V.F. Q1 2026 Earnings Report

V.F. EPS Results

• Actual EPS: -$0.24
• Consensus EPS: -$0.35
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: -$0.33

V.F. Revenue Results

• Actual Revenue: $1.76 billion
• Expected Revenue: $1.70 billion
• Beat/Miss: Beat by +$58.30 million
• YoY Revenue Growth: -7.30%

V.F. Announcement Details

• Quarter: Q1 2026
• Date: 7/30/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 8:00AM ET

VF Corp. engages in the business of producing and marketing apparel, footwear, and accessories. It operates through the following segments: Outdoor, Active, Work, and Other. The Outdoor segment includes authentic outdoor-based lifestyle brands such as performance-based and outdoor apparel, footwear, and equipment. The Active segment focuses on activity-based lifestyle brands including active apparel, footwear, backpacks, luggage, and accessories. The Work segment offers work and work-inspired lifestyle brands with product offerings including apparel, footwear, and accessories. The Other segment refers to the sale of non-VF products and sourcing activities related to transition services. The company was founded by John Barbey in October 1899 and is headquartered in Denver, CO.

V.F. Q1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: We delivered Q1 results above guidance, reporting a $56 million loss that was $50 million ahead of the high end as revenue improved to –2% in constant dollars and flat on a reported basis.
• Positive Sentiment: Our margin and leverage initiatives gained traction with gross margin up 200 basis points to 54.1%, SG&A flat year-over-year, inventories better managed and net debt down 20%, putting us on track to reach 2.5× leverage by FY 28.
• Negative Sentiment: Tariff headwinds are expected to cut gross profit by $60–70 million in FY 26 despite planned sourcing and pricing offsets, though full mitigation is projected in FY 27.
• Negative Sentiment: Vans revenue fell 15% in Q1 largely due to channel rationalization actions, and while new product pipelines, retail playbooks and marketing changes are underway, the turnaround remains a key challenge.
• Positive Sentiment: Growth engines are firing as The North Face grew 5%, Timberland 9% and Altra topped 20% in Q1, highlighting broad brand momentum and multi-brand upside potential.

Presentation

[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 Versus Corporation First Quarter Fiscal Year twenty twenty six Earnings Conference Call. All 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. Allegra, you may begin.

[Allegra Perry, VP - IR at V.F.]

Thank you. Hello and welcome to VF Corporation's first quarter fiscal twenty twenty six 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

[Allegra Perry, VP - IR at V.F.]

SEC. Unless otherwise noted, amounts referred to on today's call will be on an adjusted constant dollar and continuing operations basis, which we've defined in the presentation that was posted this morning on our Investor Relations website and which we use as lead numbers in our discussion because we believe they more accurately represent the true operational performance and underlying results of our business. You may also hear us refer to reported amounts which are in accordance with U. S. GAAP.

[Allegra Perry, VP - IR at V.F.]

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

[Bracken Darrell, President & CEO at VF Corporation]

Thanks, Allegra, and a good early morning to all of you from Vans headquarters on the West Coast. Welcome to our q one, fiscal twenty six earnings call. In spite of all the macro noise out there, we delivered above our guidance this quarter, a good start to the fiscal year. But the much more exciting thing happening is inside the company. You could feel how dramatically we're transforming.

[Bracken Darrell, President & CEO at VF Corporation]

The processes, teams, product engine, and marketing approach, even the culture, almost everything. And that's all happening as we improved our top line trend to negative 2% in constant dollars and flat in reported. A year ago, only 10% of our business by revenue is growing. And today, that number is almost 60%. We also delivered a much stronger bottom line, a loss of $56,000,000 in our seasonally low q one, about $50,000,000 ahead of the high end of our guidance and ahead of last year.

[Bracken Darrell, President & CEO at VF Corporation]

Paul covered the numbers in more detail, but in short, we're making solid progress towards our goals and are highly confident that we will turn VF back into a growth company. Now let me summarize where we are in the VF turnaround as I pass the two year mark as CEO this month. I love transformation, and we are transforming. We've assembled a great team at the top with some of the industry's best who we've either brought in from the outside or are promoting from the many leaders who grew up in VF and experienced it during its long, strong growth phase. We've dramatically improved our cost structure, reduced well over $300,000,000 of cost and have another 500,000,000 to $600,000,000 of net operating income improvement in our sites.

[Bracken Darrell, President & CEO at VF Corporation]

Even more importantly for the long term, we're building a unified product and marketing engine across each brand globally and leveraging the strong standardized processes we've created. The architecture and organizational structure changes are now complete to deliver results. You'll see more powerful product in marketing as time flows. We prioritize strengthening our balance sheet. And in fiscal twenty twenty five, as you know, we reduced our leverage a full turn and have a clear path to below the two and a half time leverage target that we initially set by fiscal twenty twenty eight.

[Bracken Darrell, President & CEO at VF Corporation]

That's just two years away despite the anticipated tariff impacts, all the anticipated tariff impacts. Paul will talk more about that shortly. We continue to be focused on paying down our debt, but we're doing it as we invest in growth. So lower costs, improved margins, declining debt, and a transformed organization. But what's all this leading to?

[Bracken Darrell, President & CEO at VF Corporation]

Why are we doing this? Of course, it's all about one goal, growth. Turnarounds by definition start with declines. It's been two years of resetting the table, and soon we too will move to growth as we did in every turnaround I've been part of. That's the focus of every leader on my team and throughout the company right now.

[Bracken Darrell, President & CEO at VF Corporation]

We're all here to grow. We have so many opportunities for growth, but today, let me focus on them by brand, starting with our top three. First, we're going to bring Vans back to growth. We don't like the numbers on Vans any more than you, down 15% in q one. About 40% of the decline can be attributed to channel rationalization actions, as you know.

[Bracken Darrell, President & CEO at VF Corporation]

Excluding excluding these, if you look at the underlying trends, Vans running is running down high single digits, but we're seeing some bright spots. We'll get Vans back to flat and then to healthy growth as fast as we can. There are some out there who think this will never happen. I sort of love having that point of view out there. I get it.

[Bracken Darrell, President & CEO at VF Corporation]

And it's our job to show you how wrong that point of view is. I'll come back to Vans and talk more in just a minute. Second, The North Face grew 5% this quarter, but our goal is to go from mid single digits to high single digits and even to double digit growth on a path to doubling revenue. That might sound ambitious today, but it's exactly what our brand president, Caroline Brown, laid out at Investor Day. We aren't promising to achieve those growth rates in the near term, but that's what we're focused on delivering.

[Bracken Darrell, President & CEO at VF Corporation]

Our product innovation pipeline continues to build momentum for the brand. Footwear was up strong double digits again this quarter and is becoming a meaningful part of the business. In addition, our bags and packs business also grew double strong double digits. But our biggest potential is actually in lifestyle apparel in general and spring and summer in particular. In fact, this is all to say we have many, many untapped growth opportunities in the North Face.

[Bracken Darrell, President & CEO at VF Corporation]

Third, we're going to support the sustained momentum and growth of Timberland. The brand grew 9% this quarter with global moment with with global momentum in the six inch boot and a growing business in the boat shoe. Our marketing strategy is working, enhancing the brand's visibility and further broadening its reach and relevance in warmer weather as we've seen with its presence at events like the Met Gala and the NBA finals and just a lot of organic social media that we seed and amplify. We're more confident than ever that the upside opportunity to break out of Timberland's historic revenue range is real, and we have the team in place to do it led by Nina Flood. This is a business where the brand and the culture are much bigger than the business itself in size, and therein lies the potential.

[Bracken Darrell, President & CEO at VF Corporation]

Finally, we'll fuel the other growth engines as they show their potential and truly turn VF into a multi brand powerhouse. Let me point to Altra in this case, which had another strong quarter, up well over 20%, has grown from $60,000,000 of revenue when we bought it to being on track to exceed $250,000,000 this year. And that size with less than 10% awareness in The US and much lower than that in the rest of the world. This is the kind of business that we can scale. It's already tied for the number one shoe in trail running in The US and one of the fastest growing franchises in the road running business.

[Bracken Darrell, President & CEO at VF Corporation]

Now let me return to Vans. As a management team, we know the impact of Vans on BS valuation, and we can see the focus around the timing of a turnaround. We get it. So let's talk about what we're seeing and thinking. First, we have a great leader, Sun Chae, and she and her team are executing on the plan laid out at Investor Day.

[Bracken Darrell, President & CEO at VF Corporation]

I was just looking at more of our future lineup last week here in Costa Mesa, and things are really coming together. Each quarter, you'll see new entries. This team's freedom to innovate will be less and less constrained by the practicalities of the old product creation process as each quarter passes, so you'll see more and more ahead. But there are already positive signals in the Pinnacle side of the business. We had a 50% increase in appointment bookings at Paris Fashion Week in June, including new accounts and accounts who delisted Vans in recent years come coming back.

[Bracken Darrell, President & CEO at VF Corporation]

If you didn't notice, there was also a strong reaction to the sheer number of skates skate inspired silhouettes featured by many luxury brands in Paris this year. These are the these are the style setters and the taste makers. Trends start in the luxury market as we saw in fashion week for Timberland with Louis Vuitton last June. I'm not suggesting that Vans will be growing 9% a year from now, but I am excited to see the tide turning on skate style shoes and luxury or or trends start. Premium today is a small part of Vans, but this shows how sensitive this business is to new products.

[Bracken Darrell, President & CEO at VF Corporation]

We don't have enough new products in the premium or the mainline yet, but Sun and the team, she is assembling our new product machines. New products are coming. With the recent changes in our supply chain, we're starting to accelerate our pace to market too. Meanwhile, Sun and our and her team are working away on increasing supply and variety in our latest products that are already that already have strong interest, like the Super Low Pro, the current cable skate, and the latest from OTW, our Pinnacle offering. We're also seeing encouraging signs in in in one of our classics, the authentic.

[Bracken Darrell, President & CEO at VF Corporation]

We have an exciting collaboration with Valentino in that shoe hitting the market this fall. Now what about the actions we're taking to make sure those new products, all of our products, are in the right places with the right support for long term growth and profitability? As we've discussed, we've taken deliberate actions to improve our channel mix to set us up for high quality, sustained, and profitable growth. These actions will continue to impact the Vans business through q q three. So as we exit the year, our channel should be at our future state.

[Bracken Darrell, President & CEO at VF Corporation]

We're already seeing some solid results in wholesale. America sellout trends continue to improve as nonvalue accounts grew again this quarter. In DTC, over the last two years, we closed about 140 stores, about 20% of our global network. While it's tough medicine affecting revenue, it's improved our profitability. We've also now reoriented about 90% of our, full price America stores to provide greater gender clarity, and we'll continue to change the format to show more newness and footwear focus in our visual merchandising.

[Bracken Darrell, President & CEO at VF Corporation]

In the pilot store on Fifth Avenue, we delivered positive comps in q one, significantly outperforming the rest of the fleet. Over in Europe, the elevated London store generated a 15% better revenue performance than the rest of the EMEA fleet, driven by a significantly higher average selling price, 35% higher, through a more premium product offering. Based on these early successes, we'll be rolling out our new retail playbook to improve assortment, curation, and navigation to other regions. It's also worth mentioning that in EMEA, we've executed on a key city strategy where we've we have elevated our merchandising and folks in those stores. And this is generating exciting early results in that region with those stores starting to perform better than the rest of the network.

[Bracken Darrell, President & CEO at VF Corporation]

And finally, on marketing, our approach simply hasn't driven enough traffic. While the whole industry is affected by slower traffic right now, we don't accept that, and we're changing our our marketing approach. I can't disclose too much now, but keep watching the space. An aspect of our marketing is that it's that is powerful is the long awaited return of the Vans Warp Tour. In its restart year, we planned three locations, and we intended to sell 50,000 tickets in each location, which would be about twice any single Warp Tour event in history. Then we sold out of all three events in hours. We added a lot more tickets and sold those out immediately too. Sunday, I was at the second of these event events in Long Beach. And over the two days, we had almost a 170,000 people at surely the largest single collection of Vans footwear and apparel ever assembled in one place.

[Bracken Darrell, President & CEO at VF Corporation]

Everyone was in Vans of all kinds. You could really feel the love for Vans. People came because they love music and they love Vans, and they're inseparable for many. 80, that's eight zero, different artists, eight stages, and just a huge boost for the brand. To wrap up on Vans, we're on track with the turnaround and couldn't be more excited about what's coming next.

[Bracken Darrell, President & CEO at VF Corporation]

Keep watching. We are well on our way to transforming VF, and this quarter is another step in the right direction. Our powerful portfolio of brands and the sustainable growth model we're creating will help us accelerate growth and improve margins. We're on a path to achieve our targets and build a stronger VF. Our focus is on growth.

[Bracken Darrell, President & CEO at VF Corporation]

I'll now hand it over to Paul who will who will go deeper into the numbers.

[Paul Vogel, Chief Financial Officer at V.F.]

Thank you, Bracken. Before I start, let me build on what Bracken said and remind you of where we are going. We committed to a 55% gross margin and a 45% s g and a to sales ratio in fiscal twenty eight. In the first quarter of this fiscal year, we are continuing to show progress toward those goals. Our quarterly two year stack trends have shown gross margins up roughly 200 basis points with s g and a down 5% over that same time period.

[Paul Vogel, Chief Financial Officer at V.F.]

We have done all of this without any growth. But as we said at the time as as we said time and time again, that's not what we're here for. We are here for growth, and our whole organization is focused on the next stage, is about growth. So now let me turn to review of the first quarter. Our first quarter was solid, and our operating results came in above guidance, the guidance we provided.

[Paul Vogel, Chief Financial Officer at V.F.]

We feel particularly good about the improve progress towards our stated medium term goals. As a quick FYI before I get into the numbers, currency movements in the quarter were significant, positively impacting reported revenue by 200 basis points. These FX changes also had a positive effect on gross margin with a negative impact on SG and A. The net of these effects had a negligible impact on our operating income. Q one revenue was 1,800,000,000.0, flat on a reported basis and down 2% year over year in constant dollars.

[Paul Vogel, Chief Financial Officer at V.F.]

This compares to our guidance of down three to down 5%. Excluding Vans, revenue was up 5%. Total revenue of the quarter did benefit from a wholesale timing shift, landed in q one rather than q two. Excluding this benefit, revenue would have been down roughly 3% at the top end of our guidance range. By brand, The North Face grew 5%, led by growth in both DTC and wholesale.

[Paul Vogel, Chief Financial Officer at V.F.]

Bands revenue in the quarter was down 15% similar to last quarter. The impact of the direct actions we are taking in the value channel and our own stores was about 40% of the reported decline. And finally, Timberland's momentum continued with revenue up 9%, reflecting growth across all regions across sorry, across all channels. By region, the APAC region grew 4%, while the Americas and EMEA regions were down 3% and down 2%, respectively. Excluding vans, the America region was up 3% versus last year.

[Paul Vogel, Chief Financial Officer at V.F.]

And lastly, by channel, DTC was down 4% while wholesale was flat. Adjusted gross margin in the quarter was up 200 basis points to 54.1%, driven primarily by higher quality inventory, lower discounts and FX. This reflects our transformation efforts to make us structurally higher margin business. SG and A dollars were flat year over year as we continue to realize cost savings across the business. Our adjusted operating margin for the quarter was negative 3.2%, up two seventy basis points year over year.

[Paul Vogel, Chief Financial Officer at V.F.]

We're continuing to make fundamental margin and profitability improvements by reshaping and strengthening the foundation of our business. Finally, adjusted loss per share was $0.24 versus $0.35 in q one of last year. Moving on to our balance sheet. Inventories were up 4% or $76,000,000 at the end of the quarter. Excluding the impact of FX, inventories were up 1%.

[Paul Vogel, Chief Financial Officer at V.F.]

Importantly, we improved the quality of our inventories, which is driving stronger gross margins, and our inventory days are down 4% year on year. Net debt was down $1,400,000,000 versus last year or down 20%. Let's now turn to the outlook for the second quarter. We expect Q2 revenues to be down 2% to down 4% on a constant dollar basis. As a reminder, Q1 did benefit by roughly one point of growth from a timing shift in wholesale, which will conversely negatively impact Q2 growth by 1%.

[Paul Vogel, Chief Financial Officer at V.F.]

Taking q one and q two together, our first half performance is expected to be in line with the comments we provided on our last earnings call in May. Moving down the p and l, we expect q two operating income to be in the range of $260,000,000 to $290,000,000 Gross margins will be broadly flat as we continue to benefit from fewer discounts and healthier inventory, but will lap the tailwinds from last year's inventory actions. SG and A dollars are expected to be up slightly versus last year mainly due to our decision to invest more into marketing ahead of back to school as well as a negative f FX impact. On a constant dollar basis, SG and A is expected to be broadly flat versus last year. And finally, we expect q two interest of approximately 50,000,000 and effective tax rate in the range of 30 to 33%, which is higher than last year's reported tax rate and in line with my comments last quarter about increasing trend in our tax rate over the next one to two years and quarterly fluctuations as a result of the change in the global tax rates and in our geographical mix.

[Paul Vogel, Chief Financial Officer at V.F.]

As a reminder, this higher tax rate will have minimal impact on cash taxes. Now let me give you a quick update on tariffs as things have moved on moved since we last updated you. When we spoke in May, we quantified the annualized unmitigated impact from the 10% incremental tariff on goods coming into The US as a 150,000,000. Based on what had been agreed at the time in terms of the timing of implementation, we estimated 65% of the impact would hit in fiscal twenty six, and then we'll start to see the impact flow through in q three. Based on the latest information that has become public, we estimate an incremental annualized tariff impact of 100,000,000 to $120,000,000 bringing the total annualized amount to $250,000,000 to $270,000,000 We expect 50% of this total to flow through in fiscal twenty six based on the timing of the expected tariff increases. As we communicated, we have actions in place to mitigate the tariff impact through sourcing savings and pricing actions that will take effect later this year.

[Paul Vogel, Chief Financial Officer at V.F.]

From a timing perspective, we will begin seeing the impact of tariffs in the p and l before we realize the full offsets from the mitigating actions. Therefore, we expect a negative net impact to the gross profit of 60,000,000 to $70,000,000 due to tariffs in fiscal twenty six. We remain confident we will be able to fully mitigate all currently anticipated tariffs in fiscal twenty seven. On the back of these developments, I also want to update you on the directional year over year guidance for operating income and free cash flow in fiscal twenty six. First, we continue to see operating income up versus last year in fiscal twenty six.

[Paul Vogel, Chief Financial Officer at V.F.]

This is inclusive of all expected tariffs that we believe to be on the table at this point, as outlined earlier, and as we continue to make progress towards our medium term targets. Second, on cash flow. We continue to expect operating cash flow and free cash flow, excluding the sale of noncore assets, to be up year on year, also including all expected tariffs at this point. So let me repeat. Free cash flow for the year will be up versus last year even after we account for tariffs.

[Paul Vogel, Chief Financial Officer at V.F.]

We are working on a number of initiatives that are expected to improve our free cash flow throughout the year, which which gives me confidence that we are well positioned to achieve our guidance. And we anticipate that our leverage will decline at the at year end of fiscal twenty six. In addition to improving our cash flow, we remain vigilant about lowering our debt. As many of you are aware, we utilize our revolving credit facility to manage fluctuating working capital needs throughout the year. To ensure we we maintain a strong liquidity position moving forward, we're in the final stages of executing a $1,500,000,000 asset backed revolving loan.

[Paul Vogel, Chief Financial Officer at V.F.]

This will replace the current revolver we have in place. We are pursuing this option as we believe the ABL gives us more flexibility, more certainty, and eliminates the majority of covenants associated with our current borrowing. It also aligns with the puts and takes associated with the cadence of quarterly working capital needs. So to be clear, we are on track to meet our guidance to reduce leverage to 2.5 times by fiscal twenty twenty eight. Before we close, I wanna highlight changes we've made to our segment reporting as well as, post quarter end update to our financing structure.

[Paul Vogel, Chief Financial Officer at V.F.]

First, in q one fiscal twenty six, we have changed our segment reporting to make it easier for investors to track our key areas of focus across brands and segments. We'll continue to disclose revenue for our top three brands, The North Face, Vans, and Timberland. And as for segments, here's what has changed. We have combined Timberland Tree and Timberland Pro into one operating segment. This combined Timberland along with North Face now constitutes our outdoor segment.

[Paul Vogel, Chief Financial Officer at V.F.]

Vans and packs make up the active segment, while Dickies Ultra Smartwell, Icebreaker, and Napa are reported in all other category. While we will no longer disclose Dickies as a stand alone brand, we continue to be excited about and committed to growing the Dickies brand. Our new brand president, Chris Goebel, has made an excellent start to resetting the brand since joining last October and is already executing on the strategy he introduced at Investor Day in March, the leadership team being rebuilt. We we believe the brand has significant growth potential under Chris' leadership. By the way, even though we are no longer disclosing separately, Diggy's decline versus last year moderated significantly this quarter.

[Paul Vogel, Chief Financial Officer at V.F.]

So in closing, we are pleased with our results in the '26. As Bracken said, are focused now on getting each of our brands growing and getting stronger and stronger. I'll now hand it back to the operator to take your questions.

[Operator]

Thank you. We will now begin the question and answer session. And your first question comes from the line of Adrienne Yih with Barclays. Please go ahead.

[Adrienne Yih, MD & Consumer Discretionary Analyst at Barclays]

Great. Thank you very much, and nice to see the progress, so congratulations on that. Bracken, I guess, I'm gonna start with sort of the the work tour. So what did you expect to see? I mean, obviously, you gave us some of the metrics, but what did you expect in terms of mindshare, market share kind of before the event?

[Adrienne Yih, MD & Consumer Discretionary Analyst at Barclays]

And what metrics kind of suggest to you that you've engaged other than selling the tickets in terms of kind of feedback, etcetera? And then Paul, can you talk about the 60,000,000 to $70,000,000 of gross profit impact? Obviously, given the guidance that you had for the first half of the year, all of that's coming in the back half. Are you able to offset this through the SG and A? Can you talk about some of the other parts of the P and L that can offset that?

[Adrienne Yih, MD & Consumer Discretionary Analyst at Barclays]

And I'm assuming that that does not include the price actions that you would be taking? Or just some clarity on how much of that includes forward price action? Thank you very much.

[Bracken Darrell, President & CEO at VF Corporation]

Okay. Let me let me let me jump on the first question. What expectations we have for the work tour? Well, as I said earlier, you know, we our expectations were first of all, realize the work tour hasn't been around since 02/2018. And we made the decision, actually, within the first few weeks that I got here to to go ahead and and restart it.

[Bracken Darrell, President & CEO at VF Corporation]

And Kevin Lyman, I should we should make sure to give credit to, especially Steve Van Doren, really ran with it, and they've recreated the work tour. We only planned three events, so we expected a pretty modest impact, although social media is a magical thing. And those three locations feel like it's happening all over The United States now. We sold 50,000 tickets. Our plan was to sell make the events much bigger than they'd ever been before.

[Bracken Darrell, President & CEO at VF Corporation]

So from twenty five thousand was the peak size of any event in the past. We went the we plan to sell 50,000 tickets. We sold out of those, I think, in an hour and a half or something. We added another 35,000 tickets. We sold out of those just as fast.

[Bracken Darrell, President & CEO at VF Corporation]

And so the the demand was just enormous. And you probably if you followed it at all in social media, you just see how much activity there was. In terms of impact on the business, in year one, we're only doing three cities, and it's the first time back, so we'll see. But we sold I would just say we sold a lot of merchandising. And if you put and if you stack on top of that all the merchandising was sold by us, the event the event manager, the the different bands around it, you can see how powerful this is as a driver of product.

[Bracken Darrell, President & CEO at VF Corporation]

And that's physically at the event. We expect that to continue, you know, especially as we go into year two of this event. So it's a super, super powerful event for us. It's a fan fest. It's a flat out, all out, huge fan fest.

[Bracken Darrell, President & CEO at VF Corporation]

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

[Paul Vogel, Chief Financial Officer at V.F.]

Yeah. So That's

[Adrienne Yih, MD & Consumer Discretionary Analyst at Barclays]

next year.

[Paul Vogel, Chief Financial Officer at V.F.]

So just to be come

[Bracken Darrell, President & CEO at VF Corporation]

to Orlando in November.

[Paul Vogel, Chief Financial Officer at V.F.]

I can was very excited with his warp tour experience. The, so just to be I to, I guess, to clarify the question. So the 60 to 70,000,000 we talked about, you're right. It's mostly the back half of the year, and that's the net number when you sort of, account for, everything that's in play right now between how much flows through this fiscal year, what we believe we can offset, between pricing and, and other actions. But, also, keep in mind a couple of things.

[Paul Vogel, Chief Financial Officer at V.F.]

You know, we've we've been working to improve gross margins anyway, throughout the year. So, obviously, this has an impact on gross margins, but it's not in a steady state or static environment in terms of gross margins. And so and we'll so and we'll continue to work sort of on the gross margin improvements outside of tariffs. And then, yes, obviously, we'll continue to be very diligent on our other cost initiatives, which we've talked about.

[Adrienne Yih, MD & Consumer Discretionary Analyst at Barclays]

And and just to be clear, it's 20% Indonesia and 19 per oh, sorry. 19% Indonesia and 20% Vietnam. Is that the incremental?

[Paul Vogel, Chief Financial Officer at V.F.]

Yeah. I mean, that's what we're going with. Yeah. So, again, I guess, to level set on that as well, everything that we've put in now is what we see as well from the public, from what's been what's been made public by the administration or others. So, you know, we don't really know anything more than anyone else in terms of expectations.

[Paul Vogel, Chief Financial Officer at V.F.]

So we've modeled, what we believe is the is the most likely outcome based on what we've seen from public information as well.

[Bracken Darrell, President & CEO at VF Corporation]

But think of that as another nine or 10 points in Southeast Asia, you know, something comparable around the world.

[Adrienne Yih, MD & Consumer Discretionary Analyst at Barclays]

Okay. Perfect. Thank you very much.

[Bracken Darrell, President & CEO at VF Corporation]

Great. Thank you. Thank you, Adrian. See you in in Orlando.

[Operator]

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

[Lorraine Hutchinson, Analyst at Bank of America]

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

[Bracken Darrell, President & CEO at VF Corporation]

Yeah. We kind of we in our Investor Day, we laid out, I think Investor Day one, we actually and we reiterated in in number two, we we set our gross margin target over the next few years to get to 55% stay there and and and potentially go beyond that. And and we continue to feel very strongly about that when we look at at our overall business. In terms of gross margin improvement, you know, we've got really gross margin opportunities across every brand. It's just a question of how much we try to exploit that.

[Bracken Darrell, President & CEO at VF Corporation]

I mean, I think in the North Face, you know, we have premiumization opportunities across the board and mix opportunities. If you really I I don't wanna go down in the mix of our gross margin by brand. It'll get really complex if we do that. But I would just say where we see the growth opportunities long term, the the gross margins are better. If you look at Vans, I think, you know, we talked premiumization today.

[Bracken Darrell, President & CEO at VF Corporation]

We talked about the Fifth Avenue store. We're selling 35% more premium mix in that Fifth Avenue store. It tells you how much upside there is. If this is like all of our brands. I think that Vans is a brand that has the ability to stretch across such a wide range of price points.

[Bracken Darrell, President & CEO at VF Corporation]

And, you know, generally speaking, as you go up in price points, you have higher gross margins. And we're barely barely touching the tip of the iceberg in terms of the premium mix that we can sell. So I think across all of our brands, we have opportunities. And and and I'm a you know, I think I can safely say that Paul and I are gross margin fanatics. I mean, we're really focused on that.

[Bracken Darrell, President & CEO at VF Corporation]

I've I've learned in my career and so is Paul. You know, gross margin is where the action is. If you get gross margin right, everything else flows. It's also a great reflection of the strength of the brand and the strength of the business as long as you've got growth, and we will get growth. So we're we're gonna get better gross margin.

[Paul Vogel, Chief Financial Officer at V.F.]

Yeah. I I would just add. So just kind of a a refresh too in terms of what we said at the Investor Day. Right? We we mentioned the the three big gross margin initiatives.

[Paul Vogel, Chief Financial Officer at V.F.]

We mentioned sort of the nine initiatives that we talked about that are gonna help generate that incremental 500 to 600,000,000 of of operating income. You know, the three that we specifically called out in gross margin were product creation, integrated business planning, and markdown management. You know, markdown management, you can think about is something that is more immediately actionable. The other two take a little bit of time, right, on product creation and integrated business planning. And so I think you'll start to see the impact of markdown measure or you already have, right, in terms of where we've seen sort of, better execution there in terms of overall markdown.

[Paul Vogel, Chief Financial Officer at V.F.]

And then you'll see from the product creation, integrated business plan, that stuff that will that will start to benefit us but really get get rolling over the next kinda year or two.

[Operator]

Thank you.

[Bracken Darrell, President & CEO at VF Corporation]

Thanks, Lorraine.

[Operator]

Your next question comes from the line of Jay Sole with UBS. Please go ahead.

[Jay Sole, Managing Director at UBS Group]

Super. Thank you so much. I just want to ask another question It sounds like you're going to mitigate a whole lot of the $250,000,000 to $275,000,000 gross impact. What kind of impact do you expect on unit volumes as you raise prices and do some of the other actions to offset the tariff

[Bracken Darrell, President & CEO at VF Corporation]

You know? Problems. But, you know, nobody really knows. I mean, this is a very unusual circumstance where the whole industry is affected kind of equally. And if you if our competitive assessment's right, I think everybody's kinda hit fairly equally in this industry, whether it's footwear, apparel, on the on the tariffs.

[Bracken Darrell, President & CEO at VF Corporation]

So it's a little hard to model. We're we're we're we've modeled different scenarios as you'd expect. So we're all the way down to a worst case scenario and then a best case scenario, which we do we then ignore, and we focus kind of on an expected case and making sure we're protected against the downside case. You know, generally, I think we're you know, I I suspect we're we're modeling somewhere in the one to one or a little bit better, you know, given that the whole industry is raising. So we'll see.

[Bracken Darrell, President & CEO at VF Corporation]

And then on top of that, you could have a macro impact. You wanna add anything, Paul?

[Paul Vogel, Chief Financial Officer at V.F.]

No. I would just say exactly that. I'd say, a, we, as you can imagine, you know, we have different scenarios around different, elasticity curves. And so we'll just some of it's gonna be a wait and see, how things, go. And then I think, Bracken mentioned, in a number of our brands, you know, sort of the where we are with the product.

[Paul Vogel, Chief Financial Officer at V.F.]

And I think some of them probably had some pricing opportunity with or without tariffs anyway, so we'll see how that that that works out.

[Jay Sole, Managing Director at UBS Group]

Yeah. So, Bracken, I think you mentioned one Does that imply, like, sort of, like, any elasticity, like, raised price 1%, unit volumes go down 1%? Is that is that what that means?

[Bracken Darrell, President & CEO at VF Corporation]

Yeah. Roughly. Although, you know, there's an argument, and we we certainly think that's very possible that it could be a little better than that because of the nature of the tariff increase impact on everybody's costs. You know, now that might not show up in right away, so that's kind of our expectation. It's gonna take a while for that to this to play out.

[Bracken Darrell, President & CEO at VF Corporation]

I think one of the there's a lot of discussion about why, you know, why why is the economy so good? Why is why the tariffs not showing up? I think it's because the tariffs really haven't shown up most people's costs yet. They're flowing through inventory or making their way into our costs and everybody else's. So, you know, it's a little hard to to know.

[Bracken Darrell, President & CEO at VF Corporation]

You know? So we're just gonna be flexible. One of the things I'm proudest of of what we've done in the last year is we've built an ability to be a great response machine to what's happening. And so we'll react to whatever we need to from a pricing cost and print plant and factory relocation standpoint with a lot more agility than we could possibly have done before to whatever it is.

[Jay Sole, Managing Director at UBS Group]

Got it. Okay. Thank you so much.

[Bracken Darrell, President & CEO at VF Corporation]

Thanks, Jay.

[Operator]

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

[Michael Binetti, Senior Managing Director at Evercore ISI]

Hey, guys. Good morning. Congrats on a nice quarter and thanks for taking our question. I guess North Face America, it's good to see the 5% growth rate on a global basis. North Face America, I know it's an unimportant quarter, but down 3% in the summer.

[Michael Binetti, Senior Managing Director at Evercore ISI]

I know you mentioned that you're pretty excited about some of the lifestyle stuff coming in. Maybe just help us connect with the down 3% over the summer and what's on the common lifestyle? Then I guess just some thought on how we should expect to see North Face Americas trend into the fall and winter based on the order books. And then I know on Vans Bracken, you've mentioned a few times on public calls since you got back, You thought Europe was closer to a turn than The U. S.

[Michael Binetti, Senior Managing Director at Evercore ISI]

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

[Bracken Darrell, President & CEO at VF Corporation]

Yeah. I I I'll start with your questions on North Face. You know, I think generally speaking, you know, I'm I am really excited about the ability to really go four real quarters for North Face. I think we've really not done we've talked a lot about it in the past. We've not really brought out enough product.

[Bracken Darrell, President & CEO at VF Corporation]

And if we have brought out product, we haven't we haven't invested enough in it in stores and in and through wholesale to see a difference in the spring and summer. As you said, this is a very light seasonal quarter for us, so I wouldn't draw too many conclusions. It's also early. I don't we we really don't have enough spring and summer product out yet, but I can promise you that is a a real focus of the team, and they're really working to get there. So I think as the as we get into the next spring and summer, you'll see more and then more and more.

[Bracken Darrell, President & CEO at VF Corporation]

So I I'm excited about that. In terms of you know, we try we're really trying not to get into kind of forecasting where the business is going by brand, so I'm probably not gonna do that now. But I I wanna talk briefly about your brands question for Europe. Yeah. I think this business in general is when you're doing a turnaround, you know, it's it's got ebbs and flows to on its way up, hopefully, or on its way to less down at this point.

[Bracken Darrell, President & CEO at VF Corporation]

And I think same thing is true for Europe. You know, I think we've got hot, really great spots in Europe. We talked about the the large city plan where we're going into key cities and seeing a difference there. I think that's great. And then and and and, you know, basically, I don't think it's turned any faster than The US.

[Bracken Darrell, President & CEO at VF Corporation]

I think it looks a lot like The US. I think the the pattern's the same, so we expect the turn to happen at about the same pace.

[Michael Binetti, Senior Managing Director at Evercore ISI]

Any comments on the forward order book for fall winter for North Face?

[Bracken Darrell, President & CEO at VF Corporation]

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

[Michael Binetti, Senior Managing Director at Evercore ISI]

Okay. Good luck with back to school.

[Bracken Darrell, President & CEO at VF Corporation]

Thank Alright. See you now.

[Operator]

Your next question comes from the line of Paul Lejuez with Citi. Please go ahead.

[Tracy Kogan, Analyst at Citigroup]

Thanks. It's Tracy Kogan filling in for Paul. I was wondering, your quarter to date trends in line with your revenue guidance of down, I think, 2% to four Or are you expecting trends to accelerate or decelerate from here? And then I thought at Vans, you expected a similar drag from your deliberate actions as you saw in 4Q, but it it seems like it was significantly less. And I was just wondering if you took fewer deliberate actions than you initially anticipated. Thank you.

[Paul Vogel, Chief Financial Officer at V.F.]

So on the first question, we're not really gonna answer that. I think we'll just you know, I said we put out our guidance for the quarter. I mean, that's obviously the expectation we have for the quarter, and, so I'll leave it at that. And on the vans, no. I mean, it's it's roughly in line with expectations.

[Paul Vogel, Chief Financial Officer at V.F.]

It was we said it was roughly 50% last quarter, roughly 40% this quarter. You know, it's just sort of how it impacts. I mean, it's really just math more than anything else. The the, overall initiatives are the same. The overall, intent is the same.

[Paul Vogel, Chief Financial Officer at V.F.]

It's really just a question of how everything falls out and where the math falls out. So, you know, to us, the 40%, 50% is roughly you know, it's roughly half plus or minus. Last quarter was a bit more. This quarter was a little bit less, but, we've talked about that. And we've talked about that the impact would be, you know, felt most significantly q four of last year, q one, and then q two as well as well this year.

[Paul Vogel, Chief Financial Officer at V.F.]

Hopefully, you start to see some moderation of that in in q three and then, you know, a lot more in q four.

[Tracy Kogan, Analyst at Citigroup]

Thank you.

[Bracken Darrell, President & CEO at VF Corporation]

Thank you so much.

[Operator]

Your next question comes from the line of Peter McGoldrick with Stifel. Please go ahead.

[Peter McGoldrick, Vice President at Stifel Financial]

Hi there. Thanks for taking our questions. So one of the callouts was leaning into marketing for back to school. Is this entirely related to the Vans brand? And should we expect this to be a sustained area of investment for fiscal twenty six?

[Bracken Darrell, President & CEO at VF Corporation]

Yeah. So back to school isn't only a Vans only it's not definitely not only advanced thing, and, yeah, we are absolutely leaning into back to school. School comes every year, and that's it's gonna come this year. So so we and I think we've got a good program for it. But, yeah, I would expect it to be this will be an annual thing.

[Bracken Darrell, President & CEO at VF Corporation]

I don't think we did as as well as we could have last year in back to school. So we're we're more focused on that this year, and I think we'll especially in advance. So we'll see how we do this year, but I'm optimistic about it.

[Peter McGoldrick, Vice President at Stifel Financial]

Thank you very much.

[Bracken Darrell, President & CEO at VF Corporation]

Thank you. Thanks, Peter.

[Operator]

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

[Laurent Vasilescu, MD & Senior Equity Analyst at Exane BNP Paribas]

Good morning. Thank you very much for taking my question. I wanted to ask about the free cash flow for the first quarter. It was down $174,000,000 I think last quarter, Paul, you mentioned there was an intentional timing shift. So by my math, looks like the free cash flow for the quarter was down maybe even more than $200,000,000 So I'm trying to understand the deterioration of free cash flow.

[Laurent Vasilescu, MD & Senior Equity Analyst at Exane BNP Paribas]

And can you walk us through how do you get to over $500,000,000 of free cash flow for the remaining quarters? Thank you.

[Paul Vogel, Chief Financial Officer at V.F.]

Yeah. So the q one, it's really around timing. It's around timing of working capital. It's it's around those types of of dynamics. But when you sort of look at the the components of free cash flow for the year, right, between our our our operating income, what we expect to spend on CapEx, how we how we're thinking about CapEx throughout the year, and other movements in working capital, we're we're right on pace.

[Paul Vogel, Chief Financial Officer at V.F.]

It's why I don't guide free cash flow on a quarterly basis, but we try and give some idea on an annual basis because you can have pretty big fluctuations sometimes with respect to timing in in, in any one quarter. As I said, we do feel good about it. There is, an incremental impact from the tariffs, which we talked about. We have some offsets that we think we're working on throughout the year to to improve free free cash flow, and it's a big focus on us. I mean, think Bracken mentioned before there's a couple of things that we really focus on.

[Paul Vogel, Chief Financial Officer at V.F.]

Gross margin is one of them, and free cash flow is the other one for me. Right? We're really committed to, to generating incremental free cash flow, to paying down our debts, reducing our leverage, and we expect free cash flow to be up this year. Again, there's lots of moving parts. There's lots of moving parts in every quarter.

[Paul Vogel, Chief Financial Officer at V.F.]

There's things that we're working on, that will hopefully come through that, that will impact our free cash flow throughout the year. And, you know, as that happens, we'll update you.

[Laurent Vasilescu, MD & Senior Equity Analyst at Exane BNP Paribas]

Wonderful. And then a follow-up here, Paul. Net debt actually increased this quarter. That might be due to seasonality. But obviously, I just you have that target for the five years.

[Laurent Vasilescu, MD & Senior Equity Analyst at Exane BNP Paribas]

But where do you think net debt goes? I know you have the €500,000,000 bond that you're going to use. Guess, are you still using the revolver for that? But where do you think net debt, the leverage goes for this fiscal year?

[Paul Vogel, Chief Financial Officer at V.F.]

Yeah. Well, so we expect leverage to decline. We haven't given a target for this year. We've given sort of the medium term target, but we do expect it to continue to move down. We ended last year at 4.1 times, so you can expect it to be below that, at the end of the year and and hopefully making reasonable progress to get into the two and a half times that we've talked about.

[Paul Vogel, Chief Financial Officer at V.F.]

Yeah. So and with respect to, the the mid the 500,000,000 maturity, so a couple things. One is currency has negatively impacted us in terms of the debt on the on the balance sheet. So that's been a little bit of a of a negative in terms of where the the how the debt, shows up given the currency moves. And then, yeah, we continue to expect to pay off the the 500 at the end of the year, and that'll be mostly from free cash flow.

[Paul Vogel, Chief Financial Officer at V.F.]

And then, again, you other short term borrowing if we need. But we feel pretty reasonably confident we'll be able that won't be any issue whatsoever.

[Laurent Vasilescu, MD & Senior Equity Analyst at Exane BNP Paribas]

Thank you very much.

[Bracken Darrell, President & CEO at VF Corporation]

Yep. Thanks, Laura.

[Operator]

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

[Matt Boss, Equity Research Analyst at JP Morgan]

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

[Bracken Darrell, President & CEO at VF Corporation]

Other reset actions were No. I think we're I think I really feel good about what we've done, and I think we're in a pretty good spot. Now don't get me wrong. They're always you know, when you're in a company of our scale, there are always things you're gonna be doing that'll that'll be, you know, pruning and and fixing things that pop up and that kind of stuff. But, yeah, basically, our reset actions the the major reset actions, think, are really behind us.

[Bracken Darrell, President & CEO at VF Corporation]

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

[Matt Boss, Equity Research Analyst at JP Morgan]

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

[Paul Vogel, Chief Financial Officer at V.F.]

No. Again, it's it's well, it's a couple of things. One is, obviously, we had some step ups over last year as far as as we lap some of our other initiatives. We still feel good about the gross margin progression. Again, you saw some of it in in q one.

[Paul Vogel, Chief Financial Officer at V.F.]

And so, again, it's just a you know, again, sometimes there's ebbs and flows with every quarter, but it's flat year on year. We feel good about where the trajectory of of gross margins, you know, have gone overall.

[Matt Boss, Equity Research Analyst at JP Morgan]

Great. Best of luck.

[Bracken Darrell, President & CEO at VF Corporation]

Thank you, Betty.

[Operator]

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

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

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

[Bracken Darrell, President & CEO at VF Corporation]

I think around the world, you've got a little bit of hesitation by wholesalers to to overextend themselves on inventory. So, you know, we're we're we're aware of that. I'm sure all of the everyone in the industry is. You know, the the traffic has generally slowed a little bit as we've gone through the summer, especially during this period of real uncertainty around what's gonna happen to tariffs. I do think it's kinda caused a bit of a a just just conservatism.

[Bracken Darrell, President & CEO at VF Corporation]

You know? And I think you can kinda see and feel it. But we're just as optimistic as we've been before. We we feel like, you know, we're we laid the right bricks in terms of innovation, and we're gonna keep investing in marketing as we've planned. And and we're not letting up at all.

[Bracken Darrell, President & CEO at VF Corporation]

So and, yeah, I mean, we're we're our whole game plan here is to keep getting stronger and stronger from a product portfolio standpoint, from a marketing execution standpoint, and from an innovation standpoint. And our expectation is that's gonna offset any of the any of the headwinds that come from as long as they're reasonable, any of the headwinds that come from concern about the economy.

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

Great. Thanks so much.

[Bracken Darrell, President & CEO at VF Corporation]

Thank you, Brooke. Thanks a lot. And thanks to everyone. I I guess I'll close by saying, you know, we're we started this, you know, this is the end of my first two years. So I'm, it's been an incredibly exciting two years, but it's, I think the next two years are gonna be a lot more exciting.

[Bracken Darrell, President & CEO at VF Corporation]

Everybody likes working more on growth than on on cost and and and organization change. And I'm I'm certainly in that camp, and so is so is my leadership team. We are really excited about the growth path we have ahead. And, you know, stay tuned. It'll be fun to talk to you next quarter and the quarter after that and the quarter after that.

[Bracken Darrell, President & CEO at VF Corporation]

And and Orlando, the warp tour, you wanna go. I've got T shirts right next to me that if we were in person, I'd be handing them out. And we'll see you in three months.

[Operator]

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

Participants

Executives

• Allegra Perry, VP - IR
• Bracken Darrell, President & CEO
• Paul Vogel, Chief Financial Officer

Analysts

• Adrienne Yih, MD & Consumer Discretionary Analyst at Barclays
• Lorraine Hutchinson, Analyst at Bank of America
• Jay Sole, Managing Director at UBS Group
• Michael Binetti, Senior Managing Director at Evercore ISI
• Tracy Kogan, Analyst at Citigroup
• Peter McGoldrick, Vice President at Stifel Financial
• Laurent Vasilescu, MD & Senior Equity Analyst at Exane BNP Paribas
• Matt Boss, Equity Research Analyst at JP Morgan
• Brooke Roach, VP - Equity Research at Goldman Sachs