V.F. Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
July 29, 2021

Key Takeaways

  • Revenue: Q1 net sales surged 96% to $2.2 billion, organic growth +83%, surpassing pre-pandemic levels with digital sales 72% above FY2020.
  • Margins & EPS: Q1 gross margin expanded +260 bps to 56.7%, operating margin improved to 6.8%, and adjusted EPS rose 133% to $0.27.
  • Upgraded Outlook: Fiscal 2022 revenue is now targeted at ≥$12 billion (+30% vs FY2021, mid-teens vs FY2020), with EPS ≥$3.20 and operating margin ≥13%, including a $0.25 Supreme contribution.
  • Vans Momentum: Vans sales jumped 102% in Q1, D2C double-digit growth vs FY2020, wholesale >100% increase, leading to a full-year Vans outlook of +28–29% (+9–10% vs FY2020).
  • Supply Chain Pressures: VF expects >$35 million in incremental expedited freight costs vs FY2020 and a 20–30 bps gross margin headwind due to ongoing COVID-related disruptions in Asia.
AI Generated. May Contain Errors.
Earnings Conference Call
V.F. Q1 2022
00:00 / 00:00

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Operator

Hello, and welcome to the V.F. Corp first quarter fiscal 2022 conference call and webcast. At this time, all participants are in listen only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A Q&A session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to John Kelley, Senior Director of Corporate Development and Investor Relations. Mr. Kelley, please go ahead.

John Kelley
John Kelley
Senior Director of Corporate Development and Investor Relations at V.F. Corp

Good morning, and welcome to V.F. Corporation's first quarter fiscal 2022 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 basis, which we've defined in the press release that was issued this morning. We use adjusted constant dollar amounts 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.

John Kelley
John Kelley
Senior Director of Corporate Development and Investor Relations at V.F. Corp

Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Due to the significant impact of the coronavirus pandemic on our prior year figures, today's call will also contain certain comparisons to the same period in fiscal 2020 for additional context. These comparisons are all on a reported dollar basis. On June 28th, 2021, the company completed the sale of its occupational workwear business. Accordingly, the company has reported the related held-for-sale assets and liabilities of this business as assets and liabilities of discontinued operations, and included the operating results and cash flows of this business in discontinued operations for all periods through the date of sale. Unless otherwise noted, the results presented on today's call are based on continuing operations.

John Kelley
John Kelley
Senior Director of Corporate Development and Investor Relations at V.F. Corp

Joining me on the call will be V.F.'s Chairman, President, and CEO, Steve Rendle, and EVP and CFO, Matt Puckett. Following our prepared remarks, we'll open the line for your questions. Steve?

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Thank you, John. Good morning, everyone. Welcome to our first quarter call. We are encouraged by the strong start to our fiscal 2022 year. Our teams delivered in an outstanding first quarter, powering V.F. back to pre-pandemic revenue levels while driving an earnings recovery well ahead of our initial expectations. We continue to see broad-based momentum across the portfolio, which furthers my confidence in our ability to accelerate growth through fiscal 2022 and beyond. While the near-term environment remains somewhat clouded by virus surges in Southeast Asia, uncertainties in other regions brought on by the impact of new variants, and further pressures on the global supply chain, our teams are executing.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

We remain focused on the things that we can control and winning in the parts of our business where the consumer is coming back strong, and we remain confident in our ability to continue driving this sharp recovery across our business. Matt will walk you through our results in detail, but I'll start us off with some Q1 highlights. V.F. revenue has surpassed pre-pandemic levels, growing 96%, or 83% organically, to $2.2 billion, with momentum across brands, regions, and channels. Our global D2C business delivered high single-digit growth relative to prior peak levels, driven by a strong acceleration from our brick-and-mortar stores in the U.S. and continued strength in our digital. Our organic D2C digital business is now 72% above fiscal 2020 levels, including the growing benefit of our omni-channel capabilities as we serve our consumers seamlessly across their choice of channel.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

We've seen a sharp recovery in our wholesale business, which grew over 100% organically in Q1, approaching prior peak fiscal 2020 levels. Strong sell-through trends and clean channel inventory levels from the past year are now translating into stronger fall 2021 and spring 2022 order books, supporting an improving outlook for our wholesale business for this year and beyond. We've seen a strong recovery in our gross margin, which grew 260 basis points to 56.7% in Q1. This represents organic gross margin expansion relative to prior peak fiscal 2020 levels, despite a 30 basis point headwind from a more challenging logistics and freight environment. V.F. drove organic earnings growth of 133%, delivering $0.27 in Q1, essentially doubling our plan.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

We're pleased to see our top-line momentum and strong gross margin expansion translate into better than anticipated SG&A leverage and earnings flow-through, an indication of the upside potential of our model as our recovery accelerates. Turning to our brand highlights from the quarter. The Vans brand has returned to pre-pandemic revenue levels, growing 102% in Q1. The recovery has been led by global D2C business, which drove double-digit growth relative to fiscal 2020, led by 73% growth in digital. This D2C strength has been broad-based, with each region recording positive D2C growth relative to pre-pandemic levels. More Vans consumers have returned to in-person shopping experiences earlier than expected, and we see encouraging trends in our D2C KPIs, with consumers buying more frequently and spending more per purchase relative to historic levels.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

In EMEA, despite the continued impact of lockdowns and supply chain disruptions, the Vans business grew 125% this quarter, representing 30% growth relative to fiscal 2020, with strength across all major markets as stores reopened throughout the region. Vans APAC business grew 19% in Q1, led by 22% growth in China. June marked a milestone for the brand in China, with the soft launch of the Vans Family program. While the official launch will be celebrated with the Super Brand Day Tmall tomorrow, we have already registered over one million new loyalty members following the initial launch, bringing global Vans Family membership to nearly 17 million consumers. Vans kicked off its 52-week drop calendar this quarter, seeking to create a consistent, predictable, globally aligned, and focused approach to drive brand energy and consumer engagement.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Seven weeks into the program, we are encouraged by the initial consumer reads and the instant sellout of several early drops. Internally, the Vans team has increased its focus, energy, and resources around driving newness and compelling storytelling, which we believe will unlock further long-term value for the brand. The team is on track to more formally market the Vans drop list in fiscal Q3, ahead of the fall holiday season. We remain bullish on the setup for Vans moving through fiscal 2022 and are encouraged by the early reads from the back-to-school season underway. We are raising our full-year outlook to growth of 28%-29%, representing growth of 9%-10% relative to fiscal 2020. Moving on to The North Face. Global brand revenues increased 83%, representing 6% growth above pre-pandemic levels.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

All regions rebounded sharply in Q1, highlighted by continued exceptional performance in EMEA, which grew 142% versus the prior year, and 58% relative to fiscal 2020, despite the impact of door closures over the period. The APAC business grew 22% in Q1, highlighted by 80% growth in digital relative to fiscal 2020 levels. The North Face's spring sell-through rates were some of the highest in years, reflecting strong progress on the brand's ability to drive 365-day relevancy. TNF continues to drive energy in on-mountain categories with the FUTURELIGHT franchise, as well as the new VECTIV footwear rollout, further establishing its legitimacy in outdoor footwear. We also see outsized growth from the casual categories such as logowear, which grew over 100% in Q1 as consumers show strong engagement with the brand off-mountain.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

TNF's loyalty program, the XPLR Pass, has grown to over seven million consumers, adding nearly 300,000 new members in Q1, driven by exclusive member experiences enriching the consumer journey. We continue to be encouraged by the broad-based global momentum at The North Face and now expect the brand to deliver 26%-27% growth this year, representing 15%-17% growth relative to fiscal 2020. Alongside this significant top-line recovery, we are seeing strong improvements in profitability and continue to expect mid-teen profitability for TNF in fiscal 2022. The Timberland brand delivered a 63% growth in Q1, tracking ahead of plan. We are encouraged by high teens growth in the Americas and 87% growth in digital relative to fiscal 2020 levels. We continue to see outsized growth from outdoor, apparel, and Timberland PRO, each growing over 75% in the quarter.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Momentum behind core iconic product also continues, with heritage styles seeing strong demand despite historically low inventories. Our Timberland team remains committed to its purpose-led vision, highlighted by the recently announced global product take-back program in partnership with ReCircled. Beginning this fall, U.S. consumers will be able to return any Timberland product to a brand store to either be refurbished for resale or recycled into future products. This program supports the brand's bold vision announced last fall for products to have a net positive impact on nature by 2030. We are encouraged by Timberland's strong start to the year, and as a result, we now expect the brand to deliver modest growth relative to fiscal 2020, surpassing pre-pandemic revenues beginning in Q2. Dickies delivered another exceptional quarter, growing 58% in Q1, well ahead of our plan.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

As the brand has kicked off several new campaigns and inventory has become more available, we've been pleasantly surprised by the intensity of sell-through performance across all wholesale partners in the U.S. This acceleration continues to be driven by both work-inspired lifestyle product, which reported strong growth across all three regions, as well as core work items. Work-inspired lifestyle now represents about 40% of global brand revenue. Importantly, the Dickies brand has begun to deliver meaningful profitability improvements driven by both gross margin expansion and SG&A efficiencies. Q1 represented a strong start to our goal of returning to double-digit profit margins in the work segment in fiscal 2022. Following a strong Q1 performance and accelerating demand signals across channels, we are confident raising the full-year outlook for the Dickies brand to mid-teen growth in fiscal 2022, representing over 25% growth relative to fiscal 2020 levels. A quick update on Supreme.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

We continue to be happy with the integration process. The V.F. supply chain organization continues to advance engagement with the Supreme teams with particular leverage opportunities in logistics capabilities, scale, and relationships, which couldn't come at a more opportune time. One quarter into our fiscal year, we remain confident in our outlook of $600 million and $0.25 from the brand. Before I turn the call over to Matt, I want to thank our associates from around the world, across our brands and enterprise functions, with a particular call-out to our supply chain teams, who have been working tirelessly over the past 18 months to minimize disruption against the backdrop of unprecedented volatility. Our strong results are a reflection of the consistent execution, hard work, and inspiring dedication of our teams around the world.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

This continued passion and energy, alongside the broad-based nature of V.F.'s acceleration, give me great confidence in our ability to continue driving the strong recovery underway. While the first quarter represents a small portion of our total year, we're starting off fiscal 2022 building off the great momentum which began in February of this year. Now I'll turn it over to Matt.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Thanks, Steve. Good morning, everyone. I'm really happy to update you on our strong Q1 results and revised outlook for the year. We're encouraged by the continued broad-based momentum across our business and the setup for each of our big brands heading into the heart of our fiscal year. Despite additional pressures throughout the global supply chain, I remain confident in our team's ability to execute and to build on the strong earnings recovery delivered in Q1. Let me start with an overview of the operating environment across geographic regions. In the Americas, less than 5% of our stores were closed at the beginning of the quarter. All stores are currently operational. A strong U.S. consumer, easing U.S. restrictions, and increased vaccination rates have encouraged a gradual recovery in foot traffic alongside continued strength in conversion.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Our Americas D2C business grew 84% organically in Q1, surpassing pre-pandemic levels, led by a sharper-than-expected recovery in our brick-and-mortar business. Consumer appetite for athletic, athleisure, and outdoor categories remained strong, benefiting our direct business as well as the performance of our key accounts. Low inventories and strong sell-through trends continue to drive down promotional activity and improve quality of sales across the marketplace, which is resulting in stronger than expected order books for the upcoming fall and spring seasons. Moving on to the EMEA region. While lockdown measures continue to affect economic activity, our business has remained resilient, growing 97% organically in Q1, representing 13% growth relative to fiscal 2020. Both wholesale and D2C channels returned to growth relative to 2020, as continued strength from both our direct digital channel and from digital titan partners helped more than offset the impact of brick-and-mortar store closures.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

About 60% of our EMEA stores were closed to start the first quarter. As we sit here today, all of those doors have now reopened. Consumer confidence is improving as restrictions ease, we've seen strong performance from our brick-and-mortar fleet following reopening. For example, our U.K. business delivered triple-digit growth from open doors following three months of lockdowns, representing growth of nearly 30% relative to fiscal 2020. Finally, our APAC region continues to deliver double-digit growth despite sporadic resurgence of the virus across many markets. Our China business grew 12% in Q1, which was impacted by a wholesale timing shift of revenues from Q1 into Q2. Excluding this impact, China would have delivered mid-teen growth this quarter. We continue to see digitally led growth in the region, particularly with our titan partners, remain confident in our ability to deliver greater than 20% growth in China in fiscal 2022.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

While we remain pleased with our APAC performance to date, we are observing most Southeast Asian markets facing various degrees of lockdowns and travel restrictions. While only about 5% of our stores are currently closed, commercial activity has been impacted across most APAC markets outside of China and Hong Kong. This latest wave also presents additional near-term uncertainty for our global supply chain. In recent weeks, more widespread virus outbreaks in key sourcing countries with lower levels of vaccination have resulted in temporary factory lockdowns and manufacturing capacity constraints. Our supply chain also continues to be impacted by port delays, equipment availability, and other logistics challenges. Essentially, every link in the supply chain has been impacted to varying degrees over the last 18 months. While we're not immune to this, we believe we've managed these challenges relatively better than most.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Our teams remain focused on delivering the products to satisfy increasing demand signals in the most cost-effective and efficient way. Some of the actions include using air freight, other means of expedited shipping, and dual sourcing where appropriate. While we remain confident in our ability to service our strong growth plans, there is a financial implication to these actions. For example, we expect to spend more than $35 million in incremental expedited freight charges relative to fiscal 2020. We view our supply chain as a key competitive advantage at V.F., and our teams are proving this now more than ever. I want to echo Steve's appreciation for the supply chain team's incredible execution over the past 18 months. As a result of their tireless and tremendous effort, I remain confident in our ability to continue navigating this dynamic environment. Now moving into our Q1 financial results.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Total V.F. revenue increased 96%, or 83% organically, to $2.2 billion, reaching pre-pandemic levels one quarter ahead of our initial expectations. Our Q1 digital business is 72% above fiscal 2020 levels organically, representing a 31% two-year CAGR. We also continue to see strength from key digital partners globally, with pure-play digital wholesale growth of over 70% relative to fiscal 2020. V.F.'s total digital penetration was roughly a quarter of our Q1 revenues, which represents about 2x our penetration from the first quarter of 2020. Gross margin expanded 260 basis points to 56.7%, representing organic expansion from Q1 peak gross margin levels in fiscal 2020. Relative to last year, this strong expansion was driven by greater full-price selling, partially offset by the expedited freight costs and business mix as our wholesale business rebounded sharply in the quarter.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

When compared to fiscal 2020 gross margin, we generated a strong mix benefit, partially offset by the incremental air freight cost and FX. Operating margin expanded meaningfully to 6.8%, driven by the strong gross margin performance and SG&A leverage relative to the prior year. We delivered EPS of $0.27 in Q1, representing 133% organic growth, driven by a stronger top line and earnings flow-through relative to our initial expectations. Following the strong, broad-based performance in Q1, we are raising our full year fiscal 2022 outlook. Our outlook today assumes no significant changes to the environment, including increased disruption to our supply chain operations. V.F. revenue is now expected to be at least $12 billion, representing at least 30% growth from fiscal 2021, and a mid-teen increase relative to our prior peak revenue in fiscal 2020.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Excluding the Supreme business, our fiscal 2022 outlook implies organic growth of at least 25%, representing at least 9% organic growth relative to fiscal 2020. As Steve covered, the increase to our revenue guidance is broad-based across the portfolio with stronger outlooks for each of our top four brands and sizable increases in two of our emerging brands, Altra and Smartwool. Specifically, the improved outlooks are supported by stronger than anticipated order books and the accelerating D2C trends we've observed over the past five months. Moving down to P&L, we still expect gross margin to exceed 56%, despite a 20 basis point-30 basis point headwind from additional air freight that wasn't assumed in our initial outlook.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

We now expect operating margin to be at least 13%, an improvement of over 20 basis points from our initial outlook, a signal to the upside potential of our model as our top line accelerates. Fiscal 2022 EPS is now expected to be at least $3.20, including a $0.25 per share contribution from the Supreme brand, representing at least 20% earnings growth relative to fiscal 2020. We continue to expect to generate over $1 billion in operating cash flow this year, with planned capital expenditures of about $350 million, including the impact of growth investments, as well as deferred capital spending from fiscal 2021. As announced on June 28th, we closed the sale of the occupational work business this quarter, providing roughly $615 million of additional liquidity. These proceeds are reflected in our fiscal 2022 outlook for total liquidity to exceed $4 billion.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

We expect to exit this year with net leverage between 2.5x and 3x, providing us meaningful near-term optionality to deploy excess capital moving forward. To conclude our prepared remarks, I'm extremely pleased with the broad-based strength we're seeing across our portfolio as we begin fiscal 2022. We took bold, decisive actions last year to position our brands and the enterprise for the strong recovery currently underway. The balanced, broad-based nature of this recovery, along with the continued optionality that our model provides, gives me confidence in our ability to drive sustainable long-term growth moving forward. We'll now turn the call over to the operator to take your questions.

Operator

Thank you. We'll now be conducting a Q&A session. If you'd like to be placed in question queue, press star one on your telephone keypad. A confirmation tone will then dictate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to take your phone off mute or pick up your handset before pressing star one. One moment please while we poll for questions. Our first question today is coming from Laurent Vasilescu from Exane BNP Paribas. Your line is now live.

Laurent Vasilescu
Laurent Vasilescu
Analyst at Exane BNP Paribas

Oh, good morning, Steve. Good morning, Matt. Thanks for taking my question. I wanted to ask about Vans. It's nice to see the raised guide for the brand. It looks like Vans was up single digits on a two-year stack. This is, I think, the toughest compare that you have for the year. How should we think about the growth rates between the first and second halves, on a two-year stack basis? Are you raising the annual guide based on certain regional performance, or is it wholesale? Then if I can go into the minutiae here, but it looks like DTC Americas was up, but there might have been a timing shift within wholesale Americas. Is that the case?

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Hey, Laurent. Yeah, you got a lot in that. I think we'll make sure we try to get through it all. Good morning and great to talk to you. Yeah. Let me start with in terms of what we saw in Q1. As you laid out there, we're really happy with the result that we saw. Certainly, sequential improvement in particular in our direct-to-consumer business, and also in the Americas in particular from a D2C perspective. That was really encouraging. There was some timing impact in the quarter, from a wholesale shipping standpoint. By the way, that's all sort of caught up in terms of that in July. That was about $30 million. A few points of growth on a global basis impacted the results in Q1.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

As it relates to our outlook, basically what we're doing here is we're flowing through the Q1 beat from a D2C perspective. Again, that was primarily in the Americas. We're partially extrapolating that into Q2 based on the trends that we've seen. By the way, July is off to a good start. Then we're dialing in some stronger wholesale order book that we're seeing. Again, most of that all in the Americas. What I would say in terms of, to your point about first half, second half, I'd really just point you to the fact that our year-to-go outlook now implies about 12%-13% growth versus fiscal 2020. Did that get everything you asked there in terms of some of the details?

Laurent Vasilescu
Laurent Vasilescu
Analyst at Exane BNP Paribas

You did. Thank you. Thank you very much for that on Vans. Matt, Steve, maybe a couple questions on how we think about the guidance. Obviously, you're giving annual guidance, but you talked about a $35 million impact from incremental freight, 20-30 bps on the GM. Can you talk about the shape of the gross margin between the first half and second half? Remind me, Matt, but I think during the Q&A last call, Camilo asked about how do we think about first half EPS, and I think it was about $1.20. Just due to the size of the impact or just the magnitude of the beat, how do we think about first half EPS?

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yeah. First of all, we're not going to give specific Q2 outlook today. Certainly as evidenced by our outlook, we're confident in taking the year up. Remember, I would remind you that the September-October timeframe is always the hardest to call from a shipment timing perspective. There's a significant amount of activity during that period of time as we begin to really load up things on the wholesale side for fall and holiday. Just given the supply chain pressures, it's really hard to call the flips and takes between quarters. To some degree, I think we can expect that quarter-to-quarter volatility will continue in the near term.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

However, though, with what we know today, while some of the flow may not be perfectly optimized as we begin the season in particular, we don't expect a meaningful impact on our ability to ultimately deliver the fall holiday season. I'll remind you that, as we have continually done, we expect that we'll perform relatively better than competitive set. As it relates to gross margin, what I would say is, certainly we're holding the year at greater than 56%. We talked about the fact that we're absorbing some higher freight, particularly air freight and other forms of expedited freight. I think we said 20 basis points-30 basis points in the prepared remarks versus our original outlook. A meaningful amount. I will tell you that the vast majority of that actually sits in our second quarter, is the way we would expect that to play out.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

The other thing I would remind you is, we have currency headwinds that we're up against that will begin to abate a little bit as we move later in the year. The other, probably the last point I would make around gross margin, we talked about the fact that our pricing actions, which have been relatively limited through spring 2021 and fall 2021, you'll see the impact of more significant pricing activity as we move into spring 2022. The Q4 window will benefit a little bit more from that perspective as well.

Laurent Vasilescu
Laurent Vasilescu
Analyst at Exane BNP Paribas

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

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Thanks, Laurent.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Thanks, Laurent.

Operator

Thank you. Next question today is coming from Camilo Lyon from BTIG. Your line is now live.

Camilo Lyon
Camilo Lyon
Analyst at BTIG

Thank you. Good morning, everybody. Just in looking at the detail you provided and the trajectory of the business versus 2020, it seems like you're now going to be trending over the long-term EBIT margins that you provided at Beaver Creek. How do we think about those implications as to what the business can deliver in this environment of full price sell-through, limited inventories, and really accelerating demand on a global basis?

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yeah, Camilo, good morning. I guess what I would say to that is certainly we're really encouraged by, first of all, the sharp recovery in gross margin that we saw in Q1, which we've signaled and we certainly anticipated, but certainly happy to see that play out as anticipated. The underlying margins in terms of the organic business actually above prior peak levels in our first quarter. I think what you could- think about relative to the outlook raise up to at least 13% operating margin given the air freight headwind that's at play and that we're calling out, I think it really speaks to our confidence in seeing that SG&A leverage beginning to play out.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

We said in our last call that if we saw some earnings opportunity, which obviously we're seeing that come to pass a bit and calling the year up, you'd expect a strong earnings flow through as a result of that. I think, again, seeing that play out despite the fact that we've got some headwinds on the supply chain side relative to freight that we didn't anticipate in May.

Camilo Lyon
Camilo Lyon
Analyst at BTIG

Got it. My second question is on going back to the global regions. In your slides, you raised the Americas, but you kept Europe and APAC the same as the prior guide. Given what you're seeing in Europe in particular and what you talked about from a growth perspective in meeting demand in China, why would you not have raised EMEA and the APAC regions?

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yeah. Good question. Let me start with, first of all, APAC, China continues to be really strong, but you got to remember, rest of Asia is pretty volatile at the moment given flare-ups in virus. It's not an enormous part of our business, but when you look at that total region, there is some impact across what I'll call rest of Asia. Think about Korea, even Taiwan, Japan, Malaysia, Singapore, et cetera. On the Asia side, there's some puts and takes there, I think, in terms of how we think about that business. The Europe business continues to be quite strong. Probably what's at play here a little bit too is when we laid out our initial guidance in May and talked about the opportunity, it could be a little bit conservative. I think that was predominantly an Americas related comment.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

I think we're seeing the Americas business and the U.S. consumer come back strong. That's playing out across our businesses, by the way. That's a broad-based comment across all of our big businesses and really across our portfolio as we see the U.S. consumer coming back strong. Certainly that's important from a go-forward standpoint, and obviously it's critical to the Vans business, I think, in particular, given the size of that business in the U.S. as well as the size of the brick-and-mortar business here as well. That's obviously really encouraging for us. Probably the last thing I would say, we still are maintaining a fairly cautious approach from a year-to-go perspective in our direct-to-consumer business. We've got sequential improvement coming as our expectation. We saw a stronger result in Q1. As I said, we've extrapolated that a bit into Q2.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

We remain careful there in terms of how that will play out over time. Hopefully that answers your question.

Camilo Lyon
Camilo Lyon
Analyst at BTIG

It does. Maybe I have just a clarification question on that. Is it fair to characterize Europe as maybe being a quarter behind the U.S. in terms of how you're stacking the resurgence in demand? Is that a fair and accurate depiction?

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Well, our business has been really good all the way through. I would say it's a fair characterization in terms of the consumer. Certainly the fact that we opened a quarter in Europe with significant door closures. I think over half our doors were closed in the beginning of the quarter, and many of those were closed through a third to half of the quarter. We're open for business here now, obviously, as we close the quarter and as we sit here today. I think from a consumer standpoint, consumer confidence, yes, that's a fair characterization. Our business, though, has been really good and resilient all the way through. Our business actually on a two-year stack in Europe was up in the quarter.

Camilo Lyon
Camilo Lyon
Analyst at BTIG

Got it. Thanks for the color. All the best.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Thanks, Camilo.

Operator

Thank you. Our next question today is coming from Matthew Boss from JPMorgan. Your line is now live.

Matthew Boss
Matthew Boss
Analyst at JPMorgan

Great. Thanks. On The North Face, maybe could you help speak to order trends that you're seeing in the business and just drivers of the 15%-17% increased outlook this year, which basically doubles your long-term target. Just what you're seeing in the business and confidence in those targets.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yeah, maybe I'll start there, Matt. Good morning. The order trends are good. Honestly, the outlook has come up a bit in The North Face, and the vast majority of that, I think, is related to U.S. order book, just to be blunt. The order books are good, but probably what's more encouraging, and I'll let Steve talk a bit here, is the sell-through continues to be really strong across our business, across geographies, and across channels. That's giving us a lot of confidence in the things that we're doing that's really resonating with the consumers. That strong sell-through, obviously, that begets stronger order book. Steve, I don't know if there's anything you want to add there.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Yeah, I would just say The North Face sits in the outdoor camp, which has had a lot of energy last year, and that's carried into this year. The North Face is that number one global brand. With the work that the team's been doing, the focus around really the segmentation between the on-mountain and off-mountain offer, we see very strong growth with our FUTURELIGHT products. Really proud of the team and the ability to have delivered VECTIV and secure two Outside magazine awards across two different categories for one collection of footwear. Just really validates North Face's opportunity within that outdoor footwear space. Also, you've heard us talk a lot about getting 365-day relevancy to evolve our sportswear, specifically our logo wear, and to be able to drive triple-digit growth in the quarter.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

This validates the work being done, the demand that's there for this brand globally. We continue to see very strong results internationally led by Europe and China. Very strong. It's just great to see the momentum building here based on those strong sell-throughs that Matt referenced. The brand is in a really good position for the balance of the year, hence giving us confidence to raise the outlook.

Matthew Boss
Matthew Boss
Analyst at JPMorgan

Great. Maybe just to follow up on the expense line, Matt, how best to think about expenses that you see as transitory or more one time to this year? Is there any change to the flattish five-year forecast, which I think you had laid out, which I think in the next two years would drive pretty material leverage on the SG&A line? Just making sure we're thinking about this right.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yes. When you think about SG&A in the short term, there are some transitory headwinds. I think we talked quite a bit about that in May, and that hasn't really changed. We specifically see that in some of the freight costs, some of the freight out costs, where we've seen a pretty significant increase. A lot of that's around supply and demand, as well as in distribution. We've got some one-time costs that we're navigating here in the short term as we bring on board some new distribution capabilities, some new capacity in a couple of places in the U.S., as well as our new distribution center in the U.K. We'll quickly sort of lap that and move past that and sort of grow through that. Certainly, there's some transitory headwinds.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

As it relates to the longer-term view, what we've said is that we expect, first of all, really happy to see our Q1 results, right? The leverage that we saw there versus our original expectations. Now, I will say some of that is timing related, certainly in terms of the spend shift or the spend timing. Some of that's shifting out a little bit. Happy to see that kind of progress. We've said that we expect to exit the year with SG&A leverage. We said, we expect to see next year we'll be sort of right on track with the long-range algorithm. Sort of the path towards that mid-teens overall operating margin that we laid out in Beaver Creek, we'll be back on that path. Hopefully that gives you sort of the context you're looking for.

Matthew Boss
Matthew Boss
Analyst at JPMorgan

Great. Best of luck.

Operator

Thank you. Our next question today is coming from Michael Binetti from Credit Suisse. Your line is now live.

Michael Binetti
Michael Binetti
Analyst at Credit Suisse

Hey, guys. Thanks. I have a few. Thanks for all the help today. I guess, on Vans, guys. Matt, I could tell you see some optimism in the order book in North America. It would really help if you would talk about that a little bit. What's changing? Just help us understand where the increases are coming from in that business. I think maybe someone touched on it earlier, that there was looked like a little bit of a wholesale shift that infected first quarter. I think it'd be really helpful to understand where the increases are coming on the wholesale order book, particularly in North America, relative to where you were 90 days ago.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yeah. Good morning, Michael. I would say it's really sort of broad-based, honestly, across the U.S. market. It's really driven by, as we saw in our own stores, we just see a continued improvement in the business, right? I think a lot of that's tied to the fact that consumers are coming back into stores. We're relatively well-positioned from an inventory perspective coming through spring and as we head into back to school. We're seeing those sales to stock ratios perform quite well. Again, that's broad-based. We're seeing that in the sort of the specialty channel. We're seeing it with some of our key national partners. I don't think it's any one place. I think it's relatively broad-based. As you know, the order windows are a little tighter in Vans.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Meaning, we're taking orders about four to five months out based on our shorter lead times there. We said we'd have the opportunity to get after more volume if the business came on a little stronger, and we've seen that occur. That's sort of playing out as we hoped it would, and it is.

Michael Binetti
Michael Binetti
Analyst at Credit Suisse

I guess you made a comment in the prepared remarks on Vans that you thought we would see some reflection of Vans being at the top of the competitive set over the next few quarters. We haven't seen many of the footwear brands report yet here lately, I would argue off of 2019, you guys were having very strong growth rates in Vans in 2019, so you are comparing against that. I'm trying to think, maybe you could just tell me a little bit more what was behind the comment that you think you expect to be at the top of the competitive set as we look at Vans over the next few quarters?

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Morning, Michael. This is Steve. I'll take that.

Michael Binetti
Michael Binetti
Analyst at Credit Suisse

[crosstalk]

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Where we see the opportunity to perform at the high level here against our competitive set is really within our supply chain's ability to service the forward demand that we see. Really keep Vans positioned with inventory, which is having certainly a positive impact on their ability to see the wholesale lift, but also the D2C lift that we're seeing. You all might remember in the last call, I talked about having significant opportunity as D2C came back on board, that momentum is building and carrying us really nicely into the back to school timeframe here. The demand trends are encouraging, our ability, we're set for back to school with the inventory required. That comment about the supply chain really is about our ability to chase back into and replenish that inventory if we see an outsized sell-through consistent with what we see here today.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Michael, maybe I'll add one thing there that we've talked about, the point about versus the competitive set. Part of that really is also around our retail stores, right? The retail store teams and those associates really that are the brand ambassadors. We've talked about that's been a bit of a challenge for us, quite honestly, as stores were closed throughout a large part of last year, not having that which is a big part of sort of the overall ecosystem. Not just the opportunity to buy in stores, but the experience that you get and the connection and the engagement that oftentimes is most robust in those stores. We know that as stores are open, as consumers are back in stores, that's going to play to our advantage. That's part of that thinking in terms of how we feel versus the competitive set.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

I'd pile on there a little bit, Michael. I mean, we're reaping the benefits of supporting our retail teams through last year by not furloughing them. We carry those talented associates forward. The historical conversion rates that we see, we're actually seeing a slight outperformance to that, and that's another aspect of the strong D2C results that we're currently seeing.

Michael Binetti
Michael Binetti
Analyst at Credit Suisse

Okay. Thanks a lot for the help, guys.

Operator

Thank you. Our next question is coming from Erinn Murphy from Piper Sandler. Your line is now live.

Erinn Murphy
Erinn Murphy
Analyst at Piper Sandler

Great. Thanks. Good morning. Steve, you talked about in your prepared remarks about the wholesale levels coming back to almost pre-pandemic levels. Can you share a bit more about the complexion of wholesale today versus pre-pandemic from a mix perspective? How does it look in terms of the composition between key partners, third party digital? Then I have a follow-up on Dickies. Thanks.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Okay. Yeah, I'll just follow the line of your question there, Erinn. I think the key account component of our wholesale business is critically important, and some of those key accounts are digital key accounts. We've talked a lot about our European partners, our Asia partners. Here in the U.S., we're seeing strength in the outdoor space, we're seeing strength in the sporting goods space. As we get our brands in a position to fill that demand, the pent-up energy that we saw coming out of Q4 into Q1 is driving that wholesale performance.

Erinn Murphy
Erinn Murphy
Analyst at Piper Sandler

Got it. Great. On Dickies, the growth has been really incredible, both on the top line as well as the margins. Can you share a bit more about where you see the incremental share gains coming from, both in the Americas from here as well as in China? Thanks.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Sure. I'll grab this one.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Sure.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Matt, if I miss anything, fill in the blanks here. We're excited about the Dickies business. Since the acquisition, this brand has significantly outperformed our acquisition plan, even despite COVID. We're seeing strength in our core work business here in the United States. We're seeing really nice acceleration in the work lifestyle component. That's now about 40% of our total revenue. This team, over the last two years, has really simplified their approach to the business. Focusing on their core icons, building out the lifestyle piece of the business while really respecting that core workwear. We have channel expansion opportunities that we see going on beyond just those core work points of sale. We're growing into sporting goods. The recent launch of the skate collection is accessing a whole host of new specialty skate accounts, which is just a great brand building image component.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

It's also giving them permission to elevate some of the offer. We've recently launched the signature collection, which is an elevated, higher price point, better gross margin collection of items really built off those core icons. I think the point here is they've focused the business. It's broad-based across all three regions, building against the traditional channels. Because of this broad-based momentum, they're able to now extend into adjacent channels of distribution, new wholesale partners, while we, at the same time, build our digital acumen and our ability to speak to consumers directly.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yeah, Erinn, maybe just one thing to add there. Maybe a little less sexy, but also really important, and to give credit to the teams. Thanks for asking about Dickies. The brand is performing, and the teams are doing a great job. We didn't make it easy on them after acquisition. We had to spin the Kontoor business, and we sold off occupational work. All of which had impacts because of the connections in the back end of some of the things that we were doing there. We've had some fits and starts there in the early days, but we're really now starting to see the benefits in the supply chain from some of the integration activities around demand planning, as an example, which ultimately allows us to service the business in a better way, too.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

That's certainly helping, while at the same time, obviously, there's a lot of momentum from a brand heat perspective. Those things coming together is I think sort of a one-two punch.

Erinn Murphy
Erinn Murphy
Analyst at Piper Sandler

Thanks so much.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Thanks, Erinn.

Operator

Thank you. Our next question is coming from John Kernan from Cowen. Your line is now live.

John Kernan
John Kernan
Analyst at Cowen

Yes, excellent. Thanks for taking my question. I wanted to go back to Vans. You gave some helpful commentary on The North Face and where that business is from a margin standpoint. I think you said mid-teens for this year, which is an impressive recovery. Where does Vans sit in the overall margin profile relative to where it was back in Beaver Creek in pre-fiscal 2020? It was significantly higher from a contribution margin than every other brand in the portfolio. I am just curious where that sits now and where you think it's going to go in fiscal 2022 and beyond.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yeah. I think it's still in the same spot, right? It sits well above most of our brand portfolio from a profitability standpoint, really. Strength in the gross margins, strength driven from the direct-to-consumer business, a really profitable brick and mortar franchise. The one thing I would say versus pre-COVID levels, there's still a little bit of a headwind there. Primarily because of two things. One, the freight side of things that they're dealing with, as all of our brands are. Remember too, that's the one business where brick and mortar is really significant. While we're seeing sequential improvement, and while fortunately we're seeing that even be a little stronger than we thought, we're still modeling brick and mortar to be down across the year and not really fully recover until early fiscal 2023.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

That was my point earlier about we remain fairly conservative in our outlook there as we move through, and particularly the back half of the year. There's a little bit of overhang there in the short term. Yeah, Vans profitability that you would've seen in Beaver Creek and what we've talked about historically, that remains. The outlook on a longer term basis, it's really compelling in terms of value creation.

John Kernan
John Kernan
Analyst at Cowen

Understood. Just going back to, I guess North Face and Outdoor, the growth you're giving off of fiscal 2020, pre-COVID levels, indicates a nice recovery. Can you talk to the sequencing of that as we go through the year? I think the guidance for the remainder of the year was above where you were in Q1, just curious how we're thinking about The North Face as it relates to both wholesale and DTC as we go through the remainder of the year.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Certainly. I'm not going to be specific quarter to quarter, but you can expect sequential improvement as we step through the year, notwithstanding what could be some volatility from a shipment timing standpoint around that peak shipping window as we begin to move into fall holiday. I think the thing to remember there is the strength. It's still a heavily weighted business toward fall, holiday, wintertime. The strength of our performance last year from a sellout perspective, and the order book profile as a result of that, both in the U.S. and in Europe. That's a big part of the growth as we see that wholesale business bouncing back sharply and as we see our direct to consumer business continue to recover sequentially as we talked about in Vans. Similar kind of comments there.

John Kernan
John Kernan
Analyst at Cowen

Understood. Thank you.

Operator

Thank you. Our next question is coming from Bob Drbul from Guggenheim. Your line is now live.

Bob Drbul
Bob Drbul
Analyst at Guggenheim

Hi. Good morning. Thanks for taking the question. I guess I would love to hear some more about what you've learned so far on Supreme. Just the update, the integration, the game plan, any early learnings. I think the accretion was probably a little bit better than we anticipated. Any commentary you could share with us would be great. Thanks.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yeah. Good morning, Bob. I would tell you first, we're really happy with the progress of our integration. The thoughtful, really targeted approach that we're taking allowing Supreme the opportunity to learn about V.F., our V.F. teams the ability to learn about the Supreme business and where are those opportunities to provide capabilities. The brand is performing in line with our expectations, and those expectations, we're seeing stronger results versus the long range growth targets that we have for the business. I think where we're connecting probably most effectively is with our supply chain teams.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

It certainly couldn't come at a better time as we look to leverage our logistics capabilities, leverage our scale and the relationships, specifically to assist in shipping and work in partnership with the Supreme team to assure that their weekly cycle of the drops stay as close as possible to the going in seasonal plan. It's early, certainly in our understanding of the business, but we're very confident about the long-term value creation thesis that we've put forward for the Supreme business and continue to see regional expansion and partnering with the team to leverage our skills and capabilities.

Bob Drbul
Bob Drbul
Analyst at Guggenheim

Great. Thanks. Just on the supply chain, I guess if we go back to the decision to add the incremental air freight, is that a function of just trying to make sure you have the product to meet the demand? Is it incremental bottlenecks that you're seeing in Vietnam or in China? I guess, is the expectation just in the coming quarter? Or if you could just give us an idea in terms of how long do you expect the incremental pressures on the margin from the incremental air freight. Thanks.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Certainly, what we're dealing with there, what we've said, I think the posture we've taken here is that the business is strong from a demand standpoint, and we're going to ensure that we can satisfy that demand in the most optimal way. We're certainly looking where it makes sense. We're going to spend against air freight and other expedited freight avenues to ensure we do that. We're seeing certainly some delays in the supply chain. I will tell you, for us, it's generally weeks, and certainly not months. We are seeing some delays in the supply chain given the environment in Southeast Asia in particular. Fortunately, by and large, most of our factory base is operational. That's not 100%, but most of it is operational. Where it's not, obviously we're working really hard to understand what those impacts will be.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

I think, again, as I said earlier, we anticipate maybe some sub-optimization from a flow standpoint at the beginning of the season. We certainly expect as we move through the season, we're going to be able to support the business and ultimately deliver things for fall holiday.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Maybe to pile on here, Bob. I think as we look at strategically using air freight and other expedited forms of moving our goods, we see an opportunity to capture share. We do think in some cases, because of our factory partners, their current operational capabilities, certainly not operating at full capacity, but at sufficient capacity. We think we have the opportunity to be in a position to grab share with some of our large brands, certainly with our own distribution, our own D2C and e-commerce, but there's opportunities to work with our key wholesale partners and advantage their position as well.

Bob Drbul
Bob Drbul
Analyst at Guggenheim

Steve, if I could just follow up on that. Are you saying that you've taken additional orders because you feel like you can meet the demand? Or are you still working with your original order books across the various brands? Just trying to understand the dynamic.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Yeah. Job one is to really fill the initial order demand. We did see additional demand come in to our fall order books. That's reflected in our outlook.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Within that, there is some additional goods to service upside demand. You know us well, it's not going to be an exceptional amount. We are really playing to win, because we see an opportunity here to recapture share and advantage at least our largest brands. Really looking across our whole portfolio because of the strength and capability of our supply chain teams. It's not going to be easy. This is a very difficult environment. We're not the only ones to talk about that. This is where our teams really come to life. This is where V.F. is built to compete in this kind of environment, and we feel very confident about our ability in those things that we can control to supply the demand. Air freight, expedited freight is a critical part of our being able to do that.

Bob Drbul
Bob Drbul
Analyst at Guggenheim

Thank you.

Operator

Thank you. Our next question is coming from Jonathan Komp from Robert W. Baird. Your line is now live.

Jonathan Komp
Jonathan Komp
Analyst at Robert W. Baird

Yeah, great. Thank you. Just maybe one clarification first. Thinking about the D2C outlook, I know you raised the full-year target, are you assuming the trend you're seeing currently for Vans does not continue? Is that the message? I guess globally for D2C, have you reflected the more positive order book indications into how you're thinking about your own D2C business?

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

Yeah, I think from a D2C perspective, what we've done is certainly we've sort of banked what we saw occur in Q1. We've begun to uplift our D2C projections, in particular in Q2, in particular in the Vans business, and in particular in Vans Americas. That's a statement that's true across the majority of the direct-to-consumer business. We're reflecting some of those trends, but it's most significant in that Vans business. We are doing that. I think, just to the point we had in the last question, what we have done, we've been pretty cautious still in our actual assumptions from a revenue perspective in the back half of the year. We haven't really changed those, just to be frank.

Matt Puckett
Matt Puckett
EVP and CFO at V.F. Corp

What we have done, in particular in Vans, and this is the point that Steve was making, we are leaning in a little bit from an inventory perspective to create some additional capacity there for upside, whether that be in our own stores or potentially even in terms of wholesale reorders. We're beginning to lean in a little more aggressively from an inventory posture standpoint in Vans in particular, and to some degree in our Dickies business as well.

Jonathan Komp
Jonathan Komp
Analyst at Robert W. Baird

Okay. That's really helpful. Thank you. Steve, if I could follow up one more question on Vans. I'd be curious, any learnings you have from the newer approach in the recent months with the product drops and the incremental marketing attention you've been focusing on Vans. Any learnings from that? How should we think about your plans in those areas going forward?

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Yeah. No, thank you for that question. This is an exciting development for Vans. It's something they pivoted and moved on very quickly. Just remind everybody, this idea of a 52-week drop model was to really think and act like a true retail operator and bring a more predictable, a more visible understanding of the product flow and use this to create brand heat. We've seen that play out extremely well. We're only about seven weeks in. They're learning every week about just how to really manage the offer for the week, how to marry the content and the storytelling, how to lever broad-based global drops that could be available across multiple channels of distribution versus very select vault type products.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

The point here is they're providing visibility, and they're giving visibility in enough time for consumers to learn about it, build the excitement and that frenzied demand that we've seen really reflect itself in some of the key collections that have dropped this year. Bodega from a specialty vault collection to the broad-based SpongeBob SquarePants, and most recently, the Metallica drop. What you're going to see us do, or our Vans team do, is they're just refining the model. They'll start to publish the drop list, and we think that's something that'll be possible by Q3. They'll give the consumer visibility of what's coming and begin to allow themselves to be positioned to capture the product if it's a limited drop, or be in the queue if it's a broader-based drop.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

I think this is just a really thoughtful evolution to what was already a well-designed go-to-market model. This is about driving brand heat and increasing consumer demand and ultimately consumer loyalty.

Jonathan Komp
Jonathan Komp
Analyst at Robert W. Baird

Yeah, that sounds very innovative for a brand like Vans. Thank you very much.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

You bet. Thank you.

Operator

Thank you. We have reached the end of our Q&A session. I'd like to turn the floor back over to management for any further closing comments.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Great. Just real quick, thank you, everybody, for taking the time to join us this morning. I would just tell you, we couldn't be prouder of our teams who helped deliver an outstanding quarter. We continue to work hard to meet the demand and to be able to power back to pre-pandemic revenue levels, slightly ahead of where we thought we would. To see that earnings recovery is just a validation of our model. The growth is broad-based across brands, regions, and channels, despite continued COVID-related impacts that we're seeing, both from a consumer standpoint, but also back through our supply chain. We're going to remain very focused on the things that we can control, and we're going to drive against those parts of the business where the consumer is coming back strong.

Steve Rendle
Steve Rendle
Chairman, President, and CEO at V.F. Corp

Continue to drive towards delivering a year that is stronger than what we originally committed to and meets your expectations, but ultimately drive the value for our shareholders that you expect.

Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.

Executives
    • John Kelley
      John Kelley
      Senior Director of Corporate Development and Investor Relations
    • Matt Puckett
      Matt Puckett
      EVP and CFO
    • Steve Rendle
      Steve Rendle
      Chairman, President, and CEO
Analysts
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