V.F. Corporation

Greetings and welcome to VF Corporation's first quarter fiscal 2021 conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Joe Alkire, Vice President of Investor Relations.

Good morning and welcome to VF Corporation's first quarter fiscal 2021 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 defined in the press release that was issued this morning. We've used 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. Reconciliations of gap 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. During the fourth quarter of 2020, the company determined that the occupational workwear business met the held for sale and discontinued operations accounting criteria. Accordingly, The company has reported the related assets and liabilities of the occupational workwear business in discontinued operations as of the date noted above and included the operating results of this business in discontinued operations for all periods presented. Unless otherwise noted, results presented on today's call are based on continuing operations. Joining me on today's call will be VF's Chairman, President, and Chief Executive Officer, Steve Rendell. and Chief Financial Officer Scott Rowe. Following our prepared remarks, we'll open the call for questions. Steve?

Thank you, Joe, and welcome, everyone. I hope my comments this morning find you and your loved ones healthy and safe. And please bear with us again, as today we will be conducting this call from separate locations. I'd like to begin by taking a moment and sharing some thoughts on recent events and outrage over the issues of racial injustice and systemic discrimination that have gripped our nation. Racism and discrimination are not welcome at VF Corporation. We are a purpose-led, diverse, and inclusive company, much like the consumers of our brands. VF and our brands have been championing equity, equality, and belonging for a long time, whether that's through a specific support for initiatives and organizations from our individual brands or supporting dozens of minority-led and focused organizations through the VF Foundation along with other forms of corporate support. This isn't new territory for us, and our actions are woven into a culture that has been built over 100 years. We at VF will continue to do what's right and lead by example through not just words, but actions. As always, we remain absolutely committed to ensuring that our company is one where everyone feels welcome, supported, and inspired to be exactly who they are. Before providing an update on the current environment and how VF is navigating the unique challenges and business disruption presented by COVID-19, and recent protests across the globe. I want to again express my deep gratitude for the way our management team and associates around the world have come together and responded to these crises. Our teams have moved with speed, agility, determination and focus and I'm humbled to have the opportunity to lead VF during this time. We have prepared ourselves well for times such as these. VF is built for this. Our strong brands, coupled with our purpose-led, people-first approach, and our financial and supply chain disciplines, and our Fortress Balance Sheet allow us to weather any storm. I'm confident that VF will emerge in a position of strength, fueled by the clarity of our strategy and our portfolio and business model transformation, which will position us to thrive and deliver accelerated growth and value creation in the years ahead. And now turning to our business. Our first quarter results were better than expected, led by our international and digital platforms. Scott will go through the details in a moment. Through the end of June, with the majority of our stores reopened, we saw encouraging signals as consumer spending in core outdoor, active, and athletic categories was resilient. Our business fundamentals continued to improve throughout the quarter, with particular strength in our digital business growing 81%, and our China business returning to growth one quarter earlier than our expectations. This improving trend has continued in July despite some store reclosures in some parts of the US. We're in the midst of an unprecedented change across the retail landscape and consumer trends and behaviors are evolving faster than ever before. Participation in outdoor activities and consumer interest in outdoor exploration is increasing. Health and wellness and the pursuit of a more active lifestyle is accelerating. Thank you for joining us today. These trends were core underpinnings of the strategy we laid out in 2017 and updated last fall in Beaver Creek. And these trends have influenced our portfolio decisions over the past several years and continue to guide our acquisition agenda. However, there is no doubt that recent events will serve to accelerate these consumer behaviors, leading to a dramatic reorganization of the marketplace. Here's the good news. We believe the set of actions we laid out a few years ago have helped to reset We believe the portfolio we have today sits at the epicenter of the trends just outlined and is poised to capitalize on these shifts, and our brands are uniquely positioned to not only benefit from these changes in consumer value systems, but have the opportunity to drive and influence them. While the COVID-19 pandemic has presented unprecedented challenges and disruption to our business, It has also presented us with the opportunity to accelerate key elements of our strategy and business and operating model transformation. And at this point, I'd like to highlight just a few. Beginning with our Distort Asia strategy, the Asia Pacific region, and more specifically China, has been the lead market in the COVID-19 pandemic. And we've applied many of our learnings from China across the globe. Our business in mainland China is strong and recovering sharply since February. With growth of 9% in the first quarter. We expect our business in mainland China to accelerate in the mid-teens in the second quarter and achieve more than 20% growth for the full year, essentially performing in line with the growth target we presented in Beaver Creek. Highlights from China for the quarter include the opening of more than 160 partner doors, led by Vans and Vickies, in the face of a challenging and uncertain retail environment, reflecting the confidence our partners have in the enduring strength of our brands. More than 35% digital growth versus low single-digit growth for all apparel and footwear categories. The acquisition of 8 million new consumers who are now interacting with VF brands on Tmall. And the introduction of a new growth platform and pilot with Alibaba Intensive, providing VF brands access to millions of new consumers in addition to ongoing data and analytics support. Moving to digital and our hyper-digital business model transformations. Our global digital business increased more than 80% in the first quarter, led by 115% growth in the Americas region and nearly 90% growth across our big four brands. As a result of this strong performance, we expect growth in digital of more than 40% for the year, and coupled with our pure play digital wholesale business, we expect our digital penetration to be more than 25% of fiscal 21 revenue. Within digital, our consumer-centric strategy recognizes that transactional activity is only one measure of success. We are increasingly focused on engagement metrics, consumer capture, and consumer lifetime value. Highlights from our digital for the quarter include buy online, pick up in store, and ship from store capabilities have fully launched in the vast majority of our stores in the U.S. The North Face will launch both this and ship from store in EMEA in August. and Bopas and ship from store for Timberland in the U.S. and the NEA is underway. Herbside functionality is being piloted in both the Americas and the NEA. We activated a deferred payment option in our U.S. retail locations. We achieved more than 30% growth with Solando and ASOS, two of our largest digital wholesale partners globally. We experienced double digit growth in Vans app downloads versus last quarter. Vans family loyalty programs surpassed 12 million members. We've seen loyalty translate into higher purchase frequency and higher average order value, resulting in 35% greater spend from band's family loyalty numbers relative to non-numbers. Digital engagement accelerated for the North Face as well. Social channel growth exploded during the quarter, roughly doubling the total number of social followers. All key engagement measures were up 20-30%, driven by our Athlete Storytelling Series, Summer Base Camp Program, All Trails Partnership, and the strong support for the brand's COVID-19 and Black Lives Matter response. New customer acquisition increased 275%, strongly supported by the Healthcare First Responder Initiative. The North Face Loyalty Program increased more than 20% and we saw significant increases in brand awareness from the key 18 to 35-year-old demographic and our customer penetration migrated toward a younger female consumer. We are clearly encouraged by the trends in our digital business and the early results we are seeing from recent investments. But I want to stress that we are early in our digital journey. F.F. has a massive opportunity to invest and extend our digital advantage. On our last call, we highlighted that 90% of the strategic investments in this year's plan were focused on our digital transformation. Digitalization applies across all aspects of consumers' lives, not just how they shop, but how they engage with brands. We have accelerated our thinking and actions around our digital initiatives in response to the current environment. We know that with our powerful brand portfolio, strengthening our digital enterprise capabilities will fuel accelerated, sustainable growth and returns as we emerge from this crisis. Let's spend a few minutes and provide a little color on some of our most critical initiatives. We're working on the digitization of our entire value chain from design and manufacturing through distribution while developing a 360-degree view of our consumer to support seamless, customized integration across all touchpoints. This is all developing through the perspective of the consumer journey which our chief digital officer covered during our investor day last fall. We are increasingly leveraging product and consumer data as a differentiator, using our analytics engine to create more individualized experiences, engaging consumers while providing product development insights. The ManChain Analytics investment across our platform will allow our brands to understand what is trending in what channels with the goal of making our digital marketing more timely, relevant, and contextual. We're working toward more focused product lines, using our consumer understanding to work with greater agility to simplify and streamline a more frequent flow of consumer-relevant products. We continue to elevate the future role of the store, focused on creating authentic brand experiences, injecting energy, and providing a platform for new product stories while offering the omni-channel capabilities which are increasingly becoming table stakes at retail. These are important initiatives that have the potential to drive a step function change in our digital transformation. I look forward to sharing additional details in the months ahead. Lastly, as you may have seen, Barron's and Calvert Research and Management re-ranked their annual list of the 100 most sustainable companies, Placing a greater weighting on social responsibility actions, including those in response to COVID-19. This re-ranking led VF from a commendable number 21 on the original 2020 list to being named number one overall. This recognition is an honor that gives us great pride, and it further cements our position as a company that sets high standards and leads by example, not to win awards, but because it's the right thing to do. To close, While much has changed since our 2017 Investor Day, our long-term strategic vision remains intact, as the key pillars of our long-range growth plan have only been made more urgent by current events. Our brands are well positioned in the large and growing outdoor, active, and athletic markets, and the consumer trends serving as the basis of our strategy have only accelerated in the current environment. Looking ahead, I believe that truly purpose-led brands and companies like ours will fare better than others when this situation is over. That's because we make principled decisions based on what's right for people and our planet, whether it's elevating our actions to combat global climate change or helping to tear down the structures of systemic racism that target the black community and other people of color. VF will always lead with purpose and act with integrity. And by continuing to foster a sense of community, With our consumers during these trying times, we're positioning VF and our brands for a brighter future, purpose-led and performance-driven. It's in our DNA. And now I'll turn it over to Scott.