this.

Our top tier limited distribution footwear, which you may know advanced vault has previously met the needs of influential footwear trend accounts in the past.

As Vince has grown our approach to this aspirational product and channel needed to evolve more quickly.

We are also competing to what has become a more crowded collaboration space, we have an opportunity to better segment, our top tier product from other products in our line to drive more energy with Influencer consumers and provide geographic relevance across our three regions are critical components to build brand heat locally.

Finally, China and the ongoing challenges of Covid has slowed a major opportunity for the brand.

At the end of Q4, we are experiencing the impact of local regulations travel restrictions and consumer anxiety, resulting in declining online and offline traffic affecting most brands, we monitor as well as outsized declines in the product categories. We compete in.

But we are taking immediate and ongoing actions to mitigate our challenges and to refresh our growth opportunities.

In late April we launched our brand building marketing investment based on classics, and we are building our storytelling in phases through the important back to school selling period.

Classic since forever is a multi phased approach to both broaden our reach and attract new consumers through expanded media choices as well as renew the purchase frequency of our known consumer base.

Additionally, in partnership with our VF consumer data and analytics team. We recently established a data driven dashboard to rapidly read and react to optimize our efforts. It's still early we've seen a return to growth in our own D to C for styles like the vans old School in North America.

To reignite our brand heat, we've stood up a new strategic business unit named critical to refresh our work at the top tier of the distribution pyramid and hired a well known industry veteran with experience at some large competitors and prior close ties to the vans brand to quickly re energize our work here.

Over time this will have a positive trickle down effect on consumer affinity. Additionally.

Additionally, we recently completed a significant refresh of our consumer research to deeply understand and reshape our brand strategies for today's evolving shopper.

We continue to accelerate capabilities in both digital and data driven decisions only weeks ago, we launched a new vans dot com platform and a rapidly evolving the consumer experience, we are leveraging vf's consumer and user experience team and consumer data and analytics hubs to ensure we are making database decisions across the business.

Finally in China, we have continued to be resilient in the face of the ongoing pandemic. We've been building capabilities as we worked through the challenges of moving our brand hub to Shanghai during the pandemic and the local lockdowns affecting how we work and the consumer's ability to shop, we acted quickly and pivoted our local strategies shifting to re prioritize Q1 active.

<unk>.

Lobbing marketing to interact with consumers locked down in their homes and working with local government officials to be the first apparel brand to reopen our Shanghai distribution Center.

We are leveraging our recently expanded Shanghai digital hub to optimize work with the large digital platforms in vans Asia launched social commerce implemented data driven consumer engagement and has begun localization of product and marketing.

China also launched our vans family loyalty program and quickly added over 2 million members. This year, we will be ready to accelerate quickly as the market reopens.

Let me wrap up by speaking about the strategic priorities I have advanced leadership focused on as we move into this new fiscal year.

Reigniting our brand heat is critical to driving traffic to our brand through both new and existing consumers, we will leverage the work I already referenced across clinical product and focus brand stories, while continuing to read and react through consumer data and analytics.

We will drive greater product and marketing relevance building off of a refreshed understanding of the consumer classics will continue to drive growth with a greater emphasis on style adaptations of our five classic icons progression will continue to play a role in addressing 365 day relevance and expanded usage occasions, and our apparel will elevate to server.

True soda head story with a heavy focus on our own D to C distributions.

And on direct to consumer we are deep diving and much sweet spot and where I started my career, our DTC business.

Direct to consumer represents 55% of our global business as well as the best brand experience and most profitable channel for our growth.

Serving the full consumer journey will be our priority and we will leverage significant growth in our advanced family loyalty program, which is now functional in all three regions and over 22 million members strong nearly 50% increase over the last 12 months.

We are following our new vans Dot com platform launch with a major site refresh and the addition of mobile commerce on our advanced consumer App in the second quarter and Youll see a focus on what we believe is the best in class customization platform to provide our consumers personalization at the highest levels.

Lastly, digital capabilities are rapidly advancing how we plan and operate our business depends leveraging our via capability teams. We are using data from consumers to influence both our go to market and our daily business decisions. We will continue to build our muscles here as we further integrate dashboards into all we do and I can't forget the meta versus <unk> partnered with.

<unk> and NFC gift project, while Vince roadblocks royalty had 64 million visits and remains the highest rated roadblocks brand experienced to date and the only brand experienced above the 90% experienced rating.

In closing I once again I'm happy to be back of bands are brand and consumer I'm passionate about and I have every confidence we will continue to provide strong and relevant offerings for our growing base of consumers and deliver growth with two months under my belt I am looking forward to steady progress and sharing more with you at our September Investor meeting I'll now.

Ill pass you to map.

Thanks, Kevin Good afternoon, everyone. We're happy to report on the year in which we delivered on our outlook from the beginning of the year and our strategy, despite facing unusual and unprecedented circumstances and challenges.

To Echo Steve's comments at the top of the call I'm incredibly proud of what our teams have achieved and how they continue to adapt.

Our brands are continuing to strengthen while pursuing their growth plans.

<unk> to become an even more balanced and resilient business.

Let's start with a few key highlights of fiscal 2022 end of Q4.

During fiscal 'twenty, two we grew revenue by 27% and earnings by 143% achieving a better outcome on both the top and bottom line and what we had expected at the beginning of the year, despite facing new challenges and headwinds we had not anticipated at the outset.

This represents high single digit organic topline growth relative to pre pandemic levels in line with Vf's long range plan target. Despite this disruptive environment.

We delivered a strong increase in gross margins, which came in at nearly 55% despite absorbing about $160 million in additional air freight costs.

<unk> that impact gross margin would have been above pre pandemic levels.

Maintain tight cost discipline over SG&A, while ensuring continued investment toward our brand's highest growth opportunities to drive behind our strategies, we continue our digital transformation.

Together these allowed us to increase our operating margin by 510 basis points to 13, 1%.

We grew revenue by 12% in constant dollars in the fourth quarter to $2 8 billion, reflecting continued double digit growth in the Americas and in EMEA, While Asia Pacific was down reflecting the impact of Covid related Lockdowns introduced in China during the period.

Adjusted gross margin was down 50 basis points to 52, 2%, while operating margin increased 120 basis points, leading to adjusted EPS growth of 67% to 45.

Now, let me say a few words about the supply chain I'm proud of what our global supply chain teams have been able to achieve during the year as we continue to use our scale and sophistication to adjust to today's ongoing challenges.

Since we last updated you in January increasing inflationary pressures and ongoing disruption primarily from Covid Lockdowns in China have led to continued cost and delivery challenges across the supply chain.

While we continue to see higher than normal levels of congestion and disruption from labor shortages and equipment constraints across the logistics network. The overall picture has improved in the last few months.

We continue to proactively address these challenges as outlined back in January we've taken pricing actions across our brands to offset the inflationary pressures.

We're procuring our supplies earlier anticipating order book collection, and overall continuing to invest in technology to create efficiencies and reduce lead times.

We're expanding our local for local sourcing strategy servicing an increasing portion of regional demand with locally manufactured product we've made.

Good strides in logistics, where we secured additional capacity by doubling the number of ports of entry and ocean carriers relative to pre pandemic levels, while using alternate origin routing and other methods to diversify our network.

We ended the year with inventory in a healthy state and are well positioned to service, our order books and support our growth plans.

I'm confident that our supply chain is truly best in class in this capability, which is central to our enterprise strategy will continue to support consistent and sustainable growth across our family of brands.

As Steve mentioned at the top of the call we generated broad based growth with five of our brands achieving record sales results for the year, including the bands, including vans, the north face and <unk>.

The north face our second largest brand had an outstanding year with full year sales up 32% to $3 3 billion and reflecting broad based strength and double digit growth in all regions every quarter of the year.

<unk> fourth quarter momentum, which saw a strong acceleration to up 35% in the Americas and sustained elevated momentum internationally.

Europe was up 18% in Asia Pacific, 22% in the quarter. These strong top line results led to meaningful improvement in profitability for the brand.

At Timberland Q4 sales were up 12% the brand achieve 20% sales growth for the full year, which was characterized by strong double digit growth in both the Americas and in Europe , but was partially offset by a decline of 13% in Asia Pacific.

In the Americas in Q4, the brand grew 20% due to continued strength in wholesale up 33% driven by a strong sell in and sell through performance across key accounts and elevated timberland pro demand.

Globally for the year, the brand significantly expanded profitability, reflecting higher gross margins achieved primarily through better sell through and higher quality sales with operating expense leverage offsetting the impact of air freight and headwinds in Asia.

It's worth noting that timberland strong performance has been delivered despite the bringing suffering some of the more elevated impacts from supply chain disruptions within our portfolio.

<unk> also achieved record sales up 19% to $838 million for the year and up 8% in Q4.

In the Americas, our largest region, which accounts for over 70% of global business revenue was up nearly 40% for the year driven by double digit growth across both work and lifestyle products.

Strong wholesale demand all of which drove record regional profit.

Our Q4 performance was up 16% in our home market.

EMEA had its strongest quarter of the year in Q4 with sales up 16% and continues to see robust work inspired lifestyle growth.

Overall for the year EMEA was down 13%, reflecting the repositioning of our work business in the region.

In Asia Pacific Q4 sales were down 20%, including a 33% decline in greater China.

Finally as mentioned at the beginning of the call advanced performance in fiscal 'twenty, two did not meet our expectations rare.

Revenue grew 19% in the year and was up 2% in the quarter impacted by the more difficult operating environment in China.

Excluding China vans grew by 6% in Q4 versus fiscal year 'twenty one.

Now turning back to VF as a whole gross margins expanded 150 basis points during the year to 54, 8%, including a 20 basis point benefit from Supreme Despite absorbing about $160 million of expedited airfreight above last year's levels.

Relative to pre pandemic levels fiscal year 'twenty, two gross margins were impacted by.

200 basis points of expedited freight and FX transaction headwinds.

Excluding these transitory headwinds underlying organic gross margins expanded 130 basis points versus fiscal 'twenty.

And all of the health of our brand in the marketplace.

For the fourth quarter adjusted gross margin was down 50 basis points to 52, 2% on an underlying basis, excluding 170 basis point impact from expedited freight costs margin was up 120 basis points.

Our operating margins expanded by 510 basis points to reach 13, 1% for the year.

I am proud to see the operating margin in line with pre pandemic pre pandemic levels. Despite the significant headwinds from expedited freight.

We continued to invest in our brands and business strategies with an increase of 22% versus fiscal 'twenty, one and organic strategic investments.

Putting some key initiatives such as digital investments like the new van E Commerce platform as well as ongoing demand creation spend across our portfolio.

We did this while maintaining cost discipline across other areas and improving <unk> profitability, which both contributed to SG&A leverage, which helped offset significant supply chain disruption and cost headwinds across the P&L.

We delivered EPS of $3 18 for the year, representing 143% earnings growth relative to last year or low double digit organic EPS growth relative to pre pandemic levels from an improved operating performance and as planned a lower tax rate thanks to some timing benefits.

We're pleased to have delivered a higher than planned level of earnings growth than our commitments from the outset of the year with a robust and flexible business model successfully overcoming a challenging environment and significant headwinds.

Finally, I'll say, a few words on our balance sheet and cash evolution. We ended the year with approximately $1 3 billion in cash. This reflects adjusted free cash flow generation of $606 million and proceeds from the Divesture divestiture of occupational work of approximately $620 million.

We returned over $1 1 billion to shareholders through dividends and share repurchases, including a further $50 million of share repurchases during the fourth quarter after $300 million during Q3.

We delivered an average dividend yield of two 7% for the year with our ongoing commitment to return cash to shareholders. This marks our 15th consecutive year of dividend increases and underscores our confidence in future growth.

Our year end inventory ended at $1 4 billion up 34% versus the prior year's depressed levels, however, when compared to fiscal 'twenty, we're up about 10%.

Our overall inventory is healthy and well positioned to support our growth plans.

Our balance sheet is sound with liquidity exceeding $3 2 billion at year end and our net leverage ratio improving to two six times from approximately four times a year ago.

Our return on invested capital reached 15, 1% up from seven 5% last year.

I wanted to give you a brief update on the ongoing tax case related to the timing of income inclusion from <unk> acquisition of Timberland in 2011.

On January 31, 2022, the court issued its opinion in favor of the IRS, which argues that all such income should have been immediately included in 2011, rather than recognize periodically has VF has done well.

While we intend to appeal, we anticipate that we will pay the 2011 tax is being disputed which are estimated at approximately $845 million for gross tax and interest we're confident in our timing in treatment of income inclusion and we'll continue to defend our position.

Now moving on to the outlook for fiscal 'twenty three and beyond.

First I'll update you on the new guidance provided today for fiscal 'twenty, three which is on a constant dollar basis and which reflects the following.

First we've assumed no additional significant COVID-19 related lockdowns in any of our key commercial our production regions with current restrictions in China expected to ease from the beginning of June.

Second we've assumed no significant worsening in global inflation rates and consumer sentiment.

We expect to grow revenue at least 7% on a constant dollar basis. This reflects continued broad based growth across our portfolio in terms of brands channels and regions, but also incorporates a cautious view on the macroeconomic environment given recent developments affecting some of our markets and consumer sentiment more broadly.

By brand, we expect the north face to grow low double digits continuing to build on our strong base achieved in fiscal 'twenty to the.

The brand's strong momentum in both on mountain and off mountain categories has led to healthy inventory levels and robust order books supporting growth across regions in fiscal 'twenty three.

We expect <unk> to generate mid single digit growth with momentum building throughout the year as initiatives initiatives to reignite classics and a recovery in China in particular start to have an impact.

We are confident in the brand's health and longer term opportunities and believe our plans to drive growth will start to have an impact from later this year.

At the group level, we anticipate further gross margin expansion of approximately 50 basis points with pricing actions offsetting product cost increases.

Benefiting from less reliance on air freight throughout the year.

We remain focused on optimizing our SG&A spend to ensure ongoing investment in our brands and our strategy and overall deliver operating margin expansion to about 13, 6%.

The SG&A ratio is expected to be about flat as we continued to leverage most spend areas to fuel ongoing investment in demand creation digital and technology and distribution expenses.

This will drive operating income growth of at least 10%.

We are anticipating reaching an EPS range of $3 30 to $3 40, which includes an estimated 23 of unfavorable nonoperating impacts, including first an increase to a more normalized tax rate of about 16% after having seen a more favorable rate achieved in fiscal 'twenty two.

FX from translation.

Third higher interest expense and fourth noncash pension expense.

Without these impacts EPS growth would be in the range of 11% to 14%.

Finally, we anticipate adjusted cash flow from operations to reach approximately $1 2 billion.

It continues to support our strategic priorities across the business with Capex expected to be about $250 million.

There are no changes to our capital allocation priorities, we're focused on investing in our organic business, while continuously evaluating opportunities to optimize our brand portfolio.

We remain committed to a strong dividend and we will opportunistically deploy share repurchases to return excess cash to shareholders.

I want to wrap up our fiscal 'twenty three outlook with a few words on the first quarter given theres some unique impacts from the current environment.

For Q1, we anticipate mid single digit revenue growth, reflecting the most challenging prior year compare in China.

These headwinds along with the nonoperating impacts I mentioned earlier will also affect our operating profit and earnings for the quarter and we expect EPS to be in the range of 10 to 15 minutes.

By region in Q1, we expect to see growth in both the Americas and <unk>.

In EMEA, while Asia Pacific will be down.

Specific to Asia Pacific our performance outside of greater China remains resilient. However, the environment in China continues to be challenging 12% of our stores were closed at the end of Q4 and about 20% are currently closed and we're not anticipating that they will reopen before early June and will affect the majority of the quarter digital traffic also continues to be impacted.

As a result, we expect our business in China to be down approximately 35% in the first quarter with continued growth at the north face not enough to offset declines anticipated across most of our portfolio.

Beyond Q1, we expect a gradual recovery in China, reflecting an improving consumer environment as well as easier compares in half two with the market expected to generate growth for the year as a whole.

We remain confident in the regions longer term growth opportunity.

Looking beyond the first quarter, we are confident in acceleration throughout the remainder of the year is well supported driven by strong fall holiday order books across brands, improving momentum advance and diminished headwind from China.

Having set the stage for the fiscal 'twenty three outlook I'll now spend a few moments on our long range plan targets.

As we told you in January we're committed to delivering the long term algorithm for VF.

Our performance in fiscal 'twenty, two and guidance for fiscal 'twenty. Three clearly shows we are largely delivering on our commitment to high single digit revenue growth and low double digit operating earnings growth. Despite underperformance in our vans business headwinds through the supply chain and finally, new and pronounced market challenges in one of our key growth markets, China as well as macro.

Hence leading to a significant increase in inflation globally.

Our ability to overcome the significant headwind is truly a testament to the power of the family of brands, we have at VF and our action oriented and execution focused teams.

In summary, we're extremely proud of the work that has been done during fiscal 'twenty two to deliver against our strategy and generate results exceeding our original guidance.

Despite a macro environment that remains volatile and challenged in the near term over the longer term our brands are well positioned to continue to benefit from favorable consumer tailwind in our teams.

We're confident in the future and are well positioned to continue to drive sustainable profitable growth.

We'll now open the line and take your questions.

Thank you.

And ladies and gentlemen at this time, we will conduct a question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate that your line is in the question queue you.

You May press the Star key followed by the number two if you would like to remove your question from the queue.

For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

Once again to ask a question press star one on your telephone keypad.

We'll pause for a moment, while we poll for questions.

Our first question comes from now wrong Vasily, Let's go with BNP Paribas. Please state your question.

Good afternoon, and thank you very much for taking my question.

I wanted to follow up on the revenue guidance of at least 7% on a constant currency basis and I. Appreciate all the color that you've provided on this extended call.

Hi.

With regards to 7%.

I think you mentioned that youre going to take some pricing just curious to know what that is versus the volume gains. This year and then on the flip side.

Are you anticipating any promotional activity you are starting to see some retailers report elevated inventory numbers and I'd just like to get some color on what youre seeing out there with your retail partners from an inventory perspective. Thank you.

You got it nice to nice to talk to you.

As it relates to the growth and the kind of the 7% and how price impacts that I think certainly we've taken we've taken price increases across.

The.

The business and really across brands and across geographies.

I'll remind you that about half of our businesses is.

As carryover across across the globe and the other half is sort of made for maybe for new and each season, and you think about that carryover business kind of like for like.

We've got kind of mid single digit price increases.

It looks a little bit different sort of through the year.

We began to take some price increase in spring 'twenty, two I'll call it more like low single digits and that moves sequentially.

Sequentially through the year and default mid mid single digits and in some cases, a little bit higher than that as we move towards the back half of the year. So overall when you net through all of that and look at the overall growth that we're expecting it's probably half to maybe just a little bit more than half.

It's coming from price and the rest is coming from volume.

As it relates to what we're seeing in terms of promotional environment, we haven't seen.

A significant change or shift at this stage our businesses are really healthy in fact, our inventory levels across.

Across most of our key partners.

If anything continue to run a little bit longer than we would like in the U S and in Europe in particular in the outdoor segment, where we've seen.

Sequentially strong performance, obviously, we highlighted the north face today, a lot and that's been a real highlight for us. The timberland is the same case.

Altra, our ultra brand, our smart Wo brand, we've got areas, where we'd like to have a little bit more inventory, but overall when we look across our key accounts, we're generally well positioned and we will watch that really closely as you can imagine as we move out of the spring season, you really get geared up for back to school, but right now we feel good about where we are and the visibility that we have.

This gives us quite a bit of confidence.

Matt Thats very very helpful. And then a question for Stephen for Kevin Kevin Great to have you on the call.

With regards to Vance I appreciate all the color you provided.

We can think about that mid single digit growth.

Maybe potentially give us some guardrails I think you gave us some guardrails for <unk> in terms of total company performance, but how do we think about the shape of advanced performance into maybe first half second half and how do we think about.

DTC versus wholesale dynamics for <unk> for the year.

Yeah, maybe let me let me, let me shape the numbers here, a little bit and then I'll turn it over to Kevin to really talk about what he's doing to drive that we're going to see we're going to see in Q1.

Cause of the significant kind of headwind that we're facing in China. In particular, we're going to see van is going to be about flat in Q1, and then sequentially improving from there as you think about a couple of things.

One just kind of the headwinds easing a little bit as we think things will reopen in China.

And we think we're well positioned there but also the compares in the back half of the year in the Asia region.

Get exceedingly.

Different and will benefit us.

And we're continuing to see sequential improvement in kind of a brick and mortar business. As you think about traffic. There. We're happy with how that is progressing that will continue to improve as we move through the year and then obviously the work that Kevin and the team have begun we expect to see some benefit of those of those things.

Really across the business as we move into the back half of the year.

Yes, Laura and thank you for asking the question I would just add that.

That said, China definitely has been an impact on us that's a business that was roughly high teens of our overall global business and it's down more towards the mid teens now.

This last year due to the challenges in the market.

As I said in my in my prepared remarks, DTC is going to be a heavy focus of mine, it's 55% of the business, we stood up our new digital platform.

And to your point on promotional activity.

We have really good high quality sales in our North American stores in particular, where we're selling 90% of our product at full price.

So really not super concerned what we do need to chase overall is traffic and Thats, primarily a brand issue as I mentioned in my remarks that I think our marketing campaigns and some of the things we're doing around pinnacle will help us regain some traction there.

And it's going to take a little bit of time.

On some of those bigger issues like product.

Oh.

Great. Thank you very much all of them.

Yes, Yes, Hello, Ron I was just going to add I realize I missed one of your question you asked about kind of channel we will see inside that mid single digit number we will see direct to consumer growing a little bit faster.

Wholesale a little bit slower in terms of kind of how to think about that.

Great. Thank you very much.

Thank you Ron.

Our next question comes from Michael Binetti with Credit Suisse. Please state your question.

Hey, guys. Thanks for all the extended detail here, it's great to hear from everybody.

I guess, let's talk about your confidence behind the sustainability of north face on the back of the strong growth last year and some of the key drivers ahead, it's pretty remarkable that the guidance for low double digits above the long term algo.

Eight to nine and.

And Thats with.

Very messy situation in China here, although I do think I heard you right that you said, China would actually grow for north face despite the negative 35.

Growth rates of the overall business in China in first quarter, So I guess maybe.

Maybe just help us with some of the drivers there and is this is this a new algorithm for north face.

Sure maybe I'll take that one Michael was safe.

I think probably best to acknowledge there is an external and internal component.

No. It was really that the outdoor space. The market itself has been fairly buoyant. The last couple of years, that's been pretty well documented but we think in particular has really benefited the north face because of our business model. So we tend to talk internally about our own mountain and our off mountain and.

Both of those categories is extremely important to us, but the on mountain is the performance and.

The off mountain as more of the outdoor inspired.

And we've put a lot of time into constructing a business model that would really allow us to do justice to the categories within both of those particular diamonds.

And there really aren't that many outdoor companies they can straddle between outdoor inspired and true top of the mountain performance. So we think that one of the reasons that we're doing so well at the moment is just exactly that.

<unk> always had the legitimacy in terms of at least an expeditions, but we've also crossed over into street, we're probably more than any other outdoor brand.

That's the that's the external bit if you like the internal bad is a little bit what we talked about in the presentation in my prepared remarks, it's really the broad based.

So we're seeing right now if we get into the detail of three geographies three China and all of our product categories are actually contributing to the success that we're seeing right now I mean, there's a couple of.

Big categories that are really leading the charge in our AD awareness Snowsports category. This year was up by nearly 75% logo, we're just shy of 50%.

But we don't have a single category that grew less than mid teens.

So we're really seeing it across the board and I would point back to something that Steve said actually if I go back 18 months, maybe two years when we really began to look at our three year plan in earnest and we constructed this on mountaineer Mountain model, we're really focused on four things.

Really the brand so the positioning of the brand and making sure that everybody is really clear about what the brand stands for and particularly as outdoor heritage.

Secondly, the product pipeline that we've built for those of you that my background actually came up through product, so probably not that much of a surprise that we doubled down on that and made sure that the the.

The pipeline was turbocharged.

Third place was really the marketplace management. So we haven't gone into a lot of detail about that but it did mentioned that we've developed some segmentation plans really allowed us to design the right product for the right consumer in the right channel and we got pretty disciplined nicely about what product goes into what channel and we've got a very clean.

Marketplace at the moment with all of our consumers reacting well to the product that we've specifically targeted to them.

The fourth thing is really people and it's not something that the consumer is going to see but we haven't done a lot of work in terms of our internal culture and our talent pipeline. So I'm penny privilege that I have got a very strong executive team with a lot of veterans that really understand the brand. So yes, all of those things just combined to give us.

A lot of confidence in within in our order book.

Yes, Michael on your question on.

On the algorithm I'll just.

We delivered on our commitments at the VF level, reflecting kind of this broad based growth across our family of brands, which by the way. We think is a competitive advantage.

And we're confident that we'll deliver on our targets and leveraging this family of brands and we're poised to deliver strong sustainable and profitable growth.

I think the performance we've shown in 'twenty two our guidance in 'twenty three.

I said in my prepared comments and it shows our commitment to delivery.

It certainly looks a little different than where we were but we are delivering and we are committed to do doing that and it's really one of the benefits of our enterprise strategy as it enables us to.

To really be agile across the portfolio of brands and allows us to drive consistent sustainable growth and we look forward in September to provide you. Some more details in terms of individual brands contribution to the long term outlook.

Michael can I sneak one more good.

One more thing on the sustainability of this growth.

As Steve is as I said.

Could not thank him more.

The work that he's done, but the foundation that he is really stabilized and strengthened.

Perfect now for Nicole who will join US early next month.

The industry experience that she brings.

And not just understanding branded product, but all the different go to market opportunities and the consumer engagement strategies, it's really from.

From a sustainability standpoint, this is like a mile relay EBIT run the first couple of legs and now he's handing off.

The baton to a very strong leader that can continue to build on what he is he set motion and expand the brand and its reach.

Through her her market understanding.

Okay. Thanks, a lot for all the detail follow up after the call.

Our next question comes from Camilo Leon with BTG. Please state your question.

Hi, and good afternoon, everyone.

I have a couple of questions I guess first you talked about a strong order book, particularly in north face.

And pretty good confidence in the discussions that you've had with your wholesale partners I'm curious to know if.

The discussions with your wholesale partners, whether it's in North America or Europe .

<unk> has changed from a 90 day ago period.

And if it has how do we have confidence that it won't change further or is this kind of evolving landscape with consumer pressures inflationary pressures.

Person is likely to persist.

Yeah.

Hey, Camilo, maybe I'll take that one first Steve Maury I can answer that one very simply it really hasnt changed.

Many.

I've read the same reports that view with regard to other industries and other sectors of the market, but I can honestly say that the top to top meetings that we've been having with all of our key accounts in the last eight.

To 12 weeks.

<unk> been very positive and as I think we kept we said earlier, we've got a pretty clean inventory position as well. So we don't see any promotional activity. This out of the ordinary in fact, I would say, it's a cleaner marketplace than we've seen in a long long time, particularly for the north face Brian .

So we really don't have that anxiety right now.

And Camilla.

Yes, Kevin you want to go ahead and talk about vans and all I can talk a little bit more broadly across some of the other brands.

I was just going to jump in as welcoming alone. So good question and I think what we see is the fact that we've got.

Different types of distribution channels right from Ssi accounts to lifestyle accounts to action sports accounts and I think overall, we don't see a major change there we continue to work with them to reshape their business as needed and we work forward on bringing new product to market. So I haven't seen a.

A big change from 90 days ago I believe.

Go out there at.

At this point, but I've certainly read the same reports that Steve Murray referenced as well so we feel good overall about our wholesale partner status today.

And Camilo from a timberland dickies and.

Our European business.

Much the same.

We come into this period with very clean inventories and in the case of a timberland have under supplied market demand.

Very very strong.

Opportunity to continue the momentum out of this year into next year that.

It doesn't mean, we're our heads in the sand.

But the partners that we have four for each of these brands.

The thought that's gone into the forward order book the flow of that product.

Now I would kind of emphasize the partnerships we have in Europe .

With the digital tightened.

These are really strong key account relationships that are able to model the <unk>.

Assortment in the flow based on what we've seen the last couple of years and we've not seen a change.

But are you now.

We are obviously sensitive. These are these are very uncertain times, but the strength of our brands. The broad based success that we've seen in the clean inventories that we see across our key wholesale partners and our own our own channels.

Is what gives us confidence to put the guide out that we are at this point.

That's great Dan and thank you for all the color it's greatly appreciated, especially in these times, Matt if I could ask you just on the gross margin outlook.

Clearly, China in vans or choose your higher growth.

Contributors. So if you could provide some some context and shape around how the gross margins should evolve through the year clearly, it's going to accelerate but if you could just maybe articulate the rate of contraction I would imagine we would expect in Q1 and how that should progress through the year.

Would be very helpful.

Yes, yes, thanks for that question Camilo.

Youre right Q1 is going to be a little bit tougher from a gross margin standpoint, I mean, the mix is going to be impacted just by the nature of kind of kind of where the business is going to come from you think about China, you think about <unk> being a little bit lower than the overall, so certainly theres going to be a mixed headwind. The other thing that we're going to face in the first quarter is really a.

Ah compare from a freight standpoint, where last year in Q1, we were starting to see some inflationary impacts in kind of underlying freight rates nowhere near the degree that we saw as we move through the year and by the way. We spent very little kind of airfreight last Q1, because we hadn't yet encountered some of the challenges that we all faced.

It's Vietnam in other parts of that.

Sourcing footprint in Asia shut down through the summer so the airfreight spend which was dramatic last year really was a non event in Q1, and we're going to see some of that in Q1. This year. So we would expect gross margins to be down as much as a couple of hundred basis points in Q1, as we look through the year, though we're confident in our kind of.

<unk> 50 basis point increase I think when you think about tailwind.

We expect the promotional environment is going to kind of generally remained clean for us and I say this over and over but our business is clean we don't we don't drive our business on promotion historically and so.

When it got a lot better for some than it had been historically, we didnt see necessarily a big change because we've always run clean and we expect that to continue.

We're going to see inflationary pressures on product costs through the year that that accelerates a little bit as we go through the year from a from an fob standpoint.

And obviously freight is there as well kind of mid single digits. When you look across the year our pricing.

<unk>.

At least offset that maybe even slightly favorable.

Current look at that.

We're going to we're going to continue to spin at higher levels of expedited freight I talked about kind of $160 million or so kind of increase there.

We're going to spend higher than we have historically, but we expect some moderation in that number and it won't be as dramatic and so there is some benefit from that.

The other thing I would say is base.

Based on the overall mix for the year.

Not assuming any kind of mix benefit for the year, we expect it'll be about neutral.

So, let's give you hopefully enough there that sort of.

Think about how to model things from a margin standpoint, and understand the assumptions, we're making but overall, we feel good about how that looks across the year, but for Q1 is going to be certainly tougher optically.

Great color. Thank you for that and good luck.

Thanks Camilla.

Our next question comes from Matthew Boss with Jpmorgan. Please go ahead.

Great. Thanks.

Steve maybe at a regional level are you seeing any signs of softening in the U S. Consumer backdrop today, maybe what are you seeing today in Europe , if we think relative to the domestic backdrop and then just in China from an underlying perspective, some companies have talked about underlying indications of demand despite the restrictions.

Or kind of looking through the restrictions just curious what youre seeing in the U S Europe and China today.

Yes.

Fair question, Matt So let me start with Europe .

Certainly.

<unk>.

The war in crisis in Ukraine.

Weighs on consumers' mind in Europe , but we've not seen that impact current demand and sell through.

Inflationary environment.

Really coming from our being exacerbated by the by the conflict.

As well has not yet impacted <unk>.

Demand or sell through but it's something that we're watching very closely and.

Our concern both personally for those impacted but what the impact could be on the business. So European.

Business has been one of our strongest.

Forming regions growing double digits year after year for.

The last five six years, and we expect that same kind of performance to that strong platform.

That enabled our brands to connect with those consumers.

In the U S. You heard Steve say that he has not seen any change.

Two.

Conversations with wholesale partners.

And that's true if there will be an impact near term it would be on those more.

Lower income consumers, but as we've reshaped our portfolio very little bit of our business goes to that particular consumer through those channels.

The one business fit.

It does have a good good position there would be dickies and the demand of our <unk> products continues to be quite strong.

Again, we will watch it closely to be sensitive to and work with our partners, but we've not seen a dramatic change there.

<unk> is where we have for all of the things that each one of us have read in here.

Others talk about Covid.

Impacts the rolling shutdowns whats the impact that's had on consumer confidence and sentiment.

Is really the large driver.

Of that of that kind of reshaping of consumer demand.

I think we've shaped well on how we see the year progressing we expect the openings that are beginning to continue to go on through June .

If there is any kind of similarity to the return that we saw in the first shutdown at the beginning of the pandemic.

China, specifically the consumers are very quick back into demand back into travel and.

That is to be the case, and we've modeled that to be moderately true and accelerating through the year.

We expect.

Our business to perform well.

And I.

Make a lot of a lot of understanding coming through the to the success of the north face.

And being able to apply that playbook to our other brands specifically as we enter the second half.

Great and then Matt as a follow up on operating margins multiyear what do you see as the right level of profitability for the portfolio or maybe what the timeline might be extended do you think anything has actually changed versus your mid teens, plus Beaver Creek plant.

Hi, Matt Yeah, No I don't short answer no I don't think anything has changed I think youre right in terms of just what's the what's the runway there and is certainly where we are.

The different place coming through Covid, and all those kinds of things, but what we're proud of is the continued operating margin expansion that we've seen despite a lot of noise and kind of a different kind of mixed profile. Even here in the near term we are delivering on expanding operating margin.

I have to take a minute to really I.

I think point you too.

So some of the materials in the release you look at the segment profitability across our segments and you think about the improvement in profitability. We are seeing in the outdoor and work segment, that's a powerful and really important to us.

And that really sets us up well, we've seen a little bit of erosion and are really highly profitable active segment.

Even some of the challenges that we faced.

And Vance, but that's going to come back and modestly move up over time, and we're much better positioned to drive overall collective VF operating margin expansion was helped with a healthier overall portfolio. So that mid teens plus kind of number absolutely. That's still what we expect and look forward to talking a little bit more about kind of the horizon for that.

And how we see that playing out in a few months time in September .

Great color best of luck.

Our next question comes from Jim Duffy with Stifel. Please go ahead.

Thank you good afternoon, guys, Hey, I wanted to focus on timberland for a moment.

With some momentum this is a brand that could make a nice contribution to both growth and margin. It looks like youre seeing balanced strength topline where did timberland margin stands right now and what's the opportunity with the timberland margin and then related to that I suppose is how you're pricing for inflation specific to the timberland brand.

So let me let me start with a couple of data points, there hopefully get to your questions. There Jim and then I'll pass you to Steve to talk about the great work that's happening there.

Profitability wise today kind of kind of low double digits is where we stand.

And.

With an expectation that that will continue to move up over time.

And then Jim.

I appreciate your question Kimberly This is an exciting brand in the portfolio in the last couple of years.

The team has taken the opportunity to really double down on some of the core elements of the brand management model, we use first with the consumer and really understanding.

The historical strength of the brand and the consumer that it speaks to and they've really taken that to weave.

Our positioning the tankard in both work and outdoor and and really bringing that together and understanding what that consumer need is to drive the product creation strategy.

Focusing on icons for sure both B.

Traditional boots, but the outdoor segment.

It really using that to inform their innovation platforms.

Green stride some of the exciting things coming through that particular part of the of the platform specifically.

Focusing on women's and the race city, we had a boot in the fall that now is a boat shoe in the spring and really being able to play that.

That eco innovation story.

With enhanced styling and and.

Comfort.

Really nice.

Connection and sell through there.

We've also seen.

The Timberlake you heard me talk about the eco innovation platform, there and that's really taking that historical commitment of timberland to sustainability and in looking at our circularity model.

All the way from design to how the product is made and ultimately managed at the end of life.

Clearly understanding the value that it has to the consumer.

But I think what's really driving the success and the inflection that you see.

Here with Timberland brand is the integrated marketplace management and choices that the team has made.

Across the globe, but probably most importantly here in the North American marketplace, and really segmenting the product.

And placing the very.

Assortments in.

In each of their key account partners and in managing that.

The flow.

Mid to the sell through on this is the brand that really has been most impacted by supply and the demand has absolutely outstripped our ability to to put enough product in front of consumers and that energy is what's carrying into.

Fiscal 'twenty three and the inflection that we're very excited about and have been building for and it's really a testament to the to the energized new team. We have there from are our ultimate leader, but also the product and marketing organization is really bringing forward all of those core elements. If it's made Kimberly.

So so powerful over the years, you see that coming together in fiscal 'twenty three will be a year of.

We think significant inflection.

Yes, Jim I realize you asked about I realize you asked about pricing and inflation.

Make sure I don't Miss that as well.

Yes, it's comparable I think what we've said across the portfolio. If anything this brand seeing a slightly higher than average the VF average kind of product cost increase just based on kind of the nature of the product and the sourcing footprint.

As we put all those pieces together, but we're going to see we're going to see price increases.

Somewhat meaningful.

Across the line as we move towards fall, but the brand couldnt be better positioned in terms of its ability to drive that given given how healthy. It is today and everything that Steve just described about kind of the work that's happened across the product and marketing aspect of that business.

Thank you guys.

Thank you Jim.

Our next question comes from Brooke Roach with Goldman Sachs. Please go ahead.

Good afternoon, and thank you so much for taking our question I'd like to ask about Supreme You mentioned in your prepared comments that you were seeing some supply chain disruption that was impacting your ability to outperform your plan in the quarter can you talk about a little more detail on your outlook for the brand for this year.

Yeah, Hey, Brooks nice to talk to you and let me, let me start there and if Steve.

Steve certainly jump in if I Miss anything.

Yes, the supply chain.

I would say overall, probably most impactful for this brand and I think one thing not just the quarter really really through the year I think we've talked about this over the last couple of quarters you know.

It's really important that product the availability sequencing and sort of duration of how long product is out there through the year. It's really important to this brand has a unique business model is dependent on ongoing newness, which by the way I think is a competitive advantage.

It is really vital that the intended product and assortment are at the right locations at the right time and that was really difficult to accomplish last year. This brand is.

Fairly heavily penetrated in Vietnam.

And as we started to see some of those challenges the ability to catch up was pretty difficult you have to realize this is a brand that our model is really about working really close to the consumer making decisions as late as we possibly can.

As it relates to how we think about flow and assortment and the product itself really really important.

To kind of the competitive advantage of this brand and so when things start to fall behind you don't have as much room to catch up and so we just didn't have enough inventory really all throughout the fall and even into the spring season in terms of how we would the amount of inventory the ability to flow it in an optimized way and so we're.

We're really happy with the overall kind of kind of where the brand sits in the integration that's occurred to date and what we see moving forward, but clearly this business was disrupted in a pretty meaningful way through.

Throughout fiscal 'twenty two.

Maybe I would add.

This has been a year of really significant learning for both Supreme and and our BFS supply chain and understanding the Supreme model.

Every week this brand puts a new assortment in front of its consumer and if that flow is interrupted and they have to rebalance and reset.

They start to get onto their onto the heel of their foot versus the toe and we started the year.

With 30% less inventory or the fall season, and we do historically, so we started from a position of a little bit less strength and they're used to and they've reacted the best they could I think as you look forward.

What's exciting for us.

We've gained a deeper understanding we know where we can help.

To support but I think the Supreme team also is understanding the needs that they have the.

The hiring of a new creative director to partner with that team and.

Further elevate both the product and the experience of the brand with <unk> is very exciting to the talented individual.

That has a deep understanding of this consumer.

And in this particular channel.

We're able to now impacts stores, we're going to be able to remodel relocate some stores this year.

We've got some new Asia store opportunities coming available.

As we begin to look at that international expansion, which was part of the acquisition thesis.

And tourism is coming back.

And.

This brand has a lot of.

Consumers that don't live in those markets, where the stores reside in the tourism impact.

And opening up of markets, where consumers now can come back into the stores.

Engage with the brand lineup for the product.

Again, it gives us another point of.

I think confidence of what this brand is capable of and we're in we're seeing that here as we open as we move through the spring season.

I know, we don't talk a lot about this brand. It's it's certainly one that we're very proud of them theres elements of the model that they are pretty proprietary that makes them unique.

But I think the things that we've talked to you about today or are important proof points in parts of the strategy that will help this brand move into fiscal 'twenty three in a stronger position.

Great and then if I could just ask one quick follow up what what is marketing spend as a percent of sales that's embedded in the outlook for the year and how does that compare to your prior year.

How are you thinking about prioritizing those marketing dollars across brands for the year given how many.

You have across the portfolio. Thank you.

Yes, Thanks, Brooks, so we're spending a little over 7% of sales.

It's planned to actually I think maybe a tick or so versus where we've been but call. It in a comparable range. So kind of growing with revenue is the expectation I'm not going get into the details in terms of where it's going to grow by brand, but you can rest assured we look really closely at.

Things like marketing return on investment, we understand product stories and kind of.

Readiness from a brand standpoint in terms of.

Marketing distribution.

And.

And Billy to lean into those things.

That's kind of an ongoing evergreen process across our organization to ensure that the marketing dollars are providing the returns that we're looking for.

Thanks, So much I'll pass it on.

Thank you Brook.

Our next question comes from Bob <unk> with Guggenheim. Please state your question.

Hey.

<unk>.

Good afternoon loved to hear a little bit more you have I think $2 5 billion on your share repurchase given where the stock is just love to hear your thoughts on that in FY 'twenty three and then I guess a similar thing is just the M&A opportunities out there that youre seeing when you think about capital allocation now that you're just maybe.

Give us an update on how you're really thinking about it at this point. Thanks.

Yeah. Thanks, Bob I guess I guess, one thing I would mention is.

As part of the prepared comments, we've got a tax deposit we're dealing with so we're going to navigate that.

A little bit of something that we've got to manage from a.

Call and overall leverage and liquidity perspective.

So we're going to be we're going to be thoughtful there.

Clearly, we've we've shown that when it makes sense and we've got excess cash will be opportunistic and buy back shares we did that during the back half of this year, we'll continue to evaluate those opportunities as it relates to as it relates to M&A.

Yes.

We've obviously shown I think have demonstrated.

Our intent to continually optimize our portfolio.

It's an evergreen process for us both in terms of looking at the marketplace in areas, where we think we have where we're maybe underpenetrated or parts of the Tam that we're really focused on outdoor active athletic work and opportunities to bring assets into the portfolio that we think makes sense and and and add two and.

Really accelerate our ability to drive long term growth both top and bottom line at the same time, we're always evaluating the portfolio that we have to ensure that it makes sense and we've demonstrated the fact that we will do both.

Acquisitions, and divestitures and that's something that we'll continue to do.

Above the dividend remains very important as well.

It's an important part of the thesis.

All three.

We look to really move those levers appropriately.

But not.

Important not to forget the dividend as well.

Thank you.

Thanks, Bob.

Our next question comes from Paul <unk> with Citi. Please state your question.

Thanks, It's Tracy Kogan filling in for Paul I had two questions. The first is.

A follow up on your gross margin guidance for this year I was wondering by brand if there were any meaningful different cadence.

That's 50 basis points overall.

Then secondly, what's your view on the right fleet size for each of your brands and how many store openings approximately are you expecting this year. Thanks.

Yes so.

Yes.

No significant variances there I did it.

In terms of the gross margin.

Kind of kind of expansion for the year.

We're going to we're not going to see exactly perfect.

At the average in terms of product cost increases or even price increases. So there will be some some variation and clearly kind of the benefit of lower expedited freight that won't be exactly the same across each brand.

Probably.

Parts of our business, where the demand continues to be really really strong we will probably see a little bit more air freight and some cases, but but by and large it's you shouldn't expect.

Significant differences by brand as it relates to.

As it relates to the fleet I don't know about exactly.

Whether we've ever really talked about that what we really talk about is the integrated marketplace management.

And the roll off.

Our own stores the rollover of our.

Our digital business in terms of the overall ecosystem by our direct to consumer the importance of key strategic accounts that we have across the world in all three regions.

As part of that obviously is kind of the digital Titan partnerships that we have so we believe that brick and mortar is an important aspect to that we will continue to have brick and mortar.

An important part of our overall.

Approach, we are adding stores, probably the net adds are less today than they were a few years ago.

And we continue to to ensure that all of our stores makes sense from a.

Both from a strategic perspective, right locations right size right profit profile and contribution and supporting that overall ecosystem. So we're probably closing a few more stores on the fringe than we have historically and.

And we're really focused on making sure we got the right stores in the right place and in some cases, it's sort of fewer fewer bigger better.

Maybe a way to think about it.

Great. Thanks very much.

Okay.

Thank you. Our next question comes from John Kernan with Cowen. Please state your question.

And our next Christian Schubert.

John most of my questions have been answered yet.

Wanted to touch on your guidance for adjusted cash flow from operations in fiscal 'twenty, three I think you're guiding to about 1 billion Q I mean that implies a fair acceleration over fiscal 'twenty two I wonder if you could provide a little bit of color on the drivers of that and particularly as it relates to what you see opportunity wise for your inventory turns.

Yeah. Good question various state Youre all over it does imply a bit of an acceleration, but it doesn't imply I think anything that's all that abnormal from our historical this year actually it's been a little bit lower because of really how we managed last year.

We actually reduced our working capital balance at the end of last year pretty dramatically. If you think about where we positioned inventory coming out of last year as we were managing very very cautiously through the pandemic.

<unk> assumed.

Kind of kind of that benefit in terms of not having to kind of build that inventory that we did this year at the same kind of kind of thing applies to accounts receivable. So this year's numbers I would say, it's more normalized in fiscal 'twenty three how we've guided fiscal 'twenty two.

It was a little bit lower from a working capital standpoint, so hopefully that gives you the color you're looking for.

Thank you.

And ladies and gentlemen at this time I'll turn the floor back to Steve rental for closing remarks.

Okay. Thank you everybody for taking the time to join US This afternoon.

We delivered solid results in what was a very challenging and highly dynamic environment.

And we leveraged our extensive scale relationships our talented people in our world class brands to deliver those results.

We generated broad based profitable growth with five brands achieving record sales.

And our family of brands is strong.

<unk> and its gaining momentum and is poised to deliver strong sustainable and profitable growth in fiscal 'twenty three and beyond.

I am very confident that we have the right leaders in place across our business with a deep and broad bench of talent.

We remain committed to investing for growth.

In order to advance our strategy and importantly to deliver superior returns to our shareholders. So thank you for your time today.

Thank you. This concludes today's conference all parties may disconnect have a good day.