Q1 2025 VF Corp Earnings Call

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Operator: We have about a minute until the call start time. Are you ready to begin? Yes. All right.

We have about a minute.

Speaker Change: Until the cold start time or are you ready to begin.

Speaker Change: Yes.

Speaker Change: Alright, I will conduct a compound from five at a silent two in one and then begin my introduction and third the playback as a reminder, your lines will be.

Operator: I will conduct a countdown from 5 at a silent 2n1 and then begin my introduction and start to play back. As a reminder, your lines will be opened during my introduction, and anything you see will be heard in the main call.

Speaker Change: Open during my introduction and anything you see will be heard in the main call.

Operator: You are going live in 5, 4, 3.

We are going live in 543.

Speaker Change: Good afternoon.

Angela: Good afternoon. My name is Angela, and I will be your conference operator today. At this time, I would like to welcome everyone to the VS Corporation First Quarter Fiscal Year 2025 earnings call. All lines have been placed on you to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like us a question during this time, think to press star, follow bit number one, and your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.

Angela: After noon my name is Angela and I will be your conference operator today at this time I would like to welcome everyone to the V. F Corporation first quarter fiscal year 2025 earnings call.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Speaker Change: Third the speaker's remarks, there will be a question and answer session.

Speaker Change: If you would like to ask a question. During this time things are press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star. One again. Thank you I will now turn the call.

Angela: I will now turn the call over to Allegra Perry by President and Vester Relations to open the conference call. We may begin.

Allegra Perry: The call over to Allegra, Perry Vice President Investor Relations to open the conference call you may begin.

Bracken Darrell: Good afternoon and welcome to VS Corporation's first quarter fiscal 2025 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 and documents filed regularly with the SEC. Unless otherwise noted, amounts referred to on today's call will be on an adjusted constant dollar basis, which we've 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.

Allegra Perry: Good afternoon, and welcome to VF Corporation's first quarter fiscal 2025 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.

Allegra Perry: With the S E C.

Operator: 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.

Allegra Perry: Less otherwise noted amounts referred to on today's call will be on an adjusted constant dollar basis, which we've 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.

Bracken Darrell: You may also hear us referred to reported amounts, which are in accordance with US GAAP. Reconciliation 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 a management view of why this information is useful to investors.

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.

Speaker Change: Joining me on the call will be Vf's, President and Chief Executive Officer, Bracken, Darrell and EVP and Chief Financial Officer, Paul Vogel <unk> <unk>.

Bracken Darrell: Joining me on the call will be VS President and Chief Executive Officer Bracken Darrell, and EVP and Chief Financial Officer Paul Vogel. Following our prepared remarks, we'll open the call for questions.

Speaker Change: Following our prepared remarks, we'll open the call for questions I'll now handover to Bracken.

Bracken Darrell: I'll now hand over to Bracken. Thank you all for joining us. I passed my 1-year anniversary of the F on July 17th. Coincidentally, the same day we announced the Supreme Investor. It's been a full year of transformation, and I believe the pace of change won't slow going forward. This is a new norm at the F in its exciting. Today I'll update you on our progress in the execution, the Reinvent transformation program, and of course on the quarter.

Bracken Darrell: Thank you all for joining us I passed my one year anniversary of the F. On July 17th Coincidently. The same day, we analysis framed divestiture.

Speaker Change: On a full year of transformation and I believe the pace of change will slow going forward. This is a new norm of VF and it's exciting.

Speaker Change: Today I'll update you on our progress in the execution of the reinvent transformation program and of course on the quarter.

Bracken Darrell: But before I do that, let me start with our leadership team. I'm a year ahead, and we've changed A to 11 direct reports. Two of those were promotions. As planned, we've made three of these changes since our last earnings call, including the leaders of our two biggest brands. And I'm sitting next to Paul Vogel, our new CFO, who has been with us roughly four weeks. Dex. I've always thought of a great leadership team as more of a partnership than the traditional pyramid, and Paul already feels like another great partner. I'm holding him back today to give him some breathing room for he's on this stage, but he is already adding value.

Speaker Change: But before I do that let me start with our leadership team.

Bracken Darrell: I'm a year in, and we've changed 8 of 11 direct reports. Two of those changes were promotions.

Speaker Change: On a year and we've changed eight of 11 direct reports two of those were promotions as planned we made three of these changes since our last earnings call, including the leaders of our two biggest brands.

Speaker Change: And I'm sitting next to Paul Vogel, our new CFO, who has been with us roughly four weeks.

Speaker Change: I've always thought of a great leadership team is more of a partnership with the traditional pyramid.

Speaker Change: Paul already feels like another great partner.

Speaker Change: I'm holding them back today to give them some breathing room for resolve this stage.

Speaker Change: But he is already adding value.

Paul Vogel: But now let me hand it over to Paul to introduce himself and say a few words. Paul. Thank you, Bracken, and good afternoon everyone. After one month at VF, I couldn't be more excited about the opportunity in front of us and to be a part of this strong team. It is a privilege to join a company with such iconic brands, and I truly believe we can reestablish VF as one of the best-run footwear, apparel, and accessories businesses in the world. I've already begun to visit our offices around the world, with recent stops at Vans and Costa Mesa and Denver, and an upcoming trip to Europe soon, and the passion our employees have for these brands is clear.

Speaker Change: But now let me hand, it over to Paul just to introduce himself and say a few words Paul.

Paul Vogel: You Bracken and good afternoon, everyone.

Paul Vogel: After one month at VF I couldnt be more excited about the opportunity in front of us and to be a part of this strong team.

It is a privilege to join a company with such iconic brands and I truly believe we can reestablish V F.

Paul Vogel: Best run footwear apparel and accessories businesses in the world.

Paul Vogel: I've already gone to visit our offices around the world with recent stops advance in Costa Mesa in Denver, and an upcoming trip to Europe soon and the passion our employees have for these brands is clear.

Paul Vogel: In my prior roles, I've seen the power of maximizing brand strength by creating the highest quality product and combining it with a distinct point of view. I also understand that the best way to create an environment of innovation is to operate an exceptionally well-run company, eliminating inefficiencies that slow us down while investing thoughtfully and strategically to grow the business. I'm confident we can drive materially improved profitability, leverage on costs, and improve free cash flow, and developing a roadmap for that is one of my top near-term priorities. While I've been an operator for the past eight years, I spent the beginning of my career on the investing side, and I understand what it will take to rebuild trust with the Wall Street community.

Paul Vogel: In my prior roles I've seen the power of maximizing brand strength by creating the highest quality product and combining it with a distinct point of view I.

Paul Vogel: I also understand that the best way to create an environment of innovation is to operate an exceptionally well run company.

Eliminating inefficiencies that slow us down while investing thoughtfully and strategically to grow the business I am confident we can drive materially improved profitability leverage on costs and improve free cash flow and developing a roadmap for that is one of my top near term priorities.

Paul Vogel: While I've been an operator for the past eight years I spent the beginning of my career on the investing side and I understand what it will take to rebuild trust with the Wall Street community.

Paul Vogel: Change doesn't happen overnight, but with the leadership team Bracken has assembled, I know we can systematically reach our long-term goals, execute and deliver on a consistent basis, and demonstrate proof points that build over time. I share Bracken's urgency to strengthen VS balance sheet, reduce leverage, and build a financial model that is operationally best in class and sustainable over the long term. I see a tremendous opportunity to unlock significant value from all the brands within the VS portfolio. I look forward to meeting many of you over the coming weeks and months. I couldn't be more excited to be joining the company at such a crucial and exciting time.

Bracken Darrell: Change doesn't happen overnight, but with the leadership team Bracken has assembled, I know we can systematically reach our long-term goals, execute and deliver on a consistent basis, and demonstrate proof points that build over time.

James: James doesn't happen overnight, but the leadership team Bracken has assembled I know, we can systematically reach our long term goals execute and deliver on a consistent basis and demonstrate proof points that build over time.

Speaker Change: Sure Brackins urgency to strengthen vf's balance sheet reduce leverage and build a financial model that is operationally best in class and sustainable over the long term.

Speaker Change: See a tremendous opportunity to unlock significant value from all of the brands within the VF portfolio.

Speaker Change: I look forward to meeting many of you over the coming weeks and months I couldn't be more excited to be joining the company in such a crucial and exciting time I will now turn it back over to Bracken.

Bracken Darrell: I will now turn it back over to Bracken. Thank you, Paul.

Bracken Darrell: Thank you Paul.

Bracken Darrell: In addition to Paul's recent start, I'm also excited that as of last Monday, Sunday is now officially the President of the Vance, relieving me of that job, and Caroline Brown is two months into leaving The North Face. I'm excited about the progress we're seeing from our Chief Strategy and Transformation Officer and our Chief Design Officer, both of whom joined in March and are working your way on things you'll see later. Nina Flood was promoted in the Timberland Rolls just six months ago, and Martino Scabia Greeny has run the newly created Global Commercial Organization since we created it nine months ago.

Bracken Darrell: In addition to Paul's recent start I'm also excited that as of last Monday Sunshade is now officially the president advanced relieving me of their job and Caroline Brown is two months into leading the north face.

Speaker Change: I am excited about the progress we're seeing from our chief strategy and transformation officer, and our Chief design Officer, both of whom joined in March and are working your way on things you will see later.

Martino Scabia Guerrini: Ina Flood was promoted into the Timberland roles just six months ago, and Martino Scabia Guerrini has run the newly created global commercial organization since we created it nine months ago. First, there's a significant potential to improve our profitability, as we all know. We delivered another significant reduction in inventories relative to last year, even as we build ahead of our peak selling season. It's back to strong, profitable growth, with particularly positive momentum in key accounts.

Bracken Darrell: In a flood was promoted into the timber raw material enrolls just six months ago and Martino scheduled Marini has run the newly created global commercial organization since we created it nine months ago.

Bracken Darrell: In other words, we have a full team now, and you can feel the energy.

Bracken Darrell: In other words, we have a full team now and you can feel the energy.

Bracken Darrell: Now for re-invent, while we're not yet back to growth, the steps we're taking now will get us there. Remember, this phase is about reducing costs, lowering our debt, resetting the US business, and getting vans back on track. First, there's a significant potential to improve our profitability, as we all know. During the quarter, we generated a further $50 million in cost savings, part of our $300 million target. We will have executed all actions to deliver $300 million cost savings by the end of the first half of the year, as we guided, and the impact will be fully reflected in the PML by the end of the fiscal year.

Bracken Darrell: Now for reinvent, where we're not yet back to grow the steps, we're taking now will get us there.

Bracken Darrell: Remember this phase about reducing costs lowering our debt resetting the U S business and getting bands back on track.

Bracken Darrell: First there's a significant potential to improve our profitability as we all know.

Bracken Darrell: During the quarter, we generated a further $50 million in cost savings as part of our $300 million target.

Bracken Darrell: We will have executed all actions to deliver $300 million cost savings by the end of the first half of the year as we guided and the impact we fully reflected the PLO P&L by the end of the fiscal year.

Bracken Darrell: And we have no intention of stopping there. As we said from the beginning, we're reinvesting some of that back into the business. In the key areas of product and brand building. And those savings are further offset by rebuilding of our annual incentive program and inflation on salaries in other areas. But, as I said before, we're absolutely committed to more cost reduction, as you'll soon hear more about. We continue to reduce debt and strengthen our balance sheet. We delivered another significant reduction in inventory relative to last year, even as we build ahead of our peak selling season.

Bracken Darrell: And we have no intention of stopping there as we said from the beginning we are reinvesting some of that back into the business in the key areas of product and brand building.

Bracken Darrell: And those savings are further offset by rebuilding of our annual incentive program and inflation on salaries and other areas.

Bracken Darrell: But as I said before we are absolutely committed to more cost reduction as you'll soon hear more about.

Bracken Darrell: We continue to reduce debt strengthen our balance sheet, we delivered another significant reduction of inventories relative to last year, even as we build ahead of our peak selling season.

Bracken Darrell: Inventories at the end of the quarter were down 24% versus last year, or $676 million. Additionally, net debt is down $587 million year over year, supporting our plan to deliver.

Bracken Darrell: Inventories at the end of the quarter were down 24% versus last year or $676 million.

Bracken Darrell: Additionally, net debt is down $587 million year over year supporting our plan to Delever.

Bracken Darrell: Last quarter, I told you our strategic portfolio review was complete. I also said we would provide you an update, and we had some news. We announced the sale of Supreme for $1.5 billion three weeks ago. To be clear, I love the Supreme brand and I love the Supreme team. It's back to strong, profitable growth. But the lack of synergies of the rest of our organization made us a clear choice for the best of us. This allows us to sharpen focus on the core business and also improve our leverage.

Bracken Darrell: Last quarter I told you of our strategic portfolio review is complete.

Bracken Darrell: I also said we would provide you an update we had some news.

Bracken Darrell: We announced the sale of Supreme for $1 $5 billion three weeks ago.

Bracken Darrell: To be clear I love, the Supreme brand and I loved the Supreme team is.

Bracken Darrell: It's back to strong profitable growth.

Bracken Darrell: But the lack of synergies with the rest of our organization made this a clear choice for divestiture.

Bracken Darrell: This allows us to sharpen focus on the core business and also improve our leverage.

Bracken Darrell: Turning to the Americas, our platform is now fully operational. As expected, the Americas continues to perform well below our potential. But they declined softened from negative 23% last quarter to negative 12% in Q1. Almost as important to me near term, we continue to be able to forecast the business. We now have eight consecutive months of accurate forecast.

Bracken Darrell: Turning to the Americas, our platform is now fully operational.

Bracken Darrell: As expected the Americas continues to perform well below our potential.

Bracken Darrell: The decline softened from negative 23% last quarter to negative 12% in Q1.

Bracken Darrell: Almost important almost as important to me near term, we continue to be able to forecast the business.

Bracken Darrell: We now have eight consecutive months of accurate forecasts.

Bracken Darrell: Moving to vans, we said the first quarter of this year would be summer to the fourth quarter last year, excluding the impact from inventory reset actions. And we actually did a little better than that with some modest improvement. Down 21% in Q1 versus 27% in Q4, reflecting an improved trend in its two biggest regions. Importantly, while the headline numbers remain weak, several indicators are showing we're heading the right direction. EME is once again the region which is showing clear early encouraging signs, with wholesale up in the quarter for the first time in six quarters, with particularly positive momentum and key accounts.

Bracken Darrell: Moving to bands, we said the first quarter of this year would be similar to the fourth quarter last year, excluding the impact from inventory reset actions.

Bracken Darrell: And we actually did a little better than that with some modest improvement down 21% in Q1 versus 27% in Q4, reflecting an improved trend in its two biggest regions.

Bracken Darrell: Importantly, while the headline numbers remain weak several indicators are showing we are headed in the right direction.

Bracken Darrell: EMEA is once again the region, which is showing clear early encouraging signs with wholesale up in the quarter for the first time in six quarters with particularly positive momentum in key accounts.

Bracken Darrell: As a result of the inventory reset actions, our markets are clean and we have space to introduce our new products, which are performing well across regions. The new school continued to gain momentum as performing well across regions is now the number two franchise globally. Other more recently introduced products are also gaining traction, including our advanced SKCU, AVE 2.0, and Ultra Range Neo. And we've launched several new styles in July. As part of our brand elevation strategy, we advanced our off-the-wall collections, unveiling a new collaboration with Pro NC Schooler, showing the depth and breadth of our brand's potential.

Bracken Darrell: As a result of the owned to our reset actions our markets are clean and we have space to introduce our new products, which are performing well across regions.

Bracken Darrell: The New school continued to gain momentum and is performing well across regions is now the number two franchise globally.

Martino Scabia Guerrini: Other more recently introduced products are also gaining traction, including our Advanced Skate Shoe Ave 2.0 and Ultra Range Neo, and we've launched several new styles in July, combined with events in music, art, and design. We have over 20 sponsored athletes across skateboarding and BMX at the Paris Games. In fact, just today, we won gold and silver in today's women's skate event.

Bracken Darrell: Other more recently introduced products are also gaining traction, including our advanced <unk>, a 2.0 and ultra range Neo and we've launched several new styles in July.

Bracken Darrell: As part of our brand elevation strategy, we advanced our off the wall collections billing a new collaboration with protons is cooler.

Bracken Darrell: Showing the depth and breadth of our brands potential and with all the excitement and buzz around the events in Paris. This summer we had our own about just beforehand or in Paris fashion week.

Bracken Darrell: And with all these sightmen buzz around events in Paris this summer, we had our own event just beforehand during Paris Fashion Week, where we started with a Paris takeover in June, with a set of grassroots skate activations combined with events in music, art, and design. Finishing off at the disruptive moment, when we took over the iconic Sacre Cool, to showcase OTW and bands off-fintic skate culture.

Bracken Darrell: Where we started with a Paris takeover in June with a set of grassroots skate activations combined with events and music art and design.

Bracken Darrell: Finishing off with the disruptive moment.

Bracken Darrell: When we took over the iconix separate cool to showcase OTW and Vance authentic escape culture.

Bracken Darrell: Peter. We have over 20 sponsored athletes across skateboarding and BMX at the Paris Games. In fact, just today, we won gold and silver in today's women's skate event. We leverage this exciting time to launch our always pushing campaign globally, featuring our top athletes in Paris, Tokyo, and New York. These new products and marketing efforts are resonating with consumers and contributing to further progress in Google search trends, which continue to move in the right direction across our markets.

Speaker Change: We have over 20 sponsored athletes across skateboarding and BMX with the Paris games. In fact, just today, we won gold and silver in todays women's skate event.

Bracken Darrell: We leveraged this exciting time to launch are always pushing campaign globally, featuring our top athletes in Paris, Tokyo and New York.

Speaker Change: These new products and marketing efforts are resonating with consumers and curved contributing to further progress in Google search trends, which continue to move in the right direction across our markets.

Bracken Darrell: Now let me give you a quick overview of the first quarter. Revenue was down 8%, which was a little better than expected, demonstrating slight sequential improvement versus Q4, with the trendline improvement across almost all brands. No, this is our smallest quarter of the fiscal year and largely skewed towards the Americas in wholesale. It's worth noting that growth in our DTC business was in line with last quarter of these pollute vans. Note, in Vans, we're closing unpopular stores and non-strategic ones, dampening our growth even further. The North Face was down 2% with growth in DTC of 8% globally, with positive performance across each of the three regions, displaying continued strong brand health, whereas wholesale was down on a global basis.

Operator: Now, let me give you a quick overview of the first quarter. Revenue was down 8%, which was a little better than expected, demonstrating slight sequential improvement versus Q4. It's worth noting that growth in our DTC business was in line with last quarter if you exclude VAM, with positive performance across each of the three regions, displaying continued strong brand health, whereas wholesale was down on a global basis. We also consistently said we'd reinvest 25 to 30% of our growth savings.

Speaker Change: Now let me give you a quick overview of the first quarter.

Speaker Change: Revenue was down, 8%, which was a little better than expected demonstrating slight sequential improvement versus Q4.

Bracken Darrell: With the trend line improvement across almost all brands.

Speaker Change: No. This is our smallest quarter of the fiscal year and largely skewed towards the Americas and wholesale.

Bracken Darrell: It's worth noting that growth in our DTC business was in line with last quarter, if you exclude bands.

Bracken Darrell: Note and vans were closing unprofitable stores in non strategic loans dampening our growth even further.

Speaker Change: The north face was down 2% with growth in DTC of 8% globally.

Bracken Darrell: With positive performance across each of the three regions displaying continued strong brand health, whereas wholesale was down on a global basis.

Bracken Darrell: Across both channels and regionally, the standout continues to be a pack which grew strongly, up 35%, even as we count the post-COVID opening quarter last year. Moving down the P&L, gross margin was down 80 basis points for the prior year, in line with the guardrails we gave you in May. To quickly remind you, this is primarily driven by the continued impact of our clear-out activities from the vans product we took back in our reset. Our operating margin was down 360 basis points, largely driven by SG&A D leverage. I'd like to note, our SG&AD dollars were down year over year.

Bracken Darrell: Across both channels and regionally standout continues to be APAC, which grew strongly up 35%, even as we comp the post COVID-19 opening quarter last year.

Bracken Darrell: Moving down the P&L gross margin was down 80 basis points from the prior year in line with the Guardrails. We gave you in may.

Bracken Darrell: To quickly remind you. This is primarily driven by the continued impact of our clear out activities from the vantage product we took back in our reset.

Bracken Darrell: Our operating operating margin was down 360 basis points, largely driven by SG&A deleverage.

Bracken Darrell: I'd like to note our SG&A dollars were down year over year and I'd also like to say I, absolutely detest Delevering our P&L.

Bracken Darrell: And I'd also like to say, I asked League to test, delivering a P&L. So you can be assured, we are not at all finished reducing SG&AD, even as we invest in our own growth turn. As a result, Q1 loss per share was 33% as expected.

Bracken Darrell: So you can be assured we are not at all finished reducing SG&A, even as we invest in our own growth turn.

Bracken Darrell: As a result Q1 loss per share was <unk> 33 was negative 33 cents as expected.

Bracken Darrell: Looking ahead to Q2, let me provide some guardrails for that quarter. These are all exploding Supreme, both from this year and last year. The overall Q2 revenue trend is expected to show modest improvement versus Q1, in line with our comments in May. Don't get me wrong, we're not back to growth yet, but the decline rate should continue to moderate. And to give you some additional color on our two biggest brands, at Vans, we will see modest sequential improvement, as we did this quarter. For the North days, we expect Q2 revenue to be down relative to Q1.

Bracken Darrell: Looking ahead to Q2, let me provide some guardrails for that quarter.

Bracken Darrell: These are all excluding Supreme both from this year and last year.

Bracken Darrell: The overall Q2 revenue trends is expected to show modest improvement versus Q1 in line with our comments in May.

Bracken Darrell: Don't get me wrong, we're not back to growth yet, but the decline rates should continue to moderate.

Bracken Darrell: And to give you some additional color on our two biggest brands.

Bracken Darrell: Vance, we will see modest sequential improvement as we did this quarter.

Speaker Change: So the north face, we expect Q2 revenue to be slightly down relative to Q1, but remember TNF had 17 or so say growth in Q2 of last year.

Bracken Darrell: But remember, TNF had 17% growth in Q2 of last year. Turning to gross margin, we expect this to be up slightly in Q2 versus last year. Inventory quality has improved, so there's less impact from the fleshing of inventory post-hands reset.

Bracken Darrell: Turning to gross margin, we expect this to be up slightly in Q2 versus last year.

Bracken Darrell: Inventory quality has improved so there's less impact from the flushing of inventory post fans reset.

Bracken Darrell: On SG&AD, let me spend a little time breaking this down further. First, reinvent savings are on track. Second, we will have normalized incentive compensation, as well as inflation, as we indicated before. We also consistently said we'll reinvest 25% to 30% of our gross savings. As we head into our holiday season, I decided to pull some of that forward, and it begins to appear in Q2. To be clear, this is not the end of our cost story. Expenses in Q2 are expected to be up slightly year over year. This combined with further revenue declines will lead to a higher rated de-lavering Q2, but we will have more to say about that in October, which I'll explain in just a moment.

Bracken Darrell: On SG&A, let me spend a little time, breaking this down further.

Bracken Darrell: First reinvent savings are on track.

Bracken Darrell: Second we will have normalized incentive compensation as well as inflation as we indicated before.

Bracken Darrell: We also consistently said, we'll reinvest 25% to 30% of our gross savings.

Bracken Darrell: As we head into our holiday season, I decided to pull some of that forward. It appears it begins to appear in Q2.

Bracken Darrell: To be clear this is not the end of our cost story.

Bracken Darrell: Expenses in Q2 are expected to be up slightly year over year. This combined with further revenue declines will lead to a higher rate of deleverage in Q2, but we will have more to say about that in October which I'll explain in just a moment.

Bracken Darrell: Moving into fiscal year 25, we're on track to deliver guidance for free cash flow plus to proceed from non-core physical asset sales of about $600 million. This excludes the impact of the investiture of Supreme. We expect the Supreme Investor to be completed at some point by the end of the calendar year. Finally, to conclude, we continue to make progress. The quarter improves sequentially relative to Q4 across almost all our brands. We're advancing on re-advent. Cost savings are on track, and we're committed to more cost reduction. We're addressing the balance sheet leverage ratio with the first step to sale of Supreme.

Bracken Darrell: Moving into fiscal year 'twenty five we're on track to deliver guidance for free cash flow plus the proceeds from noncore physical asset sales of about $600 million.

Bracken Darrell: This excludes the impact of the divestiture of Supreme.

Operator: We expect the Supreme Divestiture to be completed at some point by the end of the calendar year. We continue to make progress. The quarter improves sequentially relative to Q4 across almost all our brands. And we'll build on that in part two, or the second part, toward the end of the fiscal year, which will focus on our brand and commercial strategy.

Bracken Darrell: We expect a supreme divestiture to be completed at some point by the end of the calendar year.

Bracken Darrell: Finally to conclude.

Bracken Darrell: We continue to make progress the quarter improved sequentially relative to Q4 across almost all our brands we're advancing on reinvent.

Bracken Darrell: Cost savings are on track and were committed to more cost reduction.

Bracken Darrell: We're addressing the balance sheet leverage ratio with the first sale of spring.

Bracken Darrell: The new platform in the Americas is moving strongly in the right direction, and advance we're seeing the progress we expected. My level of confidence has never been higher. We have an incredible leadership team and dedicated talent at BF. Together, we will make the continued progress on our path to deliver strong, sustainable growth and value creation at BF.

Bracken Darrell: The new platform in the Americas is moving strongly in the right direction in advance we're seeing the progress we expected.

Bracken Darrell: My level of confidence has never been higher we have an incredible leadership team and dedicated talented V. F. So together, we will make the continued progress on our path to deliver strong sustainable growth and value creation of V F.

Bracken Darrell: To close, I've dropped a few hints about our longer-term plans. Let me clarify.

Bracken Darrell: To close I dropped a few hints about our longer term plans. So let me clarify I am excited to announce we'll be hosting a two part investor event.

Bracken Darrell: I'm excited to announce we'll be hosting a two-part investor event. Part one will be Marker Calendar's October 30th in New York, live, and of course, it'll also be webcast, focused on broader BF strategy and laying out the building blocks for a return to value creation. And we'll build on that in part two, or the second part, toward the end of the fiscal year, which will focus on our brand and commercial strategies.

Bracken Darrell: Part one will be Mark your calendars October 30th in New York Life and of course, it will also be webcast.

Bracken Darrell: Focused on broader <unk> strategy and laying out the building blocks for our return to value creation.

Bracken Darrell: And we will build on that in part two or the second part towards the end of the fiscal year, which will focus on our brand and commercial strategies.

Operator: With that now, with that, I'll now open the line for questions. At this time, I would like to remind everyone that in order to ask a question, press star, then the number one on your telephone keypad. For today's session, we do request to please limit your question to one question.

Bracken Darrell: With that now with that I'll now open the line for questions.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

Speaker Change: Today's session, we do request to please limit your question to one question.

Michael Binetti: Your first question comes from the line of Brook Road with Goldman Sachs. Please go ahead. Good afternoon, and thank you for taking a question. Brian, I was hoping you could provide additional color on your plans for the Vans brand going forward now that you have a permanent brand president in place. You talked a little bit about some early green shoots that you're seeing in the brands. Can you elaborate a little bit more on what you expect the path to look like for the brand for the next couple of quarters, both in terms of new innovation, scaling, changes in brand marketing, and maybe any types of marketing that you're pulling forward regarding SGNA for the next couple of quarters.

Speaker Change: Your first question comes from the line.

Speaker Change: Of.

Speaker Change: <unk> with Goldman Sachs. Please go ahead.

Bracken Darrell: Thank you. Yeah, I'll say a little bit of that for the next quarter or two. And of course, by the time we get to the end of the year when Sun has chance to speak to it, but I'll give you what you're asking, I think. I expect you'll see more of the same. We just turned on a new marketing campaign for vans, which is tied directly to a cascade of product launches. As I mentioned in the opening remarks, the new franchises are doing well. And we've now got two of our new franchises. I think we're in the top five.

Bracken Darrell: So ultra range and new school was number two, was number five. I think it just shows you how responsive we are to new products when they're right. And so you're going to see more new products that come through the year. We launched several new styles just this month. Of course, they're not incorporated in what we've done so far this year. On top of that, we've completely revamped our coastal approach to marketing. We've just introduced our Always Pushing campaign, which started in Paris when we had that event that we mentioned in June. And it's now moving right down through everything we do.

Speaker Change: Come through the year, we will launch several new styles. Just this month of course, they are not incorporated in what we've done so far this year.

Speaker Change: On top of that we've completely revamped our approach to marketing. We've just we just introduced are always pushing campaign, which started in Paris. When we we had that event that we mentioned in June and it's now moving right down through everything we do and you'll see more and more of that as time goes on.

Bracken Darrell: And you'll see more and more of that as time goes on. You know, our grassroots campaign is well underway, as those are influencer campaign. You may have seen a few celebrities caught wearing Vans just recently. If you Google it, you'll see it. So you're just going to see more and more of that as you go through the year. This is the kind of energy we need from vans. And I'm super excited about it. Great. Thanks so much. I'll pass it on. Thank you.

Speaker Change:

Speaker Change: Our grassroots campaign is well underway as our Influencer campaign, you may have seen a few celebrities caught caught wearing our vans just recently if you Google It youll see it.

Speaker Change: So you're just going to see more and more of that as you go through the year. This is the kind of energy, we need from Vance and I'm Super excited about it.

Operator: Great. Thanks so much. I'll pass it on.

Speaker Change: Great. Thanks, so much I'll pass it on thank you.

Michael Binetti: Your next question comes from the line of Michael Binetti with Evercore. Please go ahead. Hey guys, thanks for taking our question here. Congrats on a nice court. Bracken, first off, thanks for this spoiler on today's women's skate medals. Appreciate that. Sorry. Could you speak to the diverging trends here in North Bay, with what's this global brand, directed consumer up 8% ex-currency, and then some like US wholesale was the issue. Can you maybe just help us roll forward what's holding wholesale back right now with good real-time trends at D2C, how you expect that to trend as we get into the important season for North Bay on the wholesale side?

Operator: Your next question comes from the line of Michael Binetti with Evercore.

Speaker Change: Your next question comes from the line of my terrible Manthey Evercore.

Speaker Change: Go ahead.

Manthey Evercore: Hey, guys. Thanks for taking my question here and congrats on a nice quarter.

Speaker Change: And first off thanks for the spoiler on today's women's skate metals I appreciate that.

Speaker Change: Could you.

Speaker Change: Alright.

Speaker Change: Could you speak to the diverging trend here in north face with the global brand direct to consumer up 8% ex currency and then it sounds like U S. Wholesale was the issue can you maybe just help us roll forward, what what's holding wholesale back right now with good real time trends that need to see how you expect that to trend as we get into the.

Speaker Change: Important season for north based on the wholesale side.

Bracken Darrell: Yeah, you know, first of all, I apologize to anyone that didn't cross my mind that would be a spoiler. It was such good news on our side. But if we did, spoiler, it's still good news. Yeah, so on TNF, you know, the underlying reality is we continue to have good solid DTC growth around the world, and China continues to just be super strong. You know, it's just exciting. Wholesale is relatively weak, both mainly driven by traffic and conservatism, I think, on the retail side, both in the US and in some extent, you're up to, and you can see how the numbers be getting into it.

Bracken Darrell: I think it's probably a function of a couple of things. One is the overall macro environment, and also a little bit of skittishness just because of the weather last year. I was so warmed during the holiday season. So we're not guiding TNF going forward, but I feel really good about the brand, I feel really good about the product and issues that are coming, and I'd say stay tuned. I think TNF's going to be just fine.

Paul Vogel: So we're not guiding TNF going forward, but I feel really good about the brand. I feel really good about the product initiatives that are coming, and I'd say stay tuned. I think TNF's gonna be just fine.

Allan Leung: Your next question comes from the line of all levels with the City Group, please go ahead. Okay, curious within that pre-cashflow guidance that you reiterated, can you talk about what might have changed within that guidance on a brand, channel, or geographic level? Anything that you are now assuming can better or worse versus what you were thinking previously, or any changes in your working capital assumptions in my factor in to what you're looking for on pre-cashflow mathematics. Yeah, you know, I'm happy to say there are many changes, you know, so I'd say overall, this is a good reflection, but I think I are getting a better handle on our forecasting, and it's very much the same in terms of the underlying dynamics as it was last quarter.

Paul Vogel: Yeah, you know, I'm happy to say there aren't many changes, you know, so I'd say overall this is... A good reflection, I think, of getting a better handle on our forecasting, and it's very much the same in terms of the underlying dynamics as it was last quarter. The only real change will be, at some point, we will pull Supreme out, of course, which is, as you may or may not realize, pretty back-end loaded, so most of their cash would come in at the back end of the year.

Bracken Darrell: The only real change will be at some point we will pull Supreme out, of course, which is, as you may or may not realize, is, you know, it's pretty back-and-loaded, so most of the cash would come into the back end of the year, but other than that, there won't be a big change. Can you quantify that? We released the, I think we released the PML in the filing, so last year it was $520 million and about 20% OI. You know, you can kind of assume that's about what the cash looks like. It's going to be harder than that this year, so think around 600 and 120, and you know, and we're not sure when this will close yet, but whenever it closes, then the rest of the year, of course, the cash will pull out, but we'll reset our cash.

Speaker Change: Last quarter, the only real change will be at some point, we will pull Supreme out of course, which is as you may or may not realize is.

Speaker Change: It's pretty backend loaded so most of their cash would come in at the back end of the year, but other than that there won't be a big change.

Speaker Change: Can you quantify that.

Speaker Change: We released I think released the P&L of the filing so last year, it was $528 million and about 20% Oi.

Speaker Change: Can kind of assume that's about what the cash looks like it's going to be higher than that this year. So think.

Speaker Change: I think around 600 and 120 and.

Speaker Change: And we're not sure when this will close yet, but whenever it closes in the rest of the year and of course, the cash we'll pull out it will reset our guidance for that but it's probably you know, let's say close to halfway through the year will be more than half of the overall cash.

Operator: Thank you, good luck. Thank you.

Speaker Change: Thank you good luck.

Speaker Change: Thank you.

June Duffy: Your next question comes from the Lion of June Duffy. It's different. Please go ahead. Hello. Thanks. Hey, Bracken. Hi, Paul. Welcome. Hey, just to start a clarification question: with the Supreme Sale, are you done with the portfolio cleanup, or are there additional added sales contemplated as potentially appropriate? You know, we don't have anything specific contemplated, but I don't think we're ever really done in terms of reviewing our portfolio. So we've certainly finished our portfolio review, at least for now. We'll probably recycle amount on a regular basis, but we will recycle on a regular basis. There's no specific plans now.

Speaker Change: Your next question comes from the line of Jim Duffy with Stifel. Please go ahead Hello.

Operator: Thanks. Hey, Bracken. Hi, Paul. Welcome.

Jim Duffy: Thanks, Hey, Bracken had Paul welcome.

Speaker Change: Hey.

Jim Duffy: Just to start a clarification question with the Supreme sale are you done with the portfolio cleanup or are there additional asset sales contemplated as potentially appropriate.

Bracken Darrell: This puts us in a good position to pay off the next two transit data, as we promised. And, you know, from there on, it'll be about a good strong cast generation. Unless we decide to invest something else in the future. And I'd say, stay tuned on that. You know, the October Investor Day will give you a good sense for how we expect that that's to come down. Great. Thank you.

Bracken Darrell: T's additional cost savings. Is that a philosophical point of emphasis, or are you speaking to specific cost savings? You identified and scoped up curious. It is not going to stop in October as well. Yeah. Thank you for asking that question. Nobody else did. I was going to bring it out. It is not a philosophical point. We spent the last four months really scoping additional cost savings. We're not ready to surface with anything yet, but we will talk about that in October. We're actually working with the external consultant on that, and we feel really good about our program.

Matthew Boss: Again, for today's session, we request to please limit your question to one question, and your next question comes from the line of Matthew Boss with JP Morgan. Please go ahead. Great. Thanks. So, Bracken, as we think about your first year at the helm, larger picture. Where do you stand on the priorities that you laid out initially? Maybe first on the management team, any key roles that you're looking to fill from here? Second, I know you cited today sequential improvement, but any visibility to a return to top line growth as you see it today. And then maybe just last how you feel about organic free cash flow and debt pay down priorities?

Operator: Great, thanks. So, Bracken, as we think about your first year at the helm, the larger picture, maybe where do you stand on the priorities that you laid out initially? Maybe first, on the management team, any key roles that you're looking to fill from here? Second, I know you cited sequential improvement today, but any visibility to a return to top-line growth as you see it today? And then maybe just last, how do you feel about organic free cash flow and debt pay down priorities? Yeah.

Speaker Change: Today's sequential improvement, but any visibility to a return to topline growth as you see it today and then maybe just last how do you feel about organic free cash flow and debt pay down priorities.

Bracken Darrell: Yeah. So I will repeat, you know, the famous four are the prominent famous to you, but they feel like I feel like I've told you so many times those four priorities that I think I said in my first full call. So I won't go through those, but you reference kind of a summary of those. Yeah, from a management team, I feel great. I mean, I think we've really got an all star team and it's all I couldn't ask for. And everybody's on the floor. Everybody's on the team now. We're about half of them are new in the last month; half of them are not.

Speaker Change: Yeah.

Speaker Change: So I will repeat the same as for the permanent famous to you, but I feel like I feel like I told you. So many times those four priorities that I think I said in my first full call.

Speaker Change: So I will go through those but you referenced kind of a summary of those from a management team I feel great. I mean, I think we've really got an all star team.

Speaker Change: It's all I could have asked for.

Speaker Change: Everybody is on the other.

Speaker Change: For everybody on the team now where about half of them are new in the last months half of them are not.

Bracken Darrell: And it's really a terrific team. Now it's my job to make sure that we together work well as a team. So we're really going to be working on that. In terms of the, the turn, the, you know, the advance turn and the turn in general in the business. What's, when do I forecast it happening? I'm not going to give a number today, but I will tell you in October will be ready to talk about that. So I feel very good about the progress for making. It feels very similar to where I was when I was in my last company, and, you know, I feel like I can see it.

Speaker Change: And it's really a terrific team now it's my job to make sure that we together work well as a team. So we're really going to be working on that.

Speaker Change: In terms of the.

Speaker Change: The turn.

Speaker Change: <unk> turned on the turn in general in the business.

Speaker Change: When do I forecast it happening I'm not going to give you a number today, but I will tell you in October we'll be ready to talk about that so I feel very good about the progress we're making it feels very similar to where I was when I was in my last company.

Speaker Change: I feel like I can see it in and I feel good about in terms of the debt pay down we will certainly talk about that in October when you can expect that leverage to come down.

Bracken Darrell: And, and I feel good about it. In terms of the debt pay down, we'll certainly talk about that in October when you can expect that levers to come down. Great, best of luck. Thank you.

Speaker Change: Great Best of luck.

Speaker Change: Thank you.

Lauren Vasilescu: Your next question comes from the line of Lauren Vasilescu, with BNP. Please go ahead. Oh, good afternoon. Thank you very much for taking my question. Welcome to the call. Hey, Bracken. Hey, I wanted to ask about, great to hear about Sunche's decision to leave Lulu to join you, but can you talk about Caroline Brown's onboarding for TNF, what she brings to the table, and then maybe Bracken, I brought Paul Kemp, say much, like, are you seeing any disruptions from the Red Sea or from Bangladesh, where two Q revenues might flow into three Q? Let me take the last one first.

Operator: Oh, good afternoon. Thank you very much for taking my question. Welcome to the to the call. Hey Bracken. Hey, I wanted to ask you about Sunche's decision to leave Lulu to join you, but can you talk about Caroline Brown's onboarding for TNF, what she brings to the table? And then maybe Bracken, I know Paul can't say much, but are you seeing any disruptions from the Red Sea or from Bangladesh where 2Q revenues might flow into 3Q?

Bracken Darrell: Let me take the last one first. So Red Sea, I think we're pretty stable there now. As much activity and as much challenge as for the humanitarian and otherwise challenges there. Our workarounds are well in place.

Bracken Darrell: So, Red Sea, I think we're pretty stable there now, as much activity and as much challenge is for the humanitarian and otherwise challenge there. We've our workarounds are well in place, so I think we're okay there. On Bangladesh, we do have some disruption. We're about 15% of our production comes out of there. We do have a little bit of risk in our Q2 on now, the kind of back end of our Q2, but it's not big enough that I'd make a big deal out of it, and I'm pretty convinced it'll moderate based on the events that have happened in the last 48 hours, but we'll see.

Bracken Darrell: So I think we're okay there. On Bangladesh, we do have some disruption. About 15% of our production comes out of there. You know, we do have a little bit of risk in our Q2 on that, on the, you know, kind of the back end of our Q2. But I'm not, it's not big enough that I'd make a big deal out of it.

Bracken Darrell: And I'm pretty convinced it'll moderate based on the events that have happened in the last 48 hours. But we'll see. Yeah, I think we'll be okay. We're also quite good at moving production when we need to be. So there certainly wouldn't be any kind of long-term impairment if anything happened worse than it is today.

Bracken Darrell: I think we'll be okay. We're also quite good at moving production we need to be, so there certainly wouldn't be any kind of long-term impairment if anything happened worse than it is today. And if it were to stay the way it is today, it's not the end of the world. On Caroline, I'm just super excited about Caroline's background. She started in luxury. She spent her whole career in apparel. She really knows this business. She has a great eye for fashion and just an incredible passion for the North-Ace, and she's a phenomenal leader. I mean, she just showed up immediately as she walked in the door.

Bracken Darrell: And if it were to stay the way it is today, it's not the end of the world. For Caroline, I'm just super excited about Caroline's background. You know, she started in luxury. She has spent her whole career in apparel. She really knows this business. She has a great eye for fashion and just an incredible passion for the North Face. And she's a phenomenal leader. I mean, it just showed up immediately as she walked in the door.

Bracken Darrell: We've now got, you know, Timberland tents all over the lobby, and people are having meetings in them, at least I am. So she is really exciting to have here. I would point out, Laurent, something that some of you may not have realized. We are moving super fast here. And a lot of what we're doing, for example, right now, I can't tell you what we're doing, but we're doing a lot right now that we're not disclosing.

Bracken Darrell: We've not got Timberland tense all over the lobby, and people are having meetings in them, at least I am. So she is really excited to have her. I would point out, Laurent, that something that some of you may not have realized, we are moving super fast here, and a lot of what we're doing, for example, right now. I can't tell you what we're doing, but we're doing a lot right now that we're not disclosing. So, for example, at this point last quarter, you didn't know about Sun, you didn't know about Caroline, you didn't know about Supreme.

Bracken Darrell: So, for example, at this point last quarter, you didn't know about Sun, you didn't know about Caroline, you didn't know about Supreme. Now, I'm not suggesting we've got people changes or portfolio changes coming. My point is we just have big activities that are happening all the time now, and the pace is not going to let up.

Speaker Change: Karim.

Lauren Vasilescu: Now I'm not suggesting we've got people changes or portfolio changes coming. My point is we just got big activities that are happening all the time now, and the pace is not going to let up. Wonderful. Thank you very much. Thanks, Laurent.

Speaker Change: Suggests you've got people change their portfolio changes coming my point is we just got big activities that are happening all the time now and the pace is not going to let up.

Speaker Change: Wonderful. Thank you very much thanks Laura.

Bob Der Boer: Your next question comes from the line of Bob Der Boer with Guggenheim. Please go ahead. Hi, Braggen. Welcome, Paul. You okay?

Speaker Change: Your next question comes from the line of Bob Bowen.

Speaker Change: We've got Guggenheim. Please go ahead.

Bob Bowen: Hi, Bracken and welcome Paul.

Speaker Change: Okay.

Bracken Darrell: I guess the question I'd like to focus on is maybe China a little bit braggen. Can you just talk more about what you're seeing by Brandon, China, and just how you believe the outlook is there for what's happening? Sure. Look at people that I think China in general has been a great story for the F, and it is the overall market slowed down a little bit, as we all know, but it's still just a fantastic market. I mean, Caroline and I were talking about this today. It's such a big opportunity for us, not just for The North Face, but for all of our major brands.

Bob Bowen: I guess the question I'd like to focus on is maybe China, a little bit bragging can you just talk more about what you're seeing by brand in China and just how you believe the outlook is there for what's happening.

Speaker Change: Sure look I feel that I think.

Speaker Change: China in general has been a great story for the us and it is the overall market slowed down a little bit as we all know, but it's still just a fantastic market I mean, the Carolina never thought was such a big opportunity for us not just for the north face for for all of our major brands.

Bracken Darrell: I think the story in China is very much the story of each brand's story around the world. So, you know, bands that are turning around, the bands were really, if you think we're moving, we're changing a lot of bands over globally. You should see we're doing a China. I mean, we're really closing a lot of stores, opening stores. It's an incredible amount of churn. Only China's speed can you do; we're doing there. And they're not company-owned stores, they're partner stores with boys happening fast. The North Face continues to do extremely well there, as you know. You can see the numbers today.

Bracken Darrell: By the way, we're indexing against some very strong numbers in the year ago, so that number today is really, really powerful. And, you know, Timberland's a working process. I think Timberland is an interesting brand, and every, it's a little different in every part of the world, which is one of the challenges to Timberland. But I think there's that in that lies the opportunity. I'm excited about Timberland, but we're not focused on it for now, at least not for these discussions.

Jay Sole: Thank you. Your next question comes from the line of Jay Sole with EBS.

Bracken Darrell: Please go ahead. Great. Thank you. Hi, Bracken. Why don't you just ask you about Dickie's? hasn't come up yet. If you could elaborate a little bit on what you're seeing with that brand, what's the plan there? How do you expect to get it back to healthy growth and healthy margin? Thank you. Sure. You know, Dickie's is kind of the story of two actions. You know, we moved too fast to try to turn it into a pure fashion brand here in the US. And then we really pushed to make it a pure fashion brand outside of the US.

Bracken Darrell: It continues to do that outside of the US is doing fine in the US. It's really struggled because we lost our footing on our core work business. You know, and we're really refocused completely there now. So I'd say more to come there. I think Dickie's is a fantastic brand and a great business. A really good, strong, solid brand. And we'll get it back on its footing. It'll just take a little time. Sure. Okay. Thank you so much. Thank you.

Mitchel Kummetz: Your next question comes from the Lion of Mitch Cummets with Seaport Research Partners. Please go ahead. Yes. Thanks for taking my question. Bracken, I was hoping you could provide me some more real-time color on dance house performing for back to school. And you mentioned modest improvements in the second quarter. Is that really a function of challenging selling? Can you talk a little bit more about the sellout? Yeah, I think the sellout is contained to be down year versus year ago, which nobody likes, but you know, the trend is in the right direction overall. And so I guess that's the main thing.

Bracken Darrell: So it's a little too early for us to give you any kind of an expectation for back to school. You know, you just, if we had this called just a few weeks later, I'm not played, or we certainly could. But we'll see. You know, I'm, I feel good about the progress from making advance. I feel great about the marketing and product initiatives. So I just say, stay tuned. You know, we said we expect sequential improvement, slight sequential improvement. We do. And that's the kind of progress I want to see on dance all the way through the year.

Operator: Thank you.

Speaker Change: Thank you.

Jonathan Combs: Your next question comes from the line of John Pernum with D.D. Cohen. Please go ahead. Oh, John. Hey, good afternoon, Bracket. Afternoon, Paul. Congrats on all the positive changes you can make. Thank you. Now just to go back to advance one more time. Obviously, some should have a lot to say on dance in the coming months. What do you think the biggest opportunities for bands are from a category level? And is there anything to do in terms of right sizing distribution, whether it be in wholesale or DTC at this point? Well, first of all, the answer to your second question first: you know, we are really right-sizing and distribution.

Speaker Change: Your next question comes from the line of John Kernan with D. D. Cohen. Please go ahead hi, Jay.

Speaker Change: Yes.

Speaker Change: Hey, good afternoon Bracken afternoon, Paul.

Speaker Change: Congrats on all the deposit changes you can make it.

Speaker Change: Thank you.

Speaker Change: It's not to just to go back to bands one more time.

Speaker Change: Obviously, Sun's gonna have a lot to say on dancing in the coming months, what do you think the biggest opportunities for bands are from a category level and.

Speaker Change: Is there anything.

Speaker Change: Did you in terms of right sizing distribution, whether it be in wholesale or did you say at this point.

Speaker Change: Well first of all let me answer your second.

Speaker Change: Grocery first you know we are really right sizing our distribution. So we're doing quite a bit on both wholesale and <unk>.

Bracken Darrell: So we're doing quite a bit on both wholesale and DTC and wholesale. We are pulling back on the VHL in Europe and the US. And you know, that's happening real time. We're not talking a lot about it. So we're not going to make a big deal about it. But we are. And in the stores, you heard me talk about closing stores in the US. We're also, as I said, closing stores in China and a little bit of churn in Europe, too. So overall, I'd say there's a lot of activity there. What's the biggest opportunity? I mean, I mean, bands is just a fantastic brand.

Speaker Change: DTC and wholesale we are pulling back on the value channel in Europe, and the U S.

Speaker Change: And that's happening real time, we're not talking a lot about it so we're not going to make a big deal about it but we are.

Speaker Change: And in the stores you heard me talked about closing stores and in the U S. We're also as I said closing stores in China, and a little bit of churn in Europe too. So overall I'd say theres a lot of activity there what's the biggest opportunity event I mean vans as Vince is just a fantastic brand and it just lost the.

Bracken Darrell: And it just lost the... He's got energy. You know, it really lost energy. And you know, you can see how it happened. You know, we got so over-rotated on a couple of styles. I know you've heard me say this before, but I feel compelled to say it again. We're over-rotated on a couple of styles that will always be popular, by the way. But you could overdo them probably almost any point. And we over-rotated at the same time that the kind of culture picked them up and ran with them. And that just really drove too far, too much of a by now.

Operator: Energy. You know, it really loses energy.

Speaker Change: Energy really lost energy.

Bracken Darrell: Kind of mentality into the marketplace. And I think everybody who needed them got them. And there was not; there's never been a boy. I don't like bands anymore. I'm done with bands, or it's just I got them. In fact, you still see people wearing them. So, what are we doing? So we're innovating. And we're also putting in franchise management. So innovating by bringing out new styles. So you've seen, you know, you're starting to see them come one of the time now. 8.0, a new school, three new styles. It's quarter. And we'll have more coming, and then some really key collaborations to give energy.

Bracken Darrell: And then franchise management where you're going to see us take the gas out of some of the older styles for a while. And then recuse them when we first at the very top of the culture chain with key influencers and then flow them down. This is franchise management 101 plus innovation, which I think is really the model for growing a footwear brand. On top of that, I do think there's a fabulous. I mean, we're only 19% of our businesses in is an apparel. And that's a big opportunity, but it's not the most important near-term opportunity.

Bracken Darrell: And I know Son feels the same way I do about that. So I think there's lots of opportunity on bands. Awesome. Thank you.

Adrian: Your next question comes from the line of Adrian. This is Barclays. Please go ahead. Hi, Adrian. Thank you very much. Hi, Bracken. Looking forward to meeting you, Paul. So, Bracken, my first question is going to be more of a, I guess it's philosophical one. So you had talked about on the last quarterly call. I think Mario had said five consecutive months of making plan across the portfolio. I'm assuming based on today's results that's now at least eight consecutive months. Sounds like the confidence at an all time high, and then we're going to get, you know, a two-parter on the analyst day where typically we get numbers or some long range plan numbers.

Bracken Darrell: Can you speak to that your confidence turning into guidance? And then my second question is on gross margin. Can you give us some help on the shaping of the gross margins? Inventories are so clean for the second consecutive quarter. I would imagine that you're not delivering or not having to resort to a lot of vendor concessions. So should we see the full fill gross margins start to improve evenly in the back half? Thank you. Yeah, well, that's the gross margin coming first. You know, I do, we do expect gross margin to improve through the year.

Bracken Darrell: You know, we had a pretty big promotion headwind from gross margins, you know, the last couple of years, and it should start to come off, as you said, because it was going to the back half of the year, especially. And you know, all things, if all things hold, that's our expectation. So I'm optimistic; you know, to me, gross margin will always be the most important number in a P and L. I'm an absolute. I'm looking at Paul right now across the table. I mean, smiling too. We both are real zealots for this. So we're going to really be fixated on gross margin.

Bracken Darrell: I can't promise you every quarter exactly what's going to happen, but I expect it to improve over time. and consistent with that. When we talk about our guidance or lack of guidance when we get to October, we'll come up with a formula for how we're going to do this. I don't want to spoil the fun now. We kind of have a game plan, but we will give you more than we've given in the past, and we'll certainly give you something more in the intermediate term, something that you can look to and see what we're really trying to have to.

Bracken Darrell: So without saying any more, is legable, elbow me right in the neck because you use that close. I'll stop there. Thank you very much.

Operator: Very helpful. Thank you.

Tom Nikic: Your next question comes from the line of Tom Nikic with Redbush Securities. Please go ahead. Hey, John. Basically, my question, and you're a little quiet. Sorry, can you everybody know? Yeah, we can't. Yeah. Okay. I want to ask another question on bands. You mentioned that the market's a lot cleaner than it was before. I'm just wondering, you know, what are the conversations with also partners like? Are they seeing the productivity and new products at the new school that you seem to be seeing in DC as well? And just generally speaking, like, you know, what we need to see to get, you know, that also partners to get on board.

Speaker Change: A follow up on <unk>.

Speaker Change: So sorry, I can't give you.

Speaker Change: Everybody now, yes, we can.

Operator: Okay, I just want to ask another question about VANS. You know, you mentioned that the market is a lot cleaner than it was before. I'm just wondering, you know, what the conversations with wholesale partners are like? Are they seeing the positivity in new products like the new school that you seem to be seeing in DTC as well? Just generally speaking, like, you know, what do we need to see to get, you know, the wholesale partners to get on board?

Speaker Change: Okay.

Speaker Change: I wanted to ask another question on vans.

Speaker Change: You've mentioned that the market's a lot cleaner than it was before.

Speaker Change: I'm just wondering what are the conversations with wholesale partners like are they seeing.

Speaker Change: Positivity and new products like the New school.

You seem to be seeing in DTC as well and just generally speaking like what.

Speaker Change: What do we need to see to get.

Speaker Change: All of our partners to get onboard.

Speaker Change: Slide two.

Bracken Darrell: Re-engaging with the other friends. You know, it's really a, yeah, first of all, yes, they are, they are positive and they. I think all the key partners I've talked to are really want us to be successful in bands because they need us to be successful in bands for them, which is what it's all about. That's what partnership is. Generally, I've heard quite positive things, and you can see it in order books out in the future on bands. Now, those have to be delivered, but I say, so far, so good.

Speaker Change: Re engage with the brand.

Speaker Change: It's really first of all yes. They are they are positive.

Speaker Change: I think all of the key partners that I've talked to are really want us to be successful brands because they need us to be successful events for them, which is what it's all about this partnership has been generally quite positive things and you can see it in our order books are out in the future on bands now those have to be delivered but I'd say so far.

Speaker Change: So good.

Speaker Change: Thanks very much before.

Bracken Darrell: Your next question comes from the line of Ikeburu Cho, with both Fargo. Please go ahead. Hey, Bracken, how are you? Right. I guess my question be, I'm sure you're not going to go into specifics, although feel free to be like, but looking at the four brands. From a rated change perspective on where their growth rates were in the first quarter, where is your greatest confidence today across that portfolio and maybe rank order them in terms of where that confidence kind of lies across all four of the brands. Gosh, you know, that's like asking me to pick which channel is my favorite.

Speaker Change: Your next question comes from the line of I keep her child with Wells Fargo. Please go ahead.

Hey, Brian how are you great I guess my question would be I'm sure you're not going to go into specifics, although feel free if you'd like but looking at the four brands.

Bracken Darrell: I'm going to, I'm going to entirely dodge your question and say, you know, I think we see opportunities across all of them. The nice thing is this quarter, the trend line is pretty consistent across the mall. It's slightly sequentially improved, and that's the kind of trend line I'd like to see. I can't guarantee you'll see, but I'd like to see going forward every quarter. I think you'll see it in our biggest brands. And I hope you'll see it in all of them, but yeah, I don't know how I would rank those except I feel good about the, I feel very, very good about the work going on on bands in the Northeast and Timberland.

Simeon Siegel: And I think Dickies, while we have a long way to go, I think there's, there's also a lot of activity going into that. I think we'll get there. Thanks. Thank you.

Bracken Darrell: Your next question comes from the line of Simon Siegel with BMO Capital Markets. Please go ahead. Hey guys, thanks. Hope you have a nice summer. So nice job on the gross margin beat. Glad to hear it. Nice job on the gross margin beat. Could you imagine the 20 bits of pressure from unfavorable mix? Could you just elaborate on that a little bit and thoughts on where that goes from here? Maybe any color you'd be willing to share on ASP to your point about gross margin, ASP versus units for Vans and North Face, the past quarter, and then maybe the same question about inventory, just how that composition looks by brand.

Bracken Darrell: You know, I probably was probably just me, but I had trouble hearing part of that. So maybe if you could repeat it all again, that'd be helpful. Sure. So there was 20 bits of pressure from mixed shift. So I was just wondering, you could elaborate on that and where you'd expect mix to go from here. And then it's just I'm Vans and North Face thinking about ASP and units, how they looked the past quarter, and then inventory composition. So within the down 24% has that look by brand. Yeah, you know, I would be able to give you all the answers to that.

Operator: Sure. So there was 20 bits of pressure from mix shift. So I was just wondering if you could elaborate on that and where you'd expect mix to go from here. And then, just by Vans and North Face, thinking about ASP and units, how they looked the past quarter, and then inventory composition. So within the down 24%, how does that look by brand?

Bracken Darrell: Well, I will say is I think that from a mixed standpoint, that's a relatively small mix change. I think we expect the mix to be kind of a probably be a tailwind for the for the year, but not in a big way much like you're seeing here. So I think you'll see some mix help. But we'll see; it could go the other way. We've got the other issue we have is, you know, wholesale in general depends on our wholesale versus DTC growth, you know. So, you know, obviously if DTC grows faster, it's a mixed health; that grows slower, it's a mixed heart.

Bracken Darrell: And I think it will be a good wholesale year. So I'm a little mixed on mix. You know, I think it could be a little bit up, but we'll see on the ASP versus units. I don't think there's a big story here. You know, hopefully we'll, as we go through the year, and if, as our promotion starts to fade, we'll have a little bit better story. Okay, great.

Bracken Darrell: And then any color on the inventory by brand? No, I think we're in pretty good shape across the brands. You know, I'm happy to say I feel very good about inventory across everything right now. You mean in the channel or in our own inventory? I was speaking mainly in the channel. Yeah, either one. I was more looking at the 24% just looks very clean, Adrian's point. So just thinking about if there's any diversion there to keep in mind by brand? No, there's not much story there. It's all good, solid improvement across the board. I mean, every single brand or death.

Bracken Darrell: That's great. All right. Thanks a lot, guys. That's lucky to us here. Thank you.

Jennings Teacher: Your next question comes from the line of Jennings Teacher with BTIG. Please go ahead. I think we're taking my question. Hi. Two quick ones on Vance. First on, you know, when we think back to kind of where the brand went wrong over the last years. It felt like one of the things that could have been improved upon was having more segmentation and tearing different products for different retailers. Is there any update on how you're thinking about segmentation or how you're executing against that? And then the second one is just on lead times. You know, I know he's talked about how frustrating the long lead times are in footwear in general, and then in particularly for Vance.

Operator: Your next question comes from the line of Janine Stichter with VTIG. Please go ahead.

Bracken Darrell: Anything changing marriages in terms of your ability to fast track product. Thank you. I'll answer the second one first. The answer is no. You know, it's really not been an area we've really tried to focus on here in the beginning. I do think the overall lead time. You know, we certainly can put pressure on you. We think a little faster, but I do think lead times in general in time to market is a big opportunity. But, as I think I said an earlier call. I'm parking that one for a little while until we get the fundamental business of place.

Dana Telsey: And we'll worry about that aspect of the business model. But I do think there's outside there on segmentation of retailers. So, yeah, I think the thing we've talked about is. I think the key is we just got over distributed into value channels. And so we're pulled back in Europe or pulling back in in any US. And I think that's going to pay to have it. Thanks so much. Thank you.

Bracken Darrell: Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Please go ahead. Hi, good afternoon. As you look at the DTC channel, as you look at the DTC channel, which we had talked about was in line with the fourth quarter excluding bands. You mentioned closing some stores on bands. How should we think about DTC for bands and the other brands? How you're thinking about retail versus digital? And any expansion or just any more color on the wholesale business? How it's differing by brand domestically and overseas? Thank you. Retail versus Digital. Yeah, I think the football and retail continues to be weak. You know, I'd say just generally in the, you know, all over the Western world, you had worse traffic than I think people expected, whether it's in malls or out of malls.

Bracken Darrell: It's not just exclusive to us. It's a little bit better on the retail on the wholesale business by brand. I'm not sure I get into two. I'd break that out too much. You know, I think the, I guess, yeah, I probably wouldn't go so there's too much different to cross the board. I mean, there's some variation, but probably not notable enough to make a big deal out of. Thank you. Sorry, I wasn't more helpful.

Speaker Change: Yeah.

Speaker Change: Yes.

Operator: Thank you. Thank you.

Speaker Change: Thank you thank.

Speaker Change: Thank you.

Speaker Change: Sorry, I wasn't more helpful Dana.

Jonathan Combs: Your last question comes from the line of Jonathan Combs. Is there please go ahead. Hey, Jonathan. Yeah, hi, thank you. Hey, Bracken, I want to follow up one more question on bands. Could you maybe just break down a little more the drivers of the improvement you're seeing in Europe in the EMEA region? Given that it sounds like sell through, there's still a bit challenging at D to C. So just to be more color on what drove the sequential improvement. And do you think that's a region that could flip positive first for vans, or are there different dynamics going on?

Speaker Change: Your last question comes from the line of Jonathan Komp with Baird. Please go ahead, Hey, Jonathan.

Jonathan Komp: Yeah, Hi, Thank you Hey.

Jonathan Komp: And I want to follow up one more question on vans could you maybe just break down a little more of the drivers of the improvement you're seeing in Europe and in the EMEA region.

Speaker Change: Given that it sounds like sell through is there still a bit challenging at D to C. So just any more color on what drove the sequential improvement in <unk> do you think that's a region that could flip positive first for vans or are there different dynamics going on.

Bracken Darrell: Thank you. Yeah, I mean, I don't have too much to say about it except that, you know, the wholesale was stronger than DTC, as we said earlier. And I think that's because we really have a lot of opportunity, and wholesale is bigger, relatively speaking, in Europe than it is in the Americas, of course. So I'm kind of optimistic in general, but I'm also optimistic about EMEA. As you said, turning first, we'll see at one point that happens, but I have been I think I might have at least implied an earlier call. If you ask me what region might turn first, I'm more optimistic that I'm somewhat optimistic that it'll be EMEA first and partly because that wholesale component.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Don't have too much to say about it except that.

Speaker Change: Wholesale is was stronger than DTC as we said earlier.

Speaker Change: That's because we really have a lot of opportunity in wholesale wholesale bigger.

Speaker Change: Relatively speaking in Europe than it is in the Americas of course, so I'm kind of optimistic in general, but I'm also optimistic about EMEA as you said turning first we'll see at what point that happens, but I have been I think I might have at least implied in an earlier call. It. If you ask me what region might turn first I'm more optimistic.

Speaker Change: I'm somewhat optimistic that it'll be even be a first in.

Speaker Change: Partly because the wholesale component.

Bracken Darrell: Okay, great. Thank you. Thank you so much. I guess I'll just I think that's the last question wasn't great.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thank you so much I guess I'll just I think that's the last question wasn't.

Bracken Darrell: Well, thank you all. It's been a really exciting quarter for us with a lot of change. I said, I don't expect that to let up. Can't wait to see, hear, or both all of you in October, and Paul will get to say more than just his name and birthday. So he's excited to, and I'll have a few more people along with us. So I think this is going to be a really exciting meeting and can't wait to see you all. And now we'll get back to finish the second quarter. So thanks a lot. That concludes today's session.

Speaker Change: Great well. Thank you all it was it's been a really exciting quarter for us with a lot of change as I said I don't expect that to let up can't wait to see hear or both or all of you in the October and Paul will get to say more than just his name.

Paul Vogel: And birthday, so he's excited too and I'll have a few more people along with us. So I think this is going to be really exciting meeting and can't wait to see you all and now we'll get back to finish the second quarter. So thanks a lot.

Speaker Change: That concludes today's session. Thank you all for joining you may now disconnect.

Operator: Thank you all for joining. You may now disconnect. I'll click.

Speaker Change: Oh great.