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CTW-2023-VF-Corporation

VF Corporation, the owner of Timberland, Vans, and The North Face, has created the world's first regenerative rubber supply chain—the Regenerative Rubber Alliance. In partnership with design firm Terra Genesis and farmer communities in Thailand, the initiative transforms monoculture rubber farms into more diverse, resilient, and productive gardens. RRA gardens are sequestering more carbon, improving soil health, and increasing biodiversity in comparison to the rubber plantations that dominate the industry. Farmers also benefit from increased yields, reduced reliance on chemicals, and higher incomes. The project has already engaged over 300 farmers across 500 rubber plots, covering more than 1,660 acres, and aims to reach 30,000 farmers by 2030.

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CTW.1122.VF Corporation-Vans

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The clothing company owns brands including JanSport, The North Face, Smartwool, Timberland, Eastpak, Vans, and others.

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VF designs and sells branded lifestyle apparel, footwear, and accessories for men, women, and children. It operates through three segments: outdoor, active, and work. Its outdoor brands include the North Face, Timberland, and Smartwool. It also offers sports-inspired and streetwear brands including Vans, Kipling, Eastpak, and JanSport, and “work and work-inspired” apparel and footwear under the Dickies and Timberland PRO brands. It reached an agreement to sell the Supreme streetwear brand to EssilorLuxottica in July 2024.

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VF (VFC): Company Profile, Stock Price, News, Rankings

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Hello everyone, thank you for joining us and welcome to the VF Corporation Q2 Full Year 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in to today's call, please press *9 to raise your hand and *6 to unmute. I will now hand the call over to Allegra Perry, Vice President of Investor Relations. Please go ahead.

Hello, and Welcome to VF Corporation's Second Quarter Fiscal 2026 conference call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. Unless otherwise noted, amounts referred to on today's call will be on an adjusted constant dollar and continuing operations basis, which we've defined in the presentation that was posted on the 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.

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 today 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.

Thank you, thank you, Allegra. We picked a strange day to do a video conference call because many of us were up for 18 straight innings of baseball. Probably this, even though this is the most important event happening today, is our conference call in the world. The second most important event will be one of the two Major League Baseball games that's also happening today because it's never happened, I guess, or maybe rarely. You'll hear more later as Paul talks about it. Let me talk you through the financials, but at a really high level, it was a good quarter. We delivered on our commitments and we made further progress on our turnaround. We delivered this performance despite, admittedly, a pretty uncertain, unpredictable environment around the world.

Total revenue was up 2% in reported dollars and down 1% in constant dollars, a little better than planned and showed an improving trend versus last quarter. Operating income was $330 million, well above our guidance range of $260 million - $290 million. Net debt, excluding lease liabilities, was down $1.5 billion versus last year, or down 27%. We're focused on returning the entire company to growth. Last quarter, I highlighted that 60% of our business by revenue was growing, up from just 10% in the prior year. In Q2, so this quarter, that figure expanded over 65%. If you took out Dickies, that would be almost 70%. Speaking of Dickies, during the quarter, we announced our plans to sell the brand. I'm confident it's a very good move for the company and for our shareholders.

As we've said before, we'll always evaluate any offer we receive, reflecting our commitment to shareholder value creation. We had an inbound with a very good price of $600 million. We've done a lot of terrific work behind the scenes on the brand and the product portfolio, and I believe this positions the brand well for growth. This was a unique opportunity. On our end, we'll use the proceeds to pay down debt, consistent with our capital allocation priorities. This allows us to accelerate our path towards our medium-term leverage target of 2.5x or below. We're well on track. Let me now give you some of the highlights from the quarter on our biggest brands. Let's start with The North Face. The brand delivered another quarter of growth with revenue up 4%. All three regions grew versus last year. We grew in wholesale and in direct-to-consumer.

In terms of categories, performance apparel was up in every region with momentum in core styles. Transitional outerwear was strong, and footwear continues to gain traction and grew double digits in every region. Across categories, product innovation, newness, and elevation drove growth as we continued to show the extraordinary reach of The North Face from the summit to the street. We also celebrated 25 years of the Summit Series, expanding the collection with innovation, adding exciting new colors and designs. This was supported by an athlete-led campaign featuring our incredible stable of The North Face athletes, including the mountaineer Jim Morrison, who recently, with Jimmy Chin, became the first person ever to climb and ski down the North Face of Mount Everest. Across our marketing strategy, we're driving high consumer engagement in brand experiences and amplifying that through social channels.

In addition to the Ultra Trail du Mont Blanc, or UTMB, this included ClimbFest in San Francisco, community hiking events in APAC, and a Beijing 100K Ultra Trail race. As you know, as good as I feel about The North Face, I can't help but express what an enormous opportunity remains to be realized. We have potential in new categories, an ability to develop the women's business, and to build across all seasons of the year. Timberland revenue was up 4% in Q2, with growth across both wholesale and direct-to-consumer as well. Americas was up double digits, reflecting a strong back-to-school period. In terms of product, demand for the 6-inch premium boot remains very strong. Today, the premium 6-inch icon represents only about 20% of our global revenue, so we have a lot of opportunity for growth.

We can continue to grow the 6-inch business through colors, materials, innovations, collaborations, and more, while we also pursue the huge opportunity to grow this brand across other footwear and apparel categories. Closer to home, the strategy is already showing up with our recent launch of the Timberland 25, a lightweight version of the boot, which is very small now, but it's resonating well in its early weeks in our stores. A step further away from the boot, we're building our growing business around boat shoes. These sales are growing very strongly in all regions as we diversify the product lineup and give the brand more versatility and firepower during the warmer seasons. Timberland's adoption of a social-first marketing strategy has been instrumental in driving brand heat globally. During the quarter, the brand launched its Advice of an Icon campaign with high-visibility events in New York, London, Shanghai, and Tokyo.

Brand interest grew during the summer months, with consumer search interest positive in key markets in the U.S. and in India. The opportunity in Timberland is really significant because we can continue to grow the boot, we can grow in other footwear franchises, and we can unlock apparel around the world, all at the same time. In the U.S. especially, this will be supported by expanded and enhanced distribution. We have the game plan to do that now. Altra accelerated further with revenue up over 35% versus last year, the third consecutive quarter of strong double-digit growth for the brand. Key franchises that represent a mix of road-running and trail-running styles show our broad-based approach to building this brand. The growth opportunity for Altra across both road and trail is significant.

We're fueling this growth and driving higher brand awareness with targeted marketing investments, which, as a reminder, our awareness is less than 10% in the U.S. and even lower in other regions. Let me repeat that. Our brand awareness in the U.S. is less than 10%, yet we still have this size business and it's growing fast. This is helping e-commerce deliver particularly strong growth, driven by higher traffic and stronger conversion. Altra's on track to exceed $250 million in revenue this year, and I'm confident the brand has a long, strong runway for growth for many years to come. Let's turn to Vans. Performance was a little better this quarter with revenue down 11% versus last year. We're really focused on getting the commercial moments right as we upgrade our portfolio of products.

I told you that SZA's impact on product would be visible in the back-to-school period, and it is. Product newness across footwear is drawing in new consumers, particularly women, but also youth and kids. In terms of new styles, non-icons are up in the quarter, driven by the Super Lowpro, which continues to perform well. The new Skate Loafer, which I decided to show you this one because I bet many of you haven't seen it, had a very strong debut and is sold out in most sizes, and the Crosspath XC, which has had a very strong launch. Within existing styles and icons, we're also beginning to realize the impact of elevation, innovation, and newness. For example, the Authentic is up globally as a franchise, helped by the halo effect of the Valentino collab, which drove positive search trends in key markets.

Within the Old Skool franchise, newness has driven higher sales of women's styles. Just last week at ComplexCon, the largest event for young shoe dogs in the world, mostly guys, by the way, it's in Las Vegas. At that event, Vans had one of the longest, if not the longest, lines of people waiting for the pearlized Old Skool shoe we launched there. This is just the start. More newness is coming as we head into holiday and into spring of 2026. In the meantime, our shift in marketing strategy is starting to yield results. Digital traffic trends improved in the Americas and India, particularly during relevant consumer moments like back to school, when digital traffic was up in the Americas. Looking ahead, we're excited about the recently announced new partnership with SZA as the brand's first-ever Artistic Director.

It's early days, but in coming seasons, she'll add her voice and her touch to product and marketing. To wrap it up on Vans, each quarter we're making great progress. We took actions to clean up the marketplaces and set the stage for a very exciting product pipeline that's started to roll in and is delivering early results. I'm as confident as ever in Sun and her team leading us to a return to growth at Vans. Looking ahead, we're making progress on the turnaround of VF, and I'm super confident in our ability to deliver both our near-term and our medium-term targets. Our teams are energized for the upcoming holiday season. I'll now hand it over to Paul, who will dive in deeper into the numbers. Paul?

Great. Thanks, Bracken. Let me first, by building on Bracken's comments about Dickies. As he mentioned, this is just a great opportunity for the company. While we are big fans of Dickies, we believe this divestiture will help further accelerate the transformation of VF back to being a growth company, while also further enabling us to pay down our debt. We believe this will create increased and faster shareholder value. Dickies is a great asset, and we know the work we have done to date sets the brand up for return to profitable growth. In fact, it is the work we've put in that has created an environment for others to be interested in the asset. With that in mind, the offer we received of $600 million is incredibly attractive.

Based on fiscal 2026 estimates, this equates to an EV to sales multiple of 1.2 times and an EV to EBITDA multiple of over 20 times. Going a little deeper into the transaction, we will incur deal-related expenses as well as the small tax considerations, but we will also save on future planned capital expenditures, as well as see a reduction in our net interest expense. After considering all of these moving parts, we expect the overall cash benefit to VF to be greater than $600 million. Importantly, the Dickies sale will help us strengthen the balance sheet and bring us closer towards our medium-term leverage targets. It will also help us focus time, energy, and resources on our brands as we continue to make progress towards a return to growth. Now let's turn to the review of the second quarter.

We are pleased with our results in the second quarter. Revenue finished slightly ahead of our guidance, while our operating profit outperformed nicely. Back to school was encouraging across our key brands. Q2 revenue is $2.8 billion, up 2% on a reported basis. On a constant dollar basis, revenue is down 1% year-over-year, a little bit better than our guidance. By brands, The North Face grew 4%, led by growth in both DTC and wholesale. Vans' revenue in the quarter was down 11%, a little better than we expected, but still reflecting the impact of channel rationalization actions, which accounted for more than 20% of the reported decline. Finally, Timberland continued to see good momentum with revenue up 4%, reflecting growth across all channels, in particular DTC. By region, the Americas region was down 1%, the EMEA region was flat, and APAC was down 2%.

Lastly, by channel, DTC was down 2%, while wholesale was flat. Our adjusted gross margin for the quarter was flat versus last year, as the benefit from fewer discounts was offset by FX headwinds. There is minimal impact in our P&L from tariffs in the quarter. Our gross profit dollars were higher than expected on the back of revenue coming in ahead of guidance. SG&A dollars were up 1% year-over-year, but are down 1% in constant dollars. In the quarter, we increased back-to-school marketing year on year, which was mostly offset by cost savings across the business. Overall, SG&A was a little bit lower than expected. Our adjusted operating margin for the quarter was 11.8%, up 40 basis points year-over-year. Both interest and tax were up versus last year, as per guidance.

Finally, our adjusted earnings per share was $0.52 versus $0.60 in Q2 of last year. Now moving on to the balance sheet. Inventories were down 4%, or $86 million at the end of the quarter, excluding Dickies from both periods. Excluding the impact of FX, inventories were down 5%. Overall levels are down year on year as we continue to improve the quality of our inventories. Free cash flow through Q2 was -$453 million, in line with our expectations for the year. As a reminder, given the seasonality and working capital needs of our business, we typically start generating cash in Q3. It is also worth highlighting that first half cash flow includes the payments of roughly $60 million of incremental tariffs, in addition to the usual seasonal increase in inventory at this time of year. Overall, we are right where we expected to be for free cash flow.

Net debt, including lease liabilities, was down $1.5 billion versus last year, or down 21%. Turning to the outlook for the third quarter, note this excludes Dickies in both this year and last year. We expect Q3 revenue to be down 1% to down 3% on a constant dollar basis. We are well positioned across our brands, heading into the peak holiday period. Moving down the P&L, we expect Q3 operating income to be in the range of $275 million - $305 million. For reference, last year, Dickies' adjusted operating income was approximately $5 million in Q3. Gross margin will be down versus last year, reflecting the initial impacts from tariffs, which are partially offset from lower discounts. While we have taken some initial pricing actions, the majority of these will be reflected starting in Q4. Reported SG&A dollars are expected to be slightly up versus last year.

However, on a constant dollar basis, SG&A is expected to be broadly flat versus last year. Finally, we expect Q3 interest of approximately $40 million and an effective tax expense that is approximately double the prior year. This is in line with my recent comments about the increasing trend in our tax rate over the next one to two years and quarterly fluctuations as a result of the changes in global tax rates and in our geographical mix. As a reminder, this higher tax rate will have minimal impact on cash taxes. Now moving to fiscal 2026, we continue to see operating income up versus last year for the year as a whole, inclusive of all known anticipated tariffs. Second, on cash flow, we continue to expect operating cash flow and free cash flow, excluding the sale of non-core assets, to be up year on year.

This includes all expected tariffs and after the negative impact from the sale of Dickies, which we estimate to be $35 million. As I said last quarter, we are working on a number of initiatives that are expected to improve our free cash flow throughout the year, which gives me confidence we will achieve our guidance. Last, we are progressing towards our medium-term targets of $500 million - $600 million of operating income expansion in fiscal 2028, and a leverage ratio of 2.5 times or below by fiscal 2028 that we introduced a year ago. Overall, we've made meaningful progress on simplifying work to unlock creativity, building deep functional capabilities, and resetting the culture across the organization. We are confident we will achieve our targets. In summary, this quarter marks another quarter of meaningful progress. The year and our turnaround are progressing according to plan.

While we acknowledge the greater uncertainty in some of our markets as we head into our peak trading period, we are confident in our strategy and ability to execute in any environment. We remain focused on getting each of our brands back to sustainable and profitable growth and continuing to make progress towards our medium-term goals. I will now hand it back to the operator to take your questions.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please raise your hand now. We ask that you limit yourself to one question. If you have dialed in to today's call, please press *9 to raise your hand, and please ensure you press *6 to unmute yourself. Please stand by while we compile the Q&A roster. Your first question comes from the line of Jay Sole with UBS. Please go ahead. A reminder to please press *6 to unmute yourself.

All right. Thank you so much. My question's about Vans. You talked about how you had some improvement in sell-through in the Americas wholesale channel in the full-price doors. Can you just talk about the path back to growth for Vans? I mean, you said you have a lot of confidence in what Sun is doing. Can you talk about the path back to growth and maybe within the second quarter guide? Just give us a sense of where you think Vans will be for revenue growth.

Second quarter guide. Yeah, our expectation, it's pretty much the same story we've been giving, which is, you know, we're going to increase the amount of newness. You started to see that coming. In fact, this quarter, you know, Super Lowpro, as we said last quarter, it did really well, continues to be very, very strong. In fact, I mentioned it in the script in the beginning, we're also starting to see some pickup even on the Old Skool with women in particular, with our women's only styles that grew strong double digits, I think over 20%. Our expectation is, as we keep rolling in newer and newer product into the stores, we're going to see more and more performance. We're obviously also upgrading our marketing. If you're watching us on Instagram and TikTok, you're seeing it. If you're not, please do.

You'll see a shift away from the skate-only marketing into really that plus a lot more. You'll see surfers, you'll see a lot more product. We've got a lot more product to talk about, especially as we go into Q3 and into Q4 and into Q1 of next year. We're just going to keep pouring it on. This is a fundamentals business. You've got to be in the right places with the right products, with the right story. We think we're really going to have that as we go forward.

Yeah, and then on the numbers, if you look at Q2 down 11% in constant dollars, we talked about about 20% of that was related to the actions we've talked about around the value channel. That would imply sort of a decline of high single digits for the quarter. I would expect Q3 will have kind of a similar pace in Q3. Also, keep in mind we mentioned that Q3 will be the last quarter where we really see this impact. It'll be in the quarter, not entirely, but most of that quarter. By Q4, the dynamic around the value channel is moderated mostly.

I'd also add, you can see in our, we mentioned in the script that we had traffic up online during the back-to-school period, which is a good sign. It shows you we're executing better, we're starting to get the message out there. Winning in these commercial moments is really key for Vans, even more than the other brands.

Your next question comes from Jonathan Komp with Baird. Please go ahead.

Yeah, hi, good morning. Paul, I'm hoping maybe you could give a little bit more color on gross margins, some of the puts and takes in Q2. If you could quantify either the tariffs or some of the positive offsets from less discounting, just any more of the pieces you see, maybe bigger picture around the cost discipline and shifting into phase two of some of the savings. Can you share any updates on progress, either broadly for the organization or even for Vans specifically, as you think about some of the next phase of cost savings?

I'll start. On the gross margin side, there wasn't really that much of note. A little negative impact from FX, a little positive impact from lower promotions. That was really most of the puts and takes when you think about the impact on the quarter in terms of gross margin. I suspect the second part of the question was on just the longer-term initiatives, the medium-term initiatives?

Yeah, that's right. Really shifting to phase two and some of the expectations there.

Yeah, we're making great progress. We'll hopefully give you guys a more detailed view of how we're doing on all the initiatives at year-end. We actually thought about trying to give some. It's tough to give them out exactly in the middle of the year. Everything is on plan. As I said, we reiterated our guidance in terms of what we gave at the Investor Day a year ago in terms of our ability to hit those targets, whether it's our debt leverage or our operating margin. We're on track with all of that. Everything is on pace. Again, on the gross margin side, we've got the markdown management and integrated business planning. On the SG&A side, we've got things like store management and optimization and things on the technology side as well as the overall SG&A side. We're making progress on everything. We feel like we're on pace.

Like I said, we'll give you more detail as we get to year-end exactly how we're trending at the end of this year and how we're tracking for fiscal 2027 and 2028.

Your next question comes from Brooke Roach with Goldman Sachs. Please go ahead.

Good morning, and thank you for taking our question. I wanted to follow up on John's question to talk a little bit more about promotional recapture, particularly in the Americas business. Paul, can you give us a little bit of a sense of where you are in the promotional recapture journey and the plans for pricing and promos this holiday and the opportunity on a medium-term basis?

You want to start, or you want me to take it?

I can start. I think generally speaking, we're well on track. We had another good quarter, I think, of really having improvement versus a year ago on our promotion levels, especially around the world. I think as we go forward, we're going to be aggressive, though. We're going to make sure if we have to give a little bit back in the Americas in particular, we will. Generally speaking, we continue to think we can operate in a lower promotional environment than we have in the past, and that's our game plan.

Yeah, I think we'll continue to see benefits for the rest of the year on the promotional side in terms of the cadence this year versus what we had last year. That will be part of it. The pricing will kick in in Q4 in terms of the impact for tariffs, and you'll see some impact on gross margins more from the tariff side, not the promotional side, in Q3. We need to be clear about what we're going to see in Q3 there. The promotional environment year over year has gotten better, and you'll continue to see that throughout the rest of the year. As I mentioned on one of the earlier questions, if you look at the gross margin in the quarter, the promotional environment actually was a benefit to gross margin, but that was offset by FX, which impacted us negatively on the gross margin side.

I'll add one more comment, Brooke. I think on Vans in particular, you know, we're benefiting, or we're going to be in a better position from a promotional standpoint simply because we're not being aggressive in raising price to lower end price points. Unless we see a requirement to do that, we're going to try to avoid that.

Your next question comes from Michael Binetti from Evercore. Please go ahead.

A reminder to please press *6 to unmute yourself.

Sorry, I had to go through the process there for a sec. Thanks for all the help here today. I was wondering if you could just dissect Asia a little bit more for us. It's the first time we've seen a negative number there in total in a little while. I'm wondering if there's any kind of a timing element there, or maybe how do you think about that over the next few quarters just to help us understand what you're seeing in that business? On Paul, I wanted to clarify, I think you said if I take out the 20% Vans from the actions you had in the value channel, it gets you down about high singles and 2Q is the underlying run rate and should be about the same in the third quarter.

Is that an ex-currency comment and does that take into effect what I think you mentioned before was that some of those mitigation efforts start to wane a little bit in the third quarter before going away in the fourth quarter? Maybe you could just help us so we understand exactly what you're thinking of reported revenues should look like in the fourth quarter, or in the third quarter.

Yeah, I'll take the first one in politics. Second one, I think my experience with APAC in general, and especially China within APAC, is you have these long periods of run-up and then you kind of stabilize for a while and then you have the long periods start again. I think we're in one of those stabilizing periods. We've had a very long, strong run of growth in China, particularly on The North Face, and I think that's going to stabilize for a little while. The good news is we have so much opportunity in the rest of the world, especially in the Americas. I mean, I feel really lucky to be in a company right now where honestly one of our biggest growth opportunities longer term is the Americas. We're just underdeveloped in many of our brands and in some of our channels.

If I take Timberland, for example, we really are terribly under-distributed in the U.S. and yet we're growing very strongly. We've got good brand heat. We're going to address that going forward. Overall, I feel good about where we're going to be from a global profile, but I think APAC, it wasn't going to grow that strongly forever. It'll flatten out for a while and then probably come back.

Yeah, just a couple of things. One, just as a blanket statement, all the numbers I quote are almost always in constant dollars. If it's not that, I will let you know, but it is constant dollars. Yet on the Vans side, down 11% in constant dollars. What I said was about 20% of the decline is related to the actions we've been talking about around the value channel. That gets you to, as well as store closures, sort of a negative high single digit for the quarter in terms of an actual run rate. The run rate we believe will be kind of similar in Q3 as well.

What I also said was the impact from the value channel changes and the door closures will also impact us in Q3, not quite as much as it did in Q1 and Q2 because we start to annualize our anniversary in Q3. By Q4, these impacts we've been talking about for the most part go away. It won't be entirely, but mostly a true underlying trend by the time we get to Q4. Hopefully, we'll get away from having to back anything out for you guys.

Great, thanks a lot, guys. Appreciate it.

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

Hey guys, thanks for taking the question. I know it's early in the holiday, but any initial signs from how retailers are behaving with orders or order books? Is there any difference by channel or region? I'm curious how your partners are looking at the initial holiday season from an orders perspective and a demand perspective.

It's a little too early for us to say. We also have a lot of direct-to-consumer too, so it's just a little too early to say. This is always the period when it's really, really exciting in this business because things start to ramp up. It starts to get cold. There are a lot of good things that happen between now and Thanksgiving. It's a little too early for us to say, but we're really excited about it. We feel like we've got a good plan. We've got good products. We're optimistic, but it's too early to say how it's going to play out. There is uncertainty out there about the overall macro environment. There's the shutdown, etc. I think I said in a conference a couple of months ago, the consumer's been stubbornly positive, and I'm hoping that will happen again.

Your next question comes from the line of Adrienne Yih with Barclays. Please go ahead. A reminder to please press *6 to unmute yourself or if you are joined digitally to unmute your line via Zoom.

Oh, goodness. Thank you. I'm not great at this stuff.

Thank you so much. Okay. Bracken and Paul, you know, the three-year long-range plan was sort of anchored to FY 2024. You know, we've had four consecutive quarters of op-margin expansion. This fifth quarter, because of tariffs, we now have kind of a reversal of that trend. Historically, you've always kind of talked us to look at half years. I guess a couple of questions. You had talked about back-to-school being strong, just wondering what you're seeing kind of on the exit of that. You talked about the consumer being still resilient. Last quarter, you had mentioned sort of like how you think about philosophically demand elasticity. We're going to start to see price increases, Paul, in the mid-single-digit range, low-single-digit range, if you can help us out with that. What are you thinking about with respect to kind of how the volume plays into that? Thank you very much.

Yeah, why don't I take, I think your first question was kind of what do we see coming? It's a little hard to answer. Maybe I'll go back to Timberland since it's an interesting one to talk about. I think Timberland, we probably have more growth potential than we're going to get because we're, you know, you saw this quarter 4% growth. I think for the rest of the year, you can expect kind of low single-digit growth. That's not because the brand heat's not out there. It's out there. We're just going to really control our expansion. We're going to make sure that we're very deliberate about executing. Right now we have only, for example, only six full-price stores in the United States where there is very strong demand.

We could go out and expand aggressively into our wholesale channel, into new wholesale, etc., but we're really not going to do that. We're going to very deliberately open new stores. It's going to start later in Q3 and into Q4, although they won't really kick in and be high performing until next year. We're really trying to think in terms of driving growth longer term, not just what are we going to do this holiday and in Q4. That's our mindset on this whole business, really how do we, you know, I hope you're starting to get a feel for that. We're going to execute in the key commercial moments, but our real game plan is longer term than that. We're going to systematically put these building blocks in place. They're going to deliver for years and years to come.

Yeah, on the gross margin side, I think I had the question, right?

Yeah, on the gross margin side, as you get to the next couple of quarters, obviously we've had some good gross margin expansion. We've lapped a lot of the work we've done to reset our inventories, get inventories in a better position. We've talked about a better promotional environment for us in terms of discounting. That's all been productive. You get into Q3, you do have some impact, as I said, from the tariffs, which we won't really start to mitigate until Q4 from a pricing perspective. You will have that. You also are lapping all of the work we've done over the past year or so. You're starting to get tougher, quote unquote, comps in terms of the gross margin improvement. We still think there's more there, obviously, and we've talked about getting to 55% or better in our longer term targets.

We did make a lot of progress over the last year and a lot of the reset actions and cleanup we've done. That will impact us in the next couple of quarters. There was one other part to that question.

Yeah, we don't really get into the exact amount of pricing. You can think about it a couple of ways. One is there's always going to be a part of this between working with our vendors, working with our wholesale partners, and then pricing. It's going to be a combination of all three of those things, which is probably not a surprise to any of you. We'll also be targeted and thoughtful by brand, right? It's not going to be a uniform price increase across the board. Each brand is going to take it differently in terms of the product, in terms of how they do it, in terms of where they do it, and we'll give them the flexibility to do that.

In some areas, as Bracken mentioned, you've got places where Vans, where maybe it's not so much on the pricing side, but we've been much better on the discounting side. That can have the effect of better pricing year-over-year just based on lower discounting.

Great. Thank you very much. Very helpful. Best of luck.

Yeah, if you wanted one headline on that, I'd say surgical. We're still assuming pretty normal elasticity, but we're very surgical in the pricing.

It is U.S. only, correct? Or am I incorrect?

Yeah, generally speaking, there's always some kind of pricing happening around the world, but it's generally U.S.

Your next question comes from Anna Andreeva from Piper Sandler. Please go ahead. Anna, a reminder to unmute yourself in the Zoom.

Apologies. Great. Thank you so much for taking our question. Good morning. We had a question on where are we with the number of doors. You guys have closed own doors globally and also exited a number of wholesale doors in the U.S., but also added some doors. Are we now in a stable kind of a number of doors environment, both in wholesale and direct-to-consumer? Do you think there's an opportunity to further rein in own doors, especially at Vans, where I think you still have 600 doors or so globally? We had a follow-up. Did you quantify the earlier wholesale demand in 2Q? Thanks so much.

I'll let Paul take the second one. On the number of doors, I think we're pretty stable going in. We're going to increase the number of doors, especially in Timberland, but also in The North Face some. There will continue to be churn on Vans, but as I've said before, the biggest reduction is kind of in the past now. That will start to dissipate, especially in Q4. Our total number of doors, I think we're in the U.S., we're at about 500, well, 580 globally, I think about 480 in the U.S., which is consistent with what we said before, and about 90 in EMEA and not too many in APAC, although we have partner stores in APAC. Most of that looks like our door, even if it isn't technically.

Yeah, I think just overall in the stores, we're down about 5%, but a majority of that is Vans. We're actually growing in The North Face and other areas. The second question was the question on the wholesale in Q2, how much that impacted the increased demand. Was that the question?

It was about 50 - 60 basis points on the revenue side. If you look at the revenue number and the outperformance relative to our guidance, there are really two main factors. Call it half of it or so was that we had some orders where the demand came to ship in September versus October, and the other was just some better direct-to-consumer, particularly around back to school, did a little bit better. Those are the two big factors.

Your next question comes from the line of Matthew Boss with JPMorgan Chase & Co. Matthew, a reminder to press *6 to unmute. Please go ahead.

VF (VFC) Q2 2026 Earnings Call Transcript

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