Q1 2026 VF Corp Earnings Call

Krista: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the VF Corporation Q2 fiscal year 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply 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 would now like to turn the conference over to Allegra Perry, Vice President of Investor Relations. Allegra, you may begin.

Ladies and gentlemen, thank you for standing by. My name is Krista and I will be your conference operator. Today at this time, I would like to welcome everyone to the VF Corporation first quarter fiscal year, 2026 earnings conference. Call all lions have been placed on mute to prevent any background noise. After the speaker's remarks, will it be a question and answer session? If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. And if you would like to withdraw your question, press the star 1 again, thank you. And I would now like to turn the conference over to Allegra Perry vice president of investor relations. Allegra you may

Allegra Perry: Thank you. Hello and welcome to VF Corporation's first quarter fiscal 2026 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. Unless otherwise noted, amounts referred to on today's call will be on an adjusted constant dollar and continuing operations basis, which we've defined in the presentation that was posted this morning on our Investor Relations website, 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 may also hear us refer to reported amounts, which are in accordance with U.S. GAAP.

Thank you. Hello, and welcome to VF Corporation's Q1 fiscal 2026 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.

Unless otherwise noted, amounts referred to on today's call will be on an adjusted constant dollar and continuing operations basis, which we've defined in the presentation that was posted this morning on our Investor Relations website 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: Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the presentation, 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 Executive Vice President and Chief Financial Officer, Paul Vogel. Following our prepared remarks, we'll open the call for questions. I'll now hand over to Bracken.

You may also hear us refer to reported amounts which are in accordance with us, gaap.

Reconciliations of gaap measures to adjusted amounts can be found in the supplemental. Financial tables included in the presentation, 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, Brack, and Daryl, and EVP, and Chief Financial Officer. Paul Vogel,

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

Bracken Darrell: Thanks, Allegra, and a good early morning to all of you from Van Teck, Arizona, West Coast. Welcome to our Q1 fiscal 2026 earnings call. In spite of all the macro noise out there, we delivered above our guidance this quarter, a good start to the fiscal year. The much more exciting thing happening is inside the company. You can feel how dramatically we are transforming: the processes, teams, product engine, and marketing approach, even the culture, almost everything. That is all happening as we improved our top line trend to negative 2% in constant dollars and flat in reported. A year ago, only 10% of our business by revenue was growing, and today that number is almost 60%.

Thanks, Allegra, and a good early morning to all of you from Vans headquarters on the West Coast.

Welcome to our q1 fiscal. 26 earnings call.

Despite all the macro noise out there, we delivered above our guidance this quarter, a good start to the fiscal year.

But the much more exciting thing happening is inside the company, you can feel how dramatically we're transforming. The processes teams product engine and marketing approach. Even the culture,

Almost everything.

improved our Topline Trend to negative 2% in constant dollars in flat and reported

A year ago, only 10% of our business by revenue was growing.

Bracken Darrell: We also delivered a much stronger bottom line, a loss of $56 million in our seasonally low Q1, about $50 million ahead of the high end of our guidance and ahead of last year. Paul will cover the numbers in more detail, but in short, we are making solid progress towards our goals and are highly confident that we will turn VF Corporation back into a growth company. Now let me summarize where we are in the VF Corporation turnaround as I pass the two-year mark as CEO this month.

and today that number is almost 60%. We also delivered a much stronger, bottom line, a loss of 56 million. In our seasonally low q1 about fionn dollars ahead of the high end of our guidance and ahead of last year.

Paul covered the numbers in more detail, but in short or making solid progress, towards our goals and are highly competent that will turn v out back into a Growth Company.

Now, let me summarize where we are in the VF turnaround as I passed the 2-year Mark as CEO this month.

Bracken Darrell: I love transformation, and we are transforming. We have assembled a great team at the top with some of the industry's best, who we have either brought in from the outside or are promoting from the many leaders who grew up in VF Corporation and experienced it during its long, strong growth phase. We have dramatically improved our cost structure, reduced well over $300 million of cost, and have another $500 million to $600 million of net operating income improvement in our sites. Even more importantly, for the long term, we are building a unified product and marketing engine across each brand globally and leveraging the strong standardized processes we have created. The architecture and organizational structure changes are now complete to deliver results. You will see more powerful product and marketing as time flows.

I love transformation and we are transforming.

We've assembled a great team at the top with some of the industry's best who we've either brought in from the outside or are promoting from the many leaders who grew up in BF and experienced it during its long strong growth phase.

We've dramatically improved our cost structure.

Reduced well, over $300 million of cost and have another 500 to 600 million dollars of net. Operating income improvement in our sites,

Even more importantly, for the long term, we're building a unified product and marketing engine across each brand globally and leveraging the strong standardized processes we've created.

The architecture and organizational structure changes are now complete to deliver results.

You'll see more powerful product in marketing is time flows.

Bracken Darrell: We prioritize strengthening our balance sheet, and in fiscal 2025, as you know, we reduced our leverage of full term and have a clear path to below the two and a half time leverage target that we initially set by fiscal 2028. That is just two years away, despite all the anticipated tariff impacts. Paul will talk more about that shortly. We continue to be focused on paying down our debt, but we are doing it as we invest in growth. Lower costs, improved margins, declining debt, and a transformed organization. But what is all this leading to? Why are we doing this? Of course, it is all about one goal: growth.

We prioritize strengthening our balance sheet and in fiscal 2025, as you know, we reduced our leverage of full turn and have a clear path to below the 2 and a half time. Leverage Target that we initially set by fiscal 2028. That's just 2 years away despite the anticipated tariff impacts all the anticipated tariff impacts

Paul talked more about that shortly.

We could continue to be focused on paying down our debt, but we're doing it as we invest in growth.

So, lower costs, improve margins, declining debt, and a transformed organization.

But once all this leading to, why are we doing this? Of course, it's all about 1 goal.

Bracken Darrell: Turnarounds, by definition, start with declines. It has been two years of resetting the table, and soon we too will move to growth, as we did in every turnaround I have been part of. That is the focus of every leader on my team and throughout the company right now. We are all here to grow. We have so many opportunities for growth, but today let me focus on them by brand, starting with our top three. First, we are going to bring Vans back to growth. We do not like the numbers on Vans any more than you, down 15% in Q1. About 40% of the decline can be attributed to channel rationalization actions, as you know.

Growth.

Turnarounds by definition, start with the clients. It's been 2 years of resetting the table and soon we too will move to growth as we did in every turnaround. I've been part of

That's the focus of every leader on my team and throughout the company right now.

We're all here to grow.

We have so many opportunities for growth. But today, let me focus on them by brand, starting with our top three.

First, we're gonna, we're going to to bring Vans back to growth.

We don't like the numbers on bands, any more than you.

Down down, 15% in, q1.

About 40% of the decline can be attributed to channel R, rationalization actions. As you know,

Bracken Darrell: Excluding these, if you look at the underlying trends, Vans is running down high single digits, but we are seeing some bright spots. We will get Vans back to flat and into healthy growth as fast as we can. There are some out there who think this will never happen. I sort of love having that point of view out there. I get it. It is our job to show you how wrong that point of view is. I will come back to Vans and talk more in just a minute. Second, The North Face grew 5% this quarter, but our goal is to go from mid-single digits to high single digits and even to double-digit growth on a path to doubling revenue. That might sound ambitious today, but it is exactly what our brand president, Caroline Brown, laid out at Investor Day.

Excluding excluding these if you look at the underlying Trends, Vans running is running down high single digits, but we're seeing some bright spots.

We'll get Vans back to flat and then to Healthy Growth as fast as we can.

There's some out there who think this will never happen.

I sort of love having that point of view out there, I get it. It's our job to show you how wrong that point of view is, I'll come back to Vans and talk more in just a minute.

Second, The North Face, grew 5% this quarter but our goal is to go from mid single digits to high single digits and even to double digit growth on a path to doubling Revenue.

Bracken Darrell: We are not promising to achieve those growth rates in the near term, but that is what we are focused on delivering. Our product innovation pipeline continues to build momentum for the brand. Footwear was up strong double digits again this quarter and is becoming a meaningful part of the business. In addition, our bags and packs business also grew strong double digits. But our biggest potential is actually in lifestyle apparel in general, and spring and summer in particular. In fact, this is all to say we have many, many untapped growth opportunities in The North Face. Third, we are going to support the sustained momentum and growth of Timberland. The brand grew 9% this quarter with global momentum in the six inch premium boot and a growing business in the boat shoe.

That might sound ambitious today, but it's exactly what our brand president, Caroline Brown laid out investor day.

We aren't promising to achieve those growth rates in the near term, but that's what we're focused on delivering.

Our product Innovation pipeline continues to build momentum for the brand.

Footwear, it was up strong double digits again this quarter, and it's becoming a meaningful part of the business.

In addition, our bags and packs business also grew, delivering strong double digits.

But our biggest potential is actually in lifestyle Apparel in general and spring and summer in particular.

In fact, this is all to say, we have many many untapped growth opportunities in the North Face.

Bracken Darrell: Our marketing strategy is working, enhancing the brand's visibility and further broadening its reach and relevance in warmer weather. As we have seen with its presence at events like the Met Gala and the NBA Finals, and just a lot of organic social media that we seed and amplify. We are more confident than ever that the upside opportunity to break out of Timberland's historic revenue range is real, and we have the team in place to do it, led by Nina Flood. This is a business where the brand and the culture are much bigger than the business itself in size, and therein lies the potential. Finally, we will fuel the other growth engines as they show their potential and truly turn VF into a multi-brand powerhouse.

Third, we're going to support the sustained, momentum and growth of Timberland. The brand grew 9% this quarter with global me with, with global momentum, in the 6-inch Boot, and a growing business in the boat shoe.

Our marketing strategy is working. Enhancing the Brand's visibility and further, broadening its reach and relevance in warmer weather.

As we've seen with its Presence at events, like the Met Gala, and the NBA finals and just a lot of organic social media that we see and amplify.

We're more confident than ever at the upside opportunity to break out of Timberland's historic Revenue, ranges, real. And we have the team in place to do it led by Nina flood.

This is the business where the brand and the culture are much bigger than the business itself in size and therein lies the potential.

Bracken Darrell: Let me point to Ultra in this case, which had another strong quarter, up well over 20%, and has grown from $60 million of revenue when we bought it to being on track to exceed $250 million this year. That is size with less than 10% awareness in the U.S. and much lower than that in the rest of the world. This is the kind of business that we can scale. It is already tied for the number one shoe and trail running in the U.S. and one of the fastest growing franchises in the road running business. Now let me return to Vans. As a management team, we know the impact of Vans on VF's valuation, and we can see the focus around the timing of a turnaround. We get it. Let us talk about what we are seeing and thinking.

Finally, we'll fuel the other growth engines as they show their potential and truly turn BS into a multi-brand Powerhouse.

As grown from $60 million of revenue when we bought it to being on track to exceed $250 million this year.

And that size with less than 10% awareness in the US and much lower than that, in the rest of the world.

This is the kind of business that we can scale. It's already tied for the number 1, shoe and trail running in the US and 1 of the fastest growing franchises in the road running business,

Now, let me return to vans.

As a management team, we know the impact of vans on VSS valuation and we can see the folks around the timing of a turnaround. We get it.

Bracken Darrell: First, we have a great leader, Sun Shay, and she and her team are executing on the plan laid out at Investor Day. I was just looking at more of our future lineup last week here in Costa Mesa, and things are really coming together. Each quarter, you will see new entries. This team's freedom to innovate will be less and less constrained by the practicalities of the old product creation process as each quarter passes, so you will see more and more ahead. There are already positive signals in the pinnacle side of the business. We had a 50% increase in appointment bookings at Paris Fashion Week in June, including new accounts and accounts who delisted Vans in recent years coming back. If you did not notice, there was also a strong reaction to the sheer number of skate-inspired silhouettes featured by many luxury brands in Paris this year.

Let's talk about what we're seeing and thinking.

First, we have a great leader, Sunhe, and she and her team were executing on the plan laid out at Investor Day.

I was just looking at more of our future lineup. Last week here in Costa Mesa and things are really coming together. Each quarter, you'll see new entries, this team's freedom to innovate will be less and less constrained by the practicalities of the old product creation process as each quarter passes. So you'll see more and more ahead

but there are already positive signals in the Pinnacle side of the business,

We had a 50% increase in appointment bookings at Paris Fashion Week in June, including new accounts and accounts that had been listed in recent years coming back.

Bracken Darrell: These are the style setters and the tastemakers. Trends start in the luxury market, as we saw in Fashion Week for Timberland with Louis Vuitton last June. I am not suggesting that Vans will be growing 9% a year from now, but I am excited to see the tide turning on skate style shoes and luxury or trends start. Premium today is a small part of Vans, but this shows how sensitive this business is to new products. We don't have enough new products in the premium or the main line yet, but Sun and the team, she is assembling our new product machines. New products are coming. With the recent changes in our supply chain, we're starting to accelerate our pace to market too.

If you didn't notice there was also a strong reaction to the sheer number of skate, skate inspired Silhouettes featured by many luxury brands in Paris this year.

These are the stock. These are the style centers in the Pacemakers.

Trends start in the luxury Market as we saw in Fashion Week for Timberland with Louis Vuitton last June.

I'm not suggesting that Vans will be growing 9% a year from now, but I am excited to see the tide turning on Skate style shoes and luxury or or Trends star

Premium today is a small part of advanced, but this shows how sensitive this business is to new products.

We don't have enough new products in the premium or the mainline yet but sun and the team, she is assembling our new product machines.

New products are coming.

Bracken Darrell: Meanwhile, Sun and her team are working away on increasing supply and variety in our latest products that already have strong interest, like the Super Low Pro, the current Cable Skate, and the latest from OGW, our pinnacle offering. We're also seeing encouraging signs in one of our classics, The Authentic. We have an exciting collaboration with Valentino in that shoe, hitting the market this fall. What about the actions we're taking to make sure those new products, all of our products, are in the right places with the right support for long-term growth and profitability? As we've discussed, we've taken deliberate actions to improve our channel mix to set us up for high-quality, sustained, and profitable growth. These actions will continue to impact the Vans business through Q3. As we exit the year, our channels should be at our future state. We're already seeing some solid results in wholesale.

With the recent changes in our supply chain, we're starting to accelerate our Pace to Market too.

Meanwhile sun and art and her team are working away on increasing Supply and Variety in. Our latest products that are already that already have strong interest, like the super low Pro, the current cable skate and the latest from OTW our Pinnacle offering

We're also seeing encouraging signs in one of our Classics, the Authentic. We have an exciting collaboration with Valentino in that shoe, hitting the market this fall.

Now, what about the actions we're taking to make sure those new products, all of our products, are in the right places with the right support for long-term growth and profitability.

As we discussed, we've taken deliberate actions to improve our Channel. Mix to set us up for high quality sustained and profitable growth.

These actions will continue to impact Advanced business through Q Q3 so as we exit the year, our channels should be at our future state.

Bracken Darrell: America's sell-out trends continue to improve as non-value accounts grew again this quarter. In DTC, over the last two years, we closed about 140 stores, about 20% of our global network. While it's tough medicine affecting revenue, it's improved our profitability. We've also now reoriented about 90% of our full-price America stores to provide greater gender clarity, and we'll continue to change the format to show more newness and footwear focus in our visual merchandising. In a pilot store on Fifth Avenue, we delivered positive comps in Q1, significantly outperforming the rest of the fleet. Over in Europe, the elevated London store generated a 15% better revenue performance than the rest of the EMEA fleet, driven by a significantly higher average selling price, 35% higher, through a more premium product offering.

We're already seeing some solid results in wholesale America, sell out, Trends, continue to improve as non-value accounts. Grew again, this quarter.

In DTC over the last 2 years, we closed about 140 stores about 20% of our Global Network.

While it's a tough medicine affecting Revenue. It's improved our profitability.

We've also now reoriented reoriented about 90% of our full price, America stores to provide greater gender Clarity and will continue to change. The format to show more newness and footwork focus in our visual merchandising.

in the pilot store on Fifth Avenue, we delivered positive cops and q1 significantly outperforming the rest of the fleet

Over in Europe, the elevated London store. Generated a 15% better Revenue performance in the rest of the emia fleet driven by a significantly higher average selling price 35% higher.

Bracken Darrell: Based on these early successes, we'll be rolling out our new retail playbook to improve assortment, curation, and navigation to other regions. It's also worth mentioning that in EMEA, we've executed on a key city strategy where we have elevated our merchandising and focus in those stores. This is generating exciting early results in that region, with those stores starting to perform better than the rest of the network. Finally, on marketing, our approach simply hasn't driven enough traffic. While the whole industry is affected by slower traffic right now, we don't accept that, and we're changing our marketing approach. I can't disclose too much now, but keep watching the space. An aspect of our marketing that is powerful is the long-awaited return of the Vans Warped Tour.

Through a more premium product offering.

Based on these early successes will be rolling out our new retail Playbook to improve assortment curation and navigation to other regions.

It's also worth mentioning that anemia. We've executed on a key city strategy, where we have elevated our merchandising and focus in those stores.

And this is generating exciting early results in that region with those stores starting to perform better than the rest of the network.

And finally, on marketing our approach simply hasn't driven enough traffic.

While on the whole industry is affected by slower traffic. Right now, we don't accept that and we're changing our our marketing approach. I can't disclose too much now, but keep watching the space.

Bracken Darrell: In its restart year, we planned three locations, and we intended to sell 50,000 tickets in each location, which would be about twice any single Warped Tour event in history. We sold out of all three events in hours. We added a lot more tickets and sold those out immediately too. Sunday, I was at the second of these events in Long Beach, and over the two days, we had almost 170,000 people at surely the largest single collection of Vans footwear and apparel ever assembled in one place. Everyone was in Vans of all kinds. You could really feel the love for Vans. People came because they love music and they love Vans, and they're inseparable for many. 80, that's eight zero different artists, eight stages, and just a huge boost for the brand.

An aspect of our marketing is that it's, that is powerful. Is the long awaited Return of the band's Warp Tour and it's restart year. We plan, 3, locations, and we intended to sell. 50,000 tickets in each location which would be about twice any single Warp Tour event in history.

Then we sold out of all three events in hours.

we added a lot more tickets and sold those out immediately to

Sunday. I was at the second of these event events in Long Beach and over the 2 days, we had almost 170,000 people at surely the largest single collection of Vans Footwear and apparel ever assembled in 1 place.

Was in advance of all kinds.

You could really feel the love for bands. People came because they love music and they love dance, and they're inseparable for many.

80. That's 80 different artists, 8 stages, and just a huge boost for the brand.

Bracken Darrell: To wrap up on Vans, we're on track with the turnaround and couldn't be more excited about what's coming next. Keep watching. We are well on our way to transforming VF Corporation, and this quarter is another step in the right direction. Our powerful portfolio of brands and the sustainable growth model we're creating will help us accelerate growth and improve margins. We're on a path to achieve our targets and build a stronger VF Corporation. Our focus is on growth. I'll now hand it over to Paul Vogel, who will go deeper into the numbers.

To wrap up on bands, we're on track with the turnaround and could be more excited about what's coming next. Keep watching.

We are well on our way to transforming VF. And this quarter is another step in the right direction, our powerful portfolio of Brands, and the sustainable growth model, we're creating will help us accelerate growth and improve margins.

We're on a path to achieve our targets and build a stronger VF. Our focus is on growth. I'll now hand it over to Paul, who will go deeper into the numbers.

Paul Vogel: Thank you, Bracken. Before I start, let me build on what Bracken said and remind you of where we are going. We committed to a 55% gross margin and a 45% SG&A to sales ratio in fiscal 2028, and the first quarter of this fiscal year, we are continuing to show progress toward those goals. Our quarterly two-year stack trends have shown gross margins up roughly 200 basis points, with SG&A down 5% over that same time period. We have done all of this without any growth. As we said time and time again, that is not what we are here for. We are here for growth, and our whole organization is focused on the next stage, which is about growth. Now let me turn to review of the first quarter. Our first quarter was solid, and our operating results came in above the guidance we provided.

Thank you, Breen.

Before I start, let me build on what Bracken said and remind you of where we are going.

We committed to a 55% gross margin and a 45% sg8 set to sales ratio in fiscal 28, and the first quarter of this Cisco year. We are continuing to show progress toward those goals.

Our quarterly to your stack Trends have shown gross margins up, roughly 200 basis points with sgna down 5% over that same time period.

We have done all of this without any growth.

But as we said at the time, and as we said time and time again, that's not what we're here for. We are here for growth, and our whole organization is focused on the next stage, which is about growth.

So now let me turn to review of the first quarter.

Paul Vogel: We feel particularly good about the improved progress towards our stated medium-term goals. As a quick FYI, before I get into the numbers, currency movements in the quarter were significant, positively impacting reported revenue by 200 basis points. These FX changes also had a positive effect on gross margin, with a negative impact on SG&A. The net of these effects had an inexorable impact on our operating income. Q1 revenue was $1.8 billion, flat on a reported basis, and down 2% year over year in constant dollars. This compares to our guidance of down 3% to down 5%. Excluding Vans, revenue was up 5%. Total revenue of the quarter did benefit from a wholesale timing shift, which landed in Q1 rather than Q2. Excluding this benefit, revenue would have been down roughly 3% at the top end of our guidance range.

Our first quarter was solid and our operating results came in above Guidance. The guidance, we provided

We feel particularly good about the improve.

Progress towards our stadia medium-term goals.

As a quick FYI, before I get into the numbers currency movements in the quarter were significant, positively impacting, reported Revenue by 200 basis points. These FX changes also had a positive effect on gross margin with a negative impact on sgna.

The net of these effects had a negligible impact on our operating income.

Q1 revenue is 1.8 billion flat on a reported basis and down. 2% year-over-year in constant dollars. This compares to our guidance of down 3 to down 5%.

Excluding Vans Revenue was up 5%.

Paul Vogel: By brand, The North Face grew 5%, led by growth in both DTC and wholesale. Vans revenue the quarter was down 15%, similar to last quarter. The impact of the direct actions we are taking in the value channel and our own stores was about 40% of the reported decline. Finally, Timberland's momentum continued with revenue up 9%, reflecting growth across all regions, across all channels. By region, the APAC region grew 4%, while the Americas and EMEA regions were down 3% and down 2% respectively. Excluding Vans, the America region was up 3% versus last year. Lastly, by channel, DTC was down 4%, while wholesale was flat. Adjusted gross margin in the quarter was up 200 basis points to 54.1%, driven primarily by higher quality inventory, lower discounts, and FX. This reflects our transformation efforts to make us structurally higher in business.

Total revenue of the quarter did benefit from a wholesale timing shift, which landed in q1 rather than Q2 excluding this benefit. Revenue would have been down roughly 3% at the top end of our guidance range.

By brand The North Face grew 5% led by growth in both DTC and wholesale.

Fans revenue for the quarter was down 15%, similar to last quarter. The impact of the direct actions we are taking in the value channel and our own stores was about 40% of the reported decline.

And finally, Timberland. Momentum continued with revenue up 9%, reflecting growth across all regions and across all channels.

By region the APAC region group 4% while the Americas and Amia regions were down 3% and down 2% respectively, excluding Vans. The America region was up 3% versus last year.

And lastly by Channel, DTC was down 4%, while wholesale was flat.

Adjusted gross margin in the quarter was up, 200 basis points to 54.1%, driven primarily by higher quality, inventory, lower discounts and FX. They're still Flex our transformation efforts to make us structurally higher more business.

Paul Vogel: SG&A dollars were flat year over year as we continue to realize cost savings across the business. Our adjusted operating margin for the quarter was negative 3.2%, up 270 bps year over year. We are continuing to make fundamental margin and profitability improvements by reshaping and strengthening the foundation of our business. Finally, adjusted loss per share was $0.24 versus $0.35 in Q1 of last year. Moving on to our balance sheet, inventories were up 4%, or $76 million, at the end of the quarter. Excluding the impact of FX, inventories were up 1%. Importantly, we improved the quality of our inventories, which is driving stronger gross margins, and our inventory days are down 4% year on year. Net debt was down $1.4 billion versus last year, or down 20%. Let us now turn to the outlook for the second quarter.

Sja dollars were flat year over year as we continue to realize cost savings across the business. Our adjusted operating margin for the quarter was negative, -3.2 percent up to 170 basis points year-over-year,

we're continuing to make fundamental margin and profitability improvements by reshaping strengthening the foundation of our business. Finally adjusted loss per share was 24 cents. First 35 cents in q1 of last year.

Moving on to our balance sheet, inventories are up 4% or 76 million. At the end of the quarter, excluding the impact of FX inventories were up 1%.

Importantly, we improved the quality of our inventories, which is driving stronger gross margins, and our inventory days are down 4% year on year.

Net debt was down $1.4 billion versus last year, or down 20%.

Paul Vogel: We expect Q2 revenues to be down 2% to down 4% on a constant dollar basis. As a reminder, Q1 did benefit by roughly one point of growth from a timing shift in wholesale, which will conversely negatively impact Q2 growth by 1%. Taking Q1 and Q2 together, our first half performance is expected to be in line with the comments we provided on our last earnings call in May. Moving down the P&L, we expect Q2 operating income to be in the range of $260 million to $290 million. Gross margins will be broadly flat as we continue to benefit from fewer discounts and healthier inventory, but we will lap the tailwinds from last year's inventory actions.

Let's now turn to the outlook for the second quarter.

We expect Q2 revenues to be down 2% to down 4% on a constant dollar basis.

As a reminder, Q1 did benefit by roughly 1 point of growth from a timing shift in wholesale, which will conversely negatively impact Q2 growth by 1%.

Taking Q1 and Q2 together, our first half performance is expected to be in line with the comments we provided on our last earnings call in May.

Moving down the p&l. We expect Q2 operating income to be the range of 260 million to 290 million.

Paul Vogel: SG&A dollars are expected to be up slightly versus last year, mainly due to our decision to invest more into marketing ahead of back to school, as well as a negative FX impact. On a constant dollar basis, SG&A is expected to be broadly flat versus last year. Finally, we expect Q2 interest of approximately $50 million and an effective tax rate in the range of 30% to 33%, which is higher than last year's reported tax rate, and in line with my comments last quarter about increasing trends in our tax rate over the next one to two years and quarterly fluctuations as a result of the change in the global tax rates and in our geographical mix. As a reminder, this higher tax rate will have minimal impacts on cash taxes.

Gross margins will be broadly flat as we continue to benefit from fewer discounts and healthier inventory. But will lap the toe wins from last year's inventory, actions.

Sg8 dollars are expected to be up slightly versed last year, mainly due to our decisions to invest more into marketing ahead of back to school, as well as a negative FX impact on a constant dollar basis. Sgna, is expected to be broadly flat versus last year.

Paul Vogel: Now let me give you a quick update on tariffs as things have moved since we last updated you. When we spoke in May, we quantified the annualized unmitigated impact from the 10% incremental tariff on goods coming into the U.S. as $150 million. Based on what had been agreed at the time in terms of the timing of implementation, we estimated 65% of the impact would hit in fiscal 2026. Then we will start to see the impact flow through in Q3. Based on the latest information that has become public, we estimate an incremental annualized tariff impact of $100 million to $120 million, bringing the total annualized amount to $250 million to $270 million. We expect 50% of this total to flow through in fiscal 2026 based on the timing of the expected tariff increases.

In the range of 30 to 33%, which is higher than last year's reported tax rate and in line with my comments last quarter about the increasing trend in our tax rate over the next 1 to 2 years and quarterly fluctuations as a result of the change in global tax rates and in our geographical mix. As a reminder, this higher tax rate will have minimal impact on cash taxes.

Now, let me give you a quick update on tariffs, as things have moved on moved since we last updated you.

when we spoke in may we quantify the annualized unmitigated impact from the 10%, incremental tariff on Goods, coming into the us as 150 million

Based on what had been agreed at the time, in terms of the timing of implementation, we estimated 65% of the impact will hit in fiscal '26, and then we will start to see the impact flow through in Q3.

based on the latest information that has become public. We estimate an incremental annualized, tariff impact of 100 to 120 million bringing the total annualized amount to 250 to 270 million

Paul Vogel: As we communicated, we have actions in place to mitigate the tariff impact through sourcing savings and pricing actions that will take effect later this year. From a timing perspective, we will begin seeing the impact of tariffs in the P&L before we realize the full offsets from the mitigating actions. Therefore, we expect a negative net impact to gross profit of $60 million to $70 million due to tariffs in fiscal 2026. We remain confident we will be able to fully mitigate all currently anticipated tariffs in fiscal 2027. On the back of these developments, I also want to update you on the directional year-over-year guidance for operating income and free cash flow in fiscal 2026. First, we continue to see operating income up versus last year in fiscal 2026.

We expect 50% of this total to flow through in fiscal 26 based on the timing of the expected tariff increases.

As we communicated, we have actions in place to mitigate the Tariff impact through sourcing savings and pricing actions. That will take effect later this year.

From a timing perspective we will begin seeing the impact of tariffs in the p&l. Before we realize the full offsets from the mitigating actions. Therefore, we expect a negative net impact to gross profit of 60 to 70 million due to tariffs and fiscal 26.

We remain confident we will be able to fully mitigate all currently anticipated threats in fiscal 2027.

On the back of these developments, I also want to update you on the directional year-over-year guidance for operating income and free cash flow in fiscal 2026.

Paul Vogel: This is inclusive of all expected tariffs that we believe to be on the table at this point, as outlined earlier, and as we continue to make progress towards our medium-term targets. Second, on cash flow, we continue to expect operating cash flow and free cash flow, excluding the sale of non-core assets, to be up year on year, also including all expected tariffs at this point. Let me repeat, free cash flow for the year will be up versus last year, even after we account for tariffs. We are working on a number of initiatives that are expected to improve our free cash flow throughout the year, which gives me confidence that we are well positioned to achieve our guidance. We anticipate that our leverage will decline at year end of fiscal 2026. In addition to improving our cash flow, we remain vigilant about lowering our debt.

First, we continue to see operating income up versus last year in fiscal 2026. This is inclusive of all expected tariffs that we believe to be on the table at this point, as outlined earlier, and as we continue to make progress towards our medium-term targets.

second on cash flow, we continue to expect operating cash flow and free cash flow. Excluding the sale of non-core assets to be up here on year also, including all expected tariffs at this point. So, let me repeat free cash flow for the year, will be up first last year. Even after we account for tariffs, we are working on a number of initiatives that are expected to improve our free cash flow throughout the year, which gives me a confidence that we are well, positioned to achieve our guidance.

And we anticipate that our leverage will decline at the end of fiscal 2026.

Paul Vogel: As many of you are aware, we utilize a revolving credit facility to manage fluctuating working capital needs throughout the year. To ensure we maintain a strong liquidity position moving forward, we are in the final stages of executing a $1.5 billion asset-backed revolving loan. This will replace the current revolver we have in place. We are pursuing this option as we believe the ABL gives us more flexibility, more certainty, and eliminates the majority of covenants associated with our current borrowing. It also aligns with the puts and takes associated with the cadence of quarterly working capital needs. To be clear, we are on track to meet our guidance to reduce leverage to 2.5 times by fiscal 2028. Before we close, I want to highlight changes we have made to our segment reporting, as well as a post-quarter update to our financing structure.

In addition, to proving our cash flow, we remained Vigilant about lowering our debt. As many of you are aware, we utilize our evolving credit and facility to manage fluctuation fluctuating working capital in these throughout the year.

To ensure we remain a strong liquidity position moving forward. We are in the final stages of executing a 1.5 billion dollar asset back revolving loan. This will replace the current revolver. We have in place, we are pursuing this option. As we believe the abl gives us more flexibility, more certainty and eliminates the majority of covenants, associated with our current borrowing, it also aligns with the puts and takes associated with the Cadence of quarterly, working capital needs, so to be

Be clear. We're on track to meet our guidance to reduce leverage to 2.5 times by fiscal 2028.

Paul Vogel: First, in Q1 fiscal 2026, we have changed our segment reporting to make it easier for investors to track our key areas of focus across brands and segments. We will continue to disclose revenue for our top three brands, The North Face, Vans, and Timberland. As for segments, here is what has changed. We have combined Timberland Tree and Timberland Pro into one operating segment. This combined Timberland, along with The North Face, now constitutes our outdoor segment. Vans and Packs make up the active segment, while Dickies, Ultra, Smartwell, Icebreaker, and Napa are reported in all other categories. While we will no longer disclose Dickies as a standalone brand, we continue to be excited about and committed to growing the Dickies brand.

Before we close, I want to highlight changes we've made to our segment reporting, as well as a post-code update to our financing structure.

First, in Q1 fiscal 2026, we have changed our segment reporting to make it easier for investors to track our key areas of focus across brands and segments.

We'll continue to disclose the revenue for our top three brands: The North Face, Vans, and Timberland. As for segments, here's what has changed: we have combined Timberland Tree and Timberland PRO into one operating segment. This combined Timberland, along with The North Face, now constitutes our outdoor segment.

Vans and packs make up the active segment while dickyes, Ultra smartwell Icebreaker and Napa are reported in all other category.

Paul Vogel: Our new Brand President, Chris Goble, has made an excellent start to resetting the brand since joining last October and is already executing on the strategy he introduced at Investor Day in March, the leadership team being rebuilt. We believe the brand has significant growth potential under Chris’s leadership. By the way, even though we are no longer disclosing it separately, Dickies’ decline versus last year moderated significantly this quarter. In closing, we are pleased with our results in the first quarter of fiscal 2026. As Bracken Darrell said, we are focused now on getting each of our brands growing and getting stronger and stronger. I will now hand it back to the operator to take your questions.

While we will no longer disclose Dickies as a standalone brand, we continue to be excited about and committed to Growing the Dickies brand my new brand president, Chris gobble has made an excellent start to resetting the brand since joining last October and is already executing on the strategy. He introduced at investor day in March, the leadership team being rebuilt. We we believe the brand is significant growth potential on their Christmas leadership. By the way, even though we are no longer disclosing. It separately Dicky is a client versus last year. Moderated significantly this quarter.

So in closing, we are pleased with our results. In the first quarter of fiscal, 26 is bracken said, we are focused now on getting each of Our Brands growing and getting stronger and stronger. I'll now hand it back to the operator to take your questions.

Krista: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, again, press star one. We also ask that you limit yourself to one question. For any additional questions, please re-queue. Your first question comes from the line of Adrienne Yih with Barclays. Please go ahead.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw your question, again, press star 1. We also ask that you limit yourself to 1 question for any additional questions, please reach you. And your first question comes from the line of Adrian. Yei with Barkley, please go ahead.

Adrienne Yih: Great. Thank you very much, and nice to see the progress, so congratulations on that. Bracken Darrell, I guess I am going to start with sort of the Warped Tour. So what did you expect to see? I mean, obviously, you gave us some of the metrics, but what did you expect in terms of mind share, market share, kind of before the event, and what metrics kind of suggest to you that you have engaged other than selling the tickets in terms of kind of feedback, et cetera? Paul Vogel, can you talk about the $60 to $70 million of gross profit impact? Obviously, given the guidance that you have had for the first half of the year, all of that is coming in the back half. Are you able to offset this through the SG&A?

Adrienne Yih: Can you talk about some of the other parts of the P&L that can offset that? I am assuming that that does not include the price actions that you would be taking, or just some clarity on how much of that includes forward price actions. Thank you very much.

Bracken Darrell: Let me jump on the first question. What expectations do we have for the Warped Tour? Our expectations were, first of all, realize the Warped Tour hasn't been around since 2018. We made the decision, actually, within the first few weeks that I got here, to go ahead and restart it. Kevin Lyman, we should make sure to give credit to, especially Steve Van Doren, really ran with it, and they've recreated the Warped Tour. We only planned three events, so we expected a pretty modest impact, although social media is a magical thing, and those three locations feel like it's happening all over the United States now. We sold 50,000 tickets. Our plan was to make the events much bigger than they'd ever been before. From 25,000 was the peak size of any event in the past. We planned to sell 50,000 tickets.

For the, The Warp Tour. Um, so what did you expect to to see? I mean, obviously you gave us some of the metrics, but what did you expect in terms of Mind? Share market, share kind of before the event and what metrics kind of suggest to you that you've engaged? Other than, you know, selling the tickets um, in terms of kind of feedback Etc. And then Paul, can you talk about the 60 to 70 million dollars of gross? Uh, profit impact? Obviously, given the guidance that you had for the first half of the Year, all of that's coming in the back half, are you able to offset this through, um, the sgna? Can you talk about some of the other parts of the p&l that can offset that? And I'm assuming that that does not include the price actions that you would be taking or, or just some clarity on how much of that includes forward. Price action. Thank you very much.

Okay, let me, let me, let me jump on the first question. Um, what expectations we have for the work for real? As I said earlier, you know, we our expectations were first of all realized the work tour hasn't been around since 2018. And we made the decision actually within the first few weeks that I got here to, to go ahead and restart it and Kevin Lyman. I should we should make sure to give grab to especially Steve vandoren, uh, really ran with it and they've recreated the work to her. We only plan 3 events so we expected a pretty modest impact, although social media is a magical thing. And uh, those 3 locations feel like it's happening all over the United States now.

Bracken Darrell: We sold out of those, I think, in an hour and a half or something. We added another 35,000 tickets. We sold out of those just as fast. The demand was just enormous. You probably, if you followed it at all on social media, you'd just see how much activity there was. In terms of impact on the business, in year one, we were only doing three cities, and it's the first time back, so we'll see. We sold, I would just say, we sold a lot of merchandising. If you stack on top of that, all the merchandising was sold by us, the event manager, the different bands around it. You can see how powerful this is as a driver of product. That's physically at the event. We expect that to continue, especially as we go into year two of this event.

Uh, we sold 50 tickets, our plan was to sell make the events much bigger than they'd ever been before. So, from 25,000 was the peak size of any event in the past. We went the, we planned to sell 50,000 tickets, we sold out of those. I think in an hour and a half or something. So we added another 35,000 tickets. We sold out of those just as fast. And so the the demand was just enormous and you probably if you followed it at all on social media to see how much activity there was, um, in terms of impact on the business, you know, in year 1, we only doing 3 cities and it's a first time back, so we'll see, but we sold, I would just say, we sold a lot of merchandising and if you put and if you stack on top of that, all the merchandise that was sold by us, the event, the event manager, the the different bands around it. You can see how powerful this is as a driver of product.

Bracken Darrell: It's a super, super powerful event for us. It's a fan fest. It's a flat-out, all-out, huge fan fest. I wish we could have had every investor standing in the middle of that monstrous crowd that I was on Sunday, and you would have felt it.

Uh, and that's physically at the event. We expect that to continue, you know, especially as we go into year 2 of this event. So it's a super super powerful event for us. It's a FanFest it's a flat out, allout huge FanFest.

And I wish we could have had every investor standing in the middle of that, you know, that monstrous crowd that I was in on Sunday, and you would have felt it.

Adrienne Yih: Yeah, so.

Krista: am next here.

Bracken Darrell: You can come to Orlando in November.

Yes. So next year

Paul Vogel: Bracken Darrell was very excited with his Warped Tour experience. To clarify the question, the $60 to $70 million we talked about, you are right, it is mostly the back half of the year, and that is the net number when you sort of account for everything that is in play right now between how much flows through this fiscal year, what we believe we can offset between pricing and other actions. Keep in mind a couple of things. We have been working to improve gross margins anyway throughout the year. Obviously, this has an impact on gross margins, but it is not in a steady state or static environment in terms of gross margins. We will continue to work on the gross margin improvements outside of tariffs. Yes, we will continue to be very diligent on our other cost initiatives, which we have talked about.

So just to be clear, I'm planning to travel to Orlando in November.

Back in was very excited with his War tour experience.

Um,

The, uh, so just to be, I to, I guess to clarify the question. Um, so the $60 to $70 million we talked about, you're right. It's mostly the back half of the year, and that's the net number when you sort of, um, account for, um, everything that's in play right now between how much flows through this fiscal year, what we believe we can offset, um, between pricing and, um, uh, and other actions.

But also keep in mind, a couple of things, you know, we we've been working to improve gross margins anyway, um, throughout the year. So, obviously this, um, has an impact on Gross margins but it's not in this, uh, steady state or static environment in terms of gross margins. Um, and uh, uh, so I'm so and we'll continue to work sort of on the gross margin improvements outside of tariffs. Um, and then, yes, obviously we'll continue to be uh, very diligent on our other costs initiatives. Uh, which we've talked about,

Adrienne Yih: Just to be clear, it's 20% Indonesia and 19%, or sorry, 19% Indonesia and 20% Vietnam. Is that the incremental?

Paul Vogel: Yeah, that's where we're going. Yeah, so again, I guess to level set on that as well, everything that we've put in now is what we see as well from the public, from what's been made public by the administration or others. We don't really know anything more than anyone else in terms of expectations. So we've modeled what we believe is the most likely outcome based on what we've seen from public information as well.

You ever sent Indonesian? 20% Vietnam. Is that the incremental? Yeah? Uh, yeah. I mean that's what we're going to. Yeah. So again, I guess the level set on that as well. Um,

Bracken Darrell: Think of that as another 9 or 10 points in Southeast Asia, something comparable around the world.

Everything that we've put in now, is what we see as well from the public, um, uh, from, what's been, what's been made public by the administration or others? So, um, you know, we don't really know anything more than anyone else in terms of expectations. So, we've modeled, um, what we believe is the is the most likely outcome based on what we've seen from public information as well. Well, think of that as another 9, or 10 points, in Southeast Asia. And, you know, something comparable around the world,

Adrienne Yih: Perfect. Thank you very much.

Bracken Darrell: Great, thank you. Thank you, Adrienne Yih. See you in Orlando.

Okay, perfect. Thank you very much. Great. Thank you. Thank you, Adrian. See you in Orlando.

Krista: Your next question comes from the line of Lorraine Hutchinson with Bank of America. Please go ahead.

Lorraine Hutchinson: Thank you. Good morning. I just wanted to get your longer-term views on gross margin. Clearly, we will have some pressure through the rest of the year from tariffs, but as you step back and you look at the gross margins of each of your brands, where do you see the most opportunity to improve those going forward?

Bracken Darrell: Yeah, we kind of, in our Investor Day, we laid out, I think Investor Day one, we actually, and then we reiterated in number two, we set our gross margin target over the next few years to get to 55% and stay there and potentially go beyond that. We continue to feel very strongly about that when we look at our overall business. In terms of gross margin improvement, we have really gross margin opportunity across every brand. It is just a question of how much we try to exploit that. I mean, I think in The North Face, we have premiumization opportunities across the board and mixed opportunities. If you really, I do not want to go down in the mix of our gross margin by brand. It will get really complex if we do that.

Thank you, good morning. Um, I just wanted to get your longer term views on gross margin. Uh, clearly. We'll have some pressure through the rest of the year from tariffs. But as you step back and you look at the gross margins of each of your Brands, where do you see the most opportunity to improve those going forward?

Investor day 1, we actually and we reiterate in in number 2. We we set our gross margin Target over the next few years, to get to 55% stay there and, and potentially go beyond that.

Bracken Darrell: I would just say where we see the growth opportunities long term, the gross margins are better. If you look at Vans, I think we talked premiumization today. We talked about the Fifth Avenue store. We are selling 35% more premium mix in that Fifth Avenue store. It tells you how much upside there is. This is like all of our brands. I think Vans is a brand that has the ability to stretch across such a wide range of price points. Generally speaking, as you go up in price points, you have higher gross margins. We are barely touching the tip of the iceberg in terms of the premium mix that we can sell. So I think across all of our brands, we have opportunities. I think I could safely say that Paul and I are gross margin fanatics.

And um and we continue to feel very strongly about that when we look at at our overall business in terms of gross margin Improvement. You know, we've got really gross margin opportunity to cross every brand. It's just the question of how much we try to exploit that. I mean, I think in the North Face, you know, we have premiumization opportunities across the board and mix opportunities. If you really, I don't want to go down in the mix of our gross margin by brand. It'll get really complex if we do that, but I would just say, where we see the growth opportunities, long term, the, the gross margins are better. If you look at Vans, I think, you know, we talked premiumization today. We talked about the Fifth Avenue store. We're selling 35% more premium mix in that Fifth Avenue store, it tells you how much upside there is. It's, this is like all of our Brands. I think that Vance is a brand that has the ability to stretch across such a wide range of price points. And you know, generally speaking as you go up in price points you have higher gross margins and we're barely barely touching. The tip of the iceberg in terms of the premium mix that we can sell. So I think it

Across all of our brands, we have opportunities, and I'm a, you know, I think I can safely say that Paul and I are focused on gross margin.

Bracken Darrell: I mean, we are really focused on that. I have learned in my career, and so has Paul, gross margin is where the action is. If you get gross margin right, everything else flows. It is also a great reflection of the strength of the brand and the strength of the business as long as you have got growth. We will get growth. So we are going to get better gross margin.

Paul Vogel: I would just add, just kind of a refresh too, in terms of what we said at the Investor Day. We mentioned the three big gross margin initiatives. We mentioned the nine initiatives that we talked about that were going to help generate that incremental $500 million to $600 million of operating income. The three that we specifically called out in gross margin were product creation, integrated business planning, and markdown management. Markdown management, you can think about as something that is more immediately actionable. The other two take a little bit of time on product creation and integrated business planning. I think you will start to see the impact of markdown management, or you already have, in terms of where we have seen sort of better execution there in terms of overall markdown.

Paul Vogel: You will see from the product creation, integrated business planning, that stuff that will start to benefit us, but really get rolling over the next kind of year or two.

Uh, Fanatics. I mean, we're really focused on that. I I've learned in my career and so as Paul, you know, gross margin is where the action is. If you get gross margin right, everything else flows. It's also a great reflection of the strength of the brand and the strength of the business, as long as you've got growth and we will get growth. So we're we're going to get better. Growth margin. Yeah, I I would just add so just kind of a a refresh to in terms of what we say at the investor day, right? We we mentioned that the 3 big gross margin in issues we mentioned. So the 9 in is that we talked about that, we're going to help generate that incremental 500 to 600 million of of operating income. You know, the 3 that we specifically called out in gross margin were product creation, integrated business planning and marked down management. Um, you know, markdown management you can think about is something that, um, is more immediately actionable. Um, the other 2, take a little bit of time right on product creation and integrated business planning. And so, I think you'll start to see the impact of markdown manager. Are you already have, right? In terms of where we've seen sort of, um, better execution there in terms of overall markdowns, um, and then you'll see from the product creation,

Integrated business plan that stuff that will that will start to benefit us, but really get get rolling over the next kind of year or 2.

Adrienne Yih: Thank you.

Bracken Darrell: Thanks, Lorraine.

Thank you. Thanks Lauren.

Krista: Your next question comes from the line of Jay Sol with UBS. Please go ahead.

Your next question comes from the line of J. Soul with UBS. Please go ahead.

Speaker 7: Super, thank you so much. I just want to ask another question about tariffs. It sounds like you are going to mitigate a whole lot of the 250 to 275 gross impact. What kind of impact do you expect on unit volumes as you raise prices and do some of the other actions to offset the tariff?

Super, thank you so much. Um I just want to ask another question about tariffs. It sounds like you're going to mitigate a whole lot of the 250 to 275, Grouse impact, what kind of impact do you expect on unit volumes as you raise prices and and, you know, do some of the other actions to offset the Tariff.

Bracken Darrell: Nobody really knows. This is a very unusual circumstance where the whole industry is affected kind of equally. If our competitive assessment is right, I think everybody is kind of hit fairly equally in this industry, whether it is footwear or apparel, on the tariffs. So it is a little hard to model. We have modeled different scenarios, as you would expect, all the way down to a worst-case scenario and then a best-case scenario, which we then ignore. We focus kind of on an expected case and making sure we are protected against the downside case. Generally, I suspect we are modeling somewhere in the one-to-one or a little bit better, given that the whole industry is raising. So we will see. On top of that, you could have a macro impact. Paul, do you want to add anything?

Um, you know, you know, nobody really knows. I mean this is a very unusual circumstance where the whole industry is affected kind of equally. And if you if our competitive assessments right, I think everybody's kind of hit fairly equally in this industry. Whether it's Footwear apparel,

Paul Vogel: No, I would just say exactly that. I would say, A, as you can imagine, we have different scenarios around different elasticity curves. Some of it is going to be a wait and see how things go. Bracken mentioned in a number of our brands where we are with the product. I think some of them probably had some pricing opportunity with or without tariffs anyway. We will see how that works out.

On the, on the tariffs. So it's a little hard to model. We're we're, we're we've modeled different scenarios as you'd expect. So all the way down to a worst case scenario and then the best case scenario, which we, we then ignore, and we focus kind of on an expected case and making sure we're protected against the downside case. Um, you know, generally, I think we're, you know, I, I suspect, we're, we're modeling somewhere in the 1 to 1 or a little bit better, you know, given that the whole industry is Raising, so, we'll see. And then on top of that, you could have a macro impact, you want to add anything Paul know, I would just say exactly that I'd say a, we, um, as you can imagine, you know, we have different scenarios around different, um, elasticity curves. Um, and so, we'll just some, it's going to be a wait and see, um, how things, um, go. And then I think, um, Bracken mentioned, um, in a number of Our Brands, you know, sort of the where we are at the product. And I think some of them

Probably had some pricing opportunity with or without tariffs anyway. So we'll see how that works out.

Speaker 7: Yeah, so Bracken, I think you mentioned one-to-one. Does that imply sort of like to me last year to see raise price 1%, unit volumes go down 1%? Is that what that means?

Bracken Darrell: Yeah, roughly, although there's an argument, and we certainly think that's very possible, that it could be a little better than that because of the nature of the tariff increase impact on everybody's costs. Now that might not show up right away, so it's kind of our expectation it's going to take a while for this to play out. I think there's a lot of discussion about why is the economy so good? Why are the tariffs not showing up? I think it's because the tariffs really haven't shown up in most people's costs yet. They're flowing through inventory and making their way into our costs and everybody else's. It's a little hard to know. We're just going to be flexible. One of the things I'm proudest of, of what we've done in the last year, is we've built an ability to be a great response machine to what's happening.

Yeah. So I'm back and I think you mentioned 1 to 1 is that imply like, sort of like an elasticity like raise price, 1% unit volumes go down, 1% is that? Is that what that means? Yeah. Roughly although you know, there's an argument and we we certainly think that's very possible that it could be a little better than that because of the nature of the Tariff increase impact on everybody's costs

Bracken Darrell: We'll react to whatever we need to from a pricing, cost, and factory relocation standpoint with a lot more agility than we could possibly have done before to whatever it is.

Pricing cost and print plant and the factory relocation standpoint with a lot more agility than we could possibly have done before. So, whatever it is.

Speaker 7: Got it. Okay, thank you so much.

Bracken Darrell: Thanks, Jay.

Got it. Okay. Thank you so much. Thanks, Jay.

Krista: Your next question comes from the line of Michael Binetti with Evercore ISI. Please go ahead.

Your next question comes from the line of Michael benetti with evercore. Please go ahead.

Speaker 7: Good morning. Congrats on the next quarter, and thanks for taking our question. I guess The North Face America is good to see the 5% growth rate on the global basis. The North Face Americas, I know it's an unimportant quarter, but down 3% in the summer. I know you mentioned that you're pretty excited about some of the lifestyle stuff coming in. Maybe just help us connect with the down 3% over the summer and what's on the common lifestyle. Then I guess just some thought on how we should expect to see The North Face Americas trend into the fall and winter based on the order books. Then I know on Vans, Bracken Darrell, you've mentioned a few times on public calls since you got back that you thought Europe was closer to a turn than the U.S.

Speaker 7: You mentioned it earlier in the year when you and I got together. Can you just help us connect that to the, I guess it was down 16% in the quarter, but you're saying some nice things about the store in London getting better. Maybe just help us understand where the brand sits in the NBA today.

Bracken Darrell: I will start with your questions on The North Face. I think generally speaking, I am really excited about the ability to really go four real quarters for The North Face. I think we have really not done, we have talked a lot about it in the past, we have not really brought out enough product. If we have brought out product, we have not invested enough in it in stores and through wholesale to see a difference in the spring and summer. As you said, this is a very light seasonal quarter for us, so I would not draw too many conclusions. It is also early. We really do not have enough spring and summer product out yet, but I can promise you that is a real focus of the team, and they are really working to get there.

Good morning. Congrats on the next quarter and thanks for taking our question. Um, I guess North Face hommes, America. It's good to see the, uh, the 5% growth rate on the global basis, North Face America's. I know it's an unimportant quarter, but down 3% in the summer, I know you mentioned that you're pretty excited about some of the lifestyle stuff coming in. Maybe just help us connect with, um, the down 3 over the summer and what's on the common lifestyle. And then I guess, just just some thought on how we should expect to see North Face America's Trend into the fall and winter um based on the order books and then I know on um van Brack and you've mentioned a few times on public calls. Since you got back, you thought Europe was was closer to a turn in the US. You mentioned it earlier in the year when you and I got together can you just help us connect that to the you know the I guess it was down 16 in the quarter but you're saying some nice things about the store in London, getting better, maybe just help us understand where the brand sits in the mea today.

Yeah, I I'll start with your questions on Earth days, you know, I think, generally speaking. Um, you know, I am really excited about the ability to really go for real quarters for North Face. I think we've really not done. We've talked a lot about in the past, we've not really brought out enough product, and if we have brought our product, we haven't, we haven't invested enough in it in stores and in through wholesale to see a difference in the spring. And summer, as you said, this is a very light seasonal quarter for us so I wouldn't draw too many conclusions also early. I don't, we really don't have enough spring and summer product out yet but I can promise you that is a a, uh,

Bracken Darrell: I think as we get into the next spring and summer, you will see more and then more and more. I am excited about that. In terms of, we are really trying not to get into forecasting where the business is going by brand, so I am probably not going to do that now. But I want to talk briefly about your Vans question for Europe. I think this business in general is, when you are doing a turnaround, it has got ebbs and flows on its way up, hopefully, or on its way to less down at this point. I think the same thing is true for Europe. I think we have got really great spots in Europe. We talked about the large city plan where we are going into key cities and seeing a difference there, and I think that is great.

Bracken Darrell: Basically, I do not think it has turned any faster than the U.S. I think it looks a lot like the U.S. I think the pattern is the same, so we expect the turn to happen at about the same pace.

A real focus with the team and they're really working to get there so I think is the as we get into the next spring and summer you'll see more and then more and more. So I'm excited about that. Um, in terms of uh, you know, we try we're really trying not to get into kind of forecasting where the business is going by brand. So I'm probably not going to do that now but I I want to talk briefly about your Brand's question for Europe. Yeah. I think, uh, this business in general, is when you're doing a turnaround, you know, it's it's got uh es and flows to on its way up, hopefully, or that's way to less down at this point. And I think the same thing is true for Europe. You know, I think we've got hot really great spots in here. We talked about the, the uh, large city plan, where we're going into key cities and seeing a difference there and I think that's great. And then and and and, you know, basically, I don't think it's turned any faster than the US. I think it looks a lot like the US. I think the the patterns the same. So we expect to turn to happen at about the same pace.

Paul Vogel: Any comment on the forward order book for fall winter for The North Face?

Bracken Darrell: No, we're really trying not to do that. We really don't want to get into any kind of forward-looking forecasting by brand.

A comment on the forward order book for fall winter for North Face.

No, we're really trying not to do that, you know, we really don't want to get into any kind of forward looking forecasting by brand.

Paul Vogel: OK, good luck with back to school.

Bracken Darrell: Thank you, Michael. All right, see you now.

Okay, good luck with back to school. Thank you. Thank you, Michael. All right. See you now

Krista: Your next question comes from the line of Paul Vogel with BMO Capital Markets. Please go ahead.

You are our next question, comes from the line of Paula with City. Please go ahead.

Speaker 7: Thanks. It's Tracy Cogan filling in for Paul Vogel. I was wondering, are your quarter-to-date trends in line with your revenue guidance of down, I think, 2% to 4%, or are you expecting trends to accelerate or decelerate from here? At Vans, you expected a similar drag from your deliberate actions as you saw in Q4, but it seemed like it was significantly less. I was just wondering if you took fewer deliberate actions than you initially anticipated. Thank you.

Thanks, it's Tracy. Kogan, filling in for Paul. Um, I was wondering are your quarter debate Trends in line with your Revenue guidance of down, I think, 2 to 4 or you expecting Trend to accelerate or decelerate uh, from here. And then I thought of Van you expected a similar drag from your delivered actions as you saw in uh, 4 q. But it, it seemed like it was significantly less and I was just wondering if you took few or delivered actions then you initially anticipated it. Thank you.

Paul Vogel: On the first question, we are not really going to answer that. I think we will just, I said we put out our guidance for the quarter, and that is obviously the expectation we have for the quarter, so I will leave it at that. On the Vans, no, I mean, it is roughly in line with expectations. We said it was roughly 50% last quarter, roughly 40% this quarter. It is just sort of how it impacts. I mean, it is really just math more than anything else. The overall initiatives are the same. The overall intent is the same. It is really just a question of how everything falls out and where the math falls out. To us, the 40%, 50%, it is roughly half plus or minus. Last quarter was a little bit more. This quarter was a little bit less, but we have talked about that.

Um,

So, on the first question, we're not really going to answer that. I think we'll just, you know, I said, we put out our guidance for the quarter. I mean, that's obviously the expectation we have for the quarter and uh, so I'll leave it at that. Um, and on the Vans know, I mean, it's, it's roughly in line with the expectations. It was we said it was roughly 50% last quarter, roughly 40% this quarter, you know, it's just sort of how it impacts. I mean, it's really just math more than anything else that the, um, overall initiatives are the same, the overall, um, um, intent is the same. It's really just a question of how everything falls on where the math falls out. So, you know, to us,

Paul Vogel: We have talked about that the impact would be felt most significantly Q4 of last year, Q1, and then Q2 as well this year. Hopefully, you start to see some moderation of that in Q3 and then a lot more in Q4.

Of 40 percent, 50% roughly, you know it's roughly half plus or minus. The last quarter was a little bit more. This quarter was a little bit less but, um, we've talked about that and we've talked about that the impact would be, you know, felt most significantly Q4 of last year, q1. Um, and then Q2 is what, as well this year. Um, hopefully, you start to see some moderation of that in, in Q3. And then, you know, a lot more in Q4.

Speaker 7: Thank you.

Bracken Darrell: Thank you so much.

Thank you so much.

Krista: Your next question comes from the line of Peter McGoldrick with Spiegel. Please go ahead.

You're our next question. Comes from the line of Peter. Mick, goldbrick with stifel. Please go ahead.

Speaker 7: Hey there. Thanks for taking our questions. One of the callouts was leaning into marketing for back to school. Is this entirely related to the Vans brand, and should we expect this to be a sustained area of investment for fiscal 2026?

Bracken Darrell: Yeah, so back to school isn't only a Vans, definitely not only a Vans thing. We are absolutely leaning into back to school. School comes every year, and it's going to come this year. I think we've got a good program for it. But yeah, I would expect it to be, this will be an annual thing. I don't think we did as well as we could have last year in back to school, so we're more focused on that this year, and I think we'll, especially in Vans. We'll see how we do this year, but I'm optimistic about it.

Was leaning into marketing for back to school. Is this entirely related to the Vans brand? And should we expect this to be a sustained area of investment for fiscal 26?

Yeah, so um, back to school isn't only Advanced only is not definitely not only Advanced thing. And yeah, we are absolutely leaning into back to school school comes every year and it's it's going to come this year. So, so we, I think we got a good program for it. Um, but yeah, I would expect it to be. This will be an annual thing. I don't think we do this, as well as we could have last year and back to school. So we're we're more focused on that this year, and I think well, especially in advance. So we'll see how we do this year, but, um, optimistic about it.

Paul Vogel: All right, thank you very much.

Bracken Darrell: Thank you. Thanks, Peter.

All right. Thank you very much. Thank you. Thanks, Peter.

Krista: Your next question comes from the line of Laurent Vasilescu with BNP Paribas. Please go ahead.

Speaker 7: Good morning. Thank you very much for taking my question. I wanted to ask about the free cash flow for Q1. It was down $174 million. I think last quarter, Paul, you mentioned there was an intentional timing shift. By my math, it looks like the free cash flow for the quarter was down maybe even more than $200 million. I am trying to understand the deterioration of free cash flow. Can you walk us through how you get to over $500 million of free cash flow for the remaining quarters? Thank you.

Your next question comes from the line of Laurent Velasco with the BNP parabas. Please go ahead. Oh good morning, thank you very much for taking my question. Um I wanted to ask about the free cash flow for the first quarter. Uh it was down 174 million. I think last quarter, Paul, um, you mentioned there was an intentional timing shift. Um, so by my math, it looks like the free cash flow for the quarter was down, maybe even more than 200 million dollars.

Paul Vogel: The Q1 is really around timing. It is around timing of working capital. It is around those types of dynamics. When you sort of look at the components of free cash flow for the year, right, between our operating income, what we expect to spend on CapEx, how we are thinking about CapEx throughout the year, and other movements in working capital, we are right on pace. It is why I do not guide free cash flow on a quarterly basis, but we try and give some idea on an annual basis because you can have pretty big fluctuations sometimes with respect to timing in any one quarter. As I said, we do feel good about it. There is an incremental impact from the tariffs, which we talked about. We have some offsets that we think we are working on throughout the year to improve free cash flow.

Paul Vogel: It is a big focus on us. I think Bracken Darrell mentioned before, there are a couple of things that we really focus on. Gross margin is one of them, and free cash flow is the other one for me, right? We are really committed to generating incremental free cash flow, to paying down our debt, to reducing our leverage, and we expect free cash flow to be up this year. There are lots of moving parts in every quarter. There are things that we are working on that will hopefully come through that will impact our free cash flow throughout the year. As that happens, we will update you.

So, I'm trying to understand, uh, the deterioration of free cash flow and and can, you can you walk us through? How do you get to over 500 million dollars of free cash flow for the remaining quarters. Thank you. Um, yeah, so the q1 it's really around timing. It's around time of working capital. It's it's around those types of uh, of um, of uh, of Dynamics. But um, when you sort of look at the um, uh, the components of free cash flow for the year, right? Between our, our our operating income, what we expect to spend on capex. Um, how we, how we're thinking about capex throughout the year, um, and other movements and working capital. We're we're right on Pace. Um, it's why I don't guide free cash flow on a quarterly basis, but we try and give some idea on an annual basis because you can have pretty big fluctuations sometimes with respect to timing in in uh in any 1 quarter. Um as I said, we do feel good about it. There is uh, an incremental impact from the tariffs, which we talked about, um, we have some offsets that we think we're working on throughout the year to to improve free free.

Cash flow. Um and it's a big focus on us. I mean I think bracky mentioned before there's a couple of things that we really focus on gross margin is 1 of them. Uh and free cash flow is the other 1 for me, right? We're really committed to uh, to generating income free cash flow to paying down our debt to reducing our leverage. Um, and we expect free cash flow to be up this year again. There's lots of moving Parts with lots of moving Parts in every quarter. Um, there's things that we're working on, um, that will hopefully come through that, uh, that will impact our free cash flow throughout the year and uh, you know, as that happens, we'll update you.

Speaker 7: Wonderful. Then a follow-up here, Paul. Net debt actually increased this quarter. That might be due to seasonality, but obviously, you have that target for the five years. Where do you think net debt goes? I know you have the 500 million euro bond that you are going to use. Are you still using the revolver for that? Where do you think net debt, the leverage, goes for this fiscal year?

Paul Vogel: We expect leverage to decline. We haven't given a target for this year. We've given sort of the medium-term target, but we do expect it to continue to move down. We ended last year at 4.1 times, so you can expect it to be below that at the end of the year and hopefully making reasonable progress to get into the 2.5 times that we've talked about. With respect to the $500 million maturity, a couple of things. One is currency has negatively impacted us in terms of the debt on the balance sheet. So that's been a little bit of a negative in terms of how the debt shows up given the currency moves. We continue to expect to pay off the $500 million at the end of the year, and that'll be mostly from free cash flow and then, again, other short-term borrowing if we need.

Wonderful. And then a follow-up here. Paul. Um, net debt, actually increased this quarter, um, that might due to seasonality. But obviously, I just you have that Target for for the 5 years. But where do you think net? Debt goes, um, I know you have the 500 million euro bond that you're going to use, um, your I, I guess, are you still using the revolver for that? But where do you think that, that the leverage goes for, for this fiscal year? Um, yeah, so we expect leverage to decline. Um, we have given a target for this issue. We've given sort of the medium-term target, but we do expect it to continue to move down. We ended last year at 4.1 time so you can expect it to be below that, um, at the end of the year and and hopefully making reasonable progress to get into the 2 and a half times that that we've talked about. Um, yeah, so and with respect to um the the the 500 million maturity yet. So a couple things 1 is currency has negatively impacted Us in terms of the debt on the, on the balance sheet. Um, so that's been a little bit of a, of a negative in terms of where the, the, how the debt, um,

Paul Vogel: But we feel pretty reasonably confident that won't be any issue whatsoever.

shows up given with the currency moves. Um, and then yeah, we continue to expect to pay off the The 500 at the end of the year. Um, and that would be mostly from free cash flow and then again um you know other you know small short-term borrowing if we need. But um, we feel pretty reasonably confident, we'll be able that won't be any issue, whatsoever?

Speaker 7: Thank you very much.

Paul Vogel: Yep.

Bracken Darrell: Thanks, Laurent.

Thank you very much. Yep. Thanks Laura.

Krista: Your next question comes from the line of Matthew Boss with JPMorgan. Please go ahead.

Paul Vogel: Great, thanks. So, Bracken, on your reset actions across the portfolio, what remains or anything new that you anticipate relative to actions in place today? And just on your visibility for the portfolio to soon move to growth that you cited, is there any reason this would not happen in the second half of the year?

Hey, our next question comes from the line of Matthew boss with JP Morgan. Please go ahead. Great, thanks. Um so Bracken on your reset actions across the portfolio. What remains or anything new that you anticipate relative to actions in place today and just on your visibility for the portfolio to soon move to growth that you cited. Is there any reason this would not happen in the second half of the year?

Bracken Darrell: On the reset actions, I think I really feel good about what we've done, and I think we're in a pretty good spot. Now, don't get me wrong, there are always, when you're in a company of our scale, there are always things you're going to be doing that'll be pruning and fixing things that pop up and that kind of stuff. But basically, our reset actions, the major reset actions, I think, are really behind us. We're nearly not guiding for the year, so we're not going to go talk much about that, Matthew. As we come through the year, I promise you we'll be as transparent as we possibly can be.

Uh, all the reset actions were. Um, no, I think uh, I think I really feel good about what we've done and I think we're in a pretty good spot. Now, don't get me wrong, they're always, you know, when you're in a company of our scale, there are always things you're going to be doing. That'll it'll be

Pop up and that kind of stuff. But yeah, basically our reset actions, the, the major reset actions, I think are really behind us

Uh, we're not, we're nearly that guiding for the year so we're not going to go talk much about that Matthew. But but as we come through the year, I promise you will be as transparent as we possibly can be

Paul Vogel: Paul, are there any puts and takes to consider in the flat gross margin outlook for the second quarter that is constraining expansion on gross margin? Again, it is a couple of things. One is, obviously, we had some step-ups over last year, so as we lapped some of our other initiatives, we still feel good about the gross margin progression. Again, you saw some of it in Q1. It is just, again, sometimes there are ebbs and flows with every quarter, but it is flat year on year. We feel good about where the trajectory of gross margins have gone overall. Great. Best of luck.

And and then Paul are there any puts and takes to consider in the flat, gross margin outlook for the second quarter that's constraining expansion on gross margin.

Um know again it's it's um well it's a couple things 1 is obviously we had some step UPS over last year so we as we lap some of our other initiatives, um we still feel good about the gross margin progression. You again, you saw some of it in um uh in q1. And so again it's just you know,

Again, sometimes there's abs and flows with every quarter, but it's flat year on year. Um, we feel good about where the trajectory of uh, of gross margins uh, you know, have gone overall.

Bracken Darrell: Thank you, Betsy.

Great. Best of luck. Thank you, Beth.

Krista: We have time for one more question, and that question comes from the line of Brooke Roach with Goldman Sachs. Please go ahead.

We have time for 1, more question and that question comes from the line of Brooke roach with Goldman Sachs. Please go ahead.

Lorraine Hutchinson: Good morning, and thank you for taking our question. Bracken, I was hoping you could talk about how your conversations with wholesale partners are trending as you have implemented some of these actions across all of your brands in North America. Especially given a choppy macro backdrop, are you seeing any signs of hesitancy in taking additional inventory levels or orders into the holiday season? Is that being offset by some stronger product innovation and marketing, given what you are doing across the brands? Thank you.

Especially given a choppy macro backdrop are you seeing any signs of hesitancy and taking additional inventory levels or orders into the holiday season, and is that being offset by some stronger.

Innovation and marketing given what you are doing across the brands I think around the world to go a little bit of hesitation by wholesalers to overextend themselves on inventory so.

Bracken Darrell: I think around the world, you have got a little bit of hesitation by wholesalers to overextend themselves in inventory. We are aware of that. I am sure everyone in the industry is. The traffic has generally slowed a little bit as we have gone through the summer, especially during this period of real uncertainty around what is going to happen to tariffs. I do think it has kind of caused a bit of just conservatism, and I think you can kind of see and feel it. We are just as optimistic as we have been before. We feel like we laid the right bricks in terms of innovation, and we are going to keep investing in marketing as we have planned, and we are not letting up at all.

We're we're we're aware that I'm sure all of the everyone in the industry is in the.

The traffic is generally slowed a little bit as we've gone through the summer, especially during this period of real uncertainty around what's going to have material. So I do think it's kind of caused a bit of a.

Just conservatism and I think you can kind of see and feel it.

But we're just as optimistic as we've been before or we feel like we've laid the right breaks in terms of innovation.

To keep investing in marketing as we've planned and we're not letting up at all so and yes, we.

Bracken Darrell: Our whole game plan here is to keep getting stronger and stronger from a product portfolio standpoint, from a marketing execution standpoint, and from an innovation standpoint. Our expectation is that is going to offset any of the headwinds that come from, as long as they are reasonable, any of the headwinds that come from concern about the economy.

Our whole game plan here is to keep getting stronger and stronger for a product portfolio standpoint from a marketing execution standpoint, and from an innovation standpoint and.

Our expectation is that's going to offset any of the any of the headwinds that come from as long as a reasonable neither headwinds that come from concerned about the economy.

Okay, great. Thanks, so much. Thank you Brook, thanks, a lot and thanks to everyone I guess I'll close by saying.

Lorraine Hutchinson: Great, thanks so much.

Bracken Darrell: Thank you, Brooke. Thanks, Laurent. Thanks to everyone. I guess I will close by saying we started this, this is the end of my first two years. It has been an incredibly exciting two years, but I think the next two years are going to be a lot more exciting. Everybody likes working more on growth than on cost and organization change, and I am certainly in that camp, and so is my leadership team. We are really excited about the growth path we have ahead. Stay tuned. It will be fun to talk to you next quarter, the quarter after that, and the quarter after that. Orlando, the Warped Tour, if you want to go, I have got t-shirts right next to me that if we were in person, I would be handing them out. We will see you in three months.

We started this this is the end of my first two years.

It's been an incredibly exciting two years, but I think the next two years is going to be a lot more exciting.

He likes working more on growth than on.

Cost.

An organization change and I'm certainly in that camp and so as soon as my leadership team. We are really excited about the growth path, we ever hit and stay tuned it'll be fun to talk to you next quarter or the quarter after the quarter after that in.

In Orlando worked through or if you want to go a good T shirts right next to me that we're in person I'd be handing them out.

And we will see you in three months.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.

Krista: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.