VF Q4 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 21, 2025
Skip to Participants
Operator

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 Fourth Quarter Fiscal Year twenty five Earnings Conference Call. Lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. And I would now like to turn the conference over to Allegra Perry, Vice President of Investor Relations. Please go ahead.

Allegra Perry
Allegra Perry
Vice President, Investor Relations at V.F.

Hello, and welcome to VF Corporation's fourth quarter fiscal twenty twenty five 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
Allegra Perry
Vice President, Investor Relations at V.F.

You may also hear us refer to reported amounts which are in accordance with U. S. GAAP. Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the 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 EVP and Chief Financial Officer, Paul Vogel.

Allegra Perry
Allegra Perry
Vice President, Investor Relations at V.F.

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

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Thank you, Allegra, and welcome to our Q4 fiscal twenty twenty five earnings call and our last call of the fiscal year. In our fourth fiscal quarter, revenue was down 3%, in line with our guidance of negative 2% to negative 4%. The reinvent program and our efforts to improve our operating profitability are working well and significantly overperformed on operating income, up by 400 basis points year over year to $22,000,000 exceeding our guidance. Gross margin improved five sixty basis points versus last year from lower material costs, less distressed sales, less discounting, and higher quality inventory. SG and A declined 2% as we executed comprehensive structural changes as part of our operating model transition under Reinvent to simplify the company and enable long term growth.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Net debt was down by over a quarter versus last year, and we reduced leverage at year end by a full turn. We're on track to deliver our stated medium term goal of 2.5 x leverage. Now let me share further details on our total revenue growth. At a high level, if you exclude Vans, we're up 4%. So, of course, let's talk about Vans.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

As I've said before, there's nothing that's not working at Vans that we can't fix with what's working in the rest of the business. We told you last quarter that turnarounds are are often nonlinear. To be clear, turnarounds can look nonlinear from a numerical standpoint, and this quarter is an illustration of that. However, we are methodically advancing all our initiatives. The actions we're taking to drive improved performance and progress in our turnaround are moving forward in a clear linear manner.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

In fact, at Vans, we're making progress every week to turn around the business. You don't see the results just yet numerically, but you will. And when you do, they'll be high quality. Vans was down 20% in the quarter after being down 8% in the prior quarter. This quarter's setback doesn't tell the whole story.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

If you adjust for deliberate strategic actions to manage the marketplace and set ourselves up to achieve profitable growth, the revenue decline was down high single digits versus last year and is consistent with last quarter's trend. Put another way, 60% of the decline this quarter is a direct effect of deliberately reduced revenue to eliminate unprofitable or unproductive business. Of the total q four decline in van sales, almost 25% of it was driven by reduced storefronts and reduced channel inventory in China. As we've said in prior calls, the turnaround in APAC has been slower. We're taking the actions needed to set that marketplace up for long term growth.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Another 35% of the total decline was driven by additional an additional set of deliberate actions, which were also in place last quarter but had a lower impact. These include the closure of value doors, mainly in The US, that were margin eroding, the reduction of distressed sales that were unprofitable, and the closure of our own stores, all also mainly in The US, that were unprofitable. And the results of these actions and others are that Vans gross margin is up significantly year over year. Now let me dissect the revenue a bit further. In nonvalue wholesale, sellout was slightly up.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

And in our key accounts, van sellout was up double digits. The balance of 40% of the decline was all driven by DTC, which is primarily due to soft traffic. What are we doing to address traffic? We're evolving our marketing rapidly to drive brand heat, and we'll get that back. As I said, we've demonstrated that we can do this at Timberland, for example, where we also had a period of declines.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

So to the answer to answer the question I'll get later, how do I feel about Vans and its outlook? Good. As confident as ever. We're executing our game plan as Sun recently laid out. On talent, Sun's builder team has made several key hires, including the head of merchandising, and others are well underway.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

On product, we continue to focus on footwear by bringing in newness that will roll rollout over back to school, holiday, and next spring and beyond while reigniting the existing core icons. Our focus on women and youth is starting to show early results with a positive response to the super low pro, which was just launched and sold out in key color ways early on. Girls bought this product disproportionately, a signal that when we have something new and on trend, girls and will girls and women will come back. In terms of marketplace, we're pursuing brand elevation through channel cleanup, elevated stores, and digital marketplaces digital experiences. The cleanest of our channels or nonvalue wholesale, which is a high proportion of new products, is showing encouraging results.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

And we have opportunities to keep driving more new products to increase that momentum and improving marketing. To quickly summarize, we're making the right decisions to build a durable, growing brand over the long term. We're learning every week, and we're making progress. Growth will come. Now let me talk about some key highlights from our other brands.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

In The North Face, revenue for the brand was up 4% in Q4. DTC rose nine percent with positive growth in all regions, including double digit increases in both Americas and EMEA. From a product standpoint, outerwear was a standout and footwear continued to grow nicely in all regions. Timberland continued its strong performance with revenue up 13% in q four. Wholesale and DTC were both up globally with lower discounts driving higher margins.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Momentum in the six inch premium boot continued while other styles also performed well, including Stone Street and Mount Madison. US search interest growth remained strong in the quarter. Let me close by touching on tariffs and the market uncertainty where Paul will go deeper. How are we approaching tariffs? The same way as we're approaching the rest of the business, with a long term view but a short term pace.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

This is, of course, a dynamic situation. But at a high level, we are well positioned to manage the impact. We have an asset light model, which gives us great flexibility to move things and adjust quickly. And in fact, over the past several years, we've strategically diversified our supply chain and proactively reduced our US finished goods finished goods sourced from China to less than 2% today. We've also taken steps to strengthen our flexibility, learning from prior macro events.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

We're seasoned. When the tariffs were announced, we immediately activated our team and processes, organized a series of daily meetings to share feedback from Washington and supplier countries, supply chain opportunities and cost and factory moves, pricing strategy, and communications. These continue coordinated, daily, and effective. As a result, we have excellent visibility on the whole equation and have activated a plan to effectively manage it. This is also a catalyst to make our business operate with a faster cycle time, the way we'll we will always operate going forward.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Looking ahead, clearly, there's a lot of uncertainty out there from a macro standpoint, but we're not at all distracted by it. Our goal is to leverage it to improve our business. Our transformation is on track and progressing well and is allowing us to be more agile and nimble, making better decisions more quickly. We're making progress towards our medium term goals regardless of the volatility of the macro environment. We continue to advance on our goal to create a unique multi brand portfolio company.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

I'm more confident than ever that the actions we're taking will enable VF to return to growth and deliver strong, sustainable value creation. With that, I'll now hand it over to Paul to run through the financials. Paul?

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Great. Thank you, Bracken. While I normally dive right into the numbers, I did wanna start today by addressing the current tariff environment. As Bracken mentioned, we have been highly proactive in addressing the potential impacts from the newly implemented tariffs to ensure that we not only overcome any changes from tariff policy, but that we also emerge even stronger as a company. And while we continue to closely monitor the situation, we believe the opportunity to unlock value within VF lies within our control.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

This is what will ultimately drive improved performance and lead to VF's turnaround. We are activating a multipronged plan to address the potential impacts from tariffs and believes we can offset these. Let me start by sharing some additional information on our sourcing structure into The US. From a total company perspective, approximately 35% of our global cost of goods sold is related to product product cost for goods sold in The US. And geographically, our exposure looks like this.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Starting with China. China is less than 2% of total cost into The US, and some may recall a higher global number for China. That is because we do manufacture in China, but mostly for goods sold within China. Outside of that, our top sourcing regions of Southeast Asia and Central And South America in aggregate account for about 85% of what comes into The US. Included in the 85%, our top four sourcing countries are Vietnam, Bangladesh, Cambodia, and Indonesia in that order.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

I also wanna say that the potential additional costs created by the current 10% incremental tariff for goods coming into The US. To be clear, this is an unmitigated number, meaning it is the total impact on the business if we did absolutely nothing to offset changes in current tariff policy. On an annualized basis, the impact would be approximately a hundred and 50,000,000 in costs. If the timing on tariff implementation stays as currently planned, we would see an impact of 65% of the annualized cost in fiscal twenty six with most of the impact in the second half of the year. Actually believe we can offset the impact from from the tariffs, and we've activated our plans to do so.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

This entails cost management, select sourcing relocations, and pricing actions. We are leveraging our deep and long standing relationships with our partners and are working with them to ensure that we have the right cost structure. And on pricing, our approach is strategic and thoughtful. We have strong brands, which is always an advantage in pricing. In cost and supply chain locations, remember, we have an asset light model, As Bracken mentioned, this provides us great flexibility to move things and adjust quickly.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

We have every confidence we will fully offset these costs and emerge stronger as a business. So now turning to the financial review of the fourth quarter, starting with the p and l. Our q four revenue was 2,100,000,000.0 and down 3% year over year, in line with guidance of down two to down four. Overall, we are flat in the second half of the year as a whole versus last year after being down 7% in the first half. By brand, The North Face grew 4%, led by the brand's DTC performance.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Bands revenue in the quarter was down 20% driven by our intentional actions that Bracken mentioned earlier and continued softness in DTC. And out the top three, Timberland posted strong results at up 13%. By region, the APAC region grew 2%, while The Americas and EMEA regions were down five and two respectively as we intentionally reduced promotional activity. The Americas is performing in line with expectations and excluding Vans grew approximately in line with q three trends. And lastly, by channel, DTC was down 3% while wholesale was down 2%.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Gross margins for the quarter was up 560 basis points to 53.4% driven primarily by continued cost tailwinds, lower promotions, and higher quality inventory versus last year. SG and A was down 2% as faster than expected cost savings from the Reinvent program and initiatives more than offset inflation and investment in product and marketing. Our adjusted operating margin in the quarter was 1%, up 400 basis points year over year. Importantly, we're making real margin and profitability improvements as we continue to reshape and strengthen the foundation of our business. Finally, adjusted loss per share was a negative 13¢ versus negative 30¢ in q four of last year.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Let me just make one comment on the full year. Adjusted operating margin improved a 10 basis points versus last year, and we continue to make great progress to turn this into an efficient and well run business as we as we advance towards our medium term targets that we outlined to you in the fall. Moving to our balance sheet where we continue to make good progress. Inventories were down 4% or 71,000,000 at the end of the year. Net debt was down 1,800,000,000 versus last year, down 26% as we fully we fully paid off the $750,000,000 April 20 5 senior notes at the March, in line with our stated intentions.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

As a result, our leverage was 4.1 times at year end, down one full turn versus last year. Our free cash flow was 313,000,000, which when added to the sale of non core assets was $4.00 1,000,000 versus our guidance of 440,000,000. Importantly, cash flow from earnings was in line with our expectations. The delta was due to a timing impact that affected working capital. Moving on to the outlook.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

As you know, we're not guiding for the full year, but let me give you a few metrics beyond next quarter to give some indication of where we believe we are heading. First, on cash flow. We do expect operating cash flow and free cash flow, again, not including the sale of noncore assets, to be up year on year. Second, while you won't see leverage on the operating margin in q one, we expect to see operating margin expansion in fiscal twenty twenty six, and we will continue to make progress on our Reinvent work streams in advance towards our medium term targets. Let me turn to q one, which as a reminder is our smallest quarter for the year and also one where Vans has an outsized impact on the consolidated growth relative to other quarters.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

For revenue, we expect q one to be down 3% to 5% on a constant dollar basis. We stated in late January that we expected the first half of the year to be similar in growth rate to the second half of the last fiscal year. We expect Vans in q one to be similar to the q four trend due to the additional actions we've executed on stores and wholesale value channels. As a result of these actions, the revenue trends in the first half of fiscal twenty six is expected to be slightly below the second half of fiscal twenty five. Moving down the p and l, we expect q one operating loss to be in the range of a hundred and 10,000,000 to a loss of a hundred and 25,000,000.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Gross margin will continue to benefit from fewer discounts and promotions and FX, while SG and A dollars are expected to be flat to down slightly versus last year. Finally, we expect Q1 interest of approximately $40,000,000 and an effective tax rate in the range of 13% to 14%, which is higher than last year's reported tax rate. We will continue to provide you with quarterly guidance on tax rate as things evolve. I also wanna take a moment to give you context around our long term tax expense. Given the changes in global tax rates and our geographic mix, we do expect our reported tax rate to increase over the next one to two years and fluctuate quarter to quarter.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

This will have minimal impact on cash taxes, and we will provide quarterly guidance to help you model this going forward. In closing, we remain confident in our strategy and are well underway in transforming VF to strengthen our business and navigate any challenges or obstacles that come our way. And with that, we'll now take your questions. Okay.

Operator

Thank you. We will now begin the question and answer session. Your first question comes from Simon Siegel with BMO Capital Markets. Please go ahead.

Simeon Siegel
Simeon Siegel
Managing Director & Senior Analyst at BMO Capital Markets

Thanks. Hey, everyone. Good morning.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Morning.

Simeon Siegel
Simeon Siegel
Managing Director & Senior Analyst at BMO Capital Markets

So nice job on the gross margin improvements.

Simeon Siegel
Simeon Siegel
Managing Director & Senior Analyst at BMO Capital Markets

Obviously, the uncertainty is there and you guys were alluding to it, but just maybe any help how you're thinking about gross margin further into the year and then how we should think about how this looks structurally longer term? And then an ignorant question for you guys, sorry. The the 313 free cash flow from this year, does that include anything from Supreme? And, if so, can you just talk about bridging the past year's $3.13 to the expected growth for next year? Thanks, guys.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Good.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Yeah. So we obviously, you know, we don't give out full year guidance. I'd sort of just reiterate what I said about margins in general. So, you know, we expect to see continued improvement on the margin side in in in fiscal twenty six. We believe we're still on track to meet the goals we stated at the investor day from a few months ago.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Obviously, there's lots of of puts and takes right now, but we still feel really good about that. We're not gonna guide specifically on gross margin or s g and a right now, but that's kind of what we we're headed. And as I mentioned on my prepared comments, you know, you won't see much of in q one, which implies, you know, you can kinda make your indication where that will go for the for the rest of the year. Free cash flow, the three thirteen does not include supreme. What we were trying to do is, you know, I guess, last year, we had given some free cash flow numbers, included asset sales and things like that.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Going forward, we're not gonna do that. We'll just talk about, you know, pure free cash flow. So what we said is, you know, we expect operating cash flow importantly to be up next year. You know, free cash flow will be up, as well, and the magnitude of that will, you know, we'll see depending on sort of, you know, exactly where CapEx lands for the for the full year.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Great.

Simeon Siegel
Simeon Siegel
Managing Director & Senior Analyst at BMO Capital Markets

Great. Thanks a lot, guys. Best of luck for the year.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Hey. Thank you. Thanks a lot.

Operator

Your next question comes from the line of Brook Roach with Goldman Sachs. Please go ahead.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Hi, Brook.

Brooke Roach
Brooke Roach
Vice President - Equity Research at Goldman Sachs

Good morning. Thank you for taking our question. Hi, Bracken. Hi, Paul. I was hoping that you could talk a little bit more about the one time strategic reset actions that you are taking at Vans that weighed on fourth quarter results and are expected to weigh again on first quarter results.

Brooke Roach
Brooke Roach
Vice President - Equity Research at Goldman Sachs

Can you just give us a sense of when you might be fully through some of those actions that have already been taken and whether or not you are contemplating any additional strategic reset actions to return the brand to health? Thank you.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Yeah. Thanks for the question. We expected we expected that. By the way, I've, I'm, on the, I think, my seventh day of post COVID. So so if I if, Paul sounds like he's sitting far from me in the corner, and he and Allegra are huddled over there, and I'm in one corner.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

So, if I cough in the middle, you'll know why. Yeah. So the the the we we kinda I kinda highlighted in my script. I mean, the bottom line is there there are four things in there. One is actions in China that are really deliberately set at trying to reduce the overall level of channel availability in China, get it to the right size and the right places.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

And that that really hit peaked in q four, and that will that impact will continue into q one, q '2, and then fade in q three and be gone in q four. And then you've got the others that we talked about before, which are, you know, the we reduce the number of doors of our own doors. You know, we started that in last year, and it really is flows through. I think it's the highest quarter this this quarter, and that will begin to fade as we go into q one and then q two and then more in q three and gone in q four. And then you've got value door closures, which we talked about before.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Peaks in q four starts to come down in q one, two, three, four, and it's gone in q four. And then the the last one is distressed sales where we're bringing those down. So I think, you know, you can kinda say the impact of these will continue, you know, kinda proportionally right through q one and q two. And then in q three, they come down, and then come all the way down in q four.

Brooke Roach
Brooke Roach
Vice President - Equity Research at Goldman Sachs

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

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Thank you, Brooke.

Operator

Your

Operator

next question comes from Laurent Velasquez with BNP Paribas. Please go ahead.

Laurent Vasilescu
Managing Director & Senior Equity Analyst at Exane BNP Paribas

Hello. Good morning. Thank you very much for taking Hi, Braxton. How are you?

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Better. Much very much

Laurent Vasilescu
Managing Director & Senior Equity Analyst at Exane BNP Paribas

for taking my question. Good. Good to hear from you guys. So I understand that you're guiding for free cash flow to be higher at three thirteen million dollars from last year. I think you have the €500,000,000 note due March 2026.

Laurent Vasilescu
Managing Director & Senior Equity Analyst at Exane BNP Paribas

Should we assume that you refinance that amount or pay it down? And then Bracken, really specifically here, think I remember a few quarters ago, you called out that you were happy with the portfolio as it stands. Is that still the right way to think about it? I'd love to get your take there as the environment continues to to change. Thank you.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Sure. I'll I'll let Paul

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

take that.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

So I'll take the debt first. Yeah. So we have the the next maturity about a year from now. So, yeah, between free cash flow, we have about a $2,000,000,000 revolver right now, which we'll have access to.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

And so our expectation right now is that between free cash flow, and drawing a little on the revolver, we'll be able to, you know, pay that down a year from now. And then, you know, moving forward, again, we expect free cash flow to continue to improve year on year along with our operating performance and our operating margins, and so that's how we'll we'll move it go, moving forward. So we feel really confident that we're in a good place, to continue to pay down debt and, and particularly the one that's coming up in about a year from now.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

On your second question, Laurent, you know, yeah, we're happy with the portfolio. You know, I think it it lines up nicely with the with the strategy we laid out in October. Now that said, you know, there's always things around the edges that you're you're we're gonna keep raising, and we we do a kind of a firm review with our board every year. So we're gonna go through that. There if there's something that that doesn't belong in the portfolio, you can bet that we're we'll we'll exit it, but there's nothing significant that we talk about.

Laurent Vasilescu
Managing Director & Senior Equity Analyst at Exane BNP Paribas

Okay. Very helpful. Thank you very much and best of luck.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Thank you.

Operator

Your

Operator

next question comes from Michael Binetti with Evercore ISI. Please go ahead.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Hi, Michael.

Michael Binetti
Senior Managing Director at Evercore ISI

Hey,

Michael Binetti
Senior Managing Director at Evercore ISI

guys. Thanks for taking our questions here. Hope you're feeling okay, Bracken.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

I'm feeling good.

Michael Binetti
Senior Managing Director at Evercore ISI

Paul, not to beat a dead horse on the free cash guide. Would you mind just helping us think about the, I think you said wait to see where CapEx falls out. Any initial plan on CapEx and then working capital? I think there's no benefit this year and you talked about a strategic timing shift. I'm wondering if you shifted some working capital benefit into fiscal twenty twenty six as we think about the build there.

Michael Binetti
Senior Managing Director at Evercore ISI

And then more on the fundamentals on Vans, since you mentioned that, the next quarter is seasonally important. And anything you can talk about the strategy for Vans back to school, what we'll see that's different coming out of Sun and the team? I know it's a seasonally very important part of the year.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Sure. I'll take that one after Paul answer

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

the first.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

So on the first, on the free cash flow, yeah, the the shift was basically we had we had something payable that wasn't due in the very beginning of of early April. And to avoid any issues, any potential interest and things of that sort, we actually decided to prepay in at the end of the at the March. It was literally probably a shift of a couple weeks. Again, I'm do doing it, you knew we'd end up this is where we ended up with free cash flow relative to our guidance, but we'll always do what's right for the business.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

And it was the right business decision to pay at that time to avoid this potentially additional charges, so that's why we did it. And, yeah, so that will kinda flip just from basically late early April until late March, and that's what what what that was. And then on CapEx, yeah, we again, the operating cash flow will go up. Free cash flow will go up. You know, CapEx, we have a plan.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

We're not gonna really guide to CapEx right now. We don't. But to me, CapEx is also we we'll you know, we're looking at remodels. We're looking at store openings. We're looking at, you know, things we need to do on the technology side.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

And we have a plan that we go through, and then we we kinda look throughout the year, and we'll adjust accordingly depend on, you know, what's working and and what's not and where we wanna double down double down. So we've got, you know, long term plans in place, intermediate term plans, and then we have always have some short term flexibility to move up or down based on on needs. So that's that's kinda where we are.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Yeah. And, Michael, to answer your second question, you know, I'll just remind you some of the things that Sun said, and she is very deeply executing. You know? It all starts with leadership. You know?

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

We we feel so good about having the right leaders in our president roles. And, you know, I feel super about Sun. And she's she's a magnet for talent. You know? She's worked with a lot of people in this industry, and they seem to seem to everybody seems to wanna work with her.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

I could see why after I've been around her. So she's attracting the right people. That's the first step, and it's really happening. The second thing is product. You know?

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

She's a product person through and through, and and product is the most important thing we can do on the Vans brand. You know, we're systematically gonna continue to roll out new products. This quarter, we rolled out Super Low Pro at a very small level and sold out of the top two styles almost immediately, And they were they were positioned really for women and and youth. And so that's a very, very good sign to us. But she's she's not just focused on women and youth.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

She's focused on men, boys, women, youth, and footwear first, apparel second, and she's well underway there. You might remember the four season strategy, which which plays itself right in. If you look at our social media now, you'll see a lot of activity in for example, which is a lifestyle queue. But but, you know, we obviously don't have a lot of products for surf, but the lifestyle is there. And so we're we're gonna continue to build as we go through the year into all those four different activities she's talked about.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

And then, you know, making the hard choices to make sure we're we have the right places to distribute, that we're not, in the or that we're not dragging along unprofitable stores and then profitable value channels, which we've already talked about. And and so she's really well underway, and I feel very, very good about her progress. And you'll still see that as we come into back school, you'll see a little more and then holiday more, still more, and then in in spring even more. So it's just gonna keep rolling through and cascading.

Michael Binetti
Senior Managing Director at Evercore ISI

Thanks a lot, guys.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Thank you, Michael.

Operator

Next question comes from the line of Matthew Boss with JPMorgan. Please go ahead.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Hi, Matthew.

Matt Boss
Matt Boss
Equity Research Analyst at JP Morgan

Great, thanks.

Matt Boss
Matt Boss
Equity Research Analyst at JP Morgan

Bracken, maybe just to switch gears a bit.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Sure.

Matt Boss
Matt Boss
Equity Research Analyst at JP Morgan

Could you maybe talk the health of the North Face brand, where you see that brand today? Any changes with direct to consumer momentum as we've moved into spring? And then maybe just for Paul, I guess, what's the best way to think about progress that you're making with cost actions?

Matt Boss
Matt Boss
Equity Research Analyst at JP Morgan

Where we stand on on that curve?

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Yeah. So on TNF, I feel really good about TNF. You know, we we've got you know, you saw we had very strong sell you know, direct to consumer sales this quarter, which is terrific. It's a very it continues to be a good signal. And, you know, that's without what I know is coming.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

You know? So I'm really excited about the whole approach. In terms of spring, you know, I guess the the one thing I'd point to in spring is, you know, our footwear business, which is really an all season business, but it probably it probably literally skews outside of the winter window. And that and the we we we grew around the world in in in footwear and and strongly, by the way. So I feel good about that.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

I think it just shows that this brand really has a a role to play outside of the winter period, and we're gonna get more and more of it over time. You'll see more and more products come through. A little bit like the story on Vans, you're gonna see every successive, season, you'll see more coming from us on that. We've also by the way, this is a a fine point, but we've we've we've we used to develop just two seasons a year. We we're moving to four.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

And significance of that is that when you do two seasons a year, it's very easy for your design team to design kinda winter and winter because it kinda overlaps when you add fall. So without explaining that any further, I hope I didn't confuse you. And making it four forces us to be better in the spring and the summer. And so that you're not gonna see the impact of that this year, but you're gonna see absolutely gonna see it next spring and next summer. So we'll get we'll we're we're done that being said, we certainly have good products for this year.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

So we're gonna keep rolling out and have more and more coming.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Yeah. And then on the cost side, I'd say a couple of things actually. So first is we've now achieved, you 300,000,000, actually a little more than 300,000,000 from the the first phase of reinvent, which we talked about. So we've hit our goals and targets there, which is great. Second, we started to see a little bit, from the second initiatives we talked about, that incremental 500 to 600,000,000 of operating profit that was split between SG and A and and gross margin.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

We start to see a little bit of that as well in q four. So if you look at that and you see, you know, we beat on the, operating income line and the operating margin in q four with revenue that was right in line with our expectations. So, you're seeing that we're doing we're getting some of that benefit a little bit earlier than we thought. And we're seeing good progress across, you know, our DT business, our supply chain stores, all those areas. You know?

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

And with that, I I did mention that SG and A would be flat to down in in q one. So in general, I think you're starting to see it all come through from a cost perspective.

Matt Boss
Matt Boss
Equity Research Analyst at JP Morgan

Great. Best of luck.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Thank you so much.

Operator

Your next question comes from the line of Adrian Yee with Barclays. Please go ahead.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Hi, Adrian.

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

Great.

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

Thank you very much. And hi, sorry you're sick.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Yes, me too, but I feel better now. I'm on the other side.

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

Good. Good. Just in time for earnings. So my question is not to keep on the vans, but it sounds like there's four things that are kind of like non comp, you know, sales headwinds. Two of them, the value doors, and the the reducing of the inventory seem like they are largely done.

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

But the other two kind of, at various levels diminishing kind of follow us into all four quarters. Is that is the comp progress that you're seeing in the non value doors enough to offset that? Or are you fantastically guiding us to think that Vans will be down throughout the year, all four quarters? And then I guess a follow on to that is, non value channel demand is one thing and consumer demand, Right? And I think you're talking about the sellout is actually getting better.

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

But in your own DTC, what are you seeing in terms of that end consumer talking to you about kind of brand equity, mindshare, etcetera? Sorry.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Yeah.

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

Will do a last one.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Okay.

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

Go ahead.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Okay.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

So first of all, on your I think your first question yeah. The the answer to the question at the at a high level is the impacts of those four things will keep keep appearing in the base in q two q one, q '2, and then a lot less in q three, and then they're gone in q four. And that's pretty much true for all of them on some level. So they're they're about the same. They all have their events that keep showing they they they basically we're not doing more of them.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

They just once you do once you do these look. For example, when you close the door, you lose four quarters of the door. So if you close value channel, you use four quarters of the value channel. So so that's those are gonna keep trailing through there. There they'll be about proportionally the same through those first two couple quarters and less in q three and then gone in q four.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

In terms of in consumer demand, we're still not getting enough traffic into our stores and and our websites. And I refer to that in my script, and this is fundamental brand heat. And we are we're doing a lot of experimenting to see what we need to do to trigger that, and I don't wanna let the cow out the bag on anything that's ahead of us. So we are certainly learning a ton. And the good news is that when we have traffic when there is traffic, when you have a curated assortment, as you do in in our nonvalue wholesale, we're actually flat to up.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

And if you looked in our key accounts, we're really making sure we have the best assortment, the best execution that we can have. We're up double digits. So it it with the the key now for us is to to take the medicine that we've talked about and then get the traffic up. And so that's a function of two things. You gotta have things people wanna come by, and they gotta know about.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

And so we you know, Sun is working feverishly on developing those new products, and Super Low Pro is a great example of what we're what's ahead of us. And then the second one is we just gotta keep working on that marketing so that we've got a stronger and stronger marketing program. We've made a lot of changes in there. They're not you you aren't seeing all of them flow through yet, so it's coming. But we'll get there.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

You know, we've done it in Timberland. We know how to do this. We just gotta execute.

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

By the way, Timberland looks great. My my follow-up is either Bracken or Paul, the tariff dollar amount unmitigated, if you were to try to mitigate that through pricing, it looks like a low to mid single digit price increase across, you know, all geos. Well, across yeah, across the geography. So a, when does the inventory come off of the balance sheet and impact you? Which brands?

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

Which geos? And then just any other color on and thoughts on pricing.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Let me take the first part of that. I'm gonna let Paul take the when when it starts to show up in our p and l. Yeah. Sorry about that. Paul just ran out of the room.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Yeah. That's you're exactly right. It's to mitigate that, we have a history of pricing. So pricing is not completely foreign to us. We've systematically priced over time, and so we we're comfortable with with our ability to price.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

I've gone through and really dug into this, and and we're we're pretty good at it. And you're right. It's it's completely offset that 10% would be would be a a low sing or mid single digit number, but we're not gonna do that. You know, we're we're gonna be very strategic about how we price. We're also going after cost.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

We're going after relocations of of manufacturing as we said in the script. So, you know, we're we're we're leaving no stone unturned, and we're also not viewing this as a problem that we've just gotta try our hardest to offset as much as we can. We view this as an opportunity. We're gonna more than offset what what comes our way and turn this into an opportunity. You know, the the never waste a crisis is is is not just a cliche.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

I have I have gone through three or four of these in my career. One time, I I took the mindset of, gosh, we'll try to mitigate all we can, and we did. And we got pats on the back by investors and and and our board. And and then after about a week after we closed the year, I was like, wow. What was I thinking if we just set a if we'd really had the right mindset, we could have more than offset all of it.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

And we did the next year, and that's what we're gonna do here. So we're really after it.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Yeah. I mean, bracking out the most of it, I think, just from the impact of the management, you know, you'll see most of impact in the back half of the year. We're we're not gonna be in specific, you know you know, by brand. We don't really disclose sort of the brand geographic mix of of our COGS. But, yeah, second half of year, and as I said, the numbers that we gave you, we expect if nothing changes, if the timing of the implementation doesn't change, it's exactly where it is, we'll see about 65% of that, as I mentioned, in in fiscal twenty six, again, with most of that coming in the the last two quarters of the year.

Adrienne Yih
Adrienne Yih
Managing Director, Consumer Discretionary Analyst at Barclays

Great. Thank you very much. Best of luck and feel better.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Thank you. I do. I don't sound better, but I feel better.

Operator

Your next question comes from the line of Ike Boruchow with Wells Fargo. Please go ahead.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Thanks, Ike.

Ike Boruchow
Ike Boruchow
Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo

Hey, good morning, guys. Bracken. Paul, hope you're feeling better, Bracken. I guess just two questions for me. Just one, if we could talk about Advance, maybe not the revenue per se, but can you talk about the thoughts on what you plan to do with the store base from here?

Ike Boruchow
Ike Boruchow
Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo

I don't know yet what the ending store count was for Q4, but are there more closures you guys are planning? How are you thinking about that strategically? And then maybe bracket higher level on the dividend, I know you've reduced it given what's kind of going on in the business and tariffs and the macro. Like are there any thoughts going on about potentially reducing it further or even cutting it outright? Just curious how you're thinking about cash preservation in that sense.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Okay. I'll take the first one. I'll let Paul take the second one. Excuse me. Yeah.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

On the store count, you know, we've we've edited our store count pretty aggressively as we as we've suggested the last two calls, and, you know, I think that's great. We're never gonna be done. You know, you're always gonna be editing away stores that aren't working and adding where you feel like you have opportunities, and we'll be doing both. But I think the heavy lifting is is basically done.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Yeah. And on the store count, it is down on a percentage term.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

7%.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

About 7%. Yeah.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Or so year on year, down 8% actually officially. Global, I think it's yeah. Yeah. Eight, yeah, 8%. And no.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

We'll keep we're gonna continue to to look to optimize. There's no no news. I think you've probably seen the majority of it, but we'll see where where it goes. And, again, it's all part of CapEx. Right?

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

We'll strategically look at stores to close, look at stores to open if it makes sense. We'll look at ways to remodel stores if that makes sense. We've been testing some new remodels that have gone pretty well. Again, very early days, so we'll see. We'll roll them out slowly.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Again, that's why I said that we leave some room in our CapEx budget to to adjust. Right? So we have some new store remodels, not just in Vans, but across our entire store footprint. When we get traction, if we think they're working, we'll have the capacity to accelerate remodels. You know, if they if we don't get the ROI on those that we think we will, we can always decide to to to pull back and and and think about other ways.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

So that's how I think about both vans, the store count in general and how we're thinking about it from a a growth perspective and a CapEx perspective.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Dividend, you know, I'll I'll start, and Paul can finish if he if he feels like he didn't do a good job. You know, we're there's nothing to announce. You know, we have a we we reduced our dividend twice. We took it down to a hundred and 40 it's about a hundred and $40,000,000 a year now. That's always on the table.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

You know, if we felt like we needed it, you know, we would certainly open open that back up. We've said we're our priorities to bring the leverage down under two and a half times. So if we feel like we needed to do something there, we will we would. But we have made that decision that we and I don't know. I don't anticipate that.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Yeah. No. Have nothing else to add.

Ike Boruchow
Ike Boruchow
Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo

Yeah. Thank you.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Thank you.

Ike Boruchow
Ike Boruchow
Managing Director: Senior Analyst - Retailing, Specialty Softlines and E-commerce at Wells Fargo

Thank you.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Thank you.

Operator

And we have time for one more question, and that question comes from the line of Dana Telsey with Telsey Group. Please go ahead.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Hello, Dana.

Dana Telsey
CEO and Chief Research Officer at Telsey Advisory Group

Good morning, everyone. Hi. As you think about the buckets of the gross margin where you mentioned the product cost tailwinds, the lower promos and the higher quality inventory, how does that relate by channel and by brand? And if any of these buckets continue going forward, what's your outlook?

Dana Telsey
CEO and Chief Research Officer at Telsey Advisory Group

Thank you.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Boy, that's a that's a pretty complex question. I'm not sure how to answer that except I'll take a stab at at a higher level answer, then I'll let Paul see if he can go deeper to try to help you here. You know, overall, what we're doing goes forward. So this is not these are not temporary changes to boost our gross margin, and they kinda fade over time. We're fundamentally improving our gross margin.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

The mix between the suggestion here that there is a gross margin difference between wholesale and and and retail, you know, you had a higher SG and A on one and on the on the retail side and a lower SG and A on the other, but then the gross margin's commensurate. It's true. But we really think that we've got a we'll have a pretty balanced, balanced portfolio of channel choices there that should actually have very strong gross margin. So we expect it to carry forward. I mean, I'm I'm really excited about the gross margin improvement we're we're getting in vans as planned.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

You know, a lot of this medicine we're taking is is absolutely healing the patient, just to stay on the theme today. And and, you know, I think we can certainly see it in our p and l and especially in our gross margin, so we're excited about it. And we have no no interest, desire, or or willingness to backslide on that, so we expect it to stay.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

Yeah. I mean, I guess I would just add that, you know, obviously, the reinvent initiatives are are initiatives that affect all of our brands positively, things like integrated business planning. Again, it's the the benefits that Bracken has talked about and why we think it would become a a a great multi brand company is the things that with the initiatives that we're doing on the Reinvent side, the things we're doing on integrated business planning, they will affect it, and and it's a standardized process that will help all of our brands, and so that will help gross margins. Again, markdown management will help all of our brands. So that helps everything.

Paul Vogel
Paul Vogel
Chief Financial Officer at V.F.

And then as as Bracken mentioned, you know, getting rid of some of the distressed and and the the unproductive value doors advance helps gross margins there, you know, specifically. But in general, most of the initiatives we have, most we talk about really go against all the all the brands.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

Yeah. I I guess I'll and I'll maybe I'll parlay that into a close here. So thank you for the question. I you know, I'm I'm we're you know, Paul and I, and I think I can speak for my whole leadership team, we're we all recognize gross margin's the most important number in any p and l, and so we're we're absolutely fixated on improving it systematically over time. My last company, we improved 900 basis points, almost a almost a thousand basis points in gross margin over the time I was there.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

And while I realized this is a different world, different industry, different, I'm I'm very realistic. We have a lot we have significant improvement in gross margin still. So I expect to continue to make good progress there. You know, in closing, we really are confident about our strategy. We're really well underway in transforming VF to to really strengthen the business and and navigate whatever challenges from a macro standpoint.

Bracken Darrell
Bracken Darrell
President, CEO & Director at V.F.

They're not gonna distract us. We feel good about where we are. We have a fantastic team. We're making great progress, and and we'll we'll keep you updated as time goes on. Thanks, everyone, for the questions and the engagement, and we'll see you next quarter.

Operator

This concludes today's conference call. Thank you for your participation and you may now disconnect.

Executives
Analysts
Powered by Quartr

Key Takeaways

  • Revenue was down 3% in Q4 but operating margin expanded 400 bps year‐over‐year, and net debt fell 26% with leverage down one full turn to 4.1x.
  • Vans revenue declined 20% as 60% of the drop reflected deliberate actions to cut unprofitable channels and inventory, driving significant gross margin gains and management expects the turnaround to materialize over coming quarters.
  • The North Face posted 4% revenue growth in Q4, with DTC up 9% globally and strong performance in outerwear and footwear across all regions.
  • Timberland delivered a 13% increase in Q4 revenue on strength in wholesale and DTC channels, lower discounts and popular styles like the 6-inch premium boot driving higher margins.
  • VF’s US import exposure to China is under 2%, with the bulk of sourcing in Southeast Asia and Central/South America, and unmitigated incremental tariffs (~$150 million annually) are expected to be fully offset through cost, sourcing and pricing actions.
AI Generated. May Contain Errors.
Earnings Conference Call
VF Q4 2025
00:00 / 00:00

Transcript Sections