V.F. Corporation Q4 FY2026 earnings call

- Overall Business Progress * Returned to full year revenue growth (1% YoY) in FY26, the first annual growth in three years; 70% of the brand portfolio is now growing, up from 43% in FY24. * Expanded full year operating margin to 7% in FY26, a 220 basis point increase from FY24; gross margin reached 55.2% in FY26, a 360 basis point increase from FY24 (100 basis points from the Dickies divestiture, 260 basis points from internal efficiency improvements). * Strengthened the balance sheet: reduced net debt (excluding lease liabilities) from $5.8 billion to $2.7 billion over three years, cutting leverage from 5.1x to 2.0x (excluding leases), with year-end FY26 leverage at 3.1x, down 1 full turn YoY.

- Gross Margin Improvements * Achieved gross margin expansion through three core levers: shifting to a higher mix of higher-margin products, targeted pricing actions, and sharper markdown execution enabled by AI and in-season analytics, first deployed at scale at The North Face and Timberland Americas. * Capabilities are being scaled across all brands and regions to drive further gross margin expansion.

- Cost Management * Delivered over $225 million in structural, sustained SG&A savings (run rate) since FY24, from organizational simplification, distribution footprint consolidation, and a more cost-optimized digital commerce platform. * Savings have been partially offset by inflation, foreign exchange impacts, and deliberate incremental investments in product development and marketing, with marketing shifted to more working media spend that directly reaches consumers.

- Growth Enablement & Operational Transformation * Implemented faster speed-to-market: Vans pulled forward Fall 2026 products to Fall 2025, delivering in under six months (one-third of the standard cycle), allowing small-scale testing of new silhouettes and faster iteration based on consumer response, which improved Americas DTC performance. * Vans renewed brand energy via a social-first, culture-led marketing model, with targeted product drops paired with artist collaborations that have reconnected the brand with core consumers. * The North Face announced a multi-year exclusive partnership to outfit the U.S. Ski and Snowboard Team through 2034, including the upcoming Winter Olympic Games, to further cement the brand's elite outdoor credentials. * Timberland is resetting its apparel proposition launching Fall 2027 to deliver a cohesive head-to-toe offering, with a focused expansion of its women's business and new full-price store openings that have demonstrated strong early productivity.

For Q4 FY26 (total company revenue of $2.2 billion, up 3% YoY): - The North Face: 7% YoY revenue growth, contributing 38% of total company revenue, with 16% growth in the Americas, five consecutive quarters of double-digit footwear growth. Full year revenue surpassed $270 million, with 30+% full year growth. - Timberland: 2% YoY revenue growth, contributing 16% of total company revenue, with 8% DTC growth and a slight wholesale decline driven by intentional lower distress sales. - Altra: 45% YoY Q4 revenue growth, with over 30% full year revenue growth, across all regions and channels, marking the fifth consecutive quarter of double-digit growth. - Vans: 5% YoY global revenue decline, but achieved 5% DTC growth in the Americas, with core icon styles (Authentic up 80% YoY, Slip-Ons and apparel returning to growth). For full year FY26, Vans revenue declined 11% YoY, an improvement from the 15% decline in FY25.

By region (Q4 FY26): Americas grew 10% YoY (3% full year), EMEA declined 5% YoY, APAC grew 1% YoY. By channel: DTC grew 2% YoY, wholesale grew 3% YoY.

- Reinstated full year FY27 guidance, expecting 1% to 2% constant currency revenue growth, with 0.5 percentage points of growth coming from the 53rd fiscal week, partially offset by a 100 basis point negative revenue impact from the Middle East conflict. - Expects Q1 FY27 revenue to decline low single digits YoY, driven by wholesale order timing shifts that pulled demand forward into Q4 FY26 (a 2 percentage point shift for both quarters) and the small base size of Q1, with no impact on full year guidance. Q1 operating income is expected to be a $100 million loss, $40 million larger than last year, due to planned incremental investments in Altra and DTC growth. - Expects full year FY27 operating margin of approximately 8%, with gross margin expansion and SG&A leverage offsetting planned investments, and a full year adjusted tax rate in the low 30%s. - For Vans, expects a mid-single digit full year revenue decline (an improvement from the 11% decline in FY26), with continued Americas DTC growth throughout the year, weaker performance in the first half that improves in the second half, and wholesale growth picking up as DTC momentum translates to higher order flow. - Expects free cash flow (excluding the one-time $100 million FY26 pension termination benefit) to be flat to up versus the FY26 normalized level of $405 million, with a $100 million year-over-year increase in capital expenditures driven by Timberland full-price store expansion. - Expects inventory to rise slightly YoY as an intentional investment to support growth, with inventory days flat YoY and expected to decline in future years. - Expects end-of-FY27 leverage between 2.6x and 2.9x, on track to reach the medium-term target of ≤2.5x leverage by FY28, and a 10% operating margin exit run rate by the end of FY28 (equivalent to a full 10% operating margin for FY29).

- Geopolitical headwinds: the ongoing Middle East conflict has negatively impacted wholesale operations in the region, creating a 100 basis point negative revenue headwind for FY27, and the broader macro environment has weakened demand across EMEA. - Input cost volatility: fluctuating oil prices impact freight and product costs, with potential material headwinds to FY28 product costs that are being monitored, with mitigation efforts including supply chain cost discipline and material consolidation across brands. - Tariff uncertainty: Section 301 tariffs are expected to be reinstated mid-July 2027, with an expected incremental $70 to $80 million negative gross margin impact for FY27; the company has mitigated most of this impact through sourcing rebalancing over the past year, but final impact remains fluid. - Vans still requires additional work to rebuild wholesale demand globally and in the U.S., even after achieving Americas DTC growth, with momentum expected to build gradually over time.

Q: Vans DTC improvement is clear, but how does wholesale sell-through compare, and how should Vans Q1 be modeled? / A: Wholesale sell-through is not as strong as DTC in the Americas, due to DTC's more favorable mix including direct e-commerce traffic that VF controls. DTC momentum is a clear leading indicator of future wholesale improvement as winning new products roll out to the wholesale channel over time. Reported Q1 revenue will be slightly lower than Q4 FY26 due to 2 percentage points of order demand pulled forward to Q4, but on a normalized basis, underlying growth trends are roughly equal across the two quarters, and performance is expected to improve throughout the year. Management points to very strong new product performance (including upcoming unannounced products) as evidence of continued positive momentum. (338 characters)

Q: What work remains for Vans U.S. wholesale, and what is the state of Vans DTC store performance? / A: The main priority is rebuilding demand and order flow, not further distribution cleanup. VF significantly reduced Vans distribution in the value channel over the last year, and distribution is now roughly balanced, with only minor adjustments being made. For brick-and-mortar DTC stores, both traffic and conversion have improved, driven by a new retail leadership that has re-energized in-store execution. This U.S. execution playbook is now being rolled out to Vans operations globally over the coming year. (347 characters)

Q: What is the expected gross margin trajectory for FY27, and how much impact will reinstated tariffs have? / A: Q1 FY27 gross margin will be higher YoY, even though SG&A will also rise due to planned full-year early investments that disproportionately impact the small Q1 base. For the full year, gross margin expansion and SG&A leverage will deliver the guided 8% operating margin. VF assumes tariffs will be reinstated in July, leading to a $70 to 80 million negative gross margin impact, but almost all of this impact has already been mitigated through sourcing shifts and vendor partnerships, which is reflected in the current FY27 guidance. (342 characters)

Q: Can you clarify what a 10% operating margin exit run rate at end-FY28 means vs. original guidance? / A: When the 10% target was first announced, it was always intended to be an exit run rate (achieved by the end of FY28) rather than a full year FY28 operating margin. To avoid confusion, this means that full fiscal year 2029 will have a 10% or higher operating margin, with the target hit during FY28. The overall medium-term commitment has not changed, just clarified to match market feedback. (291 characters)