V.F. Q2 2025 Earnings Report

V.F. EPS Results

• Actual EPS: $0.60
• Consensus EPS: $0.41
• Beat/Miss: Beat by +$0.19
• One Year Ago EPS: $0.63

V.F. Revenue Results

• Actual Revenue: $2.76 billion
• Expected Revenue: $2.72 billion
• Beat/Miss: Beat by +$42.09 million
• YoY Revenue Growth: -5.60%

V.F. Announcement Details

• Quarter: Q2 2025
• Date: 10/28/2024
• Time: After Market Closes
• Conference Call Date: Monday, October 28, 2024
• Conference Call Time: 4:30PM ET

V.F. (NYSE:VFC), also known as VF Corporation, is a global apparel, footwear and accessories company. Its portfolio includes recognized outdoor, active, workwear and lifestyle brands such as The North Face, Vans, Timberland, Dickies, JanSport and Eastpak.

The company develops, markets and distributes products including jackets, outdoor and performance apparel, footwear, backpacks, luggage and workwear. Its brands serve consumers through wholesale partners, company-operated and franchised stores, and e-commerce platforms.

Founded in 1899 as the Reading Glove and Mitten Company, the business later adopted the name Vanity Fair Mills and became VF Corporation. The company serves markets in North America, Europe, Asia-Pacific and other international regions, with products sold through a global distribution network.

V.F. Q2 2025 Earnings Call Transcript

Key Takeaways

• Revenue fell 6% in Q2 (vs. down 10% in Q1), but gross margin expanded 120 bps to 52.2% and SG&A expenses were 14% lower, driving an adjusted operating margin of 11.4%.
• VF’s "Reinvent" program delivered $65 million in Q2 cost savings, completing the planned $300 million target by year-end and earmarking additional savings for reinvestment in product and marketing.
• Inventories were down 13% and net debt fell by $450 million year-over-year, with $1.5 billion in Supreme divestiture proceeds used to retire a $1 billion term loan.
• Management reinstated quarterly guidance, expecting Q3 revenue of $2.7–2.75 billion (down 1–3%) and operating income of $170–200 million, reflecting stronger forecast visibility.
• Vans posted an 11% sales decline in Q2 (improved from 21% in Q1), with new franchises like New School and collaborations such as PPARA selling out, signaling positive brand momentum.

Presentation

[Operator]

Ladies, and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the VF Corporation Second Quarter Fiscal Year 2025 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, and if you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I would now like to turn the conference over to Allegra Perry, Vice President of Investor Relations. You may begin.

[Allegra Perry, VP of Investor Relations at VF Corporation]

Hello, and welcome to VF Corporation's Second Quarter Fiscal 2025 Conference Call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly 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 press release that was issued this afternoon, and which we use as lead numbers in our discussion, because we believe they more accurately represent the true operational performance and underlying results of our business. You may also hear us refer to reported amounts, which are in accordance with U.S. GAAP.

[Allegra Perry, VP of Investor Relations at VF Corporation]

Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Joining me on the call will be VF's President and Chief Executive Officer, Bracken Darrell, and EVP and Chief Financial Officer, Paul Vogel. Following our prepared remarks, we'll open the call for questions. I'll now hand over to Bracken.

[Bracken Darrell, CEO at VF Corporation]

Thank you, Allegra, and thanks all of you for joining us. This is a fun week for us. Today, we'll update you on Q2 and get all the discussions of it and Q3 behind us. Then, day after tomorrow, we'll give you a deeper look at what our game plans are ahead. I'm putting in a plug now for the event, which will be broadcast live, and you'll get to meet a few more people in from our team. Q2 was another quarter of really good progress. We delivered on our expectations, consistent with the guardrails we provided last quarter, and VF's transformation continues, and within that, we're making strong strides in advancing our priorities.

[Bracken Darrell, CEO at VF Corporation]

While Q2 revenue was still down as we expected, we had our third straight quarter of sequential improvement in the decline rate, with moderating declines at Vans in the Americas and really almost everywhere else, too. We expanded gross margins, and we did a little better on SG&A relative to our own expectations. Paul will talk you through the financial results later in the call. Moving on to Reinvent. As we pass the one year of anniversary of when we introduced you to the program, my confidence and excitement about the transformation taking place at VF only continues to grow. I'll save a lot of the detail on future plans for later this week at the investor event, but today I'll give you a high-level update on the further progress we made in Q2 on our four stated priorities. The first priority was to lower our cost base.

[Bracken Darrell, CEO at VF Corporation]

We generated another $65 million in cost savings during Q2, and as guided, we've now fully executed all actions to deliver $300 million of cost savings by the end of this fiscal year. We fully intend to go beyond this initial savings target, as we'll discuss Wednesday. We're also continuing to reinvest some of that back into the business, as you know, focused on the key areas of product and brand building. The second priority was to strengthen our balance sheet. We made a significant step forward this quarter. Our work to normalize inventories continues, and we delivered a further reduction in the quarter despite building for our upcoming peak season. Inventories were down 13% at the end of the quarter versus last year. Net debt was further reduced by almost fi...

[Bracken Darrell, CEO at VF Corporation]

by almost $450 million compared to this time last year. Of course, you will have seen that just after the end of the quarter, we concluded the Supreme divestiture. The net proceeds of almost $1.5 billion were in the bank, and just as fast, they went right back out to pay the $1 billion term loan after the quarter closed. We're on track to pay the next term loan of $750 million by the end of the year. Third one was that we would fix the U.S. business. Our Americas business improved sequentially, with revenue down 9% in Q2 compared to 13%, down 13% in Q1.

[Bracken Darrell, CEO at VF Corporation]

The new, fully operational regional platform is starting to deliver tangible results, driven by our quarter, our greater emphasis on brand elevation and full price sales. Importantly, we continue to improve our forecasting accuracy and have now delivered 10 consecutive months on our internal plan. The last one, delivering the Vans turnaround. The brand's overall performance in Q2 was down 11%, a significant improvement relative to last quarter, when we were down 21%. This down 11% was as expected. There are further signs that we're making progress, which we'll continue to build under Sun's leadership. From a product standpoint, Knu Skool continues its strong momentum and further strengthened its position as the number two franchise globally. We're seeing some encouraging results from other new product franchises launched over the summer, particularly Upland and Hylane. Our brand elevation is starting to resonate, too.

[Bracken Darrell, CEO at VF Corporation]

Through the OTW premium label and influencer program, Vans is targeting influencers and early adopters using cities and moments and product collaborations. During New York City Fashion Week a few weeks ago, the brand engaged with fashion influencers and made a significant cultural impact by spotlighting the Satoshi and Pearlized OTW Classics, which we sold through at 100% levels. I'll be wearing the pearlized OTW Classics against Brent Hyder, our CHRO's better recommendation, because I think you'll love them. The Piet Parra collaboration was sold out in five minutes upon launch in September, and our consumer research, our consumer search interest trended positive in Q2 in key markets. Now, let me give you a short update on The North Face.

[Bracken Darrell, CEO at VF Corporation]

As we previewed last quarter, revenue is down sequentially in Q2 because of the super strong comparison to the prior year, when we were up 17%. But we were right in line with the guardrails we gave last quarter. During the quarter, we saw particularly strong performance from backpacks during back to school. The brand also continued to have strong growth in APAC, driven by Summit Series. We had some big wins in EMEA, too, where we delivered our strongest month ever in September, and where our athlete, Katie Schide, broke a course record and won the famous Ultra-Trail du Mont-Blanc race in August, wearing head to toe The North Face. The brand launched its first global brand campaign in over three years, generating a strong response on digital media, particularly with women, and we're investing in our stores.

[Bracken Darrell, CEO at VF Corporation]

Our recently opened North Face store on Sixth Street in Williamsburg, Brooklyn, includes our first-ever shop in shop for The North Face Renewed, a program we've had in place to refurbish, recycle, and resell The North Face product. We're also excited and recently announced our commitment to a new Fifth Avenue location, which will open in the fall of 2025. Finally, we're proud that Time Magazine recently ranked The North Face the world's best brand in the outdoor apparel category. Turning to Timberland, revenue for the brand improved sequentially to -3% in Q2, but compared to -9% in Q1. The Yellow Boot continues to perform well globally, with ongoing momentum enhanced by the new iconic campaign launched in September, which is driving traffic to our stores and online, and also contributing to the growth of the boot.

[Bracken Darrell, CEO at VF Corporation]

Looking ahead, we feel good about where we're heading in Q3. We expect to drive further sequential improvement that builds on the progress we've made in the last few quarters. Now I'll hand it over to Paul, who will take you through the financials in more detail, and I'll come back at the end to wrap it up. Paul?

[Paul Vogel, CFO at VF Corporation]

Thanks, Bracken. Good afternoon, everyone. It's been a great first four months. I'm looking forward to unveiling more information about our long-term financial potential at our Investor Day on Wednesday. Moving on to Q2, as Bracken mentioned, we continue to advance VF's transformation and continue to move forward as we've made progress in reducing costs, strengthening the balance sheet, fixing the Americas, and turning around Vans. Recapping the quarter, Q2 was largely in line with expectations, with sequential improvement in revenue and a positive inflection in gross margin. Total Q2 revenue was down 6% year-over-year, which marks an improvement from down 10% in Q1. By brand, Vans was down 11% versus last year, improving from Q1 of down 21%.

[Paul Vogel, CFO at VF Corporation]

We are seeing the benefits from the inventory cleanup actions taken over the past few quarters, particularly on profitability as we rightsize the brand's cost structure. The North Face revenue is down 4%, in line with the guardrails we gave you last quarter, given the strong prior year Q2 comp of up 17% from shipping timing normalization. Greater China continued its strong momentum, but this was offset by ongoing Americas pressure. Timberland was down 3% in the quarter versus Q1, down 9%, as we saw strong growth in premium boots. And rounding out our top four Vans, Dickies was down 11% in Q2, an improvement from Q1's decline of 14%, and the third sequential quarter of improvement. By region, the Americas was down 9% in Q2, compared to down 13% in Q1.

[Paul Vogel, CFO at VF Corporation]

In EMEA, we were down 5% a quarter, but September marked the biggest month ever for the region, though wholesale trends weighed on performance. The APAC region was up 5% in Q2, led by strength in The North Face and China. By channel, we saw sequential improvement in both global DTC and wholesale, as DTC improved to down 8% after contracting 13% in Q1, and wholesale was down 5% after being down 7% in Q1. Gross margin was up 120 basis points versus last year to 52.2%, inflecting to positive and in line with our expectations, and primarily due to product cost tailwinds. SG&A dollars were down 14% versus last year, or down 1%.

[Paul Vogel, CFO at VF Corporation]

This was better than our expectations of up $25 million-$35 million, as we realized higher Reinvent savings in the quarter. In addition, there was a shift of some spending from Q2 into Q3, roughly $10 million-$15 million. We did see SG&A deleverage overall of 180 basis points year-over-year to 40.8% of sales. During the quarter, we realized approximately $65 million of total Reinvent savings, bringing us to a cumulative total of approximately $200 million since we initiated the program. We are on track to deliver $300 million of savings. These savings offset additional investment in marketing and product ahead of the holiday season, more normalized incentive compensation, and inflation. This resulted in operating margin of 11.4%, down 60 basis points versus last year, and operating income of $315 million.

[Paul Vogel, CFO at VF Corporation]

Diluted earnings per share of $0.60 was down $0.03 versus fiscal 2024, aided by a lower tax rate for the quarter. This reflects favorable discrete items within the quarter. Turning to the balance sheet, we continue to make good progress on inventories as we ended Q2 down 13%. And as Bracken mentioned, we completed the sale of Supreme at the beginning of the month and made an important step towards our key financial priority of deleveraging our balance sheet by paying down the $1 billion term loan. Before I move into the details of our expectations for Q3, I want to share some thoughts on how we will be issuing guidance. Moving forward, we will provide revenue and profit guidance one quarter out, starting with Q3. Overall, we expect Q3 to show further sequential improvement across the business.

[Paul Vogel, CFO at VF Corporation]

For revenue, we expect Q3 to be in the range of $2.7 billion-$2.75 billion, translating to a decline of down 1% to down 3% on a reported basis. We are modeling FX to have approximately a negative 100 basis points impact on our reported growth rates. This trend reflects a continued stabilization of revenue trends driven by wholesale improvements compared to last year, when, as a reminder, we took inventory actions which impacted both Q3 and Q4 of fiscal 2024. Moving down to P&L, we expect Q3 operating income to be in the range of $170 million-$200 million, with gross margin up year-over-year, benefiting from lower product costs and fewer reserves.

[Paul Vogel, CFO at VF Corporation]

SG&A is expected to be up modestly year-over-year, mainly a result of the reintroduction of incentive compensation, as we have discussed in prior quarters. Additionally, we expect more variability in the tax rate by quarter. For Q3, we're expecting the tax rate to be in the low 20s%, versus Q2 in the mid-teens%. And while we're not providing Q4 guidance at this time, I want to give a little bit of color on expectations for the quarter. For starters, we expect Q4 to show another quarter of sequential improvement in year-on-year revenue trends. We expect gross margin to be up and SG&A to grow at a similar rate to Q3. For the full year, we expect free cash flow of around $425 million, with core fundamentals in line with prior guidance.

[Paul Vogel, CFO at VF Corporation]

When looking at the $600 million guidance we gave earlier in the year, our updated forecast reflects the $140 million impact from the sale of Supreme and a slightly higher benefit from the sale of non-core physical assets. Additionally, given the success so far of our Reinvent initiatives, we have decided to fund an additional $50 million into cost savings, which should drive additional savings in fiscal 2026. So in summary, we continue to make progress on our key financial priorities. I'm looking forward to speaking to you all again in a couple of days and providing further insights to our financial strategy. I'll now turn it back over to the Operator for Q&A.

[Operator]

Thank you, and we'll now begin the question-and-answer session. If you have dialed in and 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, simply press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. To be able to take as many questions as possible, we do ask that you please limit yourself to one question. Again, it is star one to join the queue, and your first question comes from the line of Adrienne Yih with Barclays. Your line is open.

[Adrienne Yih, Director and Senior Equity Analyst at Barclays]

Yes. Good afternoon, it's great to see the progress. Bracken, you talked about sort of increasingly being able to kind of predict the business. I'm really curious, what are the drivers of the business that are becoming more predictable? And I really wanted to hear about specifically those that drive the top line, and then obviously, particularly, Vans, followed by TNF. And then, Paul, what are the incremental investments that you're contemplating? Is it brand building, demand creation, outside of the incentive comp? Thank you very much.

[Bracken Darrell, CEO at VF Corporation]

Thank you, Adrienne. Thanks a lot for the comment. Yeah, so, you know, this is 10 consecutive quarters in a row in the Americas, which was our most difficult thing to predict before, and you know, we're really focused on. I'll focus really on the P&L. It's really not only revenue, but also our gross margins and our SG&A. You know, we're really able to predict across the board. Underneath that, to be able to predict that, you've got to have, and I'll stay with revenue for a second, you've got to have a pretty good sense for every part of the world, what they're gonna do, and so it's obviously been true in the Americas, but it's also been true in EMEA and APAC, so I just feel really good about our ability to roll up a forecast and have it be pretty accurate.

[Paul Vogel, CFO at VF Corporation]

Yeah, and on the investment side, it's really two things. It's really on product and marketing. We'll continue to make sure that we can invest in those areas as we Reinvent-reinvest the savings from Reinvent.

[Adrienne Yih, Director and Senior Equity Analyst at Barclays]

Okay.

[Bracken Darrell, CEO at VF Corporation]

Thanks, Adrienne.

[Adrienne Yih, Director and Senior Equity Analyst at Barclays]

Thank you very much.

[Bracken Darrell, CEO at VF Corporation]

Thanks, Adrienne.

[Operator]

Our next question comes from Laurent Vasilescu with BNP Paribas. Your line is open.

[Laurent Vasilescu, Managing Director and Senior Equity Analyst at BNP Paribas]

Oh, good afternoon, thank you very much for taking my question. And congrats, Bracken and Paul, for the progress you're making. Bracken, I was curious to know, how is the health of your overall wholesale business, and what do you see your inventory levels look like, going into the holidays? And then maybe, Paul, just on the cash flow guide, can you kind of give us some guardrails around the free cash flow for the second half? I think it's about $700 million. How do we think about it between 3Q and 4Q?

[Bracken Darrell, CEO at VF Corporation]

Thank you, Laurent. And on the overall wholesale business, I feel good about it. I think we're really on the right trajectory. We're really on the comeback trail here across the board and, you know, in the Americas, the creation of this Americas region has really had a strong impact, especially with our key accounts there, where we're starting to see, you know, good, strong momentum. In terms of channel inventories, I feel good about our channel inventories around the world. I mean, there are a few puts and takes. I would say we're a little short in some places where, you know, the winter came late last year, so people are probably a little slow to take some of the inventory in for the North Face and things in those parts of the world.

[Bracken Darrell, CEO at VF Corporation]

But overall, I feel really good about the channel inventory there. And then I'd say we're probably a little high in places like China, where it's been. You know, honestly, in a turnaround, you've usually got a few places that are slow to turn, and I think Vans is one of the it's the slowest to turn there in China, where it's kind of two steps forward and two steps back. But overall, I feel really good about the Vans turnaround. I feel we're really good about the channel inventory.

[Paul Vogel, CFO at VF Corporation]

Yeah, and on the free cash flow side, we're not going to guide, you know, quarters out. There's always so much variability in terms of free cash flow, what happens in each quarter. But I will say, just kind of reiterate what I said on my prepared remarks, which is, I think we feel really good about where free cash flow is coming in on the year relative to what we had given as guidance starting the year. And particularly, we're right in line with expectations, even maybe slightly a little bit better. And the change in this quarter, and particularly in terms of the full year, is really about taking that and using that $50 million to reinvest in the business for the benefit of 2026.

[Paul Vogel, CFO at VF Corporation]

So, again, in line on the overall core fundamentals on free cash flow, and feel really, really good about the trajectory and where it's headed.

[Laurent Vasilescu, Managing Director and Senior Equity Analyst at BNP Paribas]

Great to hear. Look forward to Wednesday.

[Bracken Darrell, CEO at VF Corporation]

Thanks, Laurent.

[Paul Vogel, CFO at VF Corporation]

Thank you.

[Bracken Darrell, CEO at VF Corporation]

Look forward to seeing you.

[Operator]

And our next question comes from Simeon Siegel with BMO Capital Markets. Your line is open.

[Simeon Siegel, Managing Director and Senior Analyst at BMO Capital Markets]

Thanks. Hey, good afternoon, everyone. So I was curious just how to think about your fixed versus variable cost at this point. You, as you just said, you march closer to the revenue and profit improvement. Just think about the puts and takes. You've got a really great gross margin. You're working your way through cost savings. The adjusted operating margin is narrowing its gap, still down. So just trying to think about how to think about ongoing deleverage impacts, maybe the Reinvent priorities, and any other expense pressure points as we walk towards that sales return. Thanks, guys.

[Bracken Darrell, CEO at VF Corporation]

Simeon, that is such a good question that we're gonna answer it on Wednesday. It is a great question. Thanks for it. We'll try... We'll give you a good glimpse at that on Wednesday.

[Simeon Siegel, Managing Director and Senior Analyst at BMO Capital Markets]

Fair enough. All right. I look forward to it. Thanks, guys.

[Bracken Darrell, CEO at VF Corporation]

Okay, thank you. But, by the way, thank you for the comments on the improvement, and we feel the same way. We really do feel like we've got good momentum across the PNL.

[Simeon Siegel, Managing Director and Senior Analyst at BMO Capital Markets]

Bracken, since we did that, can I throw in, and maybe if this is for-

[Bracken Darrell, CEO at VF Corporation]

Sure

[Simeon Siegel, Managing Director and Senior Analyst at BMO Capital Markets]

... as well? Just curious, AUR versus units, maybe the past quarter, which maybe you're more comfortable, and then how you're thinking about as you elevate brands. Excuse me. How you're just thinking about that discrepancy.

[Bracken Darrell, CEO at VF Corporation]

Yeah, we usually don't give that level of detail, so I won't now, but, and we don't plan to do it Wednesday either. But I would say, overall, I feel good about the brand elevation program we've got internally. I think we're really on the right track. It's gonna take time to play out. Yeah, I mentioned some of the things about OTW on Vans, which is the top end of that, the real tip of the spear. But I think we're on the right path. It's gonna take a few years to really get into a full-scale elevation game, but that's where we're headed.

[Paul Vogel, CFO at VF Corporation]

Yeah. I would just add one minor thing, which is we are definitely seeing more full price selling.

[Bracken Darrell, CEO at VF Corporation]

Yeah

[Paul Vogel, CFO at VF Corporation]

... in the last quarter, which is encouraging.

[Simeon Siegel, Managing Director and Senior Analyst at BMO Capital Markets]

Perfect. Thanks, guys. Appreciate it.

[Bracken Darrell, CEO at VF Corporation]

Thank you, Simeon. See you Wednesday.

[Operator]

Your next question comes from Michael Binetti with Evercore. Your line is open.

[Michael Binetti, Senior Managing Director at Evercore]

Hey, guys. Congrats on a lot of progress. Glad to see it. So I guess since Vans and Vans Americas, specifically, is a big focus, could you help us understand, just to the best that you're willing to share, the channels in Americas? I know, I know in the past you've said D2C would be where we would see the turn for Vans first. I think a lot of the POS data that people look at through the quarter was certainly worse than the down nine that you reported. So I'm just curious if we're getting close to positive on the wholesale side. Is that actually leading D2C at this point? Or maybe just how to think about that. And then, I guess, stepping back a little more broadly, any examples of how...

[Michael Binetti, Senior Managing Director at Evercore]

Maybe you're willing to share on the evolving conversations with some of your wholesale partners now that you're starting to see some green shoots with the new product?

[Bracken Darrell, CEO at VF Corporation]

Yeah. First of all, we did not say that we thought DTC would turn first in Vans. We actually said they were reverse. I said I thought it would probably be... It's a little counterintuitive, but I said it'd probably turn in wholesale first. Wholesale is outperforming DTC right now, which isn't too big a shock when you consider the traffic issue. You know, wholesalers continue to have plenty of traffic. We're dependent on generating our own, so it's gonna take a little longer to get there. As the products improve and the pipelines improve, you've got a really clean set of products in the wholesale channel that people are coming in and discovering.

[Bracken Darrell, CEO at VF Corporation]

To answer the second part of your question, I think wholesalers overall have given us really positive feedback on the path we're on with Vans, and I think we'll continue to see improvement, so I feel good about it.

[Michael Binetti, Senior Managing Director at Evercore]

If I could throw in one more. Any early examples of how the regional platform is starting to benefit the day-to-day go-to-market process at the brands?

[Bracken Darrell, CEO at VF Corporation]

Yeah, I'll repeat the one I gave earlier, but there are others. You know, our key accounts, you know, really in that regional platform, one of the things that we've done historically very well in EMEA under Martino and in APAC under Martino is we've consistently done a good job of really deeply understanding the biggest accounts and making sure we're bringing all we can to help them grow and help ourselves grow. We're starting to see that in our top accounts in the Americas, and I think you'll see more and more. They'll benefit every account we have, every wholesale account, but in the beginning, it's gonna especially benefit the big ones, and it is.

[Michael Binetti, Senior Managing Director at Evercore]

Okay, thanks a lot.

[Bracken Darrell, CEO at VF Corporation]

Thank you.

[Operator]

And your next question comes from Brooke Roach with Goldman Sachs. Your line is open.

[Brooke Roach, VP of Equity Research at Goldman Sachs]

Good afternoon, and thank you for taking our question. I was hoping we could dive a bit deeper into your expectations for the puts and takes on gross margin as we go forward, especially given your cleaner wholesale path, the better full price selling comment that you just gave, but also some of the benefits from product costs. Can you help us understand the magnitude and relative strength of each one of those benefits that we should expect over the course of the next couple of quarters, and what your outlook is for recapturing that gross profit margin? Thank you.

[Paul Vogel, CFO at VF Corporation]

Yeah, I mean, we're not getting into too much detail on that. I would say, you know, as I mentioned, we expect gross margin to be up in Q3 and up again in Q4. You know, keep in mind, we do have some benefit from the actions that were taken last year in Q3 and Q4. So that will also help in terms of, you know, kind of where we're headed. But in general, it's a lot of the things we've laid out, and we'll get into a little bit more detail on Wednesday as well on some of this. So, not to keep with that same answer, but there's a little more detail we'll share on Wednesday.

[Bracken Darrell, CEO at VF Corporation]

On Wednesday, we'll say Friday, so. Thank you, Brooke.

[Brooke Roach, VP of Equity Research at Goldman Sachs]

Great.

[Bracken Darrell, CEO at VF Corporation]

Sorry about that.

[Operator]

Your next question comes from Lorraine Hutchinson with Bank of America. Your line is open.

[Lorraine Hutchinson, Managing Director at Bank of America]

Thanks. Good afternoon. I was hoping to get a little more detail on your view on the North Face, North America. Any comments by channel or any reactions you've had from your wholesale partners about how the winter season is progressing?

[Bracken Darrell, CEO at VF Corporation]

... Yeah, you know, it's a little too early to say. You know, I, I'm less from our wholesalers or our trade partners and more from ourselves, you know? I'd say it can't be any worse than last year. You know, it seems like winter really came last year, late last year, and it seems like it's already kind of here in some parts of the U.S. now. You know, we're sitting here in New York today, as you are, and it feels a little chillier here than it did before. I just came from Canada, where it's definitely getting chilly, but it always does. So I don't know. I'm optimistic. Look, I think we're gonna have our guidance kind of independent of how severe the weather is or isn't.

[Bracken Darrell, CEO at VF Corporation]

We've got so many things internally we can fix, and too, including our go-to-market structure, that I'm confident in what we're guiding here, whether without a good winter or a terrible winter, depending on how you decide to interpret those two words. But yeah, so let's just see how it goes, but I think we've got enough in our control right now that we're gonna deliver what we're telling you.

[Lorraine Hutchinson, Managing Director at Bank of America]

Thank you.

[Bracken Darrell, CEO at VF Corporation]

Thanks, Brooke.

[Operator]

And your next question comes from Matthew Boss with JPMorgan. Your line is open.

[Matthew Boss, Equity Research Analyst at JPMorgan]

Great, thanks. So, Bracken, maybe just to dig in a bit more on Vans. So maybe just-

[Bracken Darrell, CEO at VF Corporation]

Sure

[Matthew Boss, Equity Research Analyst at JPMorgan]

... where you stand on some of the reset actions that you had outlined, and then, as we think about maybe top priorities over the balance of this year and into next year, how best to measure sequential revenue growth improvements and just the, you know, timeline as we think about maybe some of the earlier wins relative to Sun's potential influence on product assortment and multi-year growth?

[Bracken Darrell, CEO at VF Corporation]

Yeah. Thanks, thank you. Thanks, Matthew. You know, I think overall, in terms of the reset actions, you know, we described the reset actions we took in the end of last year. We're coming up to lapping those, as Paul mentioned, so they're in the rearview mirror. I mean, that's probably as good a summary as I could give you. In terms of top priorities going forward for Vans, you know, I think if you really laid them out, you know, we've already started a program of introducing new products. It obviously came before Sun got here, but, you know, she'll, she's already touching everything, you know, and she'll continue to touch everything, every new product, every marketing campaign.

[Bracken Darrell, CEO at VF Corporation]

You know, she's in the middle of the action, and those of you who know her know she would be, so she definitely is. In terms of a timeline for, and a level of improvement you could expect quarter-over-quarter, you know, we're not really gonna provide that, but I'm really excited about it, and I think we're on the right path, and you can kind of see it, and I mentioned it in the opening. You know, you see some excitement coming in, in search interest in some of the biggest markets around the world now. That's really a change, and so, look, it's early days, but I feel really good about Vans. I'm excited about the brand, I'm excited about Sun, and the reset stuff's in the rearview mirror.

[Matthew Boss, Equity Research Analyst at JPMorgan]

Great. Best of luck.

[Bracken Darrell, CEO at VF Corporation]

Thank you, Matthew.

[Operator]

And your next question comes from Jay Sole with UBS. Your line is open.

[Jay Sole, Managing Director at UBS]

Great. Thank you so much. Bracken, I just want to make sure I understand the message of introducing guidance here, because I think when the guidance was removed, the message was, "We're not gonna give guidance until we know we can, you know, give you guidance until we know we can deliver." I think the expectation at the time was full year guidance. This is quarterly guidance. So are you saying that, like, you know, like we're sort of at the bottom here, we're inflection, like, big picture, like, from here, it's onward and upward, kind of like it happened at Logitech? Or is it more like: Look, we're giving you a little bit of taste because we have our visibility into quarters, but, you know, there's still more work to do.

[Jay Sole, Managing Director at UBS]

I'm just kind of sort of curious, like, why this quarterly guide, not the full year guide, and sort of explain how you're thinking through when to introduce the full year guide?

[Bracken Darrell, CEO at VF Corporation]

Yeah, let me, let me do that. I'm gonna... I'm so glad you asked that question. Yeah, when we removed guidance, you, you described exactly what I said. I said, "You know, it's hard to guide when you don't have real confidence in the numbers that you're looking at internally." I do now. So, what I... And but, so you're asking the question, why are we guiding just one quarter out instead of a year out? You know, this is something Paul and I talked about after he got here, and Paul had an immediate impact on me. He, he, he connected to my common sense, which is, I don't really think it makes sense, and Paul kind of referenced it when he described it, for us to try to guide a year when there's nothing magical about a year.

[Bracken Darrell, CEO at VF Corporation]

You know, a year is just four quarters out. We could guide five quarters out, seven quarters out, nine quarters out, no quarters out. So, you know, I think at the end of the day, you know, the most important thing for us is to make sure we're delivering quarter in and quarter out, and that's exactly what we're gonna do. So yeah, so that's our game plan, and we'll talk a little more about this on Wednesday.

[Jay Sole, Managing Director at UBS]

Got it. Okay. Bracken, thank you so much.

[Bracken Darrell, CEO at VF Corporation]

Thank you, Jay.

[Jay Sole, Managing Director at UBS]

Looking forward to Wednesday.

[Bracken Darrell, CEO at VF Corporation]

Thank you. Thanks for the question.

[Operator]

And your next question comes from Paul Lejuez with Citi. Your line is open.

[Tracy Kogan, VP at Citi]

Thanks. It's Tracy Kogan filling in for Paul. I know you guys have mentioned that you expected additional savings beyond the $300 million, and I was wondering if maybe you could frame the magnitude of the savings you see and where these efficiencies might be. Then, will you be in reinvesting a similar proportion like you did with the first round? Thanks.

[Bracken Darrell, CEO at VF Corporation]

You know, Tracy, I hate to say this, but we're gonna have to wait on that question until Wednesday. What I would say is, you know, I'm really excited about the first round of savings we did. I think we did a good job of really level setting and removing some of the most, you know, some of the gross inefficiencies and taking some of the lowest hanging fruit. Anything we do from here is gonna be really about a little deeper and more focused on reengineering to deliver more growth. So we will talk about that Wednesday.

[Tracy Kogan, VP at Citi]

Got it. Can I just sneak one in about?

[Bracken Darrell, CEO at VF Corporation]

Of course

[Tracy Kogan, VP at Citi]

... about The North Face in North America? Was wondering if you saw anything kind of by month as the quarter progressed that might indicate, you know, why, why you saw the pressure, whether it was weather or something else?

[Bracken Darrell, CEO at VF Corporation]

... No, I wouldn't really say that. I'd say, you know, I guess, you know, look, this is my second year here, so it's hard to, and it's Paul's first. So I don't think we looked at anything by month and said, "Ooh, you know, we see a signal one way or the other." I think, you know, things are probably about like we expected them to, and we'll see. Now we're sitting in New York, and luckily it feels a little cold to me, so I had to go out and buy a jacket yesterday from The North Face, so.

[Paul Vogel, CFO at VF Corporation]

Yeah, I would just add, you know, we said on last quarter that, you know, given the tough comp on North Face from last year, that we expected it to be just, you know, slightly down sequentially from where it was in Q2, and that's exactly where we came in. So not getting into the specifics of regions, but just holistically, the North Face came in right in line with expected and basically what we had previewed in the guardrails after last quarter.

[Tracy Kogan, VP at Citi]

Got it. Thanks very much, guys.

[Bracken Darrell, CEO at VF Corporation]

Thank you. Thanks, Tracy.

[Operator]

And your next question comes from Ike Boruchow with Wells Fargo. Your line is open.

[Ike Boruchow, Managing Director and Senior Analyst at Wells Fargo]

Hey, guys. Let me add my congrats. Two questions, which I don't know if you'll answer, but I'm gonna try. On the non-core asset sales, I know it was never a specific number, but I feel like $50 million-$100 million was kind of the thought before. Is there just to kind of round out the $420 million, any way you can kind of just give us a number to help us get there? And then, I guess, Bracken, the second one's for you. Just on the portfolio review that you've talked about at length since you started, are we officially done with that review?

[Ike Boruchow, Managing Director and Senior Analyst at Wells Fargo]

Should we no longer be asking about, you know, asset divestitures or anything, or, and are we just running the business, or is there still potential for something to happen in the foreseeable future? Thanks.

[Bracken Darrell, CEO at VF Corporation]

Yeah, I'll answer that last one real quickly, and I'll let Paul answer the first one. You know, we're officially done for now. How's that? Because, you know, I think you're never really done. So we'll always be reexamining the portfolio and deciding if things fit or not based on their, not only their strategic fit, but their performance and expected performance. So I'd say, yeah, we're done for now, but, you know, we'll keep looking at it. Paul?

[Paul Vogel, CFO at VF Corporation]

Yeah, and I think what we had said was, we expected about $60 million or so in the asset sales, and we did better than that by about $15 million.

[Ike Boruchow, Managing Director and Senior Analyst at Wells Fargo]

Got it. Thanks.

[Bracken Darrell, CEO at VF Corporation]

Thank you.

[Operator]

And your next question comes from Jonathan Komp with Baird. Your line is open.

[Jonathan Komp, Senior Research Analyst at Baird]

Yeah. Hi, thanks. Good afternoon. Bracken, I just want to ask, as you think about third quarter and fourth quarter, any more detail on sort of the continued sequential improvement or a lessening of the declines? And then, as you look at the business broadly, are there parts that are running ahead of what you hoped, or does anything come to mind when you think about areas that might be outperforming, you know, what you had expected? Thanks.

[Bracken Darrell, CEO at VF Corporation]

Thank you. Thanks for the question, Jonathan. You know, I don't really have anything meaningful to say to you, except that I think there's always things that are a little bit better, a little bit worse, but overall, things have you know, kind of gone along surprisingly consistent with what we expected, and so I think it's very consistent. And and I... You know, we're not going to dimensionalize kind of what the rate of improvement as we go forward. You know, I I'm excited about the path we're on, and I think it's going to continue.

[Jonathan Komp, Senior Research Analyst at Baird]

Great. Looking forward to Wednesday. Thanks.

[Bracken Darrell, CEO at VF Corporation]

Thanks. Me too. Thanks, Jonathan.

[Operator]

And your next question comes from Jim Duffy with Stifel. Your line is open.

[Jim Duffy, Managing Director at Stifel]

Thanks. Good afternoon. Perhaps an area that deserves more attention, Timberland, it sounds like some enthusiasm around the premium boots. I'm curious, is that global commentary, and does that go beyond your collaborations? Are you seeing good, elevated interest in the Yellow Boot franchise?

[Bracken Darrell, CEO at VF Corporation]

Yeah, thanks for the question. I just bought yet another pair of Yellow Boots. Maybe that's what's showing up in the numbers. I keep buying more and more. Probably will show up again in Q3. But yeah, you know, the Yellow Boots is doing well. I mean, we had, you know, we had this Louis Vuitton collaboration, which was great, you know, about a quarter and a half ago now. And, you know, we continue to see good, solid strength, and it is around the world, so far, so good, but we'll stay tuned. You know, it's still down, right? So less down is better than more down, but it's still not up, so let's keep watching this and see where it goes from here.

[Jim Duffy, Managing Director at Stifel]

Okay. And then another brand where there wasn't a lot of discussion, Dickies, just your thoughts there on where you are with respect to stabilization of that business. Thanks.

[Bracken Darrell, CEO at VF Corporation]

I just love Dickies, I have to say. I love all our brands, you know, but I really love Dickies because it's just a special brand. You know, it's got, like they all are, it's got such a cool, deep history, and it's so old, you know, as a brand, yet you've got 16-year-old kids wearing them to go surfing or right off the beach anyway. And I just. So it's such a cool brand. I'd say, where are we on the stabilization? I think we're right in the middle of it. You know, we've really reset our strategy, and we've got the right level of focus on making sure we're winning at work and then eventually going beyond that. I do. I am really excited that we've...

[Bracken Darrell, CEO at VF Corporation]

You know, I temporarily took over down there, like I did at Vans before Sun came, and I've now relinquished my job because Chris Goble has come over from the Gap and Chris is a star over there. He was a star over there. He'll be a star over here. He did a terrific job as a general manager of the Gap in North America, and he was part of the big turnaround over there, and I think, you know, he'll lead the turnaround here on Dickies, so I'm excited about him, but we'll see. You know, it's really early. We're definitely at just the stabilization period within Dickies. Getting it back to growth is a different story, and that's really gonna be led by Chris.

[Jim Duffy, Managing Director at Stifel]

Very good. Look forward to hearing more Wednesday. Thanks.

[Bracken Darrell, CEO at VF Corporation]

Thank you. You won't hear too much about Dickies on Wednesday, 'cause we're gonna... Remember, we're gonna do all the brand stuff later in the year, so this is gonna be very much focused on-

[Jim Duffy, Managing Director at Stifel]

Oh, understood.

[Bracken Darrell, CEO at VF Corporation]

Okay.

[Jim Duffy, Managing Director at Stifel]

I had a lot of questions, I figured you wouldn't answer till Wednesday anyway, so.

[Bracken Darrell, CEO at VF Corporation]

Okay, okay. Well, you can feel free to wear it. If you wear Dickies-

[Jim Duffy, Managing Director at Stifel]

I'll wear it then.

[Bracken Darrell, CEO at VF Corporation]

... you may answer more questions.

[Jim Duffy, Managing Director at Stifel]

All right. Very good.

[Bracken Darrell, CEO at VF Corporation]

Okay.

[Operator]

... And your next question comes from Bob Drbul with Guggenheim. Your line is open.

[Bob Drbul, Senior Managing Director at Guggenheim]

Hi, Bracken. Hey, Paul. I just got two questions. The first one is, can you expand some more just on what you're seeing by brand in China, sort of, you know, last quarter, sort of current trends in China? And then the second question is just on inventory, sort of, you know, down 13% against, -1% to -3% looking forward, is that how we should expect, you know, like, when you look at where your inventory levels are sort of across the company, is that how you plan to, you know, run inventories going forward, or, or is there more ad max that you need as you sort of resume towards revenue growth? Thanks.

[Bracken Darrell, CEO at VF Corporation]

Let me come back to. Let me, let me answer that last one first, and then we'll, we'll take the China question. You know, overall, I would say, you know, in the last call, I think I said, you know, you know, we're like at a hundred and. What was it? A hundred and fifty-five days of inventory or something, and And I said, "I think we still have room down from there." But that's actually not, that's not a bad number. It's a pretty good number, but I think we can bring it down further from there over time, but we'll have to, we'll have to change the way we operate to get there. So there's, there's internal work that's gonna be required to get us down further than that.

[Bracken Darrell, CEO at VF Corporation]

But over time, I bet that we'll end up lower than that. On. And so I don't think, you know, there's some reason why we'd have our inventory suddenly go back up. I don't think that's gonna happen. If anything, it'll come down. On China, you know, overall, you know, I think, you know, you're reading the same things we are on China. You know, it's. We're so much in our control that I'm not too worried about macro environments, but it is true that the macro in China is a little softer than it has been. The North Face is really the highlight, you know, it continues to be strong, and, you know, that long-term secular trend seems to be in here for the long term and secular.

[Bracken Darrell, CEO at VF Corporation]

So that's exciting, and we're excited about it, and it's by far the biggest business in China now. So it's probably not worth talking too much about the rest of the businesses there. They're in various state. You know, Vans is in a, is really in the turnaround mode there, and, you know, the rest of the brands are falling into different places. But I'd probably focus on North Face for Vans for now, until we really bring you more info.

[Bob Drbul, Senior Managing Director at Guggenheim]

Thank you.

[Bracken Darrell, CEO at VF Corporation]

Thank you.

[Operator]

And your next question comes from Dana Telsey with Telsey Advisory Group. Your line is open.

[Dana Telsey, CEO at Telsey Advisory Group]

Hi, good afternoon, Bracken and Paul. As you think about the free cash flow guidance that was provided, any expansion in terms of what's changed within the guidance, either by brand, channel or geography? And then with the improvement that you've seen in the brand's performance, how much of it do you think was specific product that helped drive that? How much of it was the easy comparisons or what you're seeing in any of the industry segments? Thank you.

[Bracken Darrell, CEO at VF Corporation]

I'll try and answer the last one first, and I'll let Paul not answer the second the first one, which is because it's kind of a hard one to answer. I think in terms of that, the various brands and where they are, I think it's a combination of things. I do think we've got a better and better, and it'll get progressively better, set of products coming out over time. In some cases, the compares are easier. They're gonna particularly be easy as we get into three and four in a couple of places like Vans. But overall, I'd say it's an integrated thing. We've got, you know, channel changes where we've reduced the amount of value channel, for example, in Vans. We've got...

[Bracken Darrell, CEO at VF Corporation]

That took us in the wrong direction there about two quarters ago, three quarters ago. And I would say in each element of the business, you know, if you went through the five P's of marketing, each element has changes, and those changes will progressively work their way through the total business over the next year or two. I apologize to you who are particularly short-term, trying to figure out how to gauge each one of those and their impact on a quarter. What I can tell you is, when they're synchronized, they have a bigger impact, and we're getting more and more synchronized across each of these brands with a real either growth plan, transformation plan, or something.

[Bracken Darrell, CEO at VF Corporation]

So we'll talk a little bit more about that on Wednesday, but I feel good about the overall path we're on, although I don't think I could really parse out exactly what contribution each one of those is making to the current numbers.

[Paul Vogel, CFO at VF Corporation]

Yeah, I think, Bracken, preview, we would never get to that level of detail on free cash flow. But thanks.

[Bracken Darrell, CEO at VF Corporation]

Okay.

[Dana Telsey, CEO at Telsey Advisory Group]

Thank you.

[Bracken Darrell, CEO at VF Corporation]

Thank you so much. Thank you, Dana.

[Operator]

Your next question comes from Janine Stichter with BTIG. Your line is open.

[Ethan Saghi, Equity Research Associate at BTIG]

Hey, you got Ethan Saghi on for Janine. Thanks for taking my question. I was just wondering, what are you seeing in terms of the promotional environment at both Vans and The North Face, as well in the overall industry, just heading into the holiday season? Thanks.

[Bracken Darrell, CEO at VF Corporation]

I mean, I get I don't have too much to say, except it looks better than last year, you know, which is great. You know, and we were sitting on a lot of inventory last year, and we're sitting on less this year, so that's good. And our retail partner, wholesale partners are, too. Other than that, I wouldn't have much to say about it. I mean, we're as Paul alluded to, we're doing more, more full-price selling, which we like. Doesn't mean we're without promotion. We're not. But it is better.

[Ethan Saghi, Equity Research Associate at BTIG]

Got it. Thank you.

[Bracken Darrell, CEO at VF Corporation]

Thank you.

[Operator]

And your final question comes from John Kernan with TD Cowen. Your line is open.

[John Kernan, Managing Director at TD Cowen]

All right. Thanks for squeezing me in.

[Bracken Darrell, CEO at VF Corporation]

John, this is so important.

[John Kernan, Managing Director at TD Cowen]

How would you characterize-

[John Kernan, Managing Director at TD Cowen]

I know. It's gonna be a good one, right?

[Bracken Darrell, CEO at VF Corporation]

Oh, pressure, yeah.

[John Kernan, Managing Director at TD Cowen]

How would you characterize Vans internationally versus domestic, obviously?

[Bracken Darrell, CEO at VF Corporation]

I would-

[John Kernan, Managing Director at TD Cowen]

The Americas business for VF is now larger, and, you know, it's comfortably larger than the domestic business as a consolidated company. I'm just curious, when you look at Vans, how Vans is trending in certain geographies versus the U.S.?

[Bracken Darrell, CEO at VF Corporation]

Well, I probably won't go that deep, but which is not that deep, by the way, but what I would say is, I think Vans is underdeveloped internationally. You know, I think, you know, I felt that before I got here. I feel that now that I am here. But that's an easy thing to say and a much harder thing to unlock. So, you know, this is part of the opportunity I think we really have as a company. How do we get really strong growth around the world? But I would not underestimate how much opportunity we have within the U.S. I mean, that might be our single biggest upside right now.

[Bracken Darrell, CEO at VF Corporation]

You know, if we can really get ourselves in a position where we're back to where we ought to be in the Americas, we have a lot of growth opportunity there. So we've got an opportunity on both the international businesses, parts of our business and particularly U.S. business. So I'm really excited about... It's one of the things that excites me about the company. John, that was a great question.

[John Kernan, Managing Director at TD Cowen]

Look forward to more color on.

[Bracken Darrell, CEO at VF Corporation]

Okay, good.

[John Kernan, Managing Director at TD Cowen]

Yeah, I want to.

[Bracken Darrell, CEO at VF Corporation]

I will bring this to a close because it does sound like we're kind of at the end of our program. I wanna thank all of you for attending this call, but I especially wanna thank you in advance for listening to the next one or attending the next one. This will be the first investor day that Paul and I have had together, and actually all of our leadership teams had together, and we're excited to share with you kind of what our game plan is, and I think our transformation's on track. We've made a lot of progress against the set of priorities we've had, and we'll have some new info for you on Wednesday, too, so don't miss it.

[Operator]

Ladies, and gentlemen, this concludes today's conference call, and we thank you for your participation. You may now disconnect.

Participants

Executives

• Bracken Darrell, CEO

Analysts

• Simeon Siegel, Managing Director and Senior Analyst at BMO Capital Markets
• Tracy Kogan, VP at Citi
• Laurent Vasilescu, Managing Director and Senior Equity Analyst at BNP Paribas
• Dana Telsey, CEO at Telsey Advisory Group
• Michael Binetti, Senior Managing Director at Evercore
• Matthew Boss, Equity Research Analyst at JPMorgan
• Allegra Perry, VP of Investor Relations at VF Corporation
• Lorraine Hutchinson, Managing Director at Bank of America
• Jay Sole, Managing Director at UBS
• Jonathan Komp, Senior Research Analyst at Baird
• Ethan Saghi, Equity Research Associate at BTIG
• Jim Duffy, Managing Director at Stifel
• Adrienne Yih, Director and Senior Equity Analyst at Barclays
• Bob Drbul, Senior Managing Director at Guggenheim
• John Kernan, Managing Director at TD Cowen
• Paul Vogel, CFO at VF Corporation
• Brooke Roach, VP of Equity Research at Goldman Sachs
• Ike Boruchow, Managing Director and Senior Analyst at Wells Fargo