Greetings, and welcome to the VF Corporation Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allegra Perry, Vice President of Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to VF Corporation's third quarter fiscal 2024 conference call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. Unless otherwise noted, amounts referred to on today's call will be on an adjusted constant dollar basis, which we've defined in the press release that was issued this afternoon, and which we use as lead numbers in our discussion, because we believe they more accurately represent the true operational performance and underlying results of our business. You may also hear us refer to reported amounts, which are in accordance with U.S. GAAP. Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the press release, 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, Matt Puckett. Following our prepared remarks, we'll open the call for questions. I'll now hand over to Bracken.

Hello, everyone. Thanks for joining us. It's nice to be here with you for my second earnings call with VF six months in. Before I get started, I'd like to let you know about an important development within my leadership team. Matt Puckett, who's sitting right next to me, will be stepping down as our CFO later this year. He and I have agreed that it's time to make a change as part of the overall transformation efforts we're introducing across the company. Matt will stay on until we appoint his successor to help ensure a smooth transition. I want to thank Matt. His tenure at VF spans almost 23 years with roles across the organization and around the world. Since my arrival last July, Matt has been a valuable member of the team and an important player in helping to advance our transformation agenda. I really appreciate his contributions and his continued service to VF during the transition. He's also just a great person and we'll miss him, but not just yet. He'll be here for a while. Moving back to the quarter or back to today's order of business, first I'll review the quarter, then I'll update you on our four near-term priorities we described in last quarter's call, which we call Reinvent. I'll then talk briefly about our newly announced strategic portfolio review, and then I'll hand it over to Matt to cover the financials a little more deeply. Q3 was a particularly disappointing quarter with total revenue down 17% compared to down just 4% last quarter, where the results did benefit from a timing shift in deliveries. Results were challenged across our brands, including The North Face and the rest of the outdoor brands. The big Delta came down to five things. Number one, unseasonably warm weather most of the quarter. The average temperature was 3 to 4 degrees higher than average in the northern hemisphere. Number two, a difficult compare given the operational challenges we faced last year. As a reminder, last year we were late with deliveries leading to revenues that would have been recorded in the second quarter coming in the third quarter. We corrected these operational issues this year, which led to a tougher compare. Number three, continued America's underperformance. This was the last quarter operating without an America's regional platform and we expect these changes to result in improved America's results over time. Number four, we also made our results this quarter a little worse by cleaning up Vans as we reset our channels. And finally number five, there was some impact in the cyber incident as we closed the quarter. These are disappointing numbers across the board and we're acting with urgency to improve performance so that we do not report another quarter like this. We expected a weaker quarter for The North Face, but results were worse than our expectations, impacted largely by the Americas region, while international performance remained strong. Of course, the weather was a factor as temperatures were substantially warmer than normal throughout the quarter. Of note, in January, the weather got cold and The North Face returned to growth across all three regions. We believe our performance is strongly held back by the operating model that we're now transitioning away from. Let's talk a little bit about the Americas. We now have our new commercial organization in Americas platform in place and are confident this will translate to improved results for the brand and across the rest of our brands. At Vans the decline looked like it did last quarter by the numbers, but underneath there's a lot changing. I've been spending more than half of my time with our team reviewing strategies, new products, and marketing plans. Product and marketing are obviously every brand's foundation. Brand turnarounds have certain features. Three of them are a clear brand purpose, a product plan that will eventually result in growth and marketing that weaves them together. If you look at the history of every great brand, a founder creates a trademark and launches its products under it. As truly strong brands move through time, ownership evolves and almost becomes shared. The best brands learn to share and pay respect to their most important customers, those who are the most influential. While customers don't create products and marketing campaigns usually, they are the ones who drive the success through their ownership and advocacy. During the period from 2015 to 2020, the brand really took off. It got energized and accepted by new groups thanks to cultural trend makers. More celebrities started to wear them. Moms bought them for their kids, and we actually took our eye off the core youth audience that had been the lifeblood of Vans. The brand had to evolve. But rather than continue to respect and serve the youth audience that had built the brand, we only fed the trend that grew it rapidly. We largely withdrew marketing to the core youth and instead focused on everyone else. We extended our lineup to lower price points and value stores, and we offered more and more color waves of the same old things to pour more fuel into a fire built on a trend. The trend fuel burned out 18 months ago. The trend moved on. When a brand loses its way, the answer starts at its foundation, its purpose, and target audience. So now I'll wet your appetite with my opinion about where we are. We have created a package of a deeply rooted brand purpose, clear segmentation, 18-month marketing plan, and a solid product roadmap. This package is in place. We have a map back to growth for Vans. I'm not ready yet to commit to when the brand will return to growth, but it will. In the meantime, let me talk about a few dynamics we're starting to see emerge. First, we continue to see a strong performance from newer things in the Vans product portfolio, which are becoming a larger share of our business. The new school, for example, is still small, but it's growing well, especially among young girls in the U.S. I'm not pointing that style to suggest it's the turnaround shoe. There won't be a single one as you will see. We will have a cascade of new products over the next several years, but I am encouraged by how this style is resonating with the very cohort we've lost over recent years. We're resetting the marketplace in Q3 and Q4, changing our marketing and beginning to launch relevant new products in the coming seasons. I'm energized by the progress of Vans, including with the search for a new brand president. There's more to come. Timberland also sagged under the weight of the warm, high season weather and underperformed in the Americas. Importantly, our global DTC business was only down mid-single-digits in the quarter despite the weather. The important news this quarter was my announcement of Nina Flood as the new Global Brand President. She is the second strong internal VF leader I've promoted within my leadership team, the first being Martino, who runs the Global Commercial Organization. Nina brings extensive experience across general management, brand marketing and strategy with a 20-year career at VF spanning multiple leadership positions. I've been impressed by Nina since the first time I met her six months ago. In early Q4, you might have seen the brand's Louis Vuitton Timberland collaboration created enormous buzz at Paris Fashion Week and I'm excited about the brand's potential. More to come on that in future calls. To round out our highlights, VF continues to be recognized for our sustainability leadership by MSCI, where as of December 2023, we carry the top rating available for companies for the first time. In fact, we are the highest ranked in our industry. I'm immensely proud of our ongoing commitment to sustainability and it shows what we're capable of in this business across all parts of it when focused and invested. I'm keenly aware sustainability performance without company performance is not satisfying. To me it's not just a good thing to do, but it's an example of what we're capable of in every part of our business. Now we have to work to get our company performance to match that. Now let me update you briefly on Reinvent, which prioritizes aggressively four key areas we introduced last quarter, which are first, fix the U.S.; second, deliver the Vans turnaround; three, lower our cost base; and four, strengthen our balance sheet. As part of the recently established Global Commercial Structure led by Martino, the America's regional platform is taking shape. Every day this platform improves and changes have already resulted in giving management greater transparency on the business. They will take time to bring it up to the standard we have around the world. EMEA and APAC have consistently outperformed our U.S. business and Martino has imported the same key processes to the U.S. platform, including the areas of key account management, go-to-market execution, merchandise planning and forecasting. The overall discipline of one approach has been sorely missed in the U.S. The Americas team is expected to be fully in place and operational as we begin the next fiscal year. I discussed the Vans turnaround already. I'll just reiterate a few things. Along with the work we are doing on brand purpose, product innovation and marketing, we're resetting the marketplace to accelerate our progress now. This marketplace clean-up will integrate with products and marketing spun from the same storylines and that is a new approach relative to the past few years. I'm excited about what's ahead. On costs we're on track to deliver the $300 million fixed cost savings target which is entirely within our control. This quarter we began to simplify and right size the company's structure, real estate and other non-strategic areas. Matt will talk you through some of the numbers here. There's more to do, but we're making very good progress. Reducing debt and strengthening the balance sheet remains a top priority and during the quarter we benefited from the reduction of inventories and the recent reduction in the dividend. We're already reducing the net debt substantially this quarter versus last year and that's before we sell any assets. We've also identified noncore physical assets which will be monetized in the coming quarters and we're activating a plan to pay down our next two rounds of debt without refinancing. As the next phase of our transformation plan, today we announced a strategic review of our brand portfolio in alignment with the Board of Directors. This is the next natural step in our turnaround plan as we continue to execute on reinvent. VF has a long history of growth and value creation through the evolution of our portfolio. We are objectively assessing what fits and what doesn't as we look to reshape our business toward the greatest opportunities for near and long-term profitable growth and value creation. Looking ahead to the rest of the fiscal year, as we continue to implement actions and make instrumental changes across our business, we remain focused and committed to achieving our cash flow objective for fiscal 2024. We eliminated revenue and profit guidance for now, but we're committed to cash flow and we're on track to deliver. Now, let me briefly address the cyber incident we experienced in December. It obviously impacted us, but it could have been much worse. I'm super impressed by the quality of work done by our teams across the company. Rarely have I seen a company rally so quickly and so effectively to a cause. Great preparation beforehand, leadership and teamwork during and meticulous follow through mitigated the impact. I don't think it could have been handled much better and I'm really proud of the team. We've instituted a range of additional controls to derisk the potential for any future incidents. Now I want to summarize what I see VF becoming over the next several years. We're leveraging our strengths, world-class brands and great people while taking action to make VF leaner, faster and stronger through proactive measures. As I outlined last quarter, this will take time, but we're making progress quickly and building on what we laid out just a few months ago. The ultimate outcome will be a leaner, more cohesive set of brands relentlessly focused on the consumer and will deliver industry-leading innovation in products and marketing, enabled by much more efficient operations. Design or perhaps a better word for it in this industry for now, innovation will be at the center of our transformation agenda. Our commercial operations will run efficiently and effectively across all three regions. Each brand will have powerful capabilities to build innovative products consumers are hungry for with powerful marketing to tell their story. With that, I'll now hand this over to Matt to talk you through the financials.

Thank you, Bracken. Before I get into the financial update, let me take a minute to reflect on my time at VF. I've lived and loved VF for over two decades and my time with this great company has provided me with many enriching and fulfilling experiences across our business and across the world. I'm thankful for those many opportunities and more importantly, for the great friendships and relationships that have come from it. However, there always comes a time for change and Bracken and I are aligned on this being the right time. While I'll be stepping down in the coming months, in the interim, I remain committed to helping pursue the transformation agenda, leading the finance organization and supporting the transition. Now turning to the quarter. Throughout Q3 we remained highly focused on strengthening both our business fundamentals and our balance sheet. At the same time, we are advancing our transformation program Reinvent with a sense of urgency and resolve to execute against and identify new and additional opportunities to reshape and improve VF. Now I'll start with a review of the quarter, then provide an update on Reinvent and finish off with some thoughts on the year to go period. Total revenue was down 17% for the quarter as both global Vans and the Americas results remained pressured as expected. On a global basis, wholesale led to decline at down 28%, while DTC was down 9%. Excluding Vans, DTC was down 3%. Before going into a review of the regions and brands, I'll spend a few minutes outlining some items which impacted the quarter. First, Q3 was impacted by the expected timing related shifts in wholesale, where on-time deliveries this year benefited Q2 while impacting Q3 relative to the prior year period. This had an overall impact of about 2.5 points on total revenue in the quarter and 5.5% across the global wholesale revenue. Second, as Bracken mentioned earlier, we took proactive measures to accelerate the Vans turnaround by introducing several reset actions at the brand in Q3, which impacted total VF revenue about 1.5% in the quarter and may have a further impact into Q4. These actions are largely focused on ensuring we have a clean marketplace with the right level of healthy inventory into which we can more effectively introduce upcoming newness while positioning our partners and Vans for overall better sell-through and profitability, as well as delivering a more compelling brand presentation to consumers. Finally, results were impacted by the cybersecurity incident in December, which briefly disrupted our ability to fulfill orders over the pre-holiday period. We estimate the overall impact to Q3 revenue was less than 2%. From an EPS standpoint, the estimated impact was approximately $0.04 to $0.05 on the quarter. This does not include any potential recovery from cyber insurance. I'd like to take this opportunity to commend and thank our teams, particularly those in digital and technology, who worked tirelessly through the holidays, for the truly amazing effort that allowed us to quickly recover and return to servicing consumers and customers. Moving to the operating review by region, Americas was down 25% in the quarter. As anticipated, we saw the most pressure in wholesale which was down 35%. DTC, down 16%, reflected softer sell-throughs throughout the holidays, particularly outside of promotional windows in addition to weaker sell-through in cold weather and seasonal products, particularly in the outdoor segment. EMEA was down 12%. Excluding the impact from the wholesale shipment timing, the decline would have been about 7%. We are seeing slowing consumer confidence and greater caution continuing in the wholesale channel. DTC was down 1% but up slightly excluding Vans, with The North Face up mid-single-digits. Like the Americas, we also experienced a more challenged sell-through on cold weather seasonal products across Europe. The APAC region continues its growth path and was up 3% in Q3. Aside from Vans and Dickies, all of our brands that operate in the region were growing, led again by strength in The North Face. Also to note, VF revenue was up 7% in Greater China. Turning to the performance by brand, The North Face revenue was down 11% in the quarter. Excluding the wholesale shipment timing shift, The North Face revenue would have been down mid-single-digits. The Americas region results were challenged and our performance fell short of our expectations. After a slow start to the fall-winter season, momentum remained subdued and performance was choppy throughout the quarter. While core bestselling lines continued to deliver strong sell-through, we saw softness in cold weather items and some seasonal product offerings. The brand remained relatively stronger in international markets. In APAC, momentum continued in the quarter with the brand growing 28% in the region and more than 30% in Greater China. In EMEA, Q3 was down 5%. However, DTC growth continued in the region and was up 6% this quarter. Overall in EMEA, when looking across Q2 and Q3 combined to neutralize the impact of shipment timing across the quarters, the brand was up high single digits within the region. Vans Q3 revenue was down 29% and down across all three regions, broadly in line with half one when accounting for the intentional reset actions we took in the quarter to clean up the marketplace and reposition our wholesale channel. These negatively impacted global revenue by about 5 points in Q3 and may have a further impact in Q4 as we complete the work. Timberland was down 22%, driven largely by the Americas region where channel inventory and retailer caution remained a headwind and specific to the brand's assortment, boots and other seasonal product have been challenged this season. Internationally, the business performed relatively better, highlighted by low-single-digit growth in APAC. Dickies results continued to be pressured with revenue down 17% in a quarter. America's again experienced declines with softer sell-out trends in a core work business and specifically in the value-oriented distribution. International markets were impacted by the results in Europe, which were down as a result of wholesale timing shifts into Q2. However, the underlying business continues to be good, and the APAC market continued its reset. Supreme saw its positive momentum from last quarter continue with broad-based growth across regions and benefited from entry into Korea with the ongoing strong performance in the new store in this market that opened in August. Overall, strong sell-through across product categories led to improving profitability. Now moving down the P&L, Q3 gross margin expanded by 40 basis points to 55.3%, as tailwinds from channel and regional mix more than offset the impact of negative foreign currency transaction. Overall promotions were about flat versus last year, reflecting the continued elevated levels of promotional activity across our markets, our ongoing efforts to reduce inventory, in particular leveraging our own outlets, as well as the impact of the Vans marketplace reset actions. SG&A was down 5% in constant dollars during the quarter from lower distribution, administrative and marketing costs, offset partly by higher digital and technology spending. However, the larger revenue decline this quarter drove significant SG&A deleverage of 590 basis points. This more than offset the gross margin expansion, leading to an operating margin contraction of 560 basis points, which underlines the urgency we have in reducing fixed costs. Diluted earnings per share of $0.57 reflects the lower volume and operating margin along with higher interest expense, all of which was partially offset by a lower tax rate in the quarter. Despite the difficult operating performance, we made progress on our number one financial priority to reduce debt and leverage. In Q3, we delivered an approximate $640 million reduction in net debt relative to last year. This better than planned result was largely attributable to lower working capital and strong execution by our teams to maximize free cash flow. As a result, we achieved a larger than anticipated reduction in inventories, sequentially down over $330 million relative to Q2 and down over $440 million or 17% at the end of the quarter, relevant to the prior year. Our ability to meet near-term inventory objectives reflects the agility in the supply chain, a return to more effective sales and operations planning, and improved collaboration across the business. Liquidity at the end of the quarter stood at $2.8 billion and net debt was $5.2 billion, down from $5.9 billion in the prior year. In the third quarter, the company initiated an in-depth strategic review of all brand assets within the portfolio to ensure we are focused on our greatest long-term value creating opportunities. We'll provide further updates when appropriate. Now, moving on to Reinvent, where I want to expand on Bracken's update, first we made progress in executing our cost savings program as we worked towards our gross target of $300 million. The actions we've taken on Reinvent around streamlining the organization and optimizing our cost structure have begun to bear fruit. In fiscal Q3, we booked approximately $50 million in charges, of which about $20 million were non-cash. These charges are included in our reported results, but excluded from adjusted operating earnings and earnings per share that I just reviewed. The turnaround work remains in progress at Vans. During the quarter we took actions to reset the wholesale channel to ensure the brand's market positioning and product assortments are aligned with the brand direction. The impact on revenue in the quarter was approximately $50 million. As part of our priority to reduce debt and leverage, we continued to work hard to right size our inventories. We expect a further reduction in inventories in Q4 across the broader portfolio. In addition to the cash generated from lower inventories and the previous reduction in the dividend, we have also continued an effort we began last year to monetize noncore physical assets across several areas. Notably, this work now includes the closure of the corporate aviation program. We've begun the marketing process and expect to dispose of these assets over the next few quarters. To the extent the strategic review process results in the divestment of any brands, this would also support this objective. In summary, we're encouraged by the progress we're making on Reinvent. We have a lot more to accomplish, the impact of which will be increasingly visible in the coming quarters. Finally, let me bring you back to the near-term with some thoughts on the year to-go period. Our outlook on free cash flow for fiscal 2024 is unchanged and we expect to deliver about $600 million for the year. This is supported by the work we continue to do to reduce inventories, which we now expect to be down at least 10% at year end. Reflecting the additional progress we've made and compared to previous guidance of down mid-to-high single digits. We anticipate liquidity to be approximately $2.3 billion at year end and we continue to expect the second half gross margin for fiscal 2024 to be up relative to last year. While we're not providing any additional guidance today on fiscal 2024 or fiscal 2025, we expect impacts from the following areas for the next several quarters: Vans turnaround actions as we take the steps necessary to reposition and reset the brand; Continued caution from wholesalers in our key markets, translating to softer future order books globally, but with the greatest impact in the Americas; The North Face wholesale channel, particularly in the U.S., will remain challenged, and finally, a choppier Americas and European macro environment. With respect to Reinvent and the actions underway, we expect actual gross savings within fiscal 2024 to be at least $60 million, the majority of which is within SG&A and we continue to be on track to deliver the $300 million in annualized gross savings, with the vast majority of the savings in place on a forward run rate basis by the middle of next fiscal year. But keep in mind, in fiscal 2025, while we will benefit from the incremental impact from Reinvent actions year-over-year, we will face headwinds from an expected increase in incentive compensation and a more normalized amount of inflation. Looking at all this from a cash perspective, we continue to anticipate the cash costs associated with Reinvent actions to be largely offset by net proceeds from the sale of noncore physical assets that I referenced earlier in my comments. This will play out over the next several quarters. Finally, in closing, while our financial results in Q3 were challenged, I am pleased that we were able to expand gross margin, reduce inventories and generate strong cash flow. And importantly, we are reiterating our fiscal 2024 cash flow guidance despite the continued challenged earnings results. The actions we are implementing as part of Reinvent are substantial. We have moved from planning to execution across many initiatives, including our cost savings program, restructuring actions and operational improvements. In addition, we've initiated a strategic review of the portfolio designed to ensure the brands within VF are aligned to both our strategic and financial objectives. While the impacts are not visible in our financial results yet, I'm confident these actions reset the business and enable us to stabilize and then grow revenue, improve profitability and reduce debt and leverage, positioning VF to deliver shareholder value creation. With that, we will now take your questions.

Bennett: Michael Bennett: Thanks for taking our question and I just want to wish you well on your next adventure. It's been a pleasure talking with you over the years here. I guess Bracken and Matt, I get the big question on our mind here is what, maybe you could walk us through some of the filters you're looking at as you focus on which of the brands make sense in this portfolio in the strategic review. And then I guess I'm curious, Matt, maybe you could walk us just a little bit more through the puts and takes on gross margins. If there's any numbers you could offer with, especially the comment that promotions were in line to last year, just looking at the revenues and the commentary on brands in particular, you guys seem to be really pushing hard to get through a lot of the inventory. It wasn't intuitive to us. The gross would be positive in the quarter. So maybe just a little help understand the puts and takes there?

Okay, I'll go really quickly, Michael. So first of all, the number one thing is being in a good market I think. So first I think I said this on the last call. I love businesses that sit in growing markets. I also love businesses that are leaders within their markets. And then the third filter would be really, do we add value to the business within that market? So I think those are the three primary filters we'll put on this and are putting on this and we'll have a lot more to update over time.

Hey Michael, thank you. Great to speak with you today. You know, I'm not going to give exact numbers, but I'll tell you the primary drivers on the margin line. So positives were mix and it is a bit larger than what we would normally see considering the mix of the business, particularly associated with the big decline that we saw in wholesale and the relative strength in the international markets and primarily in the APAC region. So mix is a bit bigger number. Freight continues to be a real favorable number for us and a really modest benefit from price. Big offset is FX. FX is almost offsetting that mix benefit. So that's probably the single biggest drag is FX. This will be the worst quarter for us from an FX transaction standpoint that we'll see. A bit higher inventory reserves, modestly higher product costs. Promotions about flat, really. Part of your question was there. I think there's a couple of things to remember there. We've made a lot of progress across the last twelve months in reducing inventories. We continue to be aggressive about doing that, but we're in a better place than we have been. So while we continue to see a lot of promotional activity in the marketplace, particularly with our wholesale accounts, to some degree, particularly in the Americas, we're a little cleaner in our D2C channels. We're moving a lot of inventory through our outlets. But if you kind of pull up and look at our margins this quarter, our DTC full-price channels, really across the board, including in Vans, were a bit better full-price stores and our online business. And so that's where we're seeing the business start to get healthier more quickly is in our own channels.

Okay, thanks for all the help.

Our next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Hi, good afternoon. Thank you so much for taking our question. And Matt, thank you as well. I was hoping you could expand on The North Face and the results that you saw in the quarter as well as your outlook for TNF wholesale in the U.S. to remain challenged. Can you talk to your view of maybe the impacts from underlying macro and weather that we've seen this quarter and what we might see in U.S. wholesale for the next couple of quarters versus the underlying growth opportunity of that brand in calendar 2024 and longer term?

Yes, I think Matt and I will split this. I'll give you a view of the underlying growth opportunity. I continue to be super excited about The North Face. I think the brand is very strong. All indications are that the brand strength continues to be in place and the activations that we're doing, the various marketplace activities we're doing are working. But underneath it, as you said, we've got a pretty tough marketplace, both on wholesale, and the weather was obviously really tough. You want to answer that last part of the question on wholesale, Matt?

Yes, I think Brooke on wholesale. I mean, what we're seeing is we knew coming into the season it was going to be a little more difficult. Order books were down. We've said that all along and part of that is our own issue from the last year where we didn't really service the business. So we kind of were behind the eight-ball coming in and then weather didn't help. The marketplace remains pretty dynamic and pretty promotional, particularly in the outdoor segment. I think that's kind of what you see and what we see and understand across the market. And I think we're going to see that play out over the next couple of seasons as wholesale partners continue to plan very cautiously. We're seeing that, and that's how we're thinking about planning our business. All that said, the strength of the brand remains really good. All the metrics that we look at from a consumer standpoint continue to be good. Our D2C business generally is good when the weather's gotten better here in January. Our D2C business is up in all three regions. In fact, the brand is up in all three regions, but particularly in D2C. So I think the underlying drivers of opportunity and the underlying drivers of the business are really strong. The wholesale channel, particularly here in the U.S., is difficult in the near term, and we expect it to continue to be.

Great. Thanks so much.

Thanks, Brooke.

Our next question comes from the line of Adrienne Yih Barclays. Please proceed with your question.

Great. Thanks so much. Hi, Bracken. Matt, thanks for all your help in the partnership over the years. It's been fantastic. So thanks. Just want to put that out.

Thanks, Adrienne.

You're welcome. My question is going to be on the marketplace cleanup. How much of it was the shift into Q2 and how much of it is going to be an overhang as we go into the fourth quarter? And I'm going to split it. So, Bracken for you on that same question. We've seen sort of marketplace actions. Is it to get out of particular channels, to reduce stores in accounts? We've seen sometimes where they go pretty deep and the brand visibility kind of goes away, et cetera. So I'm just wondering where the push point is on that. And my last really quick one is how are you going to be taking advantage of the Escape moment at the Olympics.

Thank you. On the Q2, Q3, I would say Q3, Q4. The reset is kind of equally distributed across both quarters, and most of it is not exiting channels. That's not the reset we're talking about. It's really pulling inventory, unproductive inventory, out of those channels so that the productive inventory can move the faster movers. There is a larger marketplace change that will happen in Europe and to some extent in the U.S., but that's going to happen more gradually in terms of what we'll be doing at the Olympics, we're obviously not talking too much about it yet. We keep that close to our vest. But we do have some pretty interesting plans.

Fantastic. Best of luck.

Thank you.

Thank you. Our next question comes from the line of Laurent Vasilescu with BNP Paribas. Please proceed with your question.

Hi, Bracken. Good afternoon. Thanks so very much for taking my question. Matt, it's been a pleasure over the years. I wanted to just ask about debt pay down. Bracken, I think you mentioned you're confident about not refinancing the $1.75 billion that's come due, I think December and then spring of 2025. Maybe can you just, for the audience, can you just help us bridge through. How do you get that from a free cash flow perspective? Any update on the PAX business? And then, I think Matt, you mentioned the non-core physical assets. There's some corporate aviation program that you might sell off. Are there any assets, physical assets you might sell off? And if that's the case, could you potentially size that up so we can model the free cash flow over the next few quarters?

Yes, Laurent let me jump in and try to take that one and great to speak with you. So I'll start from the back end. The non-core physical assets, which are largely related to the elimination of corporate aviation program, there's also a couple of buildings that are involved as well. It's a meaningful number. I wouldn't give you the exact number, but kind of north of $50 million and maybe pretty close to $100 million in the end, but so that's kind of what you're looking at. And that'll likely play out over the next two to three quarters. I think we'll be able to get most of that done. So that's hopefully helpful there as it relates to the debt pay down. Yes, our objective is to not refinance those two tranches of debt that are due this December and next April. To do that, we obviously need to sell the PAX business, and we're continuing to work toward that. We expanded or opened up the aperture from a marketing standpoint last quarter, and that's been really good. We've got a number of parties who are highly interested and engaging through kind of a round of bids and in the middle of pretty substantive due diligence as we speak, so good progress there as it relates to the underlying business. We're going to generate a reasonable amount of cash flow this year and we've kind of confirmed that $600 million. I'd suggest that next year will be a bit stronger than that as we kind of normalize and continue to drive down inventories. We're going to make a lot of progress reducing inventories this year. But given where the business is from a top-line perspective, we'd expect more opportunity next year. I think I've said before that cash flow next year could be kind of in line with where we started this year, and I still think that's kind of a fair assessment.

Very helpful, thanks very much.

Thanks, Laurent.

Our next question comes from the line of Matthew Boss with Morgan. Please proceed with your question.

Thanks. Bracken, could you elaborate on your confidence in VF's future rising the statement in the release or maybe how best to gauge sequential signs of progress that you may be seeing under the surface relative to the reported results? And then, Matt, I guess maybe what's the best way to think about the right structural gross margin multi-year for the business and what portion of the $300 million cost savings should we anticipate to fall to the bottom line?

Yes, I'll address your first question quickly, Matthew. I have much better visibility into the business today compared to three and six months ago. I have a clearer understanding of where the business is likely to head. Despite the challenging quarter we just experienced, I feel more confident about our prospects in the Americas in the short term. Recently, my insight has improved significantly. We discussed guidance earlier, which was previously hampered by a lack of clarity. That's the first point. The second point is that I feel really optimistic about our brands. The more I delve into them, the better I feel. I was enthusiastic coming in, and as I explore our capabilities and the fundamental strength of the brands, I remain excited about them, even those that may not fit within VF in the long run. The third point involves our team. Since I've joined, we’ve promoted two outstanding individuals within VF, and we have many more strong people here. In fact, we will be promoting another key person soon, though I can't announce that now. We're also bringing in talent from outside, and we are announcing one of those internal promotions today which will be part of my staff. We have a lot of strong individuals in this team, even though I’m sad to see Matt leave. The overall strength of the team excites me. Lastly, Matthew, since you were on our first earnings call, I mentioned that this situation feels reminiscent of my last company at the outset, and I still feel that way now within a similar time frame. While I dislike the current numbers we have, I view it as a sign of potential, which gives me a stronger intuition about our future direction. Although we’re not seeing a turnaround yet, I believe we will, and I feel more confident about that than ever.

Hey Matt, regarding gross margin, I want to be cautious not to direct you to any specific guidance. However, if you take a step back and consider our current position, it's encouraging to see our margins turning positive, and I believe that trend will continue as we look ahead to Q4 and beyond. Currently, we are a few hundred basis points below where we stood a couple of years ago, mainly due to promotional activities and higher inventories and reserves. We do not expect an immediate recovery, but we anticipate opportunities to improve as we manage the business better with cleaner inventories, and as the marketplace gradually improves. I see opportunities for gross margin expansion, particularly as the promotional factors evolve over time. Looking at the near term, in the next several quarters, we expect a favorable mix in both channel and geographic distribution. Inflation, which has been significant this year, is easing, and we expect it to be less of a concern next year despite the current challenges with freight costs and issues related to the Suez Canal, which could affect us to some extent. However, overall inflation in the short term seems much more manageable. Currency fluctuations should also pose less of a challenge. While most of the benefits from our reinvention strategy will impact SG&A, we expect a small positive effect on gross margin as well. I believe there are more favorable factors ahead of us than negative ones, but the key focus for us over the next several quarters and years is to improve our health as a business, sell more at full price, and reduce promotions. This will be crucial. Regarding the second question about Reinvent, we plan to reinvest 25% to 35% of the savings over time, particularly in product and marketing.

Have you got it Matthew?

Thank you. Our next question comes from the line of Bob Drbul with Guggenheim. Please proceed with your question.

Hi, Bracken. I just got a couple of quick questions. First on Vans, is there anything more you can share with us on your 18-month plan just around I don't know, marketing? Are you planning to bring the work to back pricing within the brand? Anything along those lines would be helpful. And second question is just around inventories. With the inventories down, I think was at 17% are there any pockets by brand geographically that you're concerned about, either both in your business or at the wholesale level? Thanks.

Thanks Bob. I'm going to let Matt take the second question, but I'll take the first one. I'm not ready to be too specific on that yet, partly because I know that I've got a new brand president coming in, so we'll have a latitude to make some changes. But what I would say is we've got a great – I mean I think a strong kind of very punctuated plan that combines that integrates the marketing insights and then the marketing programs with the new products that are launching. And I've been through both sides of that equation, the two of them together, two or three times now, and I'm still not done, but I feel good about it, very good about it. We do not have plans to bring back the work tour, although it's certainly crossed our mind and we're talking about it a little bit. The work tour was a really powerful thing, but it took time to drill. It would take quite a bit of time to rebuild. I think the objective though, of making sure that we're really deeply in the hearts and minds of the youth audience is mission-critical for us.

Hey Bob, regarding inventory, I have a key number to share. Compared to the 17% average, Vans is down nearly 30%. This positions Vans favorably as we approach the end of the fiscal year, with inventory levels expected to be fairly close to where we want them, perhaps slightly higher in the U.S. in terms of weeks of supply. Overall, we're confident about this. Vans is above the average of 17% while Dickies has seen a larger reduction. The North Face is right on target, and Timberland and other brands are lower, with Supreme being the exception where inventories are slightly elevated, though the business is doing well. We feel generally positive about our inventory situation. The main areas of concern are in the outdoor segment, particularly with Timberland in the U.S., which we are closely evaluating. However, both Vans and The North Face are in good shape.

Thank you.

Thank you, Bob.

Our next question comes from the line of Paul Lejuez with Citi. Please proceed with your question.

Hey. Thanks guys. You mentioned some of your wholesale partners are being cautious, I think, on their ordering. But curious where you're seeing sellout performing better than sell-in, what brands, what regions? And how long do you see that dynamic lasting before sell-in and sell-out more aligned? And then just a quick second question. On the strategic review, is that all being done internally by you guys using some outside consultants? Sorry if I missed it, I'm just curious who's involved in that.

Yes. I'll address the last question, and Matthew can take the first one. Regarding the strategic review, it is an internal process. We do consult the expected experts in this context, but we are not partnering with any consulting firm. We have a strong internal team conducting the analysis, and we are collaborating with the Board on this. There are two Board members with significant experience in this area, offering valuable portfolio insights. This work has been ongoing, and I feel very positive about it. Would you like to answer the first question?

Yes, I think the most obvious place I would point you toward to where the sellout or sell-through is better than the sell-in is in Europe. We're seeing that I'd say, generally across the board, maybe a little less so in Vans. But generally, across the board, the business is a little stronger, I would suggest, and maybe what the financial results imply. And I won't be surprised to be surprised if that doesn't continue for a little bit of time as wholesalers continue to be pretty cautious, but in Europe, that's true. Certainly, with Vans and the reset actions, there's a lot of noise in some of those numbers that distort the wholesale results for Vans as we do that. So the sellout is certainly a little bit better, but not good, right? It still continues to be in a place that we're not happy with.

That probably goes without saying, but Supreme sell-out continues to be very strong.

Yes, Europe. The only thing I would mention about Europe is that inventories in the marketplace are generally well positioned. In the U.S., there are a few areas, particularly Timberland, where we are probably a bit higher on inventory than we would like. However, Europe is in a good position regarding inventory, and Asia is also doing well in that regard.

Got it. Thanks guys. Good luck.

Thank you, Paul.

Our next question comes from the line of Jim Duffy with Stifel. Please proceed with your question.

Thank you. Hello everyone. Thank you for taking my question. Bracken, I want to dig in on the portfolio review. Your message last quarter was no sacred cows, etc. The announcement of a portfolio review doesn't seem like new news. Can you give us sense of where you are in the process? Have banks been appointed to shop brands deemed unstrategic? And then when I think about the criteria you've outlined, growing markets, leaders in the markets it seems kind of a short list of brands that fit. Am I correct to interpret that that suggests a large-scale realignment of the portfolio as possible?

I wouldn't go that far. However, I agree that we've been working on this longer than we've been discussing it. I'll try to keep you updated regularly so that we're not announcing things that aren't well developed. We are making good progress on the portfolio review. While we haven't brought in bankers beyond what you've already heard, we are definitely in discussions about how to move forward with the portfolio. I don't have more information to share at this moment, but you will hear more as it unfolds.

Okay. And then may be just a question on the mechanics of the Vans realignment, can you help us maybe better understand what that means? What were the specific tactics to try to clean up inventory in the channel? If you could explain more, that would be helpful. And I'm curious, like in that context, how did you miss on sales, but over-deliver on the inventory.

Yes. Let me try to answer that one, and then Matt can also help. It's essentially a two-step process. The first step occurred this quarter, and the second step will take place in the next quarter. What we're really doing is removing the products that are not selling because the inventory is too high in the channel. We're either pulling those back or they're being returned, and then we're essentially reopening buying for the products that are selling. So it's really just about clearing out the channel. Matt, do you want to add anything to that?

I mean, Jim, you're right, there's a little bit of an inventory impact when you bring back returns or accrue for returns in this case. I think in most cases, the product is still kind of flowing and the work is happening, but you're accruing for returns, which has an inventory implication in that entry. That's in the number. I think overall, we've just been able to aggressively sell through excess inventories, again, in our own outlet stores, in particular, as well as leveraging, in some cases, the off-price channel within the wholesale space. Working aggressively to pull back on buys, which we said all along, we're working to do and probably been a little bit conservative in some of our planning in terms of that may ultimately play out, so a little bit of favorability there as well.

Understood. Thank you.

Yes. I'll give you a quick example of the impact it's had. During the holidays, several people told me they couldn't buy new school products because they weren't available in their sizes. The inventory is overstocked in the channel. This was before we started the reset, so this should help resolve that issue.

Our next question comes from the line of Jay Sole with UBS. Please proceed with your question.

Hi, Bracken. Thank you for taking my question. Matt, could you assist me? I have two inquiries. First, Bracken, you mentioned promoting two people and your recent teams. How far along are you in fully establishing the go-forward team? In other words, how many more months do you anticipate working on this before you feel the team is set and it's time to focus on execution? Then for Matt, regarding the free cash flow guidance, it appears there might be slightly lower net income than you previously expected, but more related to inventory, along with some other asset sales affecting that figure. Could you provide a breakdown in qualitative terms to help us understand the changes in the free cash flow guidance? That would be appreciated. Thank you.

That's a difficult question to answer. I would say we've already implemented many changes. Our team has advanced significantly. The structure of the company has undergone considerable transformation. Our operating model and other aspects are progressing rapidly. As we approach Q4, particularly as we transition into the next fiscal year, I believe we will be well along in establishing an organization that is truly ready to succeed in this turnaround. I think we're making substantial progress, and I'm enthusiastic about it. I genuinely believe we have a team that is committed to winning. I think if we look forward a couple of months, we will be there.

Yes, Jay, I think how you described it is probably fair a little bit tougher this quarter than what we anticipated. We talked about that relative to the Outdoor segment from a revenue standpoint, but better on the inventory line. I think there's a lot in free cash flow there, right? And when you look at the year-to-go period, the biggest levers are on the balance sheet, not on the P&L, right? And as you think about not only inventory, but accounts receivable, all the liabilities, etc., CapEx, honestly, the sales of assets, I wouldn't suggest that's free cash flow necessary. We're not counting it that way, kind of below that line, so that's not really in the number. But we're still in line for the $600 million, a few puts and takes, but we really encouraged by the inventory, I think, particularly great to see where we are at the end of the third quarter ahead of schedule.

If I could go back to your first question, Jay, I want to comment on how quickly we’re making changes on the organizational side. Since I've been here, we’ve appointed a new Chief Human Resources Officer, and the new Head of Commercial is an internal promotion. We expect to have a new Head of Design in place by the beginning of the next fiscal year, which has already been agreed upon. Matt will be leaving, so we will have a new CFO early next year. We also have a new Head of Timberland and a new Head of Vans. Overall, we have made significant changes to our team and have promoted many individuals within the company during this period. I’m really excited about our current team and confident that it will continue to strengthen.

Okay. Thank you so much.

Okay. Thanks Jay.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Hi, Dana. Considering the DTC channel, which you've mentioned has shown more improvement compared to wholesale, how does it vary between digital and DTC? What are your plans for each brand regarding physical stores? Also, is there any specific performance differentiation among the brands in the DTC channel? Thank you.

I'd say every brand has a significant direct-to-consumer e-commerce presence, but not all brands have a strong physical retail presence, and this varies globally. Starting with Vans, it has a substantial bricks-and-mortar business in the U.S. along with its online operations. Many may not realize that we have one of the most advanced DTC businesses in the footwear and apparel sector in North America, where DTC accounts for about 60% of our total U.S. business, possibly even more. This level of development is not expected to change dramatically; I anticipate that e-commerce will continue to grow while bricks-and-mortar will decrease in comparison. Additionally, I hope that wholesale will grow in relation to our own physical stores. The North Face has a strong DTC business that has potential to expand, primarily through e-commerce in the U.S., as we have a limited number of our own stores there, which is also true in Europe. We are planning to open more stores in Europe, and possibly in the U.S. as well. Timberland has a well-established DTC bricks-and-mortar business in Europe but very little presence in the U.S., which presents a challenge as most of the business here relies on wholesale, giving us less control. I don't think we plan to change this drastically, but generally, all these brands are expected to grow their e-commerce businesses, which is a fundamental part of our strategy.

Got it. And then just on the CapEx side for this year, any changes to CapEx and how you're thinking about it going forward?

No, I don't think we have a significant plan to alter the way we're thinking about CapEx. We don't have a big investment plan in CapEx, at least not an abnormal.

Most of our CapEx moving forward will be related to DTC, honestly, Dana. We'll be continuing to support the expansion where it makes sense and the brands that have expansion opportunities in The North Face is one, Supreme is one for sure and kind of the ongoing refreshment of those stores. Infrastructure-wise, nothing significant planned and obviously, we're working aggressively to kind of reduce our footprint in many cases, it's kind of the opposite.

Thank you and best of luck, Matt.

Thanks, Dana.

Thank you, Dana.

Thank you. Our final question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question.

Hey, Bracken. I have two questions. Matt, the first one is about North Face. I'm trying to understand the situation better. I know you're not providing guidance, but specifically regarding North Face, how do we reconcile the quarter's performance and the mention of positive events in January with the fact that they were able to work extra shifts but still saw a mid-single decrease? Should we be cautious not to read too much into January due to the cold weather? I'm curious about the brand's direction moving forward. Secondly, Bracken, regarding Jim's point about there being no sacred cows, can we say that the three major brands are excluded from the strategic portfolio review, or is everything still up for consideration?

We've been very explicit about saying we're not going to address that comment, any question about that. We meant it when we said no sacred cow, so we're really taking an objective look at all the brands. And other than that, we'll come back and update you over time.

I appreciate your question about The North Face. Looking ahead, we anticipate that direct-to-consumer sales will grow, including in the fourth quarter, and we expect this trend to continue. It's encouraging to see the business make a strong recovery in early January, especially as the weather improved here and somewhat in Europe too. However, we anticipate that the wholesale side will be somewhat unpredictable. We have visibility on our order book for spring, and a fairly good understanding of what fall will entail. Therefore, we expect the wholesale situation to be more challenging in the upcoming quarters.

Yes. I'm sorry, I just don't want to piecemeal out that answer. I think we need to give it a more complete way later.

Okay. Understand. Thanks guys.

Okay. That was the last question? All right. Well, thanks all of you for tuning in. Despite these clearly disappointing results, I am super excited about VF's future, as I said earlier. I think the steps we're taking to turn things around are happening. The implementation is real and the change is happening fast internally, even though you probably can't feel it, you certainly can't see it yet in our numbers. I've said it before; we have world-class brands and amazing talent. The foundations on the ways to rebuild this are here to have a great business. So I look forward to talking to you again during the quarter and as we close this next quarter and start the next fiscal year. Thanks again. And Matt, thank you.

Thanks, Bracken. Thanks, everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.