V.F. Corporation

Ladies and gentlemen, thank you for standing by. My name is Krista and I will be your conference operator today. At this time, I would like to welcome everyone to the VF Corporation first quarter fiscal year 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press the star one again. Thank you. And I would now like to turn the conference over to Allegra Perry, Vice President of Investor Relations. Allegra, you may begin.

Thank you. Hello and welcome to VF Corporation's first 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 this morning on our investor relations website and which we use as lead numbers in our discussion because we believe they more accurately represent the true operational performance and underlying results of our business. You may also hear us refer to reported amounts, which are in accordance with U.S. GAAP. Reconciliations of gap measures to adjusted amounts can be found in the supplemental financial tables included in the presentation, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Joining me on the call will be VF's President and Chief Executive Officer Bracken Darrell and EVP and Chief Financial Officer Paul Vogel. Following our prepared remarks, we'll open the call for questions. I'll now hand over to Bracken.

Thanks, Allegra. And a good early morning to all of you from Vance headquarters on the West Coast. Welcome to our Q1 fiscal 26 earnings call. In spite of all the macro noise out there, we delivered above our guidance this quarter, a good start to the fiscal year. But the much more exciting thing happening is inside the company. You can feel how dramatically we're transforming. The processes, teams, product engine, and marketing approach. Even the culture. Almost everything. And that's all happening as we improved our top-line trend to negative 2% in constant dollars and flat in reported. A year ago, only 10% of our business by revenue was growing. And today, that number is almost 60%. We also delivered a much stronger bottom line, a loss of $56 million in our seasonally low Q1, about $50 million ahead of the high end of our guidance and ahead of last year. Paul covered the numbers in more detail, but in short, we're making solid progress towards our goals and are highly confident that we will turn VF back into a growth company. Now let me summarize where we are in the VF turnaround as I pass the two-year mark as CEO this month. I love transformation, and we are transforming. We've assembled a great team at the top with some of the industry's best, who we've either brought in from the outside or are promoting from the many leaders who grew up in BF and experienced it during its long, strong growth phase. We've dramatically improved our cost structure, reduced well over $300 million of cost, and have another $500 to $600 million of net operating income improvement in our sites. Even more importantly for the long term, We're building a unified product and marketing engine across each brand globally and leveraging the strong standardized processes we've created. The architecture and organizational structure changes are now complete to deliver results. You'll see more powerful product and marketing as time flows. We prioritize strengthening our balance sheet and in fiscal 2025, as you know, we reduced our leverage a full turn and have a clear path to below the two and a half time leverage. target that we initially set by fiscal 2028, that's just two years away, despite the anticipated tariff impacts, all the anticipated tariff impacts. Paul will talk more about that shortly. We continue to be focused on paying down our debt, but we're doing it as we invest in growth. So lower costs, improved margins, declining debt, and a transformed organization. But what's all this leading to? Why are we doing this? Of course, it's all about one goal, growth. Turnarounds, by definition, start with declines. It's been two years of resetting the table, and soon we too will move to growth, as we did in every turnaround I've been part of. That's the focus of every leader on my team and throughout the company right now. We're all here to grow. We have so many opportunities for growth, but today let me focus on them by brand, starting with our top three. First, we're going to bring vans back to growth. We don't like the numbers on vans any more than you, down 15% in Q1. About 40% of the decline can be attributed to channel rationalization actions, as you know. Excluding these, if you look at the underlying trends, vans is running down high single digits, but we're seeing some bright spots. We'll get vans back to flat and then to healthy growth as fast as we can. There are some out there who think this will never happen. I sort of love having that point of view out there. I get it. And it's our job to show you how wrong that point of view is. I'll come back to Vans and talk more in just a minute. Second, the North Face grew 5% this quarter, but our goal is to go from mid-single digits to high single digits and even to double-digit growth on a path to doubling revenue. That might sound ambitious today, but it's exactly what our brand president, Caroline Brown, laid out at Investor Day. We aren't promising to achieve those growth rates in the near term, but that's what we're focused on delivering. Our product innovation pipeline continues to build momentum for the brand. Footwear was up strong double digits again this quarter and is becoming a meaningful part of the business. In addition, our bags and packs business also grew strong double digits. But our biggest potential is actually in lifestyle apparel in general and spring and summer in particular. In fact, this is all to say we have many, many untapped growth opportunities in the North Face. Third, we're going to support the sustained momentum and growth of Timberland. The brand grew 9% this quarter, with global momentum in the six-inch boot and a growing business in the boat shoe. Our marketing strategy is working, enhancing the brand's visibility and further broadening its reach and relevance in warmer weather. As we've seen with its presence at events like the Met Gala and the NBA Finals, and just a lot of organic social media that we seed and amplify. We're more confident than ever that the upside opportunity to break out of Timberland's historic revenue range is real, and we have the team in place to do it, led by Nina Flood. This is a business where the brand and the culture are much bigger than the business itself in size, and therein lies the potential. Finally, we'll fuel the other growth engines as they show their potential and truly turn VF into a multi-brand powerhouse. Let me point to Altra in this case, which had another strong quarter, up well over 20%, and has grown from $60 million of revenue when we bought it to being on track to exceed $250 million this year. And that size with less than 10% awareness in the U.S. and much lower than that in the rest of the world. This is the kind of business that we can scale. It's already tied for the number one shoe in trail running in the U.S. and one of the fastest growing franchises in the road running business. Now let me return to Vans. As a management team, we know the impact of VAMS on BS valuation, and we can see the focus around the timing of a turnaround. We get it. Let's talk about what we're seeing and thinking. First, we have a great leader, Sun Che, and she and her team are executing on the plan laid out in Investor Day. I was just looking at more of our future lineup last week here in Costa Mesa, and things are really coming together. Each quarter, you'll see new entries. This team's freedom to innovate will be less and less constrained by the practicalities of the old product creation process as each quarter passes. So you'll see more and more ahead. But there are already positive signals in the pinnacle side of the business. We had a 50% increase in appointment bookings at Paris Fashion Week in June, including new accounts and accounts who have delisted bands in recent years coming back. If you didn't notice, there was also a strong reaction to the sheer number of skate-inspired silhouettes featured by many luxury brands in Paris this year. These are the style setters and the tastemakers. Trends start in the luxury market, as we saw in Fashion Week for Timberland with Louis Vuitton last June. I'm not suggesting that Vans will be growing 9% a year from now, but I am excited to see the tide turning on skate-style shoes and luxury where trends start. Premium today is a small part of Vans, but this shows how sensitive this business is to new products. We don't have enough new products in the premium or the mainline yet, but Sun and the team she is assembling are new product machines. New products are coming. With the recent changes in our supply chain, we're starting to accelerate our pace to market too. Meanwhile, Sun and her team are working away on increasing supply and variety in our latest products that already have strong interest, like the Super Low Pro, the current CableScape, and the latest from OTW, our Pinnacle offering. We're also seeing encouraging signs in one of our classics, the Authentic. We have an exciting collaboration with Valentino in that shoe hitting the market this fall. Now, what about the actions we're taking to make sure those new products, all of our products, are in the right places with the right support for long-term growth and profitability? As we've discussed, we've taken deliberate actions to improve our channel mix to set us up for high-quality, sustained, and profitable growth. These actions will continue to impact advanced business through Q3, so as we exit the year, our channels should be at our future state. We're already seeing some solid results in wholesale. America's sellout trends continue to improve as non-value accounts grew again this quarter. In DTC, over the last two years, we closed about 140 stores, about 20% of our global network. While it's tough medicine affecting revenue, it's improved our profitability. We've also now reoriented about 90% of our full-price America stores to provide greater gender clarity, and we'll continue to change the format to show more newness and footwear focus in our visual merchandising. In the pilot store on Fifth Avenue, we delivered positive comps in Q1, significantly outperforming the rest of the fleet. Over in Europe, the elevated London store generated a 15% better revenue performance than the rest of the EMEA fleet, driven by a significantly higher average selling price, 35% higher, through a more premium product offering. Based on these early successes, we'll be rolling out our new retail playbook to improve assortment, curation, and navigation to other regions. It's also worth mentioning that in EMEA, we've executed on a key city strategy where we have elevated our merchandising and focus in those stores. And this is generating exciting early results in that region, with those stores starting to perform better than the rest of the network. And finally, on marketing, our approach simply hasn't driven enough traffic. While the whole industry is affected by slower traffic right now, we don't accept that, and we're changing our marketing approach. I can't disclose too much now, but keep watching the space. An aspect of our marketing that is powerful is the long-awaited return of the Vans Warped Tour. In its restart year, we planned three locations, and we intended to sell 50,000 tickets in each location, which would be about twice any single Warped Tour event in history. Then we sold out of all three events in hours. We added a lot more tickets and sold those out immediately, too. Sunday, I was at the second of these events in Long Beach, and over the two days, we had almost 170,000 people at surely the largest single collection of Vans footwear and apparel ever assembled in one place. Everyone was in Vans of all kinds. You could really feel the love for Vans. People came because they love music and they love Vans, and they're inseparable for many. 80, that's eight zero, different artists, eight stages, and just a huge boost for the brand. To wrap up on VANS, we're on track with the turnaround and couldn't be more excited about what's coming next. Keep watching. We are well on our way to transforming VF, and this quarter is another step in the right direction. Our powerful portfolio of brands and the sustainable growth model we're creating will help us accelerate growth and improve margins. We're on a path to achieve our targets and build a stronger VF. Our focus is on growth. I'll now hand it over to Paul, who will go deeper into the numbers. Thank you, Bracken.