V.F. Corporation

Q2 2022 Earnings Conference Call


spk_0: reading welcome to the a corporation second quarter of fiscal twenty twenty two conference call at this time or punishments are emotionally mode the question answer session will follow the fall presentation if anyone should require operators to sincerely conference please for a star zero from your telephone keypad please note this conferences being recorded oh they'll through the conference over to john kelly senior director of corporate development investor relations mr kelly you may now begin
spk_1: good morning and what going to be a corporation second quarter difficult when it when it you covered go but don't put it all make were looking statements the statements are based on current expectation and of subject to and eight the good cause actual results differ materially he didn't turn peter detail than document god regularly with the as easy unless otherwise noted that now super due on today's probably i don't i just costs a dollar basis would really bother me personally that was issued this morning we you just because dollar amount of weed numbers and our discussion because we believe they more accurately represent the true appraisal performance and underlined result or business male figure if you're for it reported him out which are in accordance with us go reconciliation that got measures to suggest that amount can be found in the supplemental natural tables included in the personally identifying quantify all excluded items and provide man whose view of why wider information useful to investors due to the significant impact at the grove are endemic a prior your fingers rage call also contains certain comparison to the same period in physical twenty twenty he prepared and they're all on or four dollar basis on june twenty eight point twenty one the company completed the tale of an occupational work by business accordingly the company has reported their legit how to tell after the my building up it's business as assets and liabilities discontinued operations and included the operating results in cash flows of the goodness and that guy after all periods through the data to fail unless otherwise noted the results presented on anthony call are based on continuing operations gonna be on the call will be of chairman president and fios eat rental and atp and get mad pocket oh and are prepared remarks or open the copier question the thank you john in good morning everyone welcome to our second quarter call it we moved through the halfway point of our kids to year i remain encouraged by the underlying momentum across the portfolio in a broad based nature of strength is be copies that we're driving the right strategy to accelerate growth in a quarter to head looking through pandemic related disruption in near term headwinds and china we conceded to see it healthy retail landscape a strong consumer outlook and accelerating demand to across our business or recovery has not been is linear is we had anticipated for some parts of our business i'm proud of our teams continue to deliver through the volatility this is certainly where we excel we're focused on what we can control in spite of were challenging environment than we had envisioned we are able to reaffirm our fiscal twenty two revenue in earning outlook a clear testament to the resiliency and optionality of our model we are business emerging in an even stronger place and before the pandemic we've accelerated our strategy to be more digitally enabled enterprise for driving significant investment behind capabilities to connect with our consumers we're driving organic growth as we elevate direct channels the asia led by china and accelerate our consumer minded reach authentic hyper digital business been transformation on top of that are number one strategic priority to drive and optimize your portfolio has netted a significant benefits over the past five years we've strategically evolved and simplified our portfolio and thirty two brands to twelve grand each with significant beat see an international opportunity squarely focused on large growing addressable markets the macro trends around outdoor an active lifestyles health and wellness casual station and sustainability have only strengthened over the past twenty months in our current portfolios well positioned to benefit from the accelerating kill with acted portfolio management remained in evergreen process and emanate remains or top capital allocation priority this is a differentiator and a competitive advantage for the at is we continue to refine our portfolio mix maximise exposure to the most attractive parts of the marketplace we're confident that we have the right strategy and or continued execution on each of these key strategic pillars positions to up for a stronger emergence they're moving into a queue to result while noisy or second quarter results highlight ongoing progress against her strategy and reflect the healthy accelerating underlying business with broad based strength across our portfolio i'll start with van which deliberate feather percent growth and due to despite meaningful hotel shipment pushed into cute three representing sequential improvement in underlying demand despite a more challenging than anticipated operating environment the he had this this has accelerated meaningfully during the quarter however in the us encouraging brick and mortar recovery trend which had been building into july were impacted by the dealt with search and it's implications across our most important market this led the sharp shifts in store traffic trajectory during the peak back to school window additionally the brand face headwinds in asia pacific with virus disruption across the region and a more challenging near term consumer environment in china will band america's qt recovery did not meet our expectations and pleased with our teams response we're focused on what we can control a retail associates are driving best in class conversion up twenty percent relative to creep endemic peaks this quarter in the americas and despite the impact of expedited freight the america's team has brought full price did he gross margins above the school twenty twenty levels supported by discounting below recovered levels but the same time leveraging are strong inventory position we've secured additional shelf space had several key wholesale accounts for the second half so despite a more challenging operating backdrop in anticipated we were able to hold onto the low end of our prior our prevent it now expects seven to nine percent growth relative to the school twenty twenty we're confident and strategic choices as evidenced by improving demand signal can strong consumer engagement in september van whore collection launch support of the bit higher sales the on record for america's the to see digital business the shipping one hundred percent fell through within days were encouraged by the ongoing to drink from progression put were lines of fifteen percent relative to physical twenty twenty led by ultra range and empty and are pleased with the continued growth in be a family membership reaching eighteen point five million consumers globally or competition a long term runway prevent remains unchanged the brand he needed is disrupted period exceptionally strong and consumer gauge when his remain healthy he activates remains a large and growing pam and the casual station trend continues to present a long term tail and prevent and although built and remains a very important part of our story we must remember that the up is not just one brand we have diversified portfolio global brands each with exposure to attractive tams with enduring pill and with significant shared platforms of expertise highlighted our international platforms and global supply chain which or neighboring broad based profitable growth and it's result or model drives ongoing capital allocation optionality to further enhanced vs growth and shareholder return profile that will build on many of these themes shortly but i like to start with an overview of the broad based momentum or seen you cross a portfolio starting with the northeast which delivered twenty nine percent growth and you to despite significant whole feel shipment pushed into que three representing a sharp acceleration of underlying demand alongside meaningful margin improvement or international businesses are gaining share or the underlying us business has accelerated meaningfully this quarter on tight inventories driving high quality failed we remain encouraged by the strength to cross categories if you never been successful bouncing on and off mountain messaging to consumers i'm not platforms like future like the active in the recently launched advanced not continue to drive strong fell through and reinforce tnf performance credibility hoffman lifestyle powell and equipment or delivering outside growth that strong three hundred sixty five days demand persisted led by logo where a pack and duffel we also saw strong performance for more versatile athletic inspired product highlighted by the wandered franchise we're raising the outlook pretty enough to twenty seven to twenty nine percent growth in fiscal twenty twenty two we continue to believe that moment prepared with underappreciated this we have three billion dollar business delivering hiking growth relative to physical twenty twenty levels with strong margin expansion underway looking into next year the north beach will continue to benefit from broad based brand momentum fueled by innovation extremely clean distribution channel increasing year round relevancy and ongoing kill wins from the outdoor marketplace supported by growing consumer interest in active outdoor lifestyle we therefore expect the northeast to be at least within a long term plan range of high single digit growth in fiscal twenty twenty three moving on to the keys which continues to build upon of incredible run delivery nineteen percent growth in a quarter the brand is driving they're integrated marketplace strategy supporting growth horizontally across work and work spark categories as well as vertically is the focus on higher tiers the distribution and bring new consumers into the brand felt remained elevated the man signal to continue to be strong across the globe the dickie theme remains focused on the key drivers of their business expanded quite work were beyond traditional channels and leveraging the brand authenticity to accelerate the lifestyle fake icons had been a focus for the marketing and feel themes and the results are compelling highlighted by the accelerated growth that the eight seventy four work in there are several versions of this fifth year old icon supported by ongoing innovation which collectively have delivered over one hundred percent growth here today in addition to the strong growth trajectory east we remain encouraged by the to significant margin expansion runaway which accelerated and cute you on the back of strong full price spelling and in a leverage are proud of the continued fix that the tickets which we build another underappreciated part of the story we're raising the outlook for decades to at least twenty percent growth in fiscal twenty two representing at least thirty percent growth relative the physical twenty we expect the brand will approach one billion dollars next year as dickie celebrates it's one hundred year anniversary next kimberlin delivered twenty five percent growth and queue to despite significant wholesale shipment put into que three representing an acceleration of underlying demand over the court the pro business remained consistent growth driver for the brand supported by a new campaign celebrating skilled trades to buy the next generation of where the workers despite historically low inventory levels corbeled an outdoor footwear continue to show strength is we head into the holiday each growing over forty percent in queue to and was and continues to create and own boot culture with with the camera interaction of green drive ego innovation in boots for the first time the fill the rich hiker launched with much fanfare new york city and posted fifty percent go through a north america two more green stride drops will hit in october driving further momentum behind it important franchise at the same time the to cloud collection another equal leadership story grow strong traffic and social engagement across all regions we believe the kindle unbranded been a much help your position today relative to where it was before covered it's leadership team has a sharpened focused on the grant product architecture getting back to timberlands core work in outdoor sustainability and craftsmanship while increasing energy and newness the every focus strategic clarity around the target consumer and on executing the right go to market set of choices the brand is demonstrating strong marketplace discipline reducing discount and thought to the rebuilding depleted inventory were driving significant improvements in profitability the integration of supreme continues to move according to plan in our teams are learning from is highly productive business including how they manage product creation building energy of drop and optimizing assortment and product flow across regions with great agility looking forward we remain confident in a significant white space opportunity but it's brand across yoga peace with a clear opportunity to leverage be a platforms supreme remains on track to become vs the billion dollar brand in the coming years and lastly when speaking to the broadway strength across our portfolio i like to briefly shine a light on or three outdoor american brands smart ice breaker and ultra it's group collectively represents nearly five hundred fifty million in revenue for the mid to high ping growth profile longer term well smaller today these brands are all profitable and are exposed to the track to around health and wellness active outdoor lifestyle and sustainability and we're seeing it in their results smart will brand is up nearly six percent year to date representing high teams growth relative to physical twenty twenty leave accelerated investment brand awareness campaign highlighting hype the high performance and versatility of it's product of targeting and acted younger consumer we're seeing the off with broad base drank the cross categories led by apparel and outside growth from new consumers are other natural fiber brand icebreaker has successfully relocated the call leadership team from new zealand to our stop you headquarters further integrating into our economy a platform which will accelerate the branch global reach the bridge and is grown yearly thirty percent year to date with gouged growth across it's largest markets in europe and the us based layers teeth and underwear represent about seventy percent of ice breaker global rather confirming the consumer appeal of one hundred percent natural product the next again next skin categories and lastly ultra the fastest growing brain and our portfolio is celebrating it's tenth anniversary this year by dabbling it's legendary loan peak franchise is the number one true any business in the u s the brand continued to build accolades with the running community with awards from runners world self magazine women's health and outside magazine across multiple franchises to the first half of the year the brand has grown over sixty percent relative to fiscal twenty twenty and we expected to accelerate into the back half of the year it's a brand continues to expand it's presence in road running with innovative new styles and designs we see tremendous opportunity for ultra to expand distribution domestically and internet ashley leveraging if differentiated products and continued strong tail into that category i see significant potential for each the brand to deliver outsized growth in the years to come we've demonstrated the ability to scale brands in a big businesses and confidence in overtime either to emerging brands will come another strong component of the financial algorithm
spk_2: as i conclude my prepared remarks and like to remind everyone that before the pandemic or portfolio is on track to deliver high single digit revenue growth and high teens earnings growth in fiscal twenty twenty while we remain in a disrupted environment i believe the a long term prospects are even more attracted today we've accelerated or transformation strategy we are
spk_1: further optimize your portfolio and importantly this portfolio today is capable of delivering greater broad based strength relative to where we were before the pandemic it's give this even greater confidence our ability to drive hi single digit offline and low teens earnings growth at a minimum it's we emerge as an even stronger company and now will turn it over the net thanks dave good morning everyone i'm happy to give an update on our progress as we navigate recovery and importantly i'm encouraged by the resilient the of our business during the first half of fiscal twenty twenty two
spk_2: the environment of clearly about differently than we had planned to make our teams remain focused on what we can control and they are delivering the underlying up on recovery across the majority of our business have exceeded our plan on putting new challenges in the a pack region and ongoing disruption because the supply chain network the top allow of allocation of investment we've been able to grab continued strategic investment spending by leveraging other part very in a base to protect earnings
spk_1: as a result i'm proud of our ability to hold onto article twenty twenty two or need outlook of about three dollars and twenty fifth despite a more challenging than anticipated operating environment including and an an incremental head land of about nine pence from expedited right they should be a strong signal that is manager theme is committed to leveraging the significant optionality and our model to deliver on our own commitment before unpacking or duty result them to quickly run through the operating environment across the region and share of the latest outlook for our global supply chain
spk_2: starting with the americas region product delayed and reduce traffic during by researchers impacted the business during a high volume period this quarter however the region with able to deliver twenty two percent organic growth and queue to represent continued sequential underlying improvement
spk_1: retailers remain bullish on the upcoming holiday season we're focused on delivering point in time to support strong demand signal population rates remain historically low do to tighten the tories and burden remained exceptionally strong and the continued reductions and promotions compared to last year driving strong average selling prices next to the a region delivered midfield organic growth in queue to despite meaningful the watching disruption particular for the north face the underlying better continue to perform about the overall market support about strong performance with get keep it'll pardon this region was the or the pandemic an issue an incredible resilient the throughout this disrupted period stores are showing continuous recapture volume despite after street traffic and large metro area we're encouraged to see the brick and mortar do you see business for both the north face and bands like me who gets cooler eat for turning to positive growth relative to fiscal year twenty recovery momentum and with thing growth are expected to accelerate throughout the year and vaccine rollouts progress
spk_2: finally the a pack region delivered low single digit organic growth despite a more challenging backdrop and anticipated for park in our portfolio
spk_1: peter thirty two covered nineteen across the region economic growth in consumer confidence your topic since july part of our didn't china have been further impacted of weaker digital traffic for non domestic graham it has been more impactful for actor brands relative to outdoor across the portfolio we believe we're perform better in our respective category versus other international brands and while we were a bullish on the long term opportunity in the region these pressures of impacted our near term outlook we now expect loathing growth in china in fiscal twenty twenty two
spk_3: moving on to our global supply chain the environment or challenging and has continued to deteriorate following our que one call in late july the resurgence of covert nike locked down to keep forcing countries like vietnam have resorted resulted in more impactful production delays and a logistic network continued with eight unprecedented challenges
spk_1: we are very experiencing increasing population the supply chain disruption which is creating mean or quarter to quarter volatility in our results
spk_3: let me a pack all the in a little more detail
spk_1: you to be at large and you to directly diversified sourcing footprint or overall production capacity as remained made better position than those with about eighty five percent of production operational throughout the quarter pressures are generally concentrated in the southern region of vietnam which represent about ten percent of the yes overall thought the mix we remain confident in our ability to navigate the production environment however the logistics network remains under increasing pressure put are generally open but operations remain severely impacted by labour and equipment availability server think significantly higher ship volumes as a result or dwelt on that point the destination have increased significantly in aggregate supply to later probative and has been paid to have extended eight to ten weeks as a result in the most recent quarter we had a material shipped revenue from due to interview three with more than half of is tied to vietnam despite the delayed cancellation rate have remained below historical level they're going strong demand and tight channel and the doors however delayed ultimately impact product availability prof the marketplace virtually all of our brands are experiencing delay collections style i'm kate is insufficient site is the woman limiting their ability to fully me strong demand for example the supreme bring it has experienced around thirty percent less than a toy around drops so despite strong fell through dream we are losing by and for unlimited supply this environment is who are world class supply chain differentiate itself highlighting the significant competitive advantage to be if it's created with his platform he always maintained a diversified sourcing footprint to provide resilient the against on personal changes in the operating or geopolitical environment or example our largest market vietnam only represents about a quarter of our sourcing next and with in vietnam we work with multiple partners and a present in multiple probably both between the northern southern readers of the country and maintain acceptable for before our teams are leveraging the scale and relationships to navigate the challenging logistics environment in the most corrupt effective way we continue to utilize expedite operate across the large number of air providers we've doubled our network of ocean carriers and significantly expanded the number of port you lived across the grab the globe a commercial and supply chain into working closely with a keyhole feel partners increasingly using direct shipping and i would indicate were doing better than most of the competitive that a keeping product on the shelves i relationship with the hoped the partners continues to strengthen with are open transparent and timely communication throughout this dynamic situation so despite the unprecedented level of disruption across the global supply chain our teams have been able to keep product flowing supporting our strong holiday growth plan and allowing be up to effectively hold our revenue guide for fit for twenty twenty two moving it some additional i like been our second quarter hello bf revenue increased twenty one percent to three point two billion despite a significant amount of water shifted from cute to interview three implying continued sequential underlying improvement for the portfolio for contact we estimate the ship represented a mid to high single digit impact to the a future growth rate relative to fiscal twenty twenty are just the gross margin painted three hundred basis points to fifty three point nine percent due to higher full price realization lower markdown favorable mac and are up twenty basis points contribution from the brain when compared to prior peak gross margins and fiscal twenty twenty are currently gross margin with impacted by about one hundred and eighty basis points headway in from incremental expedite upright and effects
spk_3: excluding me to item or organic growth margin and queue to is over one hundred basis points about prior peak level driven by a little mac and strong underlying margin right improvement
spk_1: and as a reminder are due to twenty twenty gross margin was very strong though our ability to deliver to deliver this level of underlying expansion to get fiscal year twenty margins is a strong testament to the health of our brand in the marketplace or as to a ratio improving due to the on hundred basis points organically to thirty seven point two percent despite elevated distributions band and continued growth and strategic investment good strong underlying leverage was driven by discretionary choices and a clear reflection of the optionality within our model supporting organic tps grown up sixty percent i'm proud of our team's ability to deliver earnings of one dollar and eleven and due to despite incremental expedited pregnant and significant host bill shipment timing headwinds in a quarter reflecting the strong underlying earnings momentum of the portfolio now a few comments on our on our revived it took twenty twenty two hour we're holding our revenue guy to be about twelve billion despite a weaker trying to outlaw in the near term and a lower than back in a lower than expected back to school performance at bands in the us and ongoing supply chain challenges all that highlighting the broad based break the proper brandt and geography a gross margin outlook is now about fifty six percent including forty betas point of incremental for a cost relative to what we expected in july implying and under oath in improving underlying gross margin our and adjusting for incremental free in effect after twenty twenty two outlook implied over one hundred basis points of underlying gross margin expansion relative the peak gross margins in fiscal twenty twenty given by favorable mac and clean for price fell through we're holding are operating margin allah to around thirty percent for fiscal twenty twenty two despite the incremental break cause covered at the that were focused on what we can control and for me as dna control it clearly copper mine we are all steady supply chain and distribution costs head when we spend reduction actions while protecting strategic investment and demand creation the visitors driving impressive underlying leverage and our carbon into the strong it we can continue to accelerated over overtime finally as discussed we are reaffirming are full your are invalid around three dollars and twenty cents despite about nine cent of incremental costs to regularly attributed to the supply chain disruption
spk_3: a strong to estimate of portfolio resilience resilience the and the optionality of our model
spk_1: we've introduced an important concept that the epic not just one brand and i want to reiterate this is i conclude are prepared remarks before the pandemic be a lot more reliant on the band's brain today however we have a much larger portion of our business performing at or above our expectations
spk_3: there's broad based woman and across the portfolio the also has a power as powerful enterprise platforms highlighted by are world class supply chain which provided significant competitive advantage to our business
spk_1: and lastly the of has the capacity to drive meaningful incremental shareholder value to capital allocation optionality we demonstrated it's over the course of the pandemic by maintaining our dividends and try to your occupation of work business for the supreme brand and as you may have noticed in this morning's really are share repurchase program has been real been reinstated with remaining authorization to repurchase that the two point eight billion of common stock as we have line of sight for our leverage birstall we have just additional optionality and will be opportunistic and share repurchases moving into the balance that this fiscal year
spk_0: the it's not just one bryan we are a diversified portfolio strong supporter by world class enterprise platform which we believe at minimum can drive hi single digit revenue growth low teens learning about growth and provide meaningful capital allocation optionality moving forward what doping a line for your question thank you lol having adapting the question and answer session if you like to ask a question today please press star one from you tell how he pad and a confirmation tell indicate your lies in the question here and a press start to feel like a movie question from the que
spk_4: for and shooting speaker equipment minister to pick up your handset before pressing the star here when athletes holy paul for questions thank you know first question comes from the line of matthew boss with jp morgan leisure to your question great thanks
spk_5: so maybe to start with fans
spk_1: global brand revenues more or less flat debris pandemic and the first half of the year i guess could you to tell block drivers behind the confidence and seventy nine for the year what exactly accounted for the forecast cut this year and any change to twelve to thirteen percent as a multiyear target they good morning met they just start off yeah we we see nothing in a bad strategy that would tell us that we cannot grow double digits long term it's bradford been an active player but it with a very near would crack about a day to day and the we think only growing in guy was asian try to accelerate we've grown i came to the acquisition of that over a decade of against growth and we continue to keep significant international like base in china in europe the continue to see growth here in the us adequate get it confident that we look forward is is we had a renewed focus on our icon management strategy that point this quarter mil was the twenty five percent growth that we thought our skate high they leaned into marketing that particular icon as we come to ya que three networks the back of your fear begin get an elevate on in general and really getting back into this systematic cycle of of of pushing the five key icons while we also know continue to support them or progression which is where the ultra sit m empty but we think you're very strong shell true it well as leveraging hear that the growth in apparel which is really opening up those multiple were occasion that the grant and julie will continue to leverage the in new york and through experience
spk_6: that his core element of how this brand connect with it
spk_1: with it with it consumers and will continue to lean into your grow here in the us and europe and and look to a really support our age team is we focus on that china growth trajectory in getting a brand back and think with what we know is very possible bomb is the brand pushes the the know have created health expression in a very brand right but local consumer or relevancy what a to brand their child a man i did that a couple of things in terms of interviewed thinking about the acceleration in the back half of the year that implied and it is a true statement across all of our brand that certainly there's a significant inflection in the wholesale business are based on the order book the loop we've talked about your the difference between the spring order books or to the followed a box and it and in the time that those order books were play not the impact that briefing at the when you get to give you an example for a ban on a global basis or wholesale business with down are taught high single digits in the first half we expected gonna be up to the loan double digit in the second half and again at that supported by the order books that we have and we really got visibility is pretty much all the way to the the markets for you year so that that one thing i think it worked with our understanding and it's or my ghana it's on our brand i'm gonna i get our our domain creation efforts will accelerate from has been thing employee the back after the year that always been our plan and you'll see that are we got that built the new our or modeling come from the beginning we we did have a job no bit of an acceleration to back to school versus what we thought you know in the first half of of the calendar year but even more so as we move into the holiday south you're strong demand creation and definitely strong programs coming to support support the didn't and then the last thing as which that all along we expect them continued improvement and our our traffic into our are large and highly productive brick and mortar updated business and and we generally thing that we did the a little bit about
spk_4: a little bit lower than our expectations in the month of august and particular here in the us to terms to the traffic build and here we think that was certainly type he only in some ways to the delta bearing it and some of the new restriction that replace back on consumers are there in that period of time virginia like when the beginning of it this calendar year all the way through september setting
spk_7: i'd order for each been the best sequentially improve traffic standpoint september was our best monica the corner
spk_1: october that you started off good were actually watching on track and acne and honestly were slightly ahead of our expectations in the americas region from a deal with the perspective grand a month of october so i'll just a few more data point there for your relative term going to what supporting the acceleration fighting the outlook that's great color that maybe just and the follow up on the gross margin that the fifty six percent of the year i get could you to break down the underlying drivers they improved in the outlook which helped to offset that the worst freight headwind i'm just any color and the third quarter of the fourth quarter as we think about gross margin yeah sure so it's pretty good break up or i think in terms of the underlying drivers methods that are outstanding yeah it can can you defeat them headwinds from from expedite afraid we we make that and are prepared remarks it underlying right it is better spell broom and ultimately the merchandise margins are stronger and that generally were staying at we're seeing that across across the board so i think that that's pretty straightforward
spk_8: at edit relate to get them to them to shaping in the second half when i would say about about gross margin is
spk_9: we expect cute three to be about fifty seven percent or with organic expansion a little bit stronger than what we saw teacher
spk_0: and will continue to look at later at the next but i tried getting a quarter as well a lot of what went into the new what we into the forecast that different from the fire forecast is fitting in the third quarter
spk_10: best of luck the pecking at it
spk_11: the next question is nine of aaron murphy with paper sailor the shooter question
spk_12: great thanks good morning am i gonna have a question first on china it did the salaried first that the last quarter and called out from under cover challenges their but if we take a step back in you to share a little bit more about your confidence in the region longer term and then i do think you had your a package and outlook by about six hundred basis points for that all china or there some a
spk_1: other regional i had when we need to be mindful of a good morning and it a region issue with sit squarely in china though there have been some delta impacts in a little smaller market what we've seen it it's certainly an issue you're building here china mean there's a number of factors that are impact your candidate your first is that a resurgence of code it across the greater china region truly had had an impact on economic growth and more poorly consumer confidence and we've seen that in our store traffic coming into brick and mortar and we've also seen that challenging he had some of the digital titan platform traffic where we have a big presence from a digital standpoint and yeah some of our legacy marketing tools the to typically your p opinion later marketing are no longer available and you're having a short term impact that mean long term that we want a job in fact we are but that did have a short term impact bowling importantly what we do expect to see it's a real acceleration and i think there's three really key reasons hear about vision to established and even stronger structure present in shanghai and of we've been working on your now for many months allows us to better understand the marketplace variables and speak to the local consumer in a more relevant and the authentic way for each one of our brand the our decision to high higher our our our leader in china and expand we need your scope beyond just greater china that having a a very outright impact her are confident and experience and understanding the local market local consumers how many how to engage with our key strategic partners is certainly elevating our grand in our business with ability to to understand the consumer navigate your family's new new variable we see i'm as we stand up our brand teams in shanghai that local mall at local market knowledge it's going to help us really bring our our brand purpose or via purpose flour so it's to bear and worst thing ever a really important element today's as we we focus on the health and wellbeing of are so it is that notion here in our brand marketing we see it coming to life in north face novel really putting our our purpose and place
spk_10: and and really elevating you are or messaging in our connection and delivery of value around health and wellbeing here to the chinese consumer and and really looking to improve their life your true engaging with our brand experiences that are our brand enable and i'm connecting in a much more wonder why
spk_1: one way we we think the strategic shift now that we've been really driving over the last year twelve eighteen month position of in a very strong way to navigate the new variable
spk_13: and and get that we acceleration back into the business
spk_1: right thing to you and then if i can get at the the couple of the data point there to build on on and feet again you you really think about the china reduction the implied in the up in in the guide about a third of that it's is coming from let's call it covered related impact primarily primarily the me and them in a little the the supply challenges their but i merely demand and then read the you through the comments he made about the consumer what we see here in the short term and and ended and then it he said and covert related impacts across the raptor the region
spk_10: as we thought and lockdown measures and close doors and the just generally consumer carbonated limited other countries that way bet you're in you're the core
spk_1: that at know them and to the i think right thing i would but i did i think it's important that you have promote i'm a bf perspective we certainly been will change your games will soften the language slightly i can take at all really driven by china without that you wouldn't have seen any change and i would also tell you without what we saw current china we would have not changed urban and outlook okay that's very helpful and then just if i can add one more ivy move into holiday rdp inventory very clean you know what is your promotional outlook for that holiday and then it you know if we move into the early part of twenty twenty two will all be you know particularly in the marketplace laughing a pretty happy simulates just curious time do you see that promotional outlook evolving a thing of into the first calendar quarter thank you yeah i would they can we expect promote the promotional environment to be quite clean as for the holiday time period that that that were i've got up and what we expected certainly inventory continue to be really leave you know across the marketplace that that the case for our brand and i would out they most a week fact a really clean and and in and lack of promotional kind of environment certainly versus versus historical i'm and it's really every think about moving into to spring next year and and even beyond i'm certainly certainly argue will be that the promotional room environments going to continue to be quite good yeah i'll remind you that are artist have historically of bitcoin we don't promote a lot in our branch and know it's been one of the the things we've been trying to help everyone understand me look at the two year compares versus them it appears that our business was really clean and healthy two years ago it that way now we expect it will be next year as you think about gross margin next year i
spk_14: we expect market will expand our bottom line and we expect margin both thing and probably to have a point you know in line with our l r p i'm certainly there's there's some headway in theory cook input costs inflationary pressures you're elevator freight cars that are certainly going to continue for a period of time but the still ones as well we that that promotional environment woman claimed
spk_0: we we we certainly would expect we're not going to be the same level of expedite afraid that with the next year or much benefit will be intact i will get you got to kill you know maintenance than other brands to prepared opportunity to strengthen gross margins on the back of stronger brand equity chamberlain dick either example the that and then like that but certainly not least the bigger the biggest that
spk_15: he had a tool in a toolbox years pricing and that we certainly expect and we talked about you going start to the meaningful impact on pricing is early our fiscal que for are as we think about three twenty two and even more so for me to of next year thank you so much an expression is from the line of bob devil guggenheim pushes you to russia again and that i guess the first quick question is are you thinking of changing the name and the company to vans given all of the questions that we have on van
spk_16: when i know but i i i do have a couple questions on supreme if you could
spk_1: you know i think he talked about supreme missing you know or just missing some supply opportunities in terms of the business get can you quantify that a little bit and just as you think about the back half of the year in do expect a sort of get their product and and will you will continue to sell it there and and could use give us an update on the international expansion plans for the supreme business over the next how much thanks is a bad morning the supreme agreement had a disproportionate impact or to be like a disruption that we're talking about that they've gotta and exposure into vietnam in the if you think about the of do the nature of of how they flow product they don't carry forward inventory when when a but a particular drop il is not able to be delivered on time you have to be as an agile model unable to move around but the impacts the tape famous quarter were such that it had a pretty material impact on on what we were able to do in queue to the good news is healthy trends continue to be very strong and we know that we thought a dq decrease in inventory we did he continued you're strong interest in a clear opportunity for the brand to your dick you need to grow but i think the supply chain interruption of are helping us all the that for the benefit supply chain integration that is in place that will help help our supreme team really diversify their footprint and and and focus in areas where we can help maintain your better flow if we think about ill long term and coming into the second half we have line of sight to delivery the inventory required for the for the week drop and that wasn't true six weeks ago so think there's a lot of carthage you that we can recapture that know that and done and we really start to recapture that lot volume and intimate the most recent drop and we've seen a really strong evidence of that demand zoellick yeah they can like of this disruption your the planet is group operates with on the agility to be able to flags and continues to be a competitive advantage in his they integrate into our supply chain will appeal to mitigate the impact peter european question march or international expansion covert had a your had an impact arcane dirty to travel and again to meet and work with our european an international team though that work is the i mean you're continuing virtually i'm our supreme need to get into market the model by which they look for new stores near that really anchors the brand in in new series
spk_6: has been slowed your based on it
spk_15: that worked with our came for they will help them beat up that that that knowledge date with the hit market and that were severely a few months off of what would have better a plan that we were ready to actually go and get were twenty three male but that a graphic expansion potential rename very strong a key part of our growth and your he had continued open stores book in europe
spk_1: and asia as the teams are able to get in the market and and i guess just a bigger question on you talked about wholesale shipments show started not making the second quarter shifting into third think you specifically call it out for vans and can you quantify how much of the in a wholesale business will shift into the third from the second or in what you missed in the second that you'll catch up in a third one yes sir bobby if i can not get you what you need here so obama from a person on this is lower didn't provide guidance for the for the quarter try to try to call it called split their between you two to three agree we knew it was going to be a pretty volatile environment and it certainly played out that way from it i mean shipment timing perspective we use to admit that i've been single digit and up to be yeah organic growth in the quarter relative difficult one the and the and that really impactful across all of our business to certainly several points your growth for for the victory brand that and authored a big just described in a pretty impactful per supreme i in the quarter as well and little bit especially true i would pay us and europe and to a lesser degree to some degree in asia all those small impacts there are ya brian level your began could have been in a sort of at at pre pandemic levels in the quarter and my feet up in temporal on a particular would would show meaningful acceleration versus really worried you one adjusting for or the impact of the of the whole social and the timing and only in terms of it is that what we expect respect you virtually all that gonna get to get out the door
spk_0: and shipped here and in few three
spk_1: and as results one of the reason that we've been comfortable you and you essentially holding our full year revenue outlook and in in a couple with what we see in terms of the strong underlying momentum from a girl from perspective great thank you
spk_17: but
spk_18: next question is or nine of michael been any with credit three the computer
spk_1: a guys thanks for all the detail here yeah steve i think tanks probably color you today i think ethical not helpful thing that i and i can't believe we're still here and want twenty twenty one talking about these big current a virus disruptions bag i here we are so i really appreciate some the commentary on the revenue need ps outlook is is the i could tell you start to look at a fiscal twenty three already and i know you spoke to north face and dickey's i'll of your twenty twenty three gave us no role avenue ne pf thought i wanted you to help us complete paschal than what you hire your initially thinking about bands and timberland for twenty three and then i guess matt if you know i an agency implement a cholera about question on revenues and third quarter versus fourth quarter in his early could disqualify you see the revenue dollars into a quarter growth rates into the quarter and i'm you know it's not like a lot of the wholesale snap back in third quarter but we heard some of the other athletic brands and footwear brands speakers some supply chain constraint way ending in that the march quarter see your fourth quarter i'm just curious what you what you baked into the fourth quarter they thanks my call start speak to quest article twenty three clearly it it's early for us to be able to talk about how we're looking at that but i think the carpet here that we have at our portfolio
spk_19: but we spent a lot of time is strategically have all balding near to where we are today
spk_1: the yo each what about our a potential of achieving it's long range plan in the and you see that happening this year i'm here with many barbarians specifically events we see them getting back to load double digit growth and being able to deliver that on a consistent basis
spk_16: or north big business is building momentum you've heard of you're really begin to talk
spk_1: with your a lot of carpeted the work that been done to to really strengthen their team know you tighten up a merchandising strategies get the flow between the on down and a mountain product collections yeah raising our outlook for the year on a two year basis and succeed eighty percent into the group go to that carpet kimberlin been collecting yeah we see damn really owning a driving that food culture and down as we know really drive are integrated marketplace strategy and the merchandise blow the new products coming with green stripe through cloud i'm from the things to see going on in the women's business you'll get complicated businesses and flirting and has great potential and i'd pick one point or dickey's business rating our outlet as we get this year gadgets now to be a greater than thirty percent on a two years that yet it business is very unique we started with data point of acquisition and the way our team is really looking at horizontally playing out that work and work and sparky but also been thinking on a vertical axis against the different distribution opportunities and moving into higher tiers the distribution with higher the held with product know a little bit more hill style little bit more quality material and an opening up that land and grabbing new consumers i'm on a global basis or we have a brand has the casual cheating billion dollars on here quickly while at the same time you are becoming a benefit from an operating margin standpoint know to the larger bf yeah michael your question on on not on on shaping up of revenue so yeah i'll your question bar bar you further supply chain disruption but but certain contemplating what we know today
spk_17: and in particular around the flow of any tories vietnam ramps up a and que three weeks back revenue to be about three point six billion
spk_1: including hi single digit organic growth vs fiscal year twenty and let me get philanderer the blank flower added to the assume it's going to come up with talked about gross margin at the operating margin of about sixteen percent earning of a leaf the dollar twenty inclusive of about pick fan of incremental up for the i did for a fiscal your twenty okay for the other three from the nine and guys on the point going to sound like say a little bit of a place on the that well a that the nine is the incremental or yeah from our by outlook outlook that thick that is just to give you a hint of the different versus the to your compare ah from an earnings the point about fixing the net quarters or current view
spk_20: okay and i get the elephant in the room is how much as in that three built a point six billion from square game
spk_21: yeah
spk_0: they grow our can't believe you know it's hard to call about i believe it or let applied yeah
spk_22: eight today it like a yeah good haven yale we saw nice bike looks kind of i'd call a small bike but i promise you this is not a dam danielle of it
spk_23: the third at help raise the media attention that will leverage not to my point of but leaning into the classics campaign will use this moment the young and continue to build on your band connection to pop culture but a yeah we're we're focused on think we can control and in the flow of new products and and the benefits that had on banned from your connection the consumer
spk_24: probably more were to that is for sure and thank you get to that italians
spk_1: like michael an expression is are know i have david healthy healthy life you can question
spk_25: hi good morning everyone as he talked about the wholesale basis in the shift to the back half of the year
spk_23: are you saying a different by brand and in terms of that i'm that shift and is a specific accounts were use talked about strengthening and what you're saying and then just lastly on price is priced besides for pricey thing are you taking any price and any the brand with any of the new a product on the
spk_1: you're introducing thank you i dana and a night like the most part for you
spk_23: in terms of the shipment time ago a week is it impacting all of our brand advocate most impactful field the outdoors land at and honestly i would say the two brands that will deter got a feeling it the most to the north faith in supreme honestly but but all of our businesses and i did have a it them impacting at least several point of growth of to the bakery
spk_1: and it related to the comment about about the strength and and fell through that that brought bay you're really across the businesses and i'm talking specifically about the us with the it you know in our big brand certainly we're also seeing it would be emerging brand in the outdoor merging brand new particular the the talk about their like it not only one life certainly the north face branded it is really strong and gun you know the product is moving really quickly as we can get it onto the shells were saying we're seeing significant growth and fell through despite inventory from still well below where they would have been two years ago so to speak speaks to the velocity that we're seeing to go through perspective you particular net brand and i ended with it
spk_26: the go hit go at the you gone to one follow up on the digital business which i think the guidance had been adjusted to twenty percent growth from previously twenty nine to thirty one percent is that due to the stores reopening are there anything you're saying and china or the other market chick flick given that adjustment
spk_0: yeah it's primarily at a china impact
spk_18: data on the it that that's really the that you're the primary driver a minute maybe i'm a couple a the a very small changes in other parts of the bit that basically at the china door
spk_27: and lastly on the freak site do you expect that to go into twenty twenty two if and calendar twenty twenty two yeah we get we expected expect of right yeah from the pressures they're on the on the on on for it and i figure out you about cost right
spk_28: we we expect that to continue from an inflationary standpoint you're moving into calendar twenty twenty two over time i think it will begin to moderate a bit but we're planning as if we're going to continue to see you pretty meaningful increase in front of moving forward now we we do we do expect the the level of expedited for that we've had to navigate the
spk_1: each year because the you that the shut down the near the covert challenges in the supply chain will will certainly look a lot different next year later expectation but in terms of the underlying rates around for a and just that the challenges of of up around capacity than and and and those kind of things that we expect to continued for several quarters thank you an expression line of gym duffy with the whole heathrow question thanks to morning i hope you do a while come the you spoken about this a little bit as it relates to supply chain disruptions but i'm hoping you can discuss so the inventory flow dynamics what that might result in in terms of mismatches an assortment in i'm curious is that likely to have an enduring impact impactor or what are the strategies to manage through that
spk_27: the gym i didn't your long term your this is it had an issue it's really short term your that our teams are at a navigate
spk_13: he had a disruptive your supply chain certain factories were shut down others have been operating it does your left the max capacity of again we know that few to bring our are good darn sure to the different shipping lanes it's it's really short term issue again and i weekend for the most part get ourselves back into
spk_1: i think as we come through cute three and through the condition ourselves well for spring twenty two deliveries but it it's an issue that we don't typically have to deal with and it's it's really more broken assortments yeah were you may not have every item
spk_24: yeah that was planted up for work for said either and our environments are are also partners
spk_1: but that your that's where i came here swing into action are able to to to navigate what we do have to to reset do this or month and and get proper amount of product as we late reply change the order to kill back in again great thanks they also a mask on the ultra brand valuations have some of the comps and the marketplace represent a beacon can you maybe give us an update on the size of the altar business and he expected trajectory for that as you look out over the next year or so
spk_2: yet the other
spk_1: the i would give you a sneak back side i would tell you it's it's more than double what it was from we acquired it actually disappoint point
spk_29: moving toward moving toward triple your fairly quickly i would say
spk_1: in that in that in that the average that have been growing around you know sort of thirty percent or north a thirty percent and as we look into that sort of the near term you i'm your no reason we think we're not going to you see the are certainly north with twenty to twenty five
spk_30: you know the next several years
spk_1: jim it had such a unique position in the market from it your our think about your foot in the and how ya the athlete's foot need to pay really your move to the different motions of running and and that rail line and that we're seeing feel that really play out yoda long peak no it's no secret that it's been called out of than the motorola issue here in the us market marketplace by multiple publication
spk_31: the team's understanding
spk_32: building on it and your history
spk_0: but you were playing a very significant can yeah
spk_33: with a very unique brand new that is scaling it of at a very rapid rate and i'm glad you picked it up because we talk about outdoor emerging brands
spk_1: over five hundred fifty million in revenue that profitable they're growing hiking and each one of them are insignificant pam if you think about that in contact them what's going on in a broader market place and from the i feel that we see you have a history of growing brain what we've done with the north date and van into it we have the potential for doing with brands like an ultra and guy and helping them achieve their their full potential by leveraging the skills and capability and leveraging yellowed aspects of our model to really help them get drive their growth so we can get a question and we're excited about i'll turn and what it what it means not just for the team but not for her bf he that thank you guys thank you jim thank you our final question i'm coming from the line of the ah ha ha he was a clean bnp parva this is your question a good morning thanks to taking my question i'm i'm going to ask about dickey's immature of raised for games to the brand for mid twenties crow told over thirty percent in it what's driving that is that driven by particular region product category you distribution and a for the driven by some of the you know the entrance into the scrub business or and can you see this brand surpassed the one billion dollar mark worse the pam the to to this billion dollar target fake morning that appreciate you to the question him and he going to get tired of just word that no because growth is broad based on it happening across both work and a big talk about the work inspired or the lifestyle component of the brand really leveraging at work know element a more broadly it's growing across all region and it's growing berkeley your beyond it's core work that looking for new point the distribution even in could tear your tier one in tears zero your type distribution channel the brand had a really interesting will pop up shop with fred segal during the quarter and thought it nitpicking fell through and energy or just validating he had his team new approach to the art of thing here the element of the brand he anchored to work i'm extending it into that maker economy
spk_33: that really building a strong community around them all the aspects of of of your creative self expression you're certainly moving into your the make repeat
spk_1: there's a skate element to this brand it's always been there with the eight seventy will work and ever and really gouging that
spk_13: speaking to that consumer you're helping stretch into a new concentric circles
spk_1: but it really looking at integrated marketplace opportunity and and and and really leveraging the core work heritage i'm driving though the icon but you'll continue to fear of all of our our product author yeah higher price point know your higher quality material can make them into a higher tiers if distribution but yeah continue to expand internationally in europe and asia
spk_34: and really new leveraging that that core your work heritage it comes from the us marketplace
spk_33: very helpful thank you how much and then a robot question
spk_1: as an obviously there's a lot of shutter around cotton are matching ten years ago i'm sure you wrap repeatedly about kind of be spun out contour brands but just if you can just remind us about your cotton exposure just your hedging and and just the contract
spk_18: i don't think you buy directly can buy any thoughts on on on just raw mitchell inflation body would be appreciated
spk_0: yeah right okay that when i should probably take
spk_1: yeah cup accountant certainly with the yeah they're program in terms of our our buying cotton and and yeah that the thought a fairly straightforward inconsistent with you know what what the industry would do by and large but i think it worked at recognizing it we've evolved our portfolio or over time to be more focused on your outdoor an active or cotton probably let in terms of the there is any component parts of our product and it would have been historically it about ten percent of the as product called today and based on what we know about the pricing as well with again our our contracts excedrin we expected to negatively impact our product called stop somewhere between a half a point no point in in bit or twenty three very very limited impact this year aren't really to in immaterial and finding owner product golf and asian or next year to be have caught them or unamid mingled digit headwind you know sort of in total thank you very much fat all their color pressure at the i think he said gross margins will still be up
spk_35: next year as that is that's not the right way to think about it despite the inflationary burma that the right way think about it
spk_1: thank you that your like you're on your thank you and to hamilton the call of over to see her intel for causing a life
spk_0: thank you everybody procuring at this morning

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