V.F. Corporation Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Financials: Total revenue up 2% in reported dollars, down 1% in constant dollars. Operating income was $330 million, above guidance. Net debt, excluding lease liabilities, was down $1.5 billion (27% decrease).
• Dickies Sale: Announced sale of Dickies for $600 million, expected cash benefit to V.F. greater than $600 million. This will help strengthen the balance sheet and focus on core brands.
• Brand Highlights: North Face grew 4% with strong performance in all regions; Timberland saw 4% revenue growth; Altra had over 35% revenue growth for the third consecutive quarter; Vans had product newness and marketing shifts driving early results.
• Turnaround Progress: 65% of business by revenue was growing in Q2 (over 70% excluding Dickies). Progress made on inventory management and cost discipline.

Segment Performance

• North Face: Revenue up 4%, all regions grew. Performance Apparel saw growth in every region, footwear grew double digits in all regions.
• Timberland: Revenue up 4% in Q2, growth across wholesale and DTC; Americas up double digits. The 6-inch premium boot is strong but represents ~20% of global revenue.
• Altra: Revenue up over 35% for the third consecutive quarter, with key franchises in road and trail running.
• Vans: Revenue down 11% in Q2, but product newness and improved digital traffic in Americas and EMEA contributed to early results.

Guidance

• Q3: Expected revenue down 1% to down 3% in constant dollar terms. Operating income expected in the range of $275 million to $305 million. Gross margin down vs last year due to tariffs, partially offset by lower discounts. Reported SG&A expected slightly up vs last year, but flat in constant dollar.
• Fiscal '26: Operating income expected up vs last year. Operating and free cash flow, excluding noncore sales, expected up year-on-year. Medium-term targets: $500 million to $600 million of operating income expansion by fiscal '28 and leverage ratio of 2.5x or below by fiscal '28.

Risks

• Uncertain Environment: Macro uncertainties around the world could impact results.
• Tariffs: Initial impacts on gross margin in Q3, with full effects seen in Q4.
• Brand Execution: Challenges in executing growth strategies for some brands, especially Vans, related to channel rationalization and promotional environments.

Question and Answer

Q: About Vans' path to growth A: More new product, upgraded marketing, with traffic up online during back-to-school. Q3 expected to have similar negative pace as Q2, with impacts waning in Q4.

Q: Gross margin and cost discipline A: Gross margin had small negative FX impact and positive from lower promotions. Medium-term initiatives on track, with progress in markdown management and SG&A optimization.

Q: Asia performance A: APAC, especially China, in a stabilizing period, but Americas offer growth opportunities.

Q: Holiday orders and demand A: Too early to tell, but optimistic with good products and plan.

Q: Tariffs and pricing A: Tariff impacts in Q3, pricing effects in Q4. Ability to mitigate tariffs within fiscal '27, more clarity at year-end.

Q: Debt deleveraging A: Focus on fundamental improvement, EBITDA growth, and working capital management to reach leverage targets.