Q3 2024 VF Corp Earnings Call
Operator: Greetings and welcome to the VF Corporation third quarter 2024 earnings call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the V F Corporation third quarter 'twenty 'twenty four earnings call.
At this time all participants are in a listen only mode.
A brief question and answer session will follow the formal presentation.
Operator: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allegra Perry, Vice President of Investor Relations. Thank you. You may begin.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Now my pleasure to introduce your host Allegra Perry Vice President of Investor Relations.
Allegra Perry: Thank you you may begin good afternoon, and welcome to VF Corporation third quarter fiscal 2020 for conference call participants on today's call 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. These uncertainties are detailed in documents filed.
Allegra Perry: Good afternoon, and welcome to VF Corporation's third quarter Fiscal 2024 Conference Call. Participants on today's call 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. These uncertainties are detailed in documents filed regularly with the SEC.
Allegra Perry: Regularly with the SEC.
Allegra Perry: 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 results of our business. You might also hear us refer to reported amounts, which are in accordance with U.S. GAAP. Reconciliations of Gap 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. Joining me on the call will be VF President and Chief Executive Officer Bracken Darrell, and EVP and Chief Financial Officer Matt Puckett. Following our prepared remarks, we'll open the call for questions. I'll now hand over to Bracken.
Allegra Perry: 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 I believe numbers in our discussion because we believe they more accurately represent the true operational performance and underlying results of our business you.
Allegra Perry: 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.
Joining me on the call will be Vf's, President and Chief Executive Officer, Bracken, Darrell and EVP and Chief Financial Officer, Matt bucket.
Allegra Perry: Following our prepared remarks, we'll open the call for questions I'll now hand over to Bracken.
Bracken P. Darrell: Hello, everyone. Thanks for joining us. It's nice to be here with you for my second earnings call with VF six months in. Before I get started, I'd like to let you know about an important development within my leadership team. Matt Puckett, who's sitting right next to me, will be stepping down as our CFO later this year.
Bracken: Hello, everyone. Thanks for joining us it's nice to be here with you for my second earnings call would be six months out.
Speaker Change: Before I get started I'd like to let you know.
Speaker Change: Development within my leadership team.
Bracken: Pocket, you're sitting right next to me will be stepping down as our CFO later this year.
Bracken P. Darrell: He and I have agreed that it's time to make a change as part of the overall transformation efforts we're introducing across the company. He will stay on until we appoint a successor to help ensure a smooth transition. I want to thank Matt.
Pocket: I agree that it's time to make a change as part of the overall transformation efforts, we're introducing across the company.
Pocket: That will stay on until we appoint a successor to help ensure a smooth transition.
Pocket: That his tenure at VF spans almost 23 years with roles across the organization around the world.
Bracken P. Darrell: His tenure at VF spans almost 23 years, with roles across the organization and around the world. Since my arrival last July, Matt has been a valuable member of the team and an important player in helping to advance our transformation agenda. I really appreciate his contributions and his continued service to VF during the transition. He's also just a great person, and we'll miss him. But not just yet; he'll be here for a while.
Pocket: Since my arrival last July Matt has been a valuable member of the team and an important player in helping to advance our transformation agenda.
Pocket: Really appreciate his contributions and his continued service to be out during the transition.
Speaker Change: Also just a great person and we will miss him but.
Speaker Change: Not just yet you'll be here for a while.
Bracken P. Darrell: Moving back to the quarter, or back to today's order of business. First, I'll review the quarter, then I'll update you on our four near-term priorities we described in last quarter's call, which we call re-invent. I'll then talk briefly about our newly announced Strategic Portfolio Review, and then I'll hand it over to Matt to cover the financials a little more deeply. Q3 was a particularly disappointing quarter, with total revenue down 17% compared to down just 4% last quarter, where the results did benefit from that timing shift in delivery. Results were challenged across our brands, including the North Face and the rest of the outdoor brands. The big delta came down to five things. Number one, unseasonably warm weather most of the quarter. The average temperature is 3 to 4 degrees higher than average in the Northern Hemisphere.
Speaker Change: Moving back to the quarter or back to today's order of business first I'll review the quarter.
Speaker Change: Update you on our four near term priorities. We described in last quarter's call, which we call reinvest.
Speaker Change: I'll, then talk briefly about our newly announced strategic portfolio review.
And then I'll hand, it over to Matt to cover the financials, a little more deeply.
Speaker Change: Q3 was a particularly disappointing quarter with total revenue down 17% compared to just.
Matt: <unk>, 4% last quarter, where the results did benefit with exact timing shift in deliveries.
Matt: We also were challenged across our brands, including the north face in the rest of the outdoor brands.
Matt: The Big Delta came down to five things.
Matt: Number one unseasonably warm weather most of the quarter.
The average temperature was three to four degrees higher than average in the northern hemisphere.
Bracken P. Darrell: Number two, a difficult compare given the operational challenges we faced last year. As a reminder, last year we were late with deliveries, leading to revenues that would have been recorded in the second quarter coming in the third quarter. We corrected these operational issues this year, which led to a tougher compare. Number three, continued America's underperformance.
Matt: Number two a difficult compare given the operational challenges we faced last year.
Matt: And your last year, we were late with deliveries leading to revenues that would've been recorded in the second quarter coming in the third quarter.
Matt: We corrected these operational issues this year, which led to a tougher compare.
Matt: Number three continued Americas underperformance.
Matt: This was the last quarter operating without an America's regional platform and we expect these changes to result in improved Americas results overtime.
Bracken P. Darrell: This was the last quarter operating without an Americas Regional Platform, and we expect these changes to result in improved Americas results over time. Number four, we also made our results this quarter a little worse by cleaning up vans as we reset our channels. And finally, number five, there was some impact from the cyber incident as we closed the quarter. These are disappointing numbers across the board, and we're acting with urgency to improve performance so that we do not report another quarter like this. We expected a weaker quarter for the North Face, but results were worse than our expectations, impacted largely by the Americas region, while international performance remains strong. Of course, the weather was a factor, as temperatures were substantially warmer than normal throughout the quarter.
Matt: Number four we also made our results this quarter are little worse by cleaning up vans as we reset our channels.
Matt: And finally number five there was some impact in the cyber incident as we closed the quarter.
Matt: These are disappointing numbers across the board and we are acting with urgency to improve performance, but we did not report another quarter like this.
Matt: We expected a weaker quarter for the north face, but results were worse than our expectations impacted largely by the Americas region.
Matt: While international performance remains strong.
Matt: Of course, the weather was a factor as temperatures were substantially warmer than normal throughout the quarter of note in January the weather got cold and the north face returned to growth across all three regions.
Bracken P. Darrell: Of note, in January, the weather got cold, and the North Face returned to growth across all three regions. However, we believe our performance is strongly held back by the operating model that we're now transitioning away from. Let's talk a little bit about the Americas.
Matt: We believe our performance is strongly held back by the operating model that we're now transitioning away from.
Matt: Let's talk a little bit about the Americas.
Bracken P. Darrell: We now have our new commercial organization in America's platform in place and are confident this will translate to improved results for the brand and across the rest of our brand. Advanced, the decline looked like it did last quarter by the numbers, but underneath, there's a lot changing. I've been spending more than half my time with our team, reviewing strategies, new products, and marketing plans. Products and marketing are obviously every brand's foundation.
Matt: We now have our new commercial organization and Americans platform in place and are confident this will translate to improved results for the brand and across the rest of our brands.
Advanced the decline it looked like you did last quarter by the numbers.
Matt: Underneath there's a lot changing.
Matt: I've been spending more than half my time with our team reviewing strategies, new products and marketing plans.
Matt: <unk> marketing, obviously every brand's foundation.
Matt: And brand turnarounds have certain features three of them are a clear brand purpose tried plan that will eventually result in growth and marketing that we use them together.
Bracken P. Darrell: Brand Turnarounds have certain features. Three of them are a clear brand purpose, a Product Plan that will eventually result in growth, and marketing that weaves them together. If you look at the history of every great brand, a founder creates a trademark and launches products under it.
Matt: If you look at the history of every great brand founder creates a trademark and launches its products under it.
Bracken P. Darrell: But as truly strong brands move through time, ownership evolves and almost becomes shared. The best brands learn to share and pay respect to their most important customers, those who are the most influential. While customers don't create products in marketing campaigns, usually, they are the ones who drive the success through their ownership and advocacy. During the period from 2015 to 2020, the brand really took off. It got energized and accepted by new groups, thanks to cultural trend makers. Furthermore, more celebrities started to wear them. Moms bought them for their kids.
Matt: It's truly strong brands moved through time ownership evolves it almost becomes shared.
Matt: The best brands learned to share and pay respect to their most important customers those who are the most influential.
Matt: While customers don't create products and marketing campaigns, usually they are the ones who drive the success through their ownership and advocacy.
Matt: During the period from 2015 to 2020 the brand really took off you've got energize are accepted by new groups, thanks to cultural trend makers.
Matt: Our celebrity started to wear them moms brought in Boston for their kids, we actually took our eye off the core youth audience that had been the lifeblood advance.
Bracken P. Darrell: We actually took our eye off the core youth audience that had been the lifeblood of Vans. The brand had to evolve, but rather than continue to respect and serve the youth audience that had built the brand, we only fed the trend that grew it rapidly. We largely stopped marketing to the core youth and instead focused on everyone else. We extended our lineup to lower price points and value stores, and we offered more and more color waves of the same old things to pour more fuel into a fire built on a trend. But the trend fuel burned out 18 months ago.
Matt: The brand had to evolve, but rather to continue to respect and serve the youth audience that he built the brand will be fed the trend that rapidly.
Matt: It'll be largely withdrew marketing to the core used and instead focused on everyone else we.
Matt: We extended our lineup to lower price points value stores, and we offered more and more color ways at the same old things to pour more fuel into a fire built on a trend.
Matt: The trend fuel burned out 18 months ago, the trend moved on.
Bracken P. Darrell: The trend moved on. When a brand loses its way, the answer starts at its foundation, its purpose, and its target audience. So now, I'll whet your appetite with my opinion about where we are. We have created a package of a deeply rooted brand purpose, clear segmentation, an 18-month marketing plan, and a solid product roadmap. This package is in place.
With a brand lose this way the answer starts at its foundation is purpose and target audience.
Speaker Change: Now I'll, let your appetite with my opinion about where we are.
Speaker Change: We have created a package of a deeply rooted brand purpose clearer segmentation 18 months marketing plan.
Speaker Change: Solid product roadmap. This package is in place we haven't mapped back to growth for vans I'm not ready yet to commit to win the brand will return to growth, but it will.
Bracken P. Darrell: We have a roadmap back to growth for Vans. I'm not ready yet to commit to when the brand will return to growth, but it will. In the meantime, let me talk about a few dynamics we are starting to see emerge. First, we continue to see strong performance from newer things in the Vans product portfolio, which is becoming a larger share of our business. The new school, for example, is still small, but it's growing well, especially among young girls in the U.S. I'm not pointing that style out to suggest it's the turnaround shoe.
Speaker Change: In the meantime, let me talk about a few dynamics, we're starting to see emerge.
Speaker Change: First we continue to see a strong performance from newer things in advanced product portfolio, which are becoming a larger share of our business.
Speaker Change: New School for example, it's still small, but it's growing well, especially among young girls in the U S.
Speaker Change: Not pointed that style to suggest it's the turnaround shoe.
Bracken P. Darrell: There won't be a single one, as you will see. We will have a cascade of new products over the next several years, but I am encouraged by how this style is responding with the very cohort we've lost in recent years. We're resetting the marketplace in Q3 and Q4, changing our marketing, and beginning to launch relevant new products in the coming season. I'm energized by the progress at Vans, including with the search for a new brand president. There's more to come. Timberland also sagged under the weight of the warm, high-season weather, an underperformance in the Americas.
Speaker Change: Will it be a single one as you will see we will have a cascade of new products over the next several years, but I am encouraged by how this style is resonating with the very cohort we've lost over recent years.
Speaker Change: We're resetting the marketplace in Q3, and Q4, changing our marketing and beginning to launch relevant new products for the coming seasons.
Speaker Change: I'm energized by the progress advance, including with the search for a new brand President Theres more to come.
Speaker Change: Timberland also sagged under the weight of the warm high season weather and underperformance in the Americas.
Bracken P. Darrell: Importantly, our global DTC business was only down mid single digits in the quarter despite the weather. The important news this quarter was my announcement of Nina Flood as the new global brand president. She's the second strong internal VF leader I've promoted within my leadership team, the first being Martino, who runs a global commercial organization. Nita brings extensive experience across general management, brand marketing, and strategy with a 20-year career at VF spanning multiple leadership positions. I've been impressed by Nina since the first time I met her six months ago at Stadio.
Speaker Change: Importantly, our global DTC business was only down mid single digits in the quarter. Despite the weather.
Speaker Change: The important news this quarter was my announcement of Mena flood as a new global brand President.
Speaker Change: She is a second strong internal VF later leader I've promoted within my leadership team the first being Martino, who runs our global commercial organization.
Speaker Change: Neither brings extensive experience across general management brand marketing and strategy with a 20 year career at VF spanning multiple leadership positions I've been impressed by Nida, It's the first time better six months ago and <unk>.
Speaker Change: In early Q4, you might have seen the brand's Louis Vuitton Timberland collaboration created enormous buzz at Paris fashion week, and I am excited about the brands potential.
Bracken P. Darrell: In early Q4, you might have seen the brand's Louis Vuitton-Timberland collaboration create an enormous buzz at Paris Fashion Week. And I'm excited about the brand's potential. More to come on that in future calls. To round out our highlights, VF continues to be recognized for its sustainability leadership by MSCI, where, as of December 2023, we carry the top rating available for companies for the first time.
Speaker Change: More to come on that in future calls.
Speaker Change: To round out our highlights V. S continues to be recognized for our sustainability leadership by MSCI, where as of December 2023, we carry the top rating available for companies for the first time in fact, we are the highest ranked in our industry.
Bracken P. Darrell: In fact, we are the highest ranked in our industry. I'm immensely proud of our ongoing commitment to sustainability, and it shows what we're capable of in this business across all parts of it when focused and at its best. I'm keenly aware, however, that sustainability performance without company performance is not satisfying.
Speaker Change: I'm immensely proud of our ongoing commitment to sustainability and it shows where cable up in this business across all parts of it with focused invest it.
Speaker Change: I am keenly aware sustainability performance without company performance is not satisfying.
Speaker Change: To me, it's not just a good thing to do but it's an example of what we're capable of in every part of our business.
Bracken P. Darrell: To me, it's not just a good thing to do, but it's an example of what we're capable of in every part of our business. Now we have to work to get our company performance to match that. Now let me update you briefly on reInvent, which prioritizes aggressively four key areas we introduced last quarter, which are, first, fix the U.S., second, deliver the VANS turnaround, three, lower our cost base, and four, strengthen our balance sheet. As part of the recently established global commercial structure led by Martino, America's regional platform is taking shape. Every day, this platform improves, and changes have already resulted in giving management greater transparency on the business. It will take time to bring it up to the standard we have around the world.
Speaker Change: Now we have to work to get our company performance to match that.
Speaker Change: Now, let me update you briefly on reinvent, which prioritizes aggressively four key areas, we introduced last quarter, which are <unk>.
Speaker Change: Fix the U S second deliver the bands turnaround three lower our cost base and for strength of our balance sheet.
Speaker Change: As part of the recently established global commercial structure led by Martino, The Americas regional platform is taking shape.
Speaker Change: Every day this platform improves and changes have already resulted in giving management greater transparency on the business.
Speaker Change: And it will take time to bring it up to the standard we have around the world.
Speaker Change: In EMEA and APAC have consistently outperformed our U S business at Martino as important at the same key processes to the U S platform.
Bracken P. Darrell: EMEA and AIPAC have consistently outperformed our U.S. business, and Martino has imported the same key processes to the U.S. platform, including the areas of key account management, market execution, merchandise planning, and forecasting. The overall discipline of one approach has been sorely missed in the U.S.
Including the areas of key account management go to market execution, merchandize planning and forecasting.
Speaker Change: The overall disciplined of what approach has been sorely missed in the U S. Humira.
Bracken P. Darrell: The Americas team is expected to be fully in place and operational as we begin the next fiscal year. I discussed the van's turnaround already. I'll just reiterate a few things. Along with the work we are doing on brand purpose, product innovation, and marketing, we're resetting the Marketplace to accelerate our progress. This Marketplace cleanup will integrate with products and marketing spun from the same storylines, and that is a new approach relative to the past few years.
Speaker Change: The Americas team is expected to be fully in place and operational as we begin the next fiscal year.
Speaker Change: I'll discuss the vans turnaround already I'll, just reiterate a few things.
Speaker Change: Along with the work we were doing our brand purpose product innovation and marketing, we're resetting the marketplace to accelerate our progress now this marketplace cleanup will integrate with products and marketing spun from the same story lives and that was a new approach relative to the past few years.
Bracken P. Darrell: I'm excited about what's ahead. On costs, we're on track to deliver a $300 million fixed cost savings target, which is entirely within our control. This quarter, we began to simplify and right-size the company's structure, real estate, and other non-strategic areas. But I'll talk you through some of the numbers here.
I'm excited about what's ahead.
Speaker Change: On costs, we are on track to deliver the $300 million fixed cost savings target, which is entirely within our control.
Speaker Change: This quarter, we began to simplify and rightsize the company's structure real estate and others not strategic areas.
I'll talk you through some of the numbers here theres more to do but we're making very good progress.
Bracken P. Darrell: There's more to do, but we're making very good progress. Reducing debt and strengthening the balance sheet remains a top priority, and during the quarter, we benefited from the reduction in inventories and the recent reduction in dividends. We're already reducing the net debt substantially this quarter versus last year, and that's before we sell any assets. We've also identified non-core physical assets that will be monetized in the coming quarters. And we're implementing a plan to pay down our next two rounds of debt without refinancing.
Reducing debt strengthening the balance sheet remains a top priority and during the quarter, we benefited from the reduction of inventories and the recent reduction in the dividend.
Speaker Change: Already reduced the net debt substantially this quarter versus last year, and that's before we sell any assets.
Speaker Change: We've also identified non core physical assets, which will be monetized in the coming quarters, and we're activating a plan to pay down our next two rounds of debt without refinancing.
Bracken P. Darrell: As the next phase of our transformation plan, today we announce the strategic review of our brand portfolio in alignment with the board of directors. This is the next natural step in our turnaround plan as we continue to execute on re-invents. VF has a long history of growth and value creation through the evolution of our portfolio.
Speaker Change: That's the next phase of our transformation plan today, we announced a strategic review of our brand portfolio and alignment with the board of directors.
Speaker Change: This is the next natural step in our turnaround plan as we continue to execute on reinvent.
Speaker Change: <unk> has a long history of growth and value creation through evolution evolution of our portfolio.
We are objectively assessing what fits and what doesn't as we look to reshape our business toward the greatest opportunities for near and long term profitable growth and value creation.
Bracken P. Darrell: We're objectively assessing what fits and what doesn't as we look to reshape our business toward the greatest opportunities for near and long-term profitable growth and value creation. Looking ahead to the rest of the fiscal year, as we continue to implement actions and make instrumental changes across our business, we remain focused and committed to achieving our cash flow objective for fiscal 24. We've eliminated revenue and profit guidance for now, but we're committed to cash flow, and we're on track to deliver. Now, let me briefly address the cyber incident we experienced in December. It obviously impacted us, but it could have been much worse.
Speaker Change: Yeah.
Speaker Change: Looking ahead to the rest of the fiscal year as we continue to implement actions and make instrumental change across our business, we remain focused and committed to achieving our cash flow objective for fiscal 'twenty four we eliminated revenue and profit guidance for now, but we're committed to cash flow that we're on track to deliver it.
Speaker Change: Now, let me briefly address the cyber and instead, we experienced in December.
Speaker Change: It obviously impacts us, but it could have been much worse I'm super impressed by the quality of work done by our teams across the company.
Bracken P. Darrell: I'm super impressed by the quality of work done by our teams across the company. Rarely have I seen a company rally so quickly and so effectively to a cause, thanks to great preparation beforehand.
Speaker Change: Rarely have I seen a company rally so quickly and so effectively two of costs.
Speaker Change: Great preparation beforehand leadership teamwork during and meticulous followed through mitigated the impact.
Bracken P. Darrell: Leadership and teamwork during. A meticulous follow-through mitigated the impact. I don't think it could have been handled much better, and I'm really proud of the team.
Speaker Change: I don't think it could have been handled much better and I'm really proud of the team.
Bracken P. Darrell: We've instituted a range of additional controls to de-risk the potential for any future incident. Now, I want to summarize what I see VF becoming over the next several years. We're leveraging our strengths, world-class brands, and great people, while taking action to make VF leaner, faster, and stronger through proactive measurement. As I outlined last quarter, this will take time, but we're making progress quickly and building on what we laid out just a few months ago. The ultimate outcome will be a leaner, more cohesive set of brands, relentlessly focused on the consumer, and we'll deliver industry-leading innovation in products and markets, enabled by much more efficient operations. Design, or perhaps a better word for it in this industry for now, innovation, will be at the center of our transformation agenda. Our commercial operations will run efficiently and effectively across all three regions.
Speaker Change: We've instituted a range of additional controls to de risk the potential for any future incidents.
Speaker Change: Now I want to summarize what I see VF to coming over the next several years.
Speaker Change: We're leveraging our strengths world class brands and great people, while taking action to make Leah V S leaner faster and stronger through proactive measures.
Speaker Change: As I outlined last quarter. This will take time, but we're making progress quickly and building on what we laid out just a few months ago.
Speaker Change: The ultimate outcome will be a leaner more cohesive set of brands relentlessly focused on the consumer.
Speaker Change: And we'll deliver industry, leading innovation in products and marketing.
Speaker Change: Enabled by much more efficient operations.
Design or perhaps a better word for it in this industry for now innovation will be at the center of our transformation agenda, our commercial operations will run efficiently and effectively across all three regions.
Speaker Change: Each brand will have powerful capabilities to build innovative products consumers are hungry for with powerful marketing to tell their story.
Matt Puckett: Each brand will have powerful capabilities to build innovative products consumers are hungry for, with powerful marketing to tell their story. With that, I'll now hand this over to Matt to talk you through the financials. Thank you, Bracken.
Speaker Change: With that I'll now hand, this over to Matt to talk you through the financials.
Matt: Thank you Bracken before I get into the financial update let me take a minute to reflect on my time at VF.
Matt Puckett: Before I get into the financial update, let me take a minute to reflect on my time at VF. I've lived and loved VF for over two decades, and my time with this great company has provided me with many enriching and fulfilling experiences across our business and across the world. I'm thankful for those many opportunities, and, more importantly, for the great friendships and relationships that have come from them.
Matt: I've lived in lumped VF for over two decades in my time with this great Company has provided me with many enriching and fulfilling experiences across our business and across the world.
Matt: Well for those many opportunities and more importantly for the great friendships and relationships that have come from it.
Matt Puckett: However, there always comes a time for change, and Bracken and I are aligned on this being the right time. While I'll be stepping down in the coming months, in the interim, I remain committed to helping pursue the transformation agenda, leading the finance organization, and supporting the transition. Now turning to the quarter. Throughout Q3, we remained highly focused on strengthening both our business fundamentals and our balance. At the same time, we are advancing our transformation program, ReInvent, with a sense of urgency and resolve to execute against and identify new and additional opportunities to reshape and improve VF. Now I'll start with a review of the quarter, then provide an update on ReInvent, and finish off with some thoughts on the year-to-go period. Total revenue was down 17% for the quarter, as both Global Vans and America's Results remained pressured, as expected. On a global basis, Wholesale led the decline at down 28%, while DTC was down 9%.
Speaker Change: However, there always comes a time for change and Bracken higher line on this being the right time.
Speaker Change: Well I'll be stepping down in the coming months in the interim I remain committed to helping pursued the transformation agenda, leading the finance organization and supporting the transition.
Speaker Change: Now turning to the quarter.
Speaker Change: Throughout Q3, we remained highly focused on strengthening both our business fundamentals and our balance sheet at.
Speaker Change: At the same time, we are advancing our transformation program reinvent with a sense of urgency and resolve to execute against and identify new and additional opportunities to reshape and improve the yes.
Speaker Change: Now I'll start with a review of the quarter and provide an update on reinvent and finish off with some thoughts on the year ago period.
Speaker Change: Total revenue was down 17% for the quarter as both global vans in the Americas results remain pressured as expected.
Speaker Change: On a global basis wholesale led the decline down 28%, while DTC was down 9%, excluding vans DTC was down 3%.
Matt Puckett: Excluding Vans, DTC was down 3%. Before going into a review of the regions and brands, I'll spend a few minutes outlining some items which impacted the quarter. First, Q3 was impacted by the expected timing-related shifts in wholesale, where on-time deliveries this year benefited Q2 while impacting Q3 relative to the prior year period. This had an overall impact of about 2.5 points on total revenue in the quarter and 5.5% across global wholesale revenue.
Speaker Change: Before going into a review of the regions and brands I'll spend a few minutes outlining some items, which impacted the quarter.
Speaker Change: First Q3 was impacted by the expected timing related shift in wholesale we're on time deliveries. This year benefited Q2, while impacting Q3 relative to the prior year period. It's had an overall impact of about two five points on total revenue in the quarter and five 5% across the global wholesale revenue.
Speaker Change: Second as Bracken mentioned earlier, we took proactive measures to accelerate the vans turnaround.
Matt Puckett: Second, as Bracken mentioned earlier, we took proactive measures to accelerate an advanced turnaround by introducing several reset actions at the brand in Q3, which impacted total VF revenue by about one and a half percent in the quarter and may have a further impact into Q4. These actions are largely focused on ensuring we have a clean marketplace with the right level of healthy inventory into which we can more effectively introduce upcoming newness while positioning our partners and vans for overall better sell-through and profitability, as well as delivering a more compelling brand presentation to consumers. Finally, results were impacted by the cybersecurity incident in December, which briefly disrupted our ability to fulfill orders over the pre-holiday period.
Speaker Change: Introducing several reset actions that the brand in Q3, which impacted total VF revenue about one 5% in the quarter and May have a further impact into Q4.
Speaker Change: These actions are largely focused on ensuring we have a clean marketplace with the right level of healthy inventory.
Speaker Change: Which we can more effectively introduce upcoming newness, while positioning our partners advance for overall better sell through and profitability as well as delivering a more compelling brand presentation to consumers.
Speaker Change: Finally results were impacted by the cyber security incident in December which briefly disrupted our ability to fill orders over the pre holiday period we.
Matt Puckett: We estimate the overall impact to Q3 revenue was less than 2%. From an EPS standpoint, the estimated impact was approximately $0.04 to $0.05 for the quarter. This does not include any potential recovery from cyber injury.
Speaker Change: We estimate the overall impact to Q3 revenue was less than 2% from an EPS standpoint, the estimated impact was approximately four to five <unk> on the quarter.
Speaker Change: This does not include any potential recovery from cyber insurance I'd.
Speaker Change: I'd like to take this opportunity to commend and thank our cheeks, particularly those in digital and technology, who worked tirelessly through the holidays with a truly amazing effort that allowed us to quickly recover and return just servicing consumers and customers.
Matt Puckett: I'd like to take this opportunity to commend and thank our teams, particularly those in digital and technology, who worked tirelessly through the holidays for the truly amazing effort that allowed us to quickly recover and return to servicing consumers and customers. Moving to the operating review by... America's was down 25% in the quarter. As anticipated, we saw the most pressure in wholesale, which was down 35%. DTC, down 16%, reflected softer sell-throughs throughout the holidays, particularly outside of the promotional window.
Speaker Change: Moving to the operating review by region.
Speaker Change: Americas was down 25% in the quarter and.
As anticipated we saw the most pressure in wholesale which was down 35%.
Speaker Change: <unk> down 16% reflected softer sell throughs throughout the holidays, particularly outside of promotional Windows. In addition to weaker sell through on cold weather and seasonal products, particularly in the outdoor segment.
Speaker Change: EMEA was down 12% excluding impact from the wholesale shipment timing the decline would have been about 7%, we're seeing slow consumer confidence and greater caution continuing in the wholesale channel.
Matt Puckett: In addition to weaker sell-through on cold weather and seasonal products, particularly in the outdoor segment, EMEA was down 12%; excluding the impact from the wholesale shipment timing, the decline would have been about 7%. We are seeing slowing consumer confidence and greater caution continuing in the wholesale channel. D to C was down 1%, but up slightly, excluding Vans, with the North Face up mid-single digits. Like the Americas, we also experienced a more challenging sell-through on cold-weather seasonal products across Europe.
Speaker Change: DTC was down 1%, but up slightly excluding vans with the north face up mid single digits like the Americas. We also experienced a more challenge sell through on cold weather seasonal products across Europe.
Speaker Change: The APAC region continues its growth path and was up 3% in Q3.
Speaker Change: From vans and Dickies all of our brands that operate in the region. We're growing led again by strength in the north face.
Speaker Change: Also to note the revenue was up 7% in greater China.
Speaker Change: Turning to the performance by brand the North face revenue was down 11% in the quarter, excluding the wholesale shipment timing shift the north face revenue would have been down mid single digits.
Matt Puckett: The APAC region continues its growth path and was up 3% in Q3. Aside from Vans and Dickies, all of our brands that operate in the region were growing. Led again by strength in the North... Also to note, VF revenue was up 7% in Greater China. Turning to the performance by brand, North Face revenue was down 11% in the quarter.
Speaker Change: The Americas region results were challenged in our performance fell short of our expectations.
Speaker Change: After a slow start to the fall winter season momentum remains subdued performance was choppy throughout the quarter.
Speaker Change: While core best selling lines continued to deliver strong sell through we saw softness in cold weather items and some seasonal product offerings.
Speaker Change: The brand remained relatively stronger in international markets in APAC momentum continued in the quarter with the brand growing 28% in the region and more than 30% in greater China.
Matt Puckett: Excluding the wholesale shipment timing shift, North Face revenue would have been down mid-single digit. The Americas Region results were challenged, and our performance fell short of our expectations. After a slow start to the fall-winter season, momentum remained subdued, and performance was choppy throughout the quarter.
Speaker Change: In EMEA Q3 was down 5%, however, DTC growth continued in the region and was up 6% this quarter overall.
Speaker Change: Overall EMEA when looking across Q2, and Q3 combined to neutralize the impact of shipment timing across the quarters. The brand was up high single digits within the region.
Matt Puckett: While core best-selling lines continue to deliver strong sell-through, we saw softness in cold-weather items and some seasonal product offers. However, the brand remained relatively stronger in international markets. In APAC, momentum continued in the quarter, with the brand growing 28% in the region and more than 30% in greater China. In EMEA, Q3 was down 5%. However, D-to-C growth continued in the region and was up 6% this quarter. Overall, in EMEA, when looking across Q2 and Q3 combined to neutralize the impact of shipment timing across the quarters, the brand was up high single digits in the region. BAN's Q3 revenue was down 29% and down across all three regions, broadly in line with half a when accounting for the intentional reset actions we took in the quarter to clean up the marketplace and reposition our wholesale channel. These negatively impacted global revenue by about five points in Q3 and may have a further impact in Q4 as we complete the work. Timberland was down 22%, driven largely by the Americas region, where channel inventory and retailer caution remained a headwind, and specific to the brand's assortment, boots and other seasonal products were challenged this season.
Speaker Change: <unk> Q3 revenue was down 29% and down across all three regions broadly in line with half one when accounting for the intentional reset actions, we took in the quarter to clean up the marketplace and reposition our wholesale channel.
Speaker Change: These negatively impacted global revenue by about five points in Q3 and May have a further impact in Q4 as we complete the work.
Speaker Change: Timberland were down 22% driven largely by the Americas region, where channel inventory and retailer caution remained a headwind and specific to the brand's assortment boots and other seasonal product had been challenged this season.
Speaker Change: Ashley the business performed relatively better highlighted by low single digit growth in APAC.
Speaker Change: <unk> results continue to be pressured with revenue down 17% in the quarter Americas again experienced declines with softer sell out trends in our core work business and specifically in the value oriented distribution.
Speaker Change: International markets were impacted by the results in Europe, which were down as a result of wholesale timing shifts into Q2. However, the underlying business continues to be good and.
Speaker Change: In the APAC market continued its reset.
Speaker Change: Supreme thoughts positive momentum from last quarter continue with broad based growth across regions and benefited from entry into Korea with the ongoing strong performance in the new store in this market that opened in August.
Matt Puckett: Internationally, the business performed relatively better, highlighted by low single-digit growth in APAC. However, Dickey's results continue to be pressured, with revenue down 17% in the quarter. Merrick has again experienced declines with softer sellout trends in the core work business and specifically in the value-oriented distribution. International markets were impacted by the results in Europe, which were down as a result of wholesale timing shifts into Q2. However, the underlying business continues to be good, and the AIPAC market continues to recede. Supreme Soft's positive momentum from last quarter continued with broad-based growth across regions and benefited from entry into Korea with the ongoing strong performance in the new store in this market that opened in August. Overall, strong sell-through across product categories led to improving profitability.
Speaker Change: Overall strong sell through across product categories led to improving profitability.
Speaker Change: Now moving down the P&L Q3, gross margin expanded by 40 basis points to 55, 3% as tailwind from channel and regional mix more than offset the impact of negative foreign currency transaction.
Speaker Change: Overall promotions were about flat versus last year, reflecting the continued elevated levels of promotional activity across our markets. Our ongoing efforts to reduce inventory in particular, leveraging our own outlets as well as the impact of the vans marketplace reset actions.
Speaker Change: SG&A was down 5% in constant dollars during the quarter from lower distribution administrative and marketing costs.
Speaker Change: Offset partly by higher digital and technology spending.
Speaker Change: However, the larger revenue decline this quarter drove significant SG&A deleverage of 590 basis points. This more than offset the gross margin expansion, leading to an operating margin contraction of 560 basis points, which underlines the urgency we have and reducing fixed costs.
Matt Puckett: Moving down the P&L, Q3 gross margin expanded by 40 basis points to 55.3%, as tailwinds from channel and regional mix more than offset the impact of negative foreign currency transactions. Overall, promotions were about flat versus last year, reflecting the continued elevated levels of promotional activity across our markets, our ongoing efforts to reduce inventory, in particular leveraging our own outlets, as well as the impact of the Vans Marketplace Reset Action. SG&A was down 5% in constant dollars during the quarter from lower distribution, administrative, and marketing costs, offset partly by higher digital and technology spending.
Speaker Change: Diluted earnings per share of <unk> 57 reflects the lower volume and operating margin along with higher interest expense all of which was partially offset by a lower tax rate in the quarter.
Speaker Change: Despite the difficult operating performance, we made progress on our number one financial priority to reduce debt and leverage in Q3, we delivered an approximate $640 million reduction in net debt relative to last year.
Speaker Change: This better than planned results was largely attributable to lower working capital and strong execution by our teams to maximize free cash flow.
Matt Puckett: However, the larger revenue decline this quarter drove significant SG&AD leverage of 590 basis points. This more than offset the gross margin expansion, leading to an operating margin contraction of 560 basis points, which underlines the urgency we have in reducing fixed costs. Diluted Earnings Per Share of $0.57 reflects the lower volume and operating margin, along with higher interest expenses, all of which was partially offset by a lower tax rate in the quarter.
Speaker Change: As a result, we achieved a larger than anticipated reduction in inventories sequentially down over $330 million relative to Q2 and down over $440 million or 17% at the end of the quarter relative to the prior year.
Speaker Change: Our ability to meet near term inventory objectives reflects the agility in the supply chain and returned to more effective sales and operations planning and improve collaboration across the business.
Speaker Change: Liquidity at the end of the quarter stood at $2 8 billion and net debt was $5 2 billion down from $5 9 billion in the prior year.
Matt Puckett: Despite the difficult operating performance, we made progress on our number one financial priority to reduce debt and leverage. In Q3, we delivered an approximate $640 million reduction in net debt relative to last year. This better-than-planned result was largely attributable to lower working capital and strong execution by our teams to maximize free cash flow. As a result, we achieved a larger-than-anticipated production decline in inventories, sequentially down over $330 million relative to Q2, and down over $440 million, or 17%, at the end of the quarter relative to the prior year. Our ability to meet near-term inventory objectives reflects the agility in the supply chain to return to more effective sales and operations planning and improve collaboration across the business. Liquidity at the end of the quarter stood at $2.8 billion, and net debt was $5.2 billion, down from $5.9 billion in the prior year.
Speaker Change: In the third quarter the company initiated an in depth strategic review of all brand assets within the portfolio to ensure we are focused on our greatest long term value, creating opportunities will provide further updates when appropriate.
Speaker Change: Now moving on to reinvent, where I want to expand on Brackens update first we made we made progress in executing our cost savings program as we work towards our growth target of $300 million.
Speaker Change: The actions, we've taken on reinvent around streamlining the organization and optimizing our cost structure have begun to bear fruit.
Speaker Change: In fiscal Q3, we booked approximately $50 million in charges of which about 20 million were noncash.
These charges are included in our reported results, but excluded from adjusted operating earnings and earnings per share that I just reviewed.
Speaker Change: The turnaround work remains in progress advance during the quarter, we took actions to reset the wholesale channel to ensure the brand's market positioning and product assortments are aligned with the brand direction.
Matt Puckett: In the third quarter, the company initiated an in-depth strategic review of all brand assets within the portfolio to ensure we are focused on our greatest long-term value-creating opportunity. We'll provide further updates when appropriate. Moving on to reInvent, where I want to expand on Bracken's update. First, we made progress in executing our call savings program as we worked towards our gross target of $300 million. The actions we've taken on reInvent around streamlining the organization and optimizing our call structure have begun to bear fruit. In fiscal Q3, we booked approximately $50 million in charges, of which about $20 million were non-cash.
Speaker Change: The impact on revenue in the quarter was approximately $50 million.
Speaker Change: As part of our priority priority to reduce debt and leverage we continue to work hard to rightsize our inventories we expect a further reduction in inventories in Q4 across the broader portfolio.
Speaker Change: In addition to the cash generated from lower inventories and the previous reduction in the dividend. We have also continued an effort we began last year to monetize noncore physical assets across several areas.
Speaker Change: Notably this work now includes the closure of the corporate Aviation program.
Speaker Change: We've begun the marketing process and expect to dispose of these assets over the next few quarters.
Speaker Change: To the extent the strategic review process resulted in a divestment of any brands. This would also support this objective.
Speaker Change: In summary, we are encouraged by the progress we're making on reinvent we have a lot more to accomplish the impact of which will be increasingly visible in the coming quarters.
Matt Puckett: These charges are included in our reported results but excluded from adjusted operating earnings and earnings per share that I just reviewed. The turnaround work remains in progress at Vans. During the quarter, we took action to reset the wholesale channel to ensure the brand's market positioning and product assortments are aligned with the brand direction. The impact on revenue in the quarter was approximately $50 million.
Finally, let me bring you back to the near term with some thoughts on the year ago period.
Speaker Change: Our outlook on free cash flow for fiscal 'twenty, four is unchanged and we expect to deliver about $600 million for the year.
Speaker Change: This is supported by the work we continue to do to reduce inventories, which we now expect to be down at least 10% at year end, reflecting the additional progress we've made in compared to previous guidance of down mid to high single digits.
Matt Puckett: As part of our priority to reduce debt and leverage, we continue to work hard to right-size our inventory. We expect a further reduction in inventories in Q4 across the broader portfolio. In addition to the cash generated from lower inventories and the previous reduction in the dividend, we have also continued an effort we began last year to monetize non-core physical assets across several areas. Notably, this work now includes the closure of the Corporate Aviation Program.
Speaker Change: We anticipate liquidity to be approximately $2 3 billion at year end <unk>.
Speaker Change: And we continue to expect the second half gross margin for fiscal 'twenty four to be up relative to last year.
Speaker Change: While we're not providing any providing any additional guidance today on fiscal 'twenty four or fiscal 'twenty five we expect impacts from the following areas for the next several quarters.
Matt Puckett: We've begun the marketing process and expect to dispose of these assets over the next few quarters. To the extent the strategic review process results in the divestment of any brands, this would also support this objective. In summary, we're encouraged by the progress we're making on RE-INVENT. We have a lot more to accomplish, the impact of which will be increasingly visible in the coming quarters. Finally, let me bring you back to the near term with some thoughts on the year-to-go period. Our outlook on free cash flow for fiscal 24 is unchanged, and we expect to deliver about $600 million for the year.
Speaker Change: <unk> turnaround action, because we take the steps necessary to reposition and reset the brand.
Speaker Change: Continued caution from wholesalers in our key markets translating to softer future order books globally, but with the greatest impact in the Americas.
Speaker Change: Face wholesale wholesale channel, particularly in the U S will remain challenged.
Speaker Change: And finally, a choppy or Americas and European macro environment.
Speaker Change: With respect to reinvent and the actions underway, we expect actual gross savings within fiscal 'twenty for it to be at least $60 million.
Speaker Change: A majority of which is within SG&A.
Speaker Change: And we continue to be on track to deliver the $300 million in annualized gross savings with with the vast majority of the savings in place on a forward run rate basis by the middle of next fiscal year.
Matt Puckett: This is supported by the work we continue to do to reduce inventories, which we now expect to be down at least 10% at year-end, reflecting the additional progress we've made and compared to previous guidance of down mid to high single digits. We anticipate liquidity to be approximately $2.3 billion at year end. And we continue to expect the second half gross margin for fiscal 24 to be up relative to last year. While we're not providing any additional guidance today on fiscal 24 or fiscal 25, we expect impacts from the following areas for the next several quarters. Transcribed by https://otter.ai, Continued caution from wholesalers in our key markets translating to softer future order books globally, but with the greatest impact in the Americas, The North Face Wholesale Channel, particularly in the U.S., will remain challenged. And finally, a choppier US and European macro environment With respect to reInvent and the actions underway, we expect actual gross savings within Fiscal 24 to be at least $60 million, the majority of which is within SG&A.
Speaker Change: But keep in mind in fiscal 'twenty five while we will benefit from the incremental impact from reinvent actions year over year, we will face headwinds from an expected increase in incentive compensation and a more normalized amount of inflation.
Speaker Change: Looking at all of this from a cash perspective, we continue to anticipate the cash cost associated with reinvent actions to be largely offset by net proceeds from the sale of noncore physical assets that I referenced earlier in my comments. This will play out over the next several quarters.
Speaker Change: Finally in closing.
Speaker Change: While our financial results in Q3 were challenged I am pleased that we were able to to expand gross margin reduced inventories and generate strong cash flow.
Speaker Change: And importantly, we are reiterating our fiscal 'twenty for cash flow guidance. Despite the continued challenged earnings results.
Speaker Change: The actions we are implementing as part of reinvent our substantial we have moved from planning to execution across many initiatives, including our cost savings program restructuring actions and operational improvements.
Speaker Change: In addition, we've initiated a strategic review of the portfolio designed to ensure that brands within VF or aligned to both our strategic and financial objectives.
Matt Puckett: And we continue to be on track to deliver the $300 million annualized gross savings, with the vast majority of the savings in place on a forward run rate basis by the middle of next fiscal year. But, keep in mind, in Fiscal 25, while we will benefit from the incremental impact from re-invent actions year over year, we will face headwinds from an expected increase in incentive compensation and a more normalized amount of inflation. Looking at all this from a cash perspective, we continue to anticipate the cash costs associated with the re-invent actions to be largely offset by net proceeds from the sale of non-core physical assets that I referenced earlier in my comments. This will play out over the next several quarters. Finally, in close.
Speaker Change: While the impacts are not visible in our financial results yet I am confident these actions will reset the business and enable us to stabilize and then grow revenue improve profitability and reduce debt and leverage.
Speaker Change: <unk>, the app to deliver shareholder value creation.
Speaker Change: With that we will now take your questions.
Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: A confirmation tone will indicate that your line is in the question queue.
Speaker Change: And you May press star two if you'd like to remove your question from the queue.
Speaker Change: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Matt Puckett: While our financial results in Q3 were challenged, I am pleased that we were able to expand gross margin, reduce inventories, and generate strong cash flow. And importantly, we are reiterating our fiscal 24 cash flow guidance despite the continued challenge to earnings results. The actions we are implementing as part of RE-INVEST are substantial. We have moved from planning to execution across many initiatives, including our call savings program, restructuring actions, and operational improvement. In addition, we've initiated a strategic review of the portfolio designed to ensure that the brands within VF are aligned to both our strategic and financial objectives.
Speaker Change: Interest of time, we ask that you please limit to one question.
Speaker Change: Our first question comes from the line of Michael Binetti with Evercore. Please proceed with your question.
Michael Binetti: Thanks, Kurt Thanks for taking my question and Thats right Matt.
Michael Binetti: Matt wish you well on your next venture, saying, it's been a pleasure talking with you over the years here.
Michael Binetti: I guess, Brad and I guess, the big question on our mind here is what maybe you can walk us through some of the filters you are looking at as you focus on which of the brands makes sense in this portfolio and the strategic review.
Matt Puckett: While the impacts are not visible in our financial results yet, I'm confident these actions will reset the business and enable us to stabilize and then grow revenue, improve profitability, and reduce debt and leverage, positioning VF to deliver shareholder value creation. With that, we will now take your questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.
Speaker Change: And then I guess.
Speaker Change: Matt maybe you could walk us a little bit more through the puts and takes on gross margins. If there's any numbers you can offer with <unk>.
Speaker Change: Especially it's a comment the promos are in line to last year, just looking at the revenues and the commentary on vans. In particular, you guys seem to be pushing hard to get through a lot of inventory it wasn't intuitive to us the grosses of me.
It will be positive in the quarter. So maybe just a little help understand the puts and takes there.
Speaker Change: Okay I'll go really quickly Michael So first of all the number one thing is being in a good market I think so.
Speaker Change: First of all I think I said this on the last call I love businesses that sit in growing markets small businesses that are leaders within their markets and then the third filter would be.
Operator: And you may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. In the interest of time, we ask that you please limit yourself to one question. Our first question comes from the line of Michael Binetti with Evercore. Please proceed with your question. Thanks for taking our question, and Matt, I just want to wish you well on your next venture. It's been a pleasure talking with you over the years. I guess, Bracken, a big question on our mind here is, maybe you could walk us through some of the filters you're looking at as you focus on which of the brands make sense in this portfolio and the strategic review.
Speaker Change: Really do we add value to the business within that market. So I think those are the three primary filters will put on this are putting on this.
Speaker Change: We'll have a lot more to update overtime.
Speaker Change: Hey, Michael Thank you great.
Michael Binetti: Great great to speak with you today.
Speaker Change: I'm going to give exact numbers, but I'll tell you. The primary drivers on the margin line. So positives were mix and it is a bit larger than what we would normally see.
Michael Binetti: <unk>, considering the mix of the business, particularly associated with the big decline that we saw in wholesale and the relative strength.
Michael Binetti: In international markets and primarily in the APAC region. So mix is a bit bigger number freight continues to be.
Operator: And then, I guess, I'm curious, Matt, maybe you could walk us just a little bit more through the puts and takes on gross margins, if there's any numbers you could offer with that. Especially the comment that promos were in line with last year, you know, just looking at the revenues and the commentary on Vans in particular, you guys seem to be really pushing hard to get through a lot of inventory. It wasn't intuitive to us.
Michael Binetti: Real favorable number for us and it really modest benefit from price.
Michael Binetti: Big offset is FX FX is almost offsetting that mix benefit. So that's probably the single biggest drag is FX is there'll be the worst quarter for us from an FX transaction standpoint that we will see a bit higher inventory reserves modestly higher product costs promotions about flat really part of your question was was there I think there's a couple of things to remember.
We've made a lot of progress across the last 12 months introducing inventories we continue to be aggressive about doing that but we're in a better place than we have been so while we continue to see a lot of promotional activity in the marketplace, particularly with our wholesale accounts to some degree, particularly in the Americas.
Bracken P. Darrell: The gross would be positive in the quarter. So maybe just a little help understanding. Okay, I'll go really quickly, Michael.
Bracken P. Darrell: So first of all, the number one thing is being in a good market. So first, I think I said this on the last call, you know, I love businesses that sit in growing markets. I also love businesses that are leaders within their markets.
Michael Binetti: Cleaner in our DTC channels, we're moving a lot of inventory to our outlets, but if you kind of pull up and look at our margins. This quarter. Our D to C full price channels really across the board, including in vans were a bit better full price stores and our online business and so that's where we're seeing the business start to get healthier more quickly as in our own channels.
Bracken P. Darrell: And then the third filter would be, really, do we add value to the business within that market? So I think those are the three primary filters we'll put on this and are putting on this. We'll have a lot more to update over time. Hey Michael.
Speaker Change: Okay. Thanks, Bob.
Speaker Change: Thanks, Michael.
Speaker Change: Our next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.
Matt Puckett: Thank you. It's great to speak with you today. I'm not going to give you exact numbers, but I'll tell you that the primary driver is on the margin line.
Brooke Roach: Hi, Brooks.
Brooke Roach: Hi, good afternoon. Thank you so much for taking our question.
Brooke Roach: Wow I was hoping you could expand on the north face and the results that you saw in the quarter as well as your outlook for TNF wholesale in the U S remained challenged can you.
Matt Puckett: So the positives were mixed, and it is a bit larger than what we would normally see, considering the mix of the business, particularly associated with the big decline that we saw in wholesale and the relative strength in international markets and primarily in the APAC region. So it is a bit bigger number. Freight continues to be a really favorable number for us and a really modest benefit from price. The big offset is FX. FX is almost offsetting that mix benefit, so that's probably the single biggest drag on the company.
Brooke Roach: You may be the impacts from underlying macro and weather that we've seen this quarter and what we might see in U S. Wholesale for the next couple of quarters.
Brooke Roach: Your line growth opportunity as that brand in calendar 2024 and longer term.
Speaker Change: Yes, I think Matt and I'll split this I'll give you a view of the underlying growth opportunity.
Speaker Change: Continue to be Super excited about the north face I think the brand is very strong and all indications are that the brand strength continues to be in place and the activations that we're doing the various marketplace activities. We're doing are working but underneath that as you said, we've got a pretty tough marketplace. Both in wholesale and the weather was obviously a really tough.
Matt Puckett: This will be the worst quarter for us from an FX transaction standpoint that we'll see. A bit higher inventory reserves, modestly higher product costs, and promotions about flat. Really, part of your question was there. I think there's a couple things to remember there.
Speaker Change: The answer that last part of the question on the wholesale Matt.
Think Brooklyn wholesale I mean, what we're seeing is new.
New coming into the season, it was going to be a little more difficult order books were down we've said that all along and part of part of that is our own issue from the last year, where we didn't we didn't really service the business. So we kind of behind the eight ball coming in and then weather Didnt help the marketplace remains pretty dynamic and pretty promotional particularly in the outdoor segment I think that's that's kind of what you see and what we what we see.
Matt Puckett: We've made a lot of progress in the last 12 months in reducing inventories. We continue to be aggressive about doing that, but we're in a better place than we were. So while we continue to see a lot of promotional activity in the marketplace, particularly with our wholesale accounts, to some degree, particularly in the Americas, we're a little cleaner in our D to C channels. We're moving a lot of inventory through our outlets, but if you kind of pull up and look at our margins this quarter, our D to C full price channels, really across the board, including in Vans, we're a bit You know, full price stores and our online business. And so that's where we're seeing the business start to get healthier. More quickly is on our own channel. Thanks for all the help.
Speaker Change: And understand across the market and I think we're going to see that play out over the next couple of seasons as as the.
Speaker Change: Wholesale partners continue to plan very cautiously, we're seeing that and that's how we're thinking about planning our business all of that said the strength of the brand remains really really good at all the metrics that we look at from a consumer standpoint continue to be good our DTC business generally is good and when the weather has gotten better here in January our DTC business is up in all three regions in fact.
Speaker Change: The brand is up in all three regions, but particularly in D. C. So.
Speaker Change: I think the underlying.
Michael Binetti: Thanks, Michael. Our next question comes from the line of Brooke Roach with Goldman Sachs; please proceed with your question. Hi Brooke.
Speaker Change: <unk> of opportunity and the underlying drivers of the business are really strong the wholesale channel, particularly here in the U S is difficult in the near term and we expect it to continue to be.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thanks, Brian.
Speaker Change: Our next question comes from the line of Adrienne <unk> with Barclays. Please proceed with your <unk>.
Bracken P. Darrell: Thank you. Macro and Weather. The Bulletproof Executive 2013. Yeah, I think Matt and I will split this. I'll give you a view of the underlying growth opportunity. I continue to be super excited about The North Face.
Adrienne: Great. Thanks, very much Hey, Bracken, Matt Thanks for all your help and the partnership over the years, it's been fantastic. So thanks trying to put that out.
Bracken P. Darrell: I think the brand is very strong. All indications are that, you know, the brand strength continues to be, you know, in place, and the activations that we're doing, the various marketplace activities we're doing are working. But underneath it, as you said, we've got a pretty tough marketplace, both in wholesale, and the weather was obviously really tough. Do you want to answer that last part of the question on wholesale, Matt? Yeah, I think Brooklyn wholesale, I mean, what we're seeing is, you know, we knew coming into the season that it was going to be a little more difficult because older books were down.
Speaker Change: Youre welcome.
Adrienne: My question is going to be on the marketplace cleanup.
Adrienne: How much of it was the shift into Q2 and how much of it is going to be an overhang as we go into fourth quarter and I'm going to split it and so bracken for you on that same question.
Bracken: We've seen sort of marketplace actions is it to get out of a particular channels to reduce stores in accounts, we've seen sometimes where.
Matt Puckett: We've said that all along, and part of that is our own issue from the last year where we didn't really service the business. So, we're kind of behind the eight ball coming in, and then the weather didn't help.
Bracken: They've got deep.
Bracken: And the brand visibility kind of.
Bracken: I was away et cetera, So I'm, just wondering where the push point is on that and my last really quick one is how are we going to be taking advantage of the statement I made at the Olympic. Thank you.
Matt Puckett: The marketplace remains pretty dynamic and pretty promotional, particularly in the outdoor segment. I think that's kind of what you see and what we see and understand across the market. And I think we're going to see that play out over the next couple of seasons as wholesale partners continue to plan very cautiously. We see that, and that's how we're thinking about planning our business. All that said, the strength of the brand remains really, really good. All the metrics that we look at from a consumer standpoint continue to be good.
Bracken: On the Q2 Q3, I would say Q3 Q4, the resets kind of equally distributed across both quarters and most of it is not exiting channels. That's about the reset we're talking about it's really pulling inventory unproductive inventory out of those channels. So that the productive inventory can move faster movers.
Matt Puckett: Our DTC business is generally good. When the weather's gotten better here in January, our DTC business is up in all three regions. In fact, the brand is up in all three regions, but particularly in DTC. So, I think the underlying drivers of opportunity and the underlying drivers of the business are really strong. The wholesale channel, particularly here in the US, is difficult in the near term, and we expect it to continue to grow. Thanks, bro.
Bracken: There is a larger marketplace change.
Bracken: Change that will happen in Europe and to some extent in the U S. But that's going to have more gradually.
Bracken: In terms of what we'll be doing with the Olympics youre, obviously, not talking too much about it yet.
We kind of cute, but we keep that close to our vest, but we do have some pretty interesting plans.
Bracken: And tactic best of luck.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Lorraine.
Adrienne Eugenia Yih: Our next question comes from the line of Adrienne Yih with Barclays. Please proceed with your question. Great. Thanks so much. Hi, Bracken.
Lorraine: <unk> with BNP Paribas. Please proceed with your question Tyler.
Lorraine: Hi, Bracken good afternoon. Thank you very much for taking my question.
Adrienne Eugenia Yih: Matt, thanks for all your help in the partnership over the years. It's been fantastic. So, thanks. You're welcome.
Lorraine: Over the years.
Lorraine: I wanted to just.
Bracken P. Darrell: My question is going to be on the marketplace cleanup. How much of it was the shift into 2Q and how much of it is going to be an overhang as we go into the fourth quarter? And I'm going to split it. So Bracken, on that same question, you know, we've seen some sort of marketplace actions. Is it to get out of particular channels, to reduce stores in accounts?
Lorraine: About debt pay down.
Tyler: Back then I think you mentioned.
Tyler: Confident about not refinancing the 175 billion.
Tyler: Do I think.
Tyler: December in the spring of 2025, maybe can you just.
Tyler: Can you just help us bridge.
Tyler: Through how do you get that from a free cash flow.
Tyler: Any update on on the pack business.
Tyler: And then.
Bracken P. Darrell: We've seen some times where, you know, they go pretty deep, and the brand visibility kind of, you know, goes away, etc. So I'm just wondering where the push point is on that. And my last really quick one is, how are you going to be taking advantage of the scapegoat moment at the Olympics? Thank you. On Q2, Q3, I would say Q3, Q4, the reset's kind of equally distributed across both quarters, and most of it is not exiting channels. That's not the reset we're talking about.
Tyler: Matt you mentioned, the noncore physical assets Theres, some corporate aviation program that you might sell off are there any other are there.
Tyler: Asset physical assets, you might sell off and if thats. The case could you potentially size that up so we can at a model to free cash flow over the next few quarters.
Matt: Yes, let me, let me jump in and try to take that one and great to speak with you.
Speaker Change: So I'll start from the back end.
Speaker Change: Non core physical assets, which are largely related to the elimination of corporate aviation program. There is also a couple of buildings that are involved as well.
Yes.
Bracken P. Darrell: It's really pulling inventory, unproductive inventory, out of those channels so that the productive inventory can move, the faster movers. There is a larger marketplace change that will happen, you know, in Europe and to some extent, in the U.S., but that's going to happen more gradually. In terms of what we'll be doing at the Olympics, we're obviously not talking too much about it yet. We kind of keep that close to our vest, but we do have some pretty interesting plans. Fantastic
Speaker Change: It's a meaningful number.
Speaker Change: Wouldn't that wouldn't give you the exact number but kind of north of $50 million.
Speaker Change: And may be pretty close to a 100 and the yen but.
Speaker Change: So thats kind of what youre looking at and that will likely play out over the next two to three quarters I think we'll be able to get most of that done. So that's hopefully helpful. There as it relates to the debt Paydown, yes. Our objective is to not refinance those two tranches of debt that are due this December and next April.
Speaker Change: Do that we obviously need to sell the <unk> business and we're continuing to work toward that we expanded and opened up the aperture from a from a marketing standpoint last quarter and Thats been really good we've got a number of parties who are highly interested in engaging through a kind of a round of bids.
Bracken P. Darrell: Best of luck. Thank you. Thank you. Our next question comes from the line of Laurent Valescu with BNP Paribas. Please proceed with your question. Hi LeRon.
Laurent Vasilescu: Hi Bracken, good afternoon. Thank you very much for taking my question, Matt. Thank you. I wanted to just ask about debt pay down.
Speaker Change: And in the middle of a pretty sustained of due diligence as we speak so.
Speaker Change: Good progress there as it relates to the underlying business.
Laurent Vasilescu: Bracken, I think you mentioned you're confident about not refinancing the $1.75 billion. Yeah, well, let me jump in and try to take that one.
Speaker Change: We're going to generate a reasonable amount of cash flow. This year, and we've kind of confirm that $600 million I'd suggest that next year will be a bit stronger than that as we as we kind of normalize and.
Matt Puckett: And great to speak with you. So I'll start from the back end, the non-core physical assets, which are largely related to the elimination of the corporate aviation program. There are also a couple of buildings that are involved as well. You know, it's, it's a meaningful number; I wouldn't, I wouldn't give you the exact number, but kind of north of 50 million and maybe maybe pretty close to 100 in the end. But so that's kind of what you're looking at. And that'll likely play out over the next two to three quarters. I think we'll be able to get most of that done, so that's hopefully helpful there. As it relates to the debt paydown, yes, our objective is to not refinance those two tranches of debt that are due this December and next April.
Speaker Change: <unk> continued to drive down inventories were going to make a lot of progress reducing inventories this year, but given where the business is from a topline perspective, we would expect more opportunity next year I think I've said before that cash flow next year could be kind of in line with where we started this year and I still think thats kind of a fair assessment.
Speaker Change: Very helpful. Thanks, very much.
Speaker Change: Thanks, Laura.
Speaker Change: Our next question comes from the line of Matthew Boss with Jpmorgan. Please proceed with your question.
Matthew Boss: Hey, good afternoon.
Matthew Boss: So bracken could you elaborate on your confidence in <unk> future rising the statement in the in the release, there or maybe how passionate engaged sequential signs of progress.
Matt Puckett: To do that, we obviously need to sell the PACS business, and we're continuing to work toward that. You know, we expanded or opened up the aperture from a marketing standpoint last quarter, and that's been really good. We've got a number of parties who are highly interested and engaging who are kind of in the middle of a round of bids and in the middle of pretty substantive due diligence as we speak.
Matthew Boss: May be seeing under the surface relative to the reported results and then Matt I guess, maybe what's the best way to think about the right structural gross margin multiyear for the business and what portion of the $300 million cost savings should we anticipate to fall to the bottom line.
Matt Puckett: Good progress there. As it relates to the underlying business, we're going to generate a reasonable amount of cash flow this year, and we've kind of confirmed that $600 million. I'd suggest that next year will be a bit stronger than that as we kind of normalize and continue to drive down inventories. We're going to make a lot of progress reducing inventories this year, but given where the business is from a top-line perspective, we'd expect more opportunities next year. I think I've said before that cash flow next year could be kind of in line with where we started this year, and I still think that's kind of a fair assessment. Very helpful. Thank you very much.
Matthew Boss: Yes.
Speaker Change: Quickly on the on your first question.
Matt: First I have.
I have better a lot better transparency on the business today than I did three months ago, and certainly six months ago.
Matt: A better a better sense of where the business is going to land.
Matt: I feel much more comfortable with that I understand where the business is landing in the Americas and a near timeframe.
Matt: <unk> a terrible quarter. We just had you know I feel like a better transparency, especially in the last couple of months.
Matt: In here.
Matt: Withdrew guidance earlier, Matt and I talked through it we withdrew guidance because of that lack of transparency or lack of clarity. So that's number one and the second one is I feel really really good about the brands the deeper I get into the better I feel I was excited coming in and the more I look into what's out there what we're capable of and really whats.
Laurent Vasilescu: Thank you all. Our next question comes from Matthew Boss with J.P. Morgan. Please proceed with your question. Hey Matthew. So Bracken, could you elaborate on your confidence in VF's future? Thank you for watching!
Matt: But the fundamental consumer power of the franchise I'm really excited about them, even the ones that they probably wont be part of the really good about.
Matthew Boss: or maybe how best to gauge sequential signs of progress you may be seeing under the relative to the reported and then Matt. I guess maybe what's the best way to think about the right structural gross margin multi-year, What portion of the $300 million cost? And Abe DeFalco.
Matt: The third one is the team.
Matt: Since I've been here I think we've we've promoted two very strong people and VF and there are a lot more strong people within VF in fact will be promoting another one to a big job here shortly.
Matt: Which we haven't announced yet so I can't.
Bracken P. Darrell: Yeah, I'll go quickly on your first question, Matthew. First, I have a lot more transparency in the business today than I did three months ago, and certainly six months ago. I have a better sense of where the business is going to land. I feel much more comfortable that I understand where the business is landing in the Americas in the near future. Despite the terrible quarter we just had, I feel like I have better transparency, especially in the last couple of months that I've had since I've been here. You know, I went through guidance earlier. You know, Matt and I talked through it. We went through guidance because of that lack of transparency and lack of clarity. So that's number one. The second one is I feel it's just really, really good about the brands. The deeper I get into them, the better I feel.
Matt: But we will also be bringing in some other people from the outside.
Matt: In fact internally, we're announcing one of those today it would be a nice to have so we've got we've just got a lot of really strong people and this team as much as I hate to see that but I think the team itself is very strong year up and down so I'm very excited about and I guess the last part is the.
Matt: Matthew I think Youre on our first earnings call I said guests it feels a lot like.
Matt: My last company, where I wanted to at the beginning it really does and I feel about the same at about the same timeframe.
Matt: You hate to see numbers like we have right now absolutely despise it.
Matt: But I have it's a bellwether and it feels intuitively feel to give me a stronger sense for where we're going and I feel.
Matt: You don't know Youre coming out of it until your balance and we certainly are bouncing yet, but we will and I feel more confident about that than ever.
Bracken P. Darrell: You know, I was excited coming in, and the more I look into what's out there, what we're capable of, and really what the fundamental consumer power of the brands is, I'm really excited about them. Even the ones that some people think, they probably won't be part of VF, I feel really good about. The third one is the team.
Speaker Change: Hey, Matt in terms of gross margin, so I'm going to be careful here Tonight to not guide you to anything but what I would say is if you kind of step back and look at where we are in and good to see our margins turn positive and that will that will continue I think moving forward as we think about Q4 in Q4 and beyond.
Bracken P. Darrell: You know, since I've been here, I think we've promoted two very strong people within VF, and there are a lot more strong people within VF. In fact, we'll be promoting another one to a big job here shortly, which we haven't announced yet, so I can't say. But we'll also be bringing in some other people from the outside. In fact, internally, we're announcing one of those today. It will be on my staff. So we've got a lot of really strong people on this team.
Speaker Change: We're sitting today.
Speaker Change: Couple of hundred basis points, maybe even a little bit more below where we were just a couple of years ago, all attributable to promotional activity and higher inventories and inventory reserves et cetera.
Speaker Change: We're not assuming that that is going to snap back overnight, but we also expect that there is an opportunity there as we manage the business more effectively as we have cleaner inventories.
Speaker Change: And as we obviously benefit from from a marketplace that presumably over time will get.
Bracken P. Darrell: As much as I hate to see Matt leave, you know, I think the team itself is very strong here, all up and down. So I'm very excited about it. You know, and I guess the last part is that Matthew. I think you were on our first earnings call where I said, guys, this feels a lot like my last company, what I went into at the beginning. It really does.
Speaker Change: Better so.
Speaker Change: So I think gross margin expansion opportunities are there aside from the promotional since.
Scenario, which can play out over time, if I just look at the near term, but over the next several quarters mix will continue to be.
Bracken P. Darrell: And I feel about the same at about the same time frame. I, you know, you know, you hate to see numbers like we have right now. I absolutely despise them.
Speaker Change: Good Guy.
Speaker Change: We think about channel mix I think about geographic mix inflation, which has been pretty significant. This year is waning in fact, we see that waning here even in Q4 won't be as big of an issue next year now notwithstanding the current issue that we're dealing with relative to the cost of freight and what's going on in the <unk>.
Bracken P. Darrell: But I have a, it's a bellwether, and it feels, intuitively feels, it gives me a stronger sense for where we're going, and I feel, you know, you don't know you're coming out of it until you bounce, and we certainly aren't bouncing yet, but we will. And I feel more confident about that than ever. Hey, Matt.
Speaker Change: Now that could that could dent that a little bit and that could be.
Speaker Change: Not an immaterial number but.
Speaker Change: But overall inflation in the near term is is a lot more manageable.
FX will be less of a headwind.
Bracken P. Darrell: In terms of gross margins, so, you know, I'm going to be careful here to not guide you to anything, but what I would say is if you kind of step back and look at where we are, and it's good to see our margins turn positive, and that will continue, I think, moving forward as we think about Q4 and beyond. We're sitting today at a couple hundred basis points, maybe even a little bit more below We're not assuming that that's going to snap back overnight, but we also expect that there's an opportunity there as we manage the business more effectively, as we have cleaner inventories, and as we obviously benefit from a marketplace that, presumably, over time will get better. So I think gross margin expansion opportunities are there. Aside from the promotional scenario, which can play out over time, if I just look at the nearer term, right over the next several quarters, you know, mix will continue to be a good guy.
Speaker Change: And there is a little bit of benefit not significant most of the reinvent benefits in SG&A, but a little bit of benefit in gross margin. So there is more I think good guys and bad guys in front of us, but the big lever for us and for our businesses over the course of the next several quarters and really the next couple of years is how do we just get healthier and how do we sell more at full price and drive down.
Speaker Change: I think that'll that'll be really critical as it relates to the second question I think on reinvent and we've said we plan to reinvest 25% to 35% of the savings across time, particularly in product and marketing.
Speaker Change: Let me cover Matthew.
Matthew Boss: Thank you. Our next question just redo the line of.
Matthew Boss: Bob <unk> with Guggenheim. Please proceed with your question.
Bob: Hi, Bob.
Bob: Hi, Brian.
Bob: I just got a couple of quick questions first on advance is there anything more you can share with us on your 18 month plan just around.
Bob: I don't know marketing or are you planning to bring to work toward back.
Speaker Change: Pricing within the brand anything along those lines would be helpful. And second question is just around inventories.
Matt Puckett: You know, we think about channel mix, and we think about geography. Inflation, which has been pretty significant this year, is waning. In fact, we see that waning here even in Q4. It won't be as big of an issue next year now, notwithstanding the current issue that we're dealing with relative to the cost of freight and what's going on in the Suez Canal. That could dent that a little bit, and that could be not an immaterial number. But overall, inflation in the near term is a lot more manageable. FX will be less of a headwind, and there's a little bit of benefit, but not significant.
Speaker Change: With the inventories down and he was at 17% are there any pockets by brand geographically that you are concerned about either both.
Speaker Change: In your business or at the wholesale level. Thanks.
Speaker Change: Thanks, Bob.
Speaker Change: <unk> second question, but I'll take the first one I'm not ready to be too specific on that yet.
Speaker Change: Because I know that I've got a new brand president coming in so we'll have latitude to make some changes, but what I would say is we've got a great I.
Speaker Change: I think it's strong because very punctuated.
Speaker Change: Plan to combine the integrates the marketing insights and then the marketing programs with the new products that are launching and I've been through both sides of that equation. The two of them together two or three times now and I'm still not done, but I feel good about it very good about it.
Matt Puckett: Most of the reinvention benefit sits in SG&A, but a little bit of benefit in gross margin. So there are more, I think, good guys than bad guys in front of us. But the big lever for us and for our businesses over the course of the next several quarters and, really, the next couple years is, how do we just get healthier, and how do we sell more at full price and drive down promotions? I think that'll be really critical. As it relates to the second question, I think on reinventing. We've said we plan to reinvest 25 to 35 percent of the savings across time, particularly in product and market. Callbert, Lacia.
Speaker Change: We do not have plans to bring back the Warped tour, although we're certainly cross online and we're talking about a little bit the work two or is it was a really powerful thing, but it took time to grow and would take quite a bit of time to rebuild I think the objective, though is making sure that we're really deeply in the hearts and minds of youth audience is mission critical for us.
Speaker Change: Hey, Bob fill in inventory a couple of things I'll give you one number here that maybe is really useful.
Bob: Relative to the 17% vans is actually down almost 30%. So vans is in a really good place I think relative to where we sit from a from a top line and the reset actions in the vans marketplace with the actions. We're taking is by and large going to be about where we'd like it to be as we get toward the end of the fiscal year, maybe maybe just modestly higher from a weakness.
Matt Puckett: Thank you. Our next question comes from the line of... Bob Drubal with Guggenheim. Please proceed with your question. Hi Bob. Hi Bracken.
Robert Drbul: Just got a couple of quick questions. First, on vans. Is there anything more you can share with us on your 18-month plan just around, you know, I don't know, marketing? Are you planning to bring the Warped Tour back?
Bob: Supply standpoint in the U S, but pretty close so I think we feel pretty good there. If you look at the overall average of 17 bands.
Bob: And then on the higher side of that <expletive> is on the higher side in terms of reduction.
Robert Drbul: You know, pricing within the brand? You know, anything along those lines would be helpful. And the second question is just around inventories. You know, with the inventories down, I think it was at 17%, are there any pockets by brand geographically that you're concerned about either both in your business or at the wholesale level? Thanks. Thanks, Bob. I'm going to let Matt take the second question, but I'll take the first one.
Bob: North face is kind of right on the number and timberland and all the other brands are.
Bob: Lower and Supreme is actually probably the only brand with inventories are modestly higher than obviously the business is performing well. So I think overall, we feel pretty good about where we are if I say, if theres a pocket or two of inventory, it's certainly coming out of the outdoor in the outdoor segment coming out of this this fall winter selling season, and I think probably particularly in the timberland business here.
Bob: In the U S is something that we're taking a hard look at but relatively speaking.
Bob: Bands and the north face in pretty good shape.
Speaker Change: Thank you.
Speaker Change: Thank you Bob.
Bracken P. Darrell: You know, I'm not ready to be too specific on that yet, partly because I know that I've got a new brand president coming in, so we'll have the latitude to make some changes. But what I would say is we've got a great, I mean, I think a strong, you know, kind of very punctuated plan that integrates marketing insights and then marketing programs with the new products that are launching. And I've been through both sides of that equation, the two of them together, two or three times now, and I'm still not done, but I feel good about it, very good about it. We do not have plans to bring back the Warped Tour, although that certainly crossed my mind, and we're talking about it a little bit.
Speaker Change: Our next question comes from the line of Paul Lajoie with Citi. Please proceed with your question.
Hi, Paul.
Paul Lajoie: Hey, Thanks, guys. You mentioned some of your wholesale partners are being cautious I think on their ordering but curious where youre seeing sell out performing better than sell in what brands what regions.
Paul Lajoie: And how long do you see that dynamic last thing before sell in and sell out are more aligned and then just a quick second question on the strategic review is that all being done internally by you guys using some outside consultants sorry, if I missed it but just curious that was involved in that.
Speaker Change: I'll take the lessons and I'll, let <unk> take the first one.
Speaker Change: Strategic review, it's an it's an internal exercise we do.
Bracken P. Darrell: The Warped Tour was a really powerful thing, but it took time to grow and would take, you know, quite a bit of time to rebuild. I think the objective, though, of making sure that we're really deeply in the hearts and minds of that youth audience is mission critical for us. Hey, Bob, and Phil, on inventory, a couple of things. I will give you one number here that might be really useful.
Speaker Change: We get the advice of the people you would expect us to and.
Speaker Change: Context, but we don't have a consulting or somewhere and we're working with we have a really strong team internally. It was doing the analysis that we're working with the board on that and we've got a.
Speaker Change: Two different two different groups on the board who were really strong in this area a lot of portfolio experienced there. So that work has been ongoing has been going so I feel really good about it and you want to answer the first question.
Matt Puckett: Relative to the 17%, VANS is actually down almost 30%. So VANS is in a really good place, I think, relative to where we sit from a top line and the reset actions. And the VANS marketplace, with the actions we're taking, is by and large going to be about where we would like it to be as we get toward the end of the fiscal year. Maybe just modestly higher from a weeks of supply standpoint in the U.S., but pretty close. So I think we feel pretty good there. If you look at the overall average of 17, you know, VANS is on the higher side of that. Dickies is on the higher side in terms of reduction.
The most obvious place that I would point, you towards where the sell out or sell through is better than the sell in is in Europe, we're seeing that.
Speaker Change: I'd say generally across the board, maybe a little less so in vans, but generally across the board. The business is a little stronger I would suggest and maybe what the financial results imply and I won't be surprised to be surprised if that doesn't continue for a little bit of time as as wholesalers continue to be pretty cautious, but but in Europe.
Certainly with vans and the reset actions there is a lot of noise and some of those numbers that distort the wholesale results for vans as we do that so the sellout suddenly a little bit better, but not good but it still continues to be in a place that we're not happy with.
Matt Puckett: North Face is kind of right on the number, and Timberland and all the other brands are lower. And Supreme is actually probably the only brand where the inventories are modestly higher, and obviously, the business is performing well. So I think overall we feel pretty good about where we are. You know, if I say that if there's a pocket or two of inventory, it's certainly in the outdoor segment coming out of this fall-winter selling season. And I think, particularly in the Timberland business here in the U.S., it's something that we're taking a hard look at. But, relatively speaking, VANS and North Face are pretty good.
Got it.
Speaker Change: <unk>.
Speaker Change: It probably goes without saying, but the Supreme sellout continues to be very strong.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: The other thing I'd say about Europe is inventories in the marketplace across the board.
Speaker Change: Really well positioned U S. A little there's a couple of pockets as I said earlier, I think particularly timberland, where we're probably a little bit higher than we like to be but but Europe is in a good place from an inventory standpoint as it is in Asia by the way.
Speaker Change: Got it thanks, guys. Good luck. Thank you Paul.
Speaker Change: Our next question comes from the line of Jim Duffy with Stifel. Please proceed with your question.
Robert Drbul: Thank you, Bob. The next question comes from the line of Paul Leggeway with Citi. Please proceed with your question. Hi Paul.
Jim Duffy: Hi, Jackie.
Jim Duffy: Hello, everyone. Thank you for taking my question.
Jim Duffy: Brian I wanted to dig in on the portfolio review.
Paul Leggeway: Hey, thanks. Thanks guys. You mentioned some of your wholesale partners are being cautious, I think, on their ordering, but curious where you're seeing sell out, better than shell in what brand? And how long do you see that dynamic last? www.larryweaver.com Yeah, I'll take the last one and I'll let Matthew take the first one.
Jim Duffy: This last quarter was no sacred cows, Boris aligned et cetera, the announcement of.
Jim Duffy: The portfolio review doesn't seem like New news can you give us a sense of where you are in the process have bank's been appointed to shop brands team on strategic and then when I think about the criteria ive outlined growing market leaders in the markets. It seems kind of a short list of brands that fit am I correct to interpret that.
Bracken P. Darrell: Yeah, the strategic review, it's an internal exercise. We do, you know, we get the advice of the people you would expect us to in that context, but we don't have a consultant or someone we're working with. We have a really strong team internally that's doing the analysis, and we're working with the board on that. We've got two different groups on the board who are really strong in this area. I have a lot of portfolio experience there, so that work has been ongoing. It's been going well, so I feel really good about it. Do you want to answer the first question on that? I think the most obvious place I would point you toward where the sell-out or sell-through is better than the sell-in is in Europe.
Jim Duffy: Suggests a large scale realignment of the portfolio as possible.
Jim Duffy: I wouldn't go that far, but I would say you're right that we've been working on this for longer than we had been talking about it that's kind of I will try to do that regularly.
Speaker Change: Absolutely we don't just come out with things that are really pretty well alone. So we are well along the way on this portfolio review and while we haven't hired bankers beyond the discussion that you know, we're certainly downstream on discussions on exactly what we do from a portfolio standpoint, and I don't have more to say about that now, but you'll hear more as it comes.
Bracken P. Darrell: We're seeing that, I'd say, generally across the board, maybe a little less so in VANS, but generally, across the board, the business is a little stronger, I would suggest, than maybe the financial results imply. And I wouldn't be surprised – I don't think any of us would be surprised if that didn't continue for a little bit of time as wholesalers continue to be pretty cautious. But in Europe, that's not true.
Speaker Change: Okay, and then maybe just a question on the mechanics of the vans realignment can you help us maybe better understand what that means.
Bracken P. Darrell: Certainly, with VANS and the reset actions, there's a lot of noise in some of those numbers that distort the wholesale results for VANS as we do that, so the sell-out is certainly a little bit better, but not good. It still continues to be in a place that we're not happy with, and a brother in the U.S. That probably goes without saying, but Supreme's sell-out continues to be very I'd say about Europe's inventories in the marketplace, U.S., there are a couple pockets, as I said earlier, I think particularly Timberland, where we're probably a little bit higher than we'd like to be, but Europe is in a good place from an inventory standpoint, as is Asia. Thank you, Paul.
Speaker Change: What were the specific tactics to try to clean up inventory in the channel. If you could explain more that'd be helpful and I am curious like in that context, how did.
Speaker Change: If you Miss on sales, but over deliver on the inventory.
Speaker Change: Yeah, Let me, let me try to answer that one.
Speaker Change: Also help.
Speaker Change: It's essentially tapping in two steps. The first one was this quarter the last quarter or the second one will be in the next quarter and are really doing is pulling.
Speaker Change: Kind of icons that are not selling that inventory is too high and the channels are pulling that back out or they're returning it and then we're opening up a basically an open to buy for the productivity is selling so it's really just cleaning out the channel.
Jim Duffy: Our next question comes from the line of Jim Duffy with Stiefel. Please proceed with your question. Thank you. Hello everyone, thank you for taking my question. Bracken, I want to dig in on the portfolio review. Your message last quarter was that there were no sacred cows, the boars aligned, etc.
Speaker Change: I would add anything to that Matt and then Jim you're right, there's a bit of an inventory impact when you when you bring back returns or accrue accrue for returns in this case.
Jim Duffy: The announcement of a portfolio review doesn't seem like new news. Can you give us a sense of where you are in the process? Have banks been appointed to shop brands deemed unstrategic?
Speaker Change: In most cases, the product is still kind of flowing into work is happening.
Speaker Change: You are accruing for returns, which has an inventory implications in that and that entry.
Bracken P. Darrell: And then when I think about the criteria you've outlined, growing markets, leaders in the markets, it seems kind of a short list of brands that fit. Am I correct to interpret that that suggests a large-scale realignment of the portfolio is possible? I wouldn't go that far, but I would say you're right, that we've been working on this for longer than we've been talking about it. That's kind of, I will try to do that regularly so that we don't just come out with things that aren't really pretty well along.
Speaker Change: So thats the number I think overall, we've just been able to aggressively sell through excess inventories again in our own outlet stores in particular as well as leveraging in some cases the off price channel within the wholesale space.
Speaker Change: And working aggressively to.
Speaker Change: Pull back on buys which we've said all along we are working to do and probably been a little bit conservative in some of our planning in terms of how that may ultimately play out so a little bit of favorability there as well.
Jim Duffy: So we are well along the way on this portfolio review, and while we haven't hired bankers beyond the discussions that you know of, we're certainly downstream on discussions on exactly what we do from a portfolio standpoint. And I don't have more to say about that now, but you'll hear more as we go. Okay, and then maybe just a question about the mechanics of the Vans realignment. Can you help us maybe better understand what that means? What were the specific tactics to try to clean up inventory in the channel? If you could explain more, that would be helpful.
Speaker Change: Understood. Thank you.
Speaker Change: Yes, I'll give you a quick example of the impact it's had.
Speaker Change: Over the holidays, we had several people tell me they couldnt get goodbye.
Speaker Change: School product because it wasn't available in their sizes yet.
Speaker Change: The inventory overstock inside channel was before we started doing this reset so.
Speaker Change: This should clean that up.
Speaker Change: Our next question comes from the line of Jay sole with UBS. Please proceed with your question Hi.
Jay Sole: Hi, Jay.
Bracken P. Darrell: And I'm curious, like, in that context, how did you miss on sales but over deliver on the, Yeah, let me try to answer that one. And then Matt can also help. You know, it's essentially happening in two steps. The first one was this quarter, the last quarter; the second one will be in the next quarter. And what we're really doing is pulling, you know, kind of the icons that are not selling because inventory is too high in the channel. So we're pulling that back out, or they're returning it. And then we're opening up basically an open to buy for the product that is selling. So it's really just cleaning out the channel. Would you like to add anything to that, Matt?
Jay Sole: Thanks, So much for taking my question and thank you for all the help.
Jay Sole: Two questions. The first question is you talked a lot about promoting two people and youre restarting the teams.
Jay Sole: How far are you along from having the teams really the go forward team really voice that in other words like how many more months here.
Jay Sole: Okay.
Speaker Change: <unk> working on this before you felt okay with team is in place now it's about executing and then maybe for Matt on the free cash flow guidance it sounds like.
Speaker Change: Probably some a little bit less net income is expected before but more from inventory and it sounds like theres. Some other asset sales that are.
Bracken P. Darrell: And Jim, you're right. There's a little bit of an inventory impact when you bring back returns or accrue for returns in this case. I think in most cases, the product is still kind of flowing, and the work is happening, but you're accruing for returns, which has an inventory implication in that entry. So that's in the number. I think overall we've just been able to aggressively sell through excess inventories, again, in our own outlet stores, in particular, as well as leveraging, in some cases, the off-price channel within the wholesale space and working aggressively to pull back on buys, which we've said all along we're working to do and probably been a little bit conservative in some of our planning in terms of how that may ultimately play out. So there is a little bit of favorability there.
Matt: And then if you could just sort of give us like the pieces in qualitative terms just to help us do a little math on how the free cash flow guidance. The same that'd be that'd be helpful. Thank you.
Speaker Change: That's a hard question to answer I would say, we've made a lot of changes already.
Speaker Change: Our team is.
Speaker Change: All forward quite a bit the structure of the company now has changed quite a bit our operating model all of those things are rolling aggressively forward and as we enter Q4, especially as we as we move into the beginning of next fiscal year I think it will be very far along in terms of having an organization that I think is really.
Matt Puckett: Okay. Thank you. Yeah, I'll give you a quick example of the impact it's had. I had, you know, over the holidays, we had several people tell me they couldn't get, couldn't buy new school products. www.larryweaver.com This should clean up.
Speaker Change: Poised to win in this turnaround so I'd say, we're pretty far along J and I'm excited about it I really feel like we have a team that is here to win.
Speaker Change: And I think you roll forward a couple of months, we'll be there.
Speaker Change: Yes, Jay I think I think you described it is probably fair.
Jay Sole: Our next question comes from the line of Jay Sole with UBS. Please proceed with your question. Bye, Jay. Hi Bracken, thanks so much for taking my question. Thank you for all the help.
Speaker Change: A little bit tougher this quarter than what we anticipate we've talked about that relative to the outdoor segment from a revenue standpoint, but better on the inventory line I think there's a lot. There's a lot in free cash flow that right and when you look at the year to go period. The biggest levers are on the balance sheet not on the P&L right and as you think about not only inventory, but accounts receivable all.
Jay Sole: I have two questions. The first question is, Bracken, you talked about promoting, you know, two people and setting up the teams. You know, how far are you along from having the teams really, the go-forward team really fully set? In other words, like how many more months or quarters do you expect to be working on this before you feel like, okay, the team is in place, now it's about executing? And then maybe for Matt, on the free cash flow guidance, it sounds like there's probably a little bit less net income than you expected before, but more from inventory, and it sounds like there's some other asset sales that are impacting that. If you could just sort of give us the pieces in qualitative terms, just to help us do a little math on how the free cash flow guidance is the same, that'd be helpful. Thank you. You know, that's a hard question to answer.
Speaker Change: All the liabilities et cetera.
Speaker Change: Capex honestly the sales of assets I wouldn't suggest that free cash flow necessarily not counting it that way.
Speaker Change: So that line so that's not really in a number.
We're still in line for the $600 million a few puts and takes but they are really encouraged by the inventory I think particularly great to see where we are at the end of the at the end of the third quarter ahead of schedule.
Speaker Change: If I could just to go back to your first question Jay maybe use the question to make a comment about how faster moving on the orange side.
Speaker Change: Since I've been here, we have a new head of people associate Euro new head of commercial which is an internal promotion will have a new head of design.
Bracken P. Darrell: I would say we've made a lot of changes already. So our team has evolved forward quite a bit. The structure of the company now has changed quite a bit. Our operating model, all those things are rolling aggressively forward. And as we enter Q4, especially as we move into the beginning of next fiscal year, I think we'll be very far along in terms of having an organization that I think is really poised to win in this turnaround. So I'd say we're pretty far along. Jay and I'm excited about it. I really feel like we have a team that is here to win.
Speaker Change: By the end of the fiscal year or the beginning of the next fiscal year, that's kind of agreed to.
Speaker Change: Sure.
Speaker Change: Matt will be leaving so we'll have a new CFO at some point early in the next year, we have a new head of timberland will have a new head of events. So we've we've actually changed a lot of we will have changed a lot of the team here.
Speaker Change: And promoted a lot of people in this company during that timeframe. So.
Speaker Change: I'm really excited about the team we have in place.
Bracken P. Darrell: And I think, you know, you roll forward a couple months, and we'll be there. Yeah, Jay, I think what you described is probably fair, a little bit tougher this quarter than we anticipated. We talked about that relative to the outdoor segment from a revenue standpoint, but better on the inventory line. I think there's a lot in pre-cash flow, though, right? And when you look at the year-to-go period, the biggest levers are on the balance sheet, not on the P&L, right? And as you think about not only inventory but accounts receivable, all the liabilities, et cetera, you know, CapEx. Honestly, the sale of assets, I wouldn't suggest that's free cash flow necessarily. We're not counting it that way, kind of below that line, so that's not really in the number.
Speaker Change: And I think it's going to get stronger and stronger.
Speaker Change: Okay. Thank you so much.
Speaker Change: Jay.
Speaker Change: Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.
Dana Lauren Telsey: Hi, good afternoon.
Dana Lauren Telsey: Hi, Bracken.
Dana Lauren Telsey: As you think about the DTC channel, which you talk about as more improved than what you're seeing out of wholesale how does it differ by digital and DTC. What are your plans for each brand on the physical store side and are there any is there any color by brand performance differentiation in the DTC channel.
Speaker Change: Thank you.
Speaker Change: Yes, I'd say everybody every brand has a sizable DTC E com.
Matt Puckett: But, you know, we're still in line for the $600 million, a few put and takes, but we're really encouraged by the inventory, I think, particularly. Great to see where we are at the end of the third quarter ahead of schedule. If I could just go back to your first question, Jay, and maybe use the question to make a comment about how fast we're moving on the orgs. We have, since I've been here, we have a new head of people, so CHRO, and a new head of commercial. We'll have a new head of design by the beginning of the next fiscal year; go down here to go to the website. Okay, thank you so much.
Speaker Change: And not everybody not every brand has a sizable footprint in bricks and mortar and it really varies around the world.
Speaker Change: In the if I'll start with vans.
Speaker Change: <unk> is a very large, especially U S based brick and mortar business as well as an online business a lot of people may not realize it.
One of the most developed DTC businesses, our North America was one of the most developed of.
Footwear and apparel.
Speaker Change: Something like 60% of our total business is DTC in the U S, maybe even higher than that.
Speaker Change: So it's very developed I don't expect that to.
Jay Sole: Thanks, Jay. Our next question comes from the line of Dana Telsey with the Telsey Advisory Group. Please proceed with your question. Hi, good afternoon. Hi, Bracken.
Speaker Change: Changed dramatically one way or the other I imagine the E comm will grow in the bricks and mortar will shrink relative to each other and hopefully wholesales will begin to grow.
Dana Lauren Telsey: As you think about the DTC channel, which you talk about as more improved than what you're seeing out of wholesale, how does it differ between digital and DTC? What are your plans for each brand on the physical store side? And is there any color by brand performance differentiation in the DTC channel?
Speaker Change: Relative to the to the bricks and of our own bricks and mortar. So I would expect all of it the north face great DTC business it could be even bigger it's mostly E com in the U S. We have very little of our own stores relatively speaking in the U S.
Bracken P. Darrell: Thank you. You know, I'd say everybody, every brand has a sizable DTC e-com business, and not everybody, not every brand has a sizable footprint in bricks and mortar, and it really varies around the world. You know, in the, if I'll start with Vans, you know, Vans has a very large, especially U.S.-based brick and mortar business, as well as an online business. A lot of people may not realize that we're one of the most developed DTC businesses, or North America is one of the most developed DTC businesses, in all of footwear and apparel. I mean, something like 60% of our total business is DTC in the U.S., maybe even higher than that. So it's very developed.
Speaker Change: And that's kind of true in Europe.
Speaker Change: And in that case, we're growing we're adding more stores in Europe, probably the U S. I think if I have my facts right now.
Speaker Change: I would think that will continue.
Speaker Change: And I'm going to keep whole APAC out for a second.
Speaker Change: Timberland has a very developed DTC bricks and mortar business in Europe, and very very little in the U S, which is one of the things that we struggle with here in the U S Big business, all wholesale less control.
Speaker Change: I don't think we have any plans to change that but I would say generally speaking all of those businesses are going to have a larger and larger E. Comm business. It's a core part of our strategy.
Speaker Change: Got it.
Speaker Change: And then just on the on the Capex side for this year.
Bracken P. Darrell: I don't expect that to change dramatically one way or the other. I imagine e-commerce will grow, and bricks and mortar will shrink relative to each other. And hopefully, wholesale will begin to grow relative to our own bricks and mortar. So I would expect that to happen. The North Face, we have a great BTC business that can be even bigger. It's mostly e-commerce in the U.S. We have very little of our own stores, relatively speaking, in the U.S. And that's kind of true in Europe.
Speaker Change: Changes to Capex, and how you're thinking about it going forward.
Speaker Change: No I don't think we are a significant player.
Speaker Change: The way, we're thinking about Capex, we don't have a big investment plan and Capex.
Speaker Change: At least not abnormal.
Speaker Change: Most of our Capex moving forward will be related to DTC honestly, Dana will be continuing to support the expansion, where it makes sense and the brands that have expansion opportunities in our space is one Supreme is one for sure.
Bracken P. Darrell: But in that case, we're probably adding more stores in Europe than we have in the U.S., I think, if I have my facts right. And I would think that will continue. And I'm going to hold APAC out for a second. Timberland has a very developed BTC bricks and mortar business in Europe and very, very little in the U.S., which is one of the things we struggle with here in the U.S. Big business, all wholesale, less control.
Speaker Change: And kind of the ongoing refreshment of those stores.
Speaker Change: Structure wise nothing significant planned and obviously, we're working aggressively to kind of reduce our footprint in many cases, it's kind of the opposite.
Bracken P. Darrell: I don't think we have any plans to change that. But, generally speaking, all those businesses are going to have a larger and larger e-commerce business. It's a core part of our strategy. And then just on the CapEx side for this year, any changes to CapEx and how you're thinking about it going forward? No, I don't think we have a significant plan to alter the way we're thinking about CapEx. We don't have a big investment plan for CapEx.
Speaker Change: Thank you and best of luck Matt.
Matt: Thanks, Dan Thank.
Speaker Change: Thank you Dana.
Speaker Change: Thank you.
Speaker Change: Final question comes from the line of Ike <unk> with Wells Fargo. Please proceed with your question.
Ike: Hey, Brendan.
Ike: Hey, So just two questions from me I guess, maybe Matt. The first one is on north face. So just trying to fully understand that but I know you're.
Ike: Not giving guidance, but on the north face specifically kind of marry the quarter, even extra shifts down mid single, but the comment on January being positive.
Dana Lauren Telsey: Most of our CapEx moving forward will be related to B2C, honestly, Dana, we'll be, you know, continuing to support the expansion where it makes sense and the brands that have expansion opportunities, North Face is one, Supreme is one, for sure, and kind of the ongoing refreshment of those stores. Infrastructure-wise, nothing significant planned, and obviously we're working aggressively to kind of reduce our footprint in many cases, so it's kind of Thank you and best of luck!
Should we not read too much into that January some of the cold side, just kind of curious.
Speaker Change: Any thoughts on the brand trajectory from here and then Bracken just.
Speaker Change: Not to be too directly to Jim's question about the no sacred cows is it is it fair to say that the three big brands are not a part of the strategic portfolio review or or is everything.
Speaker Change: Are all options on the table right now.
Matt Puckett: Thanks, Dana. Thank you, Dana. Thank you. Our final question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question. Bye-bye. Hey Bracken, I have just two questions for you. I guess maybe Matt, the first one is on North Face.
Bracken: We've been very explicit about saying, we're not going to address that comment.
Bracken: Any question about that we've made it when he said no sacred cows, so really taking objective look at all the brands.
Bracken: And other than that we'll come back and update you over time.
Ike Boruchow: So just trying to fully understand, I know you're not giving guidance, but on the North Face specifically, trying to marry the quarter, even extra shifts down mid-single with the comment on January being positive, just should we not read too much into that January because of the cold snap? Just kind of curious, any thoughts on the brand trajectory from here? And then, Bracken, just, you know, not to be too direct, but to Jim's question about the no secret cows, I mean, is it fair to say that the three big brands are not a part of the strategic portfolio review, or are all options on the table right now? You know, we've been very explicit about saying we're not going to address that comment. Any questions about that? We meant it when we said no sacred cow, so we're really taking an objective look at all the brands.
Bracken: And I think I think your question on the North face.
Bracken: We look forward, we expect DTC to grow.
Bracken: And we expect DTC to grow in the fourth quarter, and we expect DTC to continue to grow it's good to see the business bounce back in January particularly the early part of January really strong as the weather is the weather turned here and to some degree in Europe as well so.
Bracken: But what we've said wholesale is going to be pretty choppy we've got.
Bracken: Order book visibility, obviously for spring and how that will shape play out and pretty good understanding what false going to look like so we would expect that to be more difficult over the next few quarters.
Speaker Change: Yes, I'm sorry, thanks, guys. So I just want to piecemeal out that answer I think we need to give him a more complete way later.
Speaker Change: Totally understand thanks, guys.
Speaker Change: Okay.
Speaker Change: Okay that was the last question.
Speaker Change: Alright, well. Thanks. Thanks, Thanks, all of you for tuning yet. Despite these clearly disappointing results I am Super excited about yes futures I said earlier I think the steps, we're taking a turn things around or happening.
Bracken P. Darrell: And other than that, we'll come back and update you. And I think your question on the north face: as we look forward, we expect D2C to grow. And we expect D2C to grow in the fourth quarter, and we expect D2C to continue to grow. It's good to see the business bounce back in January, particularly the early part of January. Really strong as the weather turned here and, to some degree, in Europe as well.
Speaker Change: The limitation is real and the change is happening fast internally, even though you probably can't feel it you certainly can't see yet in our numbers.
Speaker Change: <unk> said it before we have world class brands and amazing talent.
Speaker Change: Foundations on which to rebuild.
Matt Puckett: But we've said wholesale is going to be pretty choppy. We've got order book visibility, obviously for spring, and how that will play out, and a pretty good understanding of what fall is going to look like. So we'd expect that to be more difficult over the next few weeks. I'm sorry, I just don't want to piecemeal out that answer. I think we need to give it in a more complete way. That'
Speaker Change: Here to have a great business. So I look forward to talking to you again during the quarter and as we close this next quarter and start the next fiscal year. Thanks again.
Speaker Change: Thank you thanks, Brian Thanks, everyone.
Speaker Change: Yeah.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Okay.
Ike Boruchow: Thanks guys. Okay, that was the last one. All right, well, thanks to all of you for tuning in. Despite these clearly disappointing results, I am super excited about VS Future, as I said earlier. I think the steps we're taking to turn things around are happening. The implementation is real, and change is happening fast internally, even though you probably can't feel it; you certainly can't see it yet in our numbers. I've said it before; we have world-class brands and amazing talent.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: Hmm.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Hum.
Speaker Change: Hum.
Bracken P. Darrell: The foundations on which to rebuild are here to have a great business, so I look forward to talking to you again during the quarter and as we close this next quarter and start the next fiscal year. Thanks again. And, Matt, thank you. Thanks, Bracken. This concludes today's teleconference. You may disconnect your lines at this time.
Speaker Change: [music].
Operator: Thank you for your participation. Subs by www.zeoranger.co.uk and www.larryweaver.com. Thanks for watching! , www.larryweaver.com BF-WATCH TV 2021, www.larryweaver.com, Bye! www.larryweaver.com transcript Emily Beynon, Copyright 2020, New Thinking Allowed Foundation BF-WATCH TV 2021, www.larryweaver.com %HESITATION, www.larryweaver.com
Speaker Change: Okay.
Speaker Change: [music].