The paragraph introduces the VF Corporation's Second Quarter Fiscal Year 2025 Earnings Conference Call. Abby, the conference operator, initiates the call and introduces Allegra Perry, the Vice President of Investor Relations. Allegra welcomes participants, explains that forward-looking statements will be made, and mentions that the results discussed will be on an adjusted constant dollar and continuing operations basis. She also notes that reconciliations to GAAP measures are available in the press release. The call will feature VF's President and CEO, Bracken Darrell, and EVP and CFO, Paul Vogel, who will provide remarks before opening the call for questions. Bracken then takes over the call.

The paragraph provides an update on the company's performance and strategy. In Q2, the company achieved positive results, adhering to expectations despite a decline in revenue, particularly noting progress at Vans in the Americas. They improved gross margins and performed better than expected on SG&A. The company is advancing its VF transformation, emphasizing its priorities. It generated $65 million in cost savings in Q2, aiming for $300 million by the fiscal year's end, with plans to exceed this target. They are reinvesting savings into product and brand development. Additionally, they made significant progress in strengthening their balance sheet. More details on these strategies will be shared in an upcoming investor event.

The company is working to normalize inventories and reduced them by 13% compared to last year while also decreasing net debt by $450 million. Following the Supreme divestiture, they received nearly $1.5 billion in net proceeds, used $1 billion to pay off a term loan, and plan to settle another $750 million loan by the year's end. The U.S. business is improving with a 9% revenue drop in Q2 compared to 13% in Q1, aided by a focus on brand elevation and full-price sales. Additionally, the Vans brand reported an 11% decline in Q2, an improvement from a 21% drop in the previous quarter, showing progress under new leadership. Initiatives like the Knu Skool product and new franchises Upland and Hylane, as well as the OTW premium label and influencer program, are contributing positively.

During New York City Fashion Week, the brand made a cultural impact by engaging with influencers and achieving 100% sell-through of the Satoshi and Paralyzed OTW Classics. The Paralyzed OTW Classics were popular despite CHRO Brent Hyder's reservations, and a particular collaboration sold out in five minutes after its launch. Consumer interest showed positive trends in Q2. The North Face, although experiencing sequential revenue decline in Q2 due to high prior-year comparisons, saw strong performance in backpacks and growth in APAC through the Summit Series. The brand had significant wins in EMEA, with athlete Katie Schide setting a record at the Ultra Trail du Mont Blanc. A new global brand campaign focused on women generated strong digital media response. The North Face is investing in retail, with a new store in Brooklyn featuring a shop-and-shop for refurbished products and a planned Fifth Avenue location opening in 2025. Time Magazine ranked The North Face as the top outdoor apparel brand. The paragraph then transitions to discussing Timberland.

The brand experienced a sequential improvement in revenue, with Q2 showing a decline of 3% compared to a 9% decline in Q1. The yellow boot product performed well globally, boosted by a new campaign. The brand is optimistic about further improvements in Q3. Paul Vogel highlighted the financials, noting a reduction in costs and improvements in the balance sheet. Q2 revenue decreased by 6% year-over-year, an improvement from a 10% decline in Q1. Vans saw a smaller decline of 11%, compared to 21% in the previous quarter, due to inventory cleanup efforts. The North Face also saw a slight decline, while strong momentum in Greater China was offset by challenges in the Americas.

In the quarter, Timberland's performance improved with a 3% decline compared to a 9% drop in Q1, aided by growth in premium boots. Dickies also showed improvement, with an 11% decrease compared to a 14% decline in Q1. The Americas' sales fell 9% in Q2, better than the 13% decline in Q1, while EMEA saw a 5% drop, with September being a record month. The APAC region grew by 5%, led by The North Face and China, which showed sequential improvement in both direct-to-consumer (DTC) and wholesale figures. The gross margin increased by 120 basis points to 52.2% due to product cost savings. SG&A expenses decreased by 14% year-over-year, with a shift in some spending to Q3. The company realized $65 million in savings from their reinvention program, targeting $300 million in total savings. Operating margin reached 11.4%, and operating income was $315 million. Earnings per share dropped to $0.60, a decrease of $0.03, helped by a lower tax rate due to favorable discrete items.

In the paragraph, the company reports progress in reducing inventories by 13% by the end of Q2 and highlights the sale of Supreme, aiming to reduce debt by paying off a $1 billion loan. They plan to provide revenue and profit guidance one quarter ahead, starting with Q3, where they anticipate revenue between $2.7 billion to $2.75 billion, reflecting a decline of 1% to 3%, impacted by foreign exchange rates. Operating income for Q3 is expected to be between $170 million to $200 million, with an improved gross margin due to lower product costs and less need for reserves. SG&A costs are predicted to rise slightly due to the reinstatement of incentive compensation. The tax rate is expected to be in the low 20s for Q3. Although Q4 guidance is not provided, they foresee continued sequential improvement in revenue trends and gross margin, with SG&A growing at a rate similar to Q3.

The paragraph discusses a business update where they revised their full-year free cash flow expectation to $425 million, down from their earlier guidance of $600 million. This adjustment reflects a $140 million impact from selling Supreme and a slightly higher gain from selling non-core physical assets. Additionally, they plan to invest an extra $50 million in their Reinvent initiatives to drive cost savings in fiscal '26. The speaker expresses optimism about the progress in key financial priorities and looks forward to further discussions on their financial strategy. The Q&A session begins with Adrienne Yih from Barclays asking about drivers of business predictability, particularly regarding the Vans and TNF brands, and about planned incremental investments. Bracken Darrell responds, highlighting improved predictability in revenue, gross margins, and SG&A expenses, especially in the Americas.

In the paragraph, several executives discuss the company's global revenue forecasting and investment strategies, focusing on products and marketing. Laurent Vasilescu from BNP Paribas asks about the health of their wholesale business and inventory levels approaching the holidays, and about the company's free cash flow guide. Bracken Darrell responds, expressing confidence in the wholesale business's positive trajectory and stating that channel inventories are healthy globally, albeit with some regional variations.

The paragraph discusses the state of channel inventory and free cash flow. The speaker indicates that while some regions, like the North Basin, are slowly taking in inventory, they feel positive overall, despite some challenges in China, particularly with the Vans brand. Regarding free cash flow, Paul Vogel mentions that they do not provide quarterly guidance due to variability but feels positive about the annual performance in line with expectations and perhaps slightly better. They plan to reinvest $50 million into the business for future benefits in 2026. The conversation then shifts to a question from Simeon Siegel about fixed and variable costs.

In the paragraph, Simeon Siegel asks Bracken Darrell about the company's revenue, profit improvement, and their approach to managing expenses and reinvestment priorities as they work towards increasing sales. Bracken mentions that the question will be addressed in more detail on Wednesday but expresses confidence in their current strategy and momentum. Simeon inquires further about average unit retail (AUR) versus unit sales and any discrepancies between them. Bracken responds that they don't provide specific details on that but feels positive about their brand elevation program, acknowledging that it will take time to reach full scale. Paul Vogel adds that they're seeing more full-price selling, which is promising.

In the paragraph, Bracken Darrell discusses the performance and expectations for the Vans brand, specifically in the U.S. market. Contrary to previous assumptions that B2C (business-to-consumer) would improve before wholesale, he clarifies that wholesale is actually performing better than B2C. This is attributed to the consistent customer traffic that wholesalers experience, whereas B2C relies on generating its own traffic. Darrell notes that as product offerings and pipelines improve, the wholesale channel should continue performing well. He also mentions that wholesale partners have provided positive feedback on the progress being made with Vans.

In the paragraph, Michael Binetti asks Bracken Darrell to provide early examples of how the regional platform is benefiting Vans' day-to-day go-to-market process. Darrell explains that, particularly in EMEA and APAC, they have historically excelled in deeply understanding their key accounts to foster mutual growth. This approach is now being extended to the Americas, initially benefiting the major accounts and eventually all wholesale accounts. Brooke Roach from Goldman Sachs then inquires about the expectations for gross margin changes in light of better full-price selling and reduced product costs. Paul Vogel responds, indicating that gross margin is expected to rise in Q3 and Q4, partly due to benefits from actions taken the previous year.

The paragraph features a conversation in which Lorraine Hutchinson from Bank of America asks Bracken Darrell for insight into The North Face's performance in North America, particularly in relation to the winter season and feedback from wholesale partners. Bracken responds by saying it's too early to make definitive statements and that he is optimistic despite last year's late winter. He notes that internal factors, such as improvements in the company's go-to-market structure, give him confidence in meeting their guidance, regardless of the winter's severity. He emphasizes that their performance is under control and believes they will deliver as planned. Following this, another question from Matthew Boss of J.P. Morgan is introduced.

In the paragraph, Bracken Darrell responds to a question from Matthew about the reset actions taken by Vans at the end of the previous year. He mentions that these actions are now behind them. He outlines the company's top priorities, particularly highlighting the introduction of new products and the influential role of Sun in these developments and marketing strategies. Although specific timelines for revenue growth are not provided, Bracken expresses optimism about future improvements and increased search interest in major markets, indicating positive momentum for the Vans brand. Matthew concludes with well wishes, and the operator introduces the next question from Jay Sole of UBS.

In the paragraph, Bracken Darrell responds to a question about the decision to issue quarterly guidance instead of full-year guidance. He explains that guidance was initially removed because there wasn't enough confidence in the internal numbers. Now, they feel confident enough to provide guidance, but only on a quarterly basis. Bracken mentions discussions with Paul, who influenced his decision, highlighting the idea that there's nothing inherently significant about providing yearly guidance as opposed to quarterly. The focus is on delivering consistent results each quarter, and further details will be discussed in an upcoming meeting on Wednesday.

In the paragraph, Bracken Darrell addresses Tracy Kogan's questions during a call. Kogan, filling in for Paul Lejuez, inquires about anticipated savings beyond $300 million and whether there will be a similar reinvestment strategy as before. Darrell defers a detailed response until an upcoming announcement but expresses satisfaction with the initial savings round that tackled major inefficiencies. When asked about the North Face brand's performance in North America, Darrell notes no significant monthly trends influencing pressure, attributing current conditions to expected patterns and a cold spell in New York encouraging North Face purchases.

In the discussion, Paul Vogel explains that North Face's performance was slightly down sequentially from Q2, aligning with their expectations and previous guidance. Ike Boruchow from Wells Fargo seeks clarification on non-core asset sales, mentioning an anticipated figure of $50 million to $100 million, and inquires about the completion of a portfolio review. Bracken Darrell indicates that the review is officially done for now but will continue to be reassessed based on strategic and performance factors. Paul Vogel adds that they exceeded the expected $60 million from asset sales by about $50 million.

In the paragraph, Bracken Darrell responds to questions from Jonathan Komp and Jim Duffy during a financial call. He mentions that the business performance is consistent with expectations, without providing specific details on improvement rates. Additionally, Darrell expresses excitement about the company's trajectory. When asked about Timberland's premium boots, particularly the iconic yellow boot, Darrell notes strong global interest, attributing some success to collaborations like the one with Louis Vuitton, while humorously mentioning his personal purchases of the boots.

The paragraph discusses the current status and strategy for the Dickies brand. Bracken Darrell expresses his admiration for the brand and notes that they are in the middle of stabilizing it. A new leader, Chris Gobel, who was successful at Gap, has been appointed to guide the turnaround for Dickies. Although there is optimism about the brand's future, it's stated that more detailed discussions about brand strategies, including Dickies, will occur later in the year. The immediate focus is on stabilization, with growth to be addressed subsequently.

In the paragraph, Bracken Darrell responds to Bob Drbul's questions regarding brand performance in China and inventory management. On inventory, Darrell mentions that the company currently has about 155 days of inventory, which he considers a good number, but believes there is potential to reduce it further with internal changes. He assures that there is no reason for inventory levels to increase and expects them to decrease over time. Regarding China, Darrell implies that their observations align with the general market trends noticed by others.

The paragraph discusses the current business performance, particularly focusing on the brand The North Face, which is highlighted as the strongest in China and a focus for the future. Other brands like Vans are in various stages of turnaround or performance. The conversation touches on free cash flow guidance and the factors contributing to brand performance improvements, attributing them to a mix of better products and easier market comparisons. Bracken Darrell and Paul address questions from Dana Telsey about brand performance, suggesting an integrated approach to improvement.

The paragraph discusses changes in the value channel for Vans and the overall business. The speaker acknowledges the difficulty in gauging the impact of each change on quarterly results but expresses confidence in the synchronization of plans across brands, which should have a larger impact over time. Although it's challenging to specify individual contributions to current numbers, the overall direction is positive. In response to a question about the promotional environment for Vans, The North Face, and the industry ahead of the holiday season, it is noted that the situation appears better than the previous year, with less inventory being carried by the company and its wholesale partners.

In the paragraph, Bracken Darrell discusses the Vans brand's performance and growth opportunities for VF Corporation. He notes that while Vans is a significant part of the company's business, it is underdeveloped internationally, which presents an opportunity for growth. However, he emphasizes that there is also substantial growth potential within the U.S. market. Darrell expresses excitement about the growth opportunities both domestically and internationally, highlighting this potential as an exciting aspect of VF Corporation. John Kernan acknowledges the response and looks forward to more details in the future.

Bracken Darrell concludes the call by thanking the participants and expressing excitement for the upcoming Investor Day, which will be the first for him and Paul, as well as the leadership team. He mentions progress made on their priorities and promises new information in the upcoming session. The operator then closes the call, thanking everyone for their participation.

This summary was generated with AI and may contain some inaccuracies.