VF Corp (VFC) — Q1 2025 Earnings Call Transcript

Good afternoon and welcome to VF Corporation's first quarter fiscal 2025 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, Paul Vogel. Following our prepared remarks, we'll open the call for questions. I'll now hand over to Bracken.

Thank you all for joining us. I passed my 1-year anniversary at VF on July 17. Coincidentally, the same day we announced the Supreme divestiture. It's been a full year of transformation and I believe the pace of change won't slow going forward. This is the new norm at VF and it's exciting. Today, I'll update you on our progress on the execution of the Reinvent transformation program and, of course, on the quarter. But before I do that, let me start with our leadership team. On the year-end, we changed 8 of 11 direct reports, 2 of those are promotions. As planned, we made 3 of these changes since our last earnings call, including the leaders of our 2 biggest brands. And I'm sitting next to Paul Vogel, our new CFO, who has been with us roughly 4 weeks. I've always thought of a great leadership team as more of a partnership than a traditional pyramid and Paul already feels like another great partner. I'm holding him back today to give him some breathing room before he's on this stage, but he has already added value. But now let me hand it over to Paul just to introduce himself and say a few words. Paul?

Thank you, Bracken, and good afternoon, everyone. After 1 month at VF, I couldn't be more excited about the opportunity in front of us and to be a part of this strong team. It is a privilege to join a company with such iconic brands and I truly believe we can re-establish VF as one of the best-run footwear, apparel, and accessories businesses in the world. I've already begun to visit our offices around the world with recent stops in Costa Mesa and Denver and an upcoming trip to Europe soon and the passion our employees have for these brands is clear. In my prior roles, I've seen the power of maximizing brand strength by creating the highest quality product and combining it with a distinct point of view. I also understand that the best way to create an environment of innovation is to operate an exceptionally well-run company, eliminating inefficiencies that slow us down while investing thoughtfully and strategically to grow the business. I'm confident we can drive materially improved profitability, leverage on costs, and improve free cash flow and developing a roadmap for that is one of my top near-term priorities. While I've been an operator for the past 8 years, I spent the beginning of my career on the investing side and I understand what it will take to rebuild trust with the Wall Street community. Change doesn't happen overnight. But with the leadership team Bracken has assembled, I know we can systematically reach our long-term goals, execute, and deliver on a consistent basis and demonstrate proof points that build over time. I share Bracken's urgency to strengthen VF's balance sheet, reduce leverage, and build a financial model that is operationally best-in-class and sustainable over the long term. I see a tremendous opportunity to unlock significant value from all the brands within the VF portfolio. I look forward to meeting many of you over the coming weeks and months. I couldn't be more excited to be joining the company at such a crucial and exciting time. I will now turn it back over to Bracken.

Thank you, Paul. In addition to Paul's recent start, I'm also excited that as of last Monday, Sanjay is now officially the President of Vans, relieving me of that job, and Caroline Brown is 2 months into leading the North Face. I'm excited about the progress we're seeing from our Chief Strategy and Transformation Officer and our Chief Design Officer, both of whom joined in March and are working away on things you'll see later. Nina Flood was promoted into the Timberland role just 6 months ago. And Martino Scabbia Guerrini has run the newly created global commercial organization since we created it 9 months ago. In other words, we have a full team now and you can feel the energy. Now for Reinvent; while we're not yet back to growth, the steps we're taking now will get us there. Remember, this phase is about reducing costs, lowering our debt, resetting the U.S. business, and getting Vans back on track. First, there's a significant potential to improve our profitability, as we all know. During the quarter, we generated a further $50 million in cost savings, part of our $300 million target. We will have executed all actions to deliver $300 million in cost savings by the end of the first half of the year, as we guided, and the impact will be fully reflected in the P&L by the end of the fiscal year. And we have no intention of stopping there. As we said from the beginning, we're reinvesting some of that back into the business in the key areas of product and brand building. And those savings are further offset by the rebuilding of our annual incentive program and inflation on salaries and other areas. But as I said before, we are absolutely committed to more cost reduction, as you'll hear more about. We continue to reduce debt and strengthen our balance sheet. We delivered another significant reduction in inventories relative to last year. Even as we build ahead of our peak selling season. Inventories at the end of the quarter were down 24% versus last year or $676 million. Additionally, net debt is down $587 million year-over-year, supporting our plan to delever. Last quarter, I told you our strategic portfolio review is complete. I also said we would provide you an update and we had some news. We announced the sale of Supreme for $1.5 billion 3 weeks ago. To be clear, I love the Supreme brand and I love the Supreme team. It's back to strong profitable growth. But the lack of synergies with the rest of our organization made it a clear choice for divestiture. This allows us to sharpen focus on the core business and also improve our leverage. Turning to the Americas; our platform is now fully operational. As expected, the Americas continues to perform well below our potential but the decline softened from negative 23% last quarter to negative 12% in Q1. Almost as important to me near term, we continue to be able to forecast the business. We now have 8 consecutive months of accurate forecasts. Moving to Vans; we said the first quarter of this year would be similar to the fourth quarter last year, excluding the impact from inventory reset actions. And we actually did a little better than that with some modest improvement. Down 21% in Q1 versus 27% in Q4, reflecting an improved trend in its two biggest regions. Importantly, while the headline numbers remain weak, several indicators are showing we're headed in the right direction. EMEA is once again the region which is showing clear early encouraging signs with wholesale up in the quarter for the first time in 6 quarters with particularly positive momentum in key accounts. As a result of the inventory reset actions, our markets are clean and we have space to introduce our new products which are performing well across regions. The Knu Skool continued to gain momentum and is performing well across regions and is now the number 2 franchise globally. Other more recently introduced products are also gaining traction, including our advanced Skate shoe, AVE 2.0, and UltraRange Neo, and we launched several new styles in July. As part of our brand elevation strategy, we advanced our off-the-wall collections and built a new collaboration with Broze Knu Schooler showing the depth and breadth of our brand's potential. And with all the excitement and buzz around events in Paris this summer, we had our own event just beforehand during Paris Fashion Week, where we started with a Paris takeover in June with a set of grassroots activations combined with events in music, art, and design. Finishing off with a disruptive moment when we took over the iconic Saraco to showcase OTW and Vans' authentic skate culture. We have over 20 sponsored athletes across skateboarding and other events at the Paris games. In fact, just today, we won gold and silver in the women's skate event. We leverage this exciting time to launch our always pushing campaign globally, featuring our top athletes in Paris, Tokyo, and New York. These new products and marketing efforts are resonating with consumers and contributing to further progress in Google search trends which continue to move in the right direction across our markets. Now, let me give you a quick overview of the first quarter. Revenue was down 8%, which was a little better than expected, demonstrating slight sequential improvement versus Q4 with the trend line improvement across almost all brands. Now this is our smallest quarter of the fiscal year and largely skewed towards the Americas and wholesale. It's worth noting that growth in our DTC business was in line with last quarter if you exclude Vans. Note, in Vans, we're closing unprofitable stores and non-strategic ones, dampening our growth even further. The North Face was down 2% with growth in DTC up 8% globally with positive performance across each of the 3 regions, displaying continued strong brand health, whereas wholesale was down on a global basis. Across both channels and regionally, the standout continues to be APAC which grew strongly, up 35%, even as we compared the post-COVID opening quarter last year. Moving down to P&L. Gross margin was down 80 basis points from the prior year, in line with the guardrails we gave you in May. To quickly remind you, this is primarily driven by the continued impact of our clear-out activities from the Vans product we took back in our reset. Our operating margin was down 360 basis points, largely driven by SG&A deleverage. I'd like to note our SG&A dollars were down year-over-year. And I'd also like to say I absolutely detest deleveraging a P&L. So you can be assured we are not at all finished reducing SG&A even as we invest in our own growth. As a result, Q1 loss per share was negative $0.33 as expected. Looking ahead to Q2, let me provide some guardrails for that quarter. These are all excluding Supreme, both from this year and last year. The overall Q2 revenue trend is expected to show modest improvement versus Q1, in line with our comments in May. Don't get me wrong, we're not back in growth yet, but the decline rate should continue to moderate. And to give you some additional color on our 2 biggest brands, at Vans, we will see modest sequential improvement as we did this quarter. For the North Face, we expect Q2 revenue to be slightly down relative to Q1 but remember, T&F had 17% growth in Q2 of last year. Turning to gross margin; we expect this to be up slightly in Q2 versus last year. Inventory quality has improved, so there's less impact from the flushing of inventory post-Vans reset. On SG&A, let me spend a little time breaking this down further. First, Reinvent savings are on track. Second, we will have realized incentive compensation as well as inflation as we indicated before. We also consistently said we'll reinvest 25% to 30% of our gross savings. As we head into our holiday season, I decided to pull some of that forward and it begins to appear in Q2. To be clear, this is not the end of our cost story. Expenses in Q2 are expected to be up slightly year-over-year. This, combined with further revenue declines will lead to a higher rate of deleverage in Q2, but we will have more to say about that in October which I'll explain in just a moment. Moving into fiscal year '25; we're on track to deliver guidance for free cash flow plus the proceeds from non-core physical asset sales of about $600 million. This excludes the impact of the divestiture of Supreme. We expect the Supreme divestiture to be completed at some point by the end of the calendar year. Finally, to conclude, we continue to make progress. The quarter improved sequentially relative to Q4 across almost all our brands. We're advancing on Reinvent. Cost savings are on track and we're committed to more cost reduction. We're addressing the balance sheet leverage ratio with the first sale of Supreme. The new platform in the Americas is moving strongly in the right direction and advance we're seeing progress we expected. My level of confidence has never been higher. We have an incredible leadership team and dedicated talent at VF. So together, we will make the continued progress on our path to deliver strong, sustainable growth and value creation at VF. To close, I've dropped a few hints about our longer-term plan, so let me clarify. I'm excited to announce we'll be hosting a 2-part investor event. Part one will be, mark your calendars, October 30 in New York, live and of course, as well as webcast. Focused on broader VF strategy and laying out the building blocks for a return to value creation. And we'll build on that in part 2 or the second part toward the end of the fiscal year which will focus on our brand and commercial strategies. With that, I'll now open the line for questions.

I was hoping you could provide additional color on your plans for the Vans brand going forward now that you have a permanent brand president in place. You talked a little bit about some early green shoots that you're seeing in the brands. Can you elaborate a little bit more on what you expect the path to look like for the brand for the next couple of quarters, both in terms of new innovation, scaling, changes in brand marketing? And maybe any types of marketing that you're pulling forward regarding SG&A the next couple of quarters?

Yes, I'll save a little bit of that for the next quarter or 2. And of course, by the time we get to the end of the year when Sanjay has a chance to speak to it. But I'll give you what you're asking, I think. I expect you'll see more of the same. We just turned on a new marketing campaign for Vans which is tied directly to a cascade of product launches. As I mentioned in my opening remarks, the new franchises are doing well. And we've now got 2 of our new franchises, I think, are in the top 5. So UltraRange and Knu Skool, one's number 2, and another is number 5. I think it just shows you how responsive we are to new products when they're right. And so you're going to see more new products as we come through the year. We will launch several new styles just this month. Of course, they're not incorporated in what we've done so far this year. On top of that, we've completely revamped our approach to marketing. We just introduced our always pushing campaign which started in Paris when we had that event that we mentioned in June. And it's now moving right down through everything we do. And you'll see more and more of that as time goes on. Our grassroots campaign is well underway, as is our influencer campaign. You may have seen a few celebrities caught wearing Vans just recently. So you're just going to see more and more of that as you go through the year. This is the kind of energy we need from Vans, and I'm super excited about it.

Congrats on the nice quarter. Bracken, first off, thanks for the spoiler on today's women's skate medals. I appreciate that. Could you speak to the diverging trends here in North Face with the global brand direct-to-consumer up 8% ex currency? And then it sounds like U.S. wholesale was the issue. Can you maybe just help us roll forward what's holding wholesale back right now with good real-time trends at B2C? How you expect that to trend as we get into the important season for North Face on the wholesale side?

Yes. First of all, I apologize to you. It didn't cross our mind that it would be spoilers such good news on our side. But if we did spoil it, it's still good news. Yes. So on TNF, the underlying reality is we continue to have good solid DTC growth around the world, and China continues to just be super strong, which is exciting. Wholesale is relatively weak, both mainly driven by traffic and conservatism, I think, on the retail side, both in the U.S. and to some extent, in Europe. And you can see on the numbers you dig into it. I think it's probably a function of a couple of things. One is the overall macro environment and also a little bit of skittishness just because of the weather last year when it was so warm during the holiday season. So we're not guiding TNF going forward but I feel really good about the brand. I feel really good about the product initiatives that are coming. And I'd say stay tuned. I think TNF is going to be just fine.

Curious within that free cash flow guidance that you reiterated, can you talk about what might have changed within that guidance on a brand channel or geographic level, anything that you are now assuming is getting better or worse versus what you were thinking previously or any changes in your working capital assumptions that might factor into what you're looking for on free cash flow now?

Yes. I'm happy to say there aren't any changes. So I'd say, overall, this is a good reflection but I think we are getting a better handle on our forecasting. And it's very much the same in terms of the underlying dynamics as it was last quarter. The only real change will be, at some point, we will pull Supreme out, of course, which is, as you may or may not realize, pretty back-end loaded. So most of the cash would come into the back end of the year. But other than that, there won't be a big change.

Just to start a clarification question. With the Supreme sale, are you done with the portfolio clean-up? Or are there additional asset sales contemplated as potentially appropriate?

We don't have anything specific contemplated but I don't think we're ever really done in terms of reviewing our portfolio. So we've certainly finished our portfolio review, at least for now. We'll probably recycle on that on a regular basis. but we will recycle on a regular basis. There's no specific plans now. This puts us in a good position to pay off the next 2 tranches of debt as we promised. And from there on, it will be about good strong cash generation unless we decide to divest something else in the future. And I'd say stay tuned on that. The October Investor Day will give you a good sense of how we expect that debt to come down.

To use additional cost savings? Is that a philosophical point of emphasis? Or are you speaking to specific cost savings you've identified in scope? I'm curious.

It is not on... Yes. Thank you for asking that question because nobody else did. I was going to bring it up. It is not a philosophical point. We spent the last 4 months really scoping additional cost savings. We're not ready to service with anything yet. But we will talk about that in October. We're actually working with an external consultant on that and we feel really good about our program.

Great. So Bracken, as we think about your first year at the helm, larger picture, maybe where do you stand on the priorities that you laid out initially? Maybe first, on the management team, any key roles that you're looking to fill from here? Second, I know you cited today sequential improvement but any visibility to a return to top line growth as you see it today? And then maybe just last, how do you feel about organic free cash flow and debt pay down priorities?

I won't go over the four priorities I've shared before. Instead, I want to emphasize how strong I feel about our management team. We have an exceptional group, and it's exactly what I needed. Everyone is on board, with about half being new in recent months, and it's a fantastic team. My focus now is to ensure we collaborate effectively. Regarding turnover at Vans and the overall business outlook, I won't give you specific numbers today, but in October, we'll discuss it in detail. I'm optimistic about our progress; it reminds me of my experience in my previous company, and I feel confident about where we're headed. As for debt paydown, we'll address that in October, and you can expect to see leverage decrease.

I wanted to ask about Sanjay's decision to leave Wu to join you. Can you discuss Caroline Brown's onboarding for TNF and what she brings to the table? Also, Bracken, while Paul may not be able to say much, are you experiencing any disruptions from the Red Sea or Bangladesh that might affect Q2 revenues flowing into Q3?

Let me start with the last question. In the Red Sea, things seem pretty stable right now despite various humanitarian challenges. Our contingency plans are effectively in place, so I feel confident about that situation. Regarding Bangladesh, we are experiencing some disruptions since about 15% of our production comes from there. There is a bit of risk in our second quarter concerning that, but it's not significant enough for me to be overly concerned. I believe the situation will stabilize based on recent events, but we will have to wait and see. If it remains as it is now, it's manageable. We are also adept at relocating our production when necessary, so there won't be any lasting issues if the situation worsens. On a positive note, I'm really enthusiastic about Caroline's background. She comes from a luxury background and has spent her entire career in apparel, which gives her a deep understanding of this business. She has a fantastic eye for fashion and an incredible passion for The North Face. She's an exceptional leader and made an immediate impact upon her arrival. We have Timberland tents in our lobby now, and meetings are taking place there, including mine. Additionally, I want to mention that we are moving rapidly on several fronts. There are many initiatives underway that we haven't publicly disclosed yet. For instance, last quarter, you weren't aware of Sanjay, Caroline, or Supreme. I'm not indicating any upcoming personnel or portfolio changes, but we are continuously engaged in significant activities, and the pace is accelerating.

Welcome, Paul. I guess the question I'd like to focus on is maybe China a little bit, Bracken. Can you just talk more about what you're seeing by brand in China and just how you believe the outlook is there for what's happening?

Sure. At the end of the day, I believe China has been a remarkable market for VF. Although the overall market has slowed down a bit, it remains a fantastic opportunity for us across all our major brands, not just the North Face. The situation in China mirrors the performance of each brand globally. Vans is undergoing a transformation, and while we are making global changes, the activity we are seeing in China is significant. We are closing many stores and opening new ones at a rapid pace, although these are partner stores rather than company-owned. The North Face continues to perform exceptionally well there, which is evident in our current numbers compared to last year. Timberland is still a work in progress and presents unique challenges in different markets, but I see potential there. I'm enthusiastic about Timberland, but it's not our main focus for now in this discussion.

I wanted to just ask you about Dickies hasn't come up yet. If you could elaborate a little bit on what you're seeing with that brand? What's the plan there? How do you expect to get it back to healthy growth and healthy margins?

Sure. Dickies is kind of the story of two actions. We moved too fast to try to turn it into a pure fashion brand here in the U.S. And then we really pushed to make it a pure fashion outside of the U.S., it continues to do that outside the U.S., it's doing fine. In the U.S., it's really struggled because we lost our footing in our core work business and we're really refocused completely there now. So I'd say more to come there. I think Dickies is a fantastic brand and a great business, a really good, strong, solid brand and we'll get it back on its footing. It will just take a little time.

Bracken, I was hoping you could provide maybe some more real-time color on Vans, how it's performing for back-to-school. And you mentioned modest improvement in the second quarter. Is that really a function of challenging selling? Can you talk a little bit more about the sell-out?

Yes. I think the sell-out has continued to be down versus a year ago which nobody likes but the trend is in the right direction overall. And so I guess that's the main thing. And so it's a little too early for us to give you any kind of expectation for back-to-school. If we had this call just a few weeks later, a month later, we certainly could. But we'll see. I feel good about the progress we're making on Vans. I feel great about the marketing and product initiatives. So I'd just say stay tuned. We said we expect sequential improvement, slight sequential improvement. We do. And that's the kind of progress I want to see on Vans all the way through the year.

Congrats on all the positive changes you can make. Now just to go back to Vans one more time. Obviously, Sanjay is going to have a lot to say on Vans in the coming months. What do you think the biggest opportunities for Vans are from a category level? And is there anything to do in terms of rightsize distribution, whether it be in wholesale or DTC at this point?

I'll start by addressing your second question. We are actively adjusting our distribution approach. We're making significant changes in both wholesale and direct-to-consumer sales. In wholesale, we're scaling back in the value channel in Europe and the U.S., and this is happening right now without much public discussion. So, while we won't make a huge announcement about it, it is occurring. Regarding our stores, as I mentioned, we are closing stores in the U.S. as well as in China, along with some turnover in Europe. Overall, there's a lot happening in this area. As for the biggest opportunities for Vans, it’s a fantastic brand that has recently lost some energy. This decline stemmed from an overemphasis on a few styles that, while they will always maintain popularity, became too prevalent. This overexposure coincided with a cultural surge in their appeal, leading to a strong buy-now mentality, which I believe resulted in customers who wanted them already owning them. It's not a matter of people disliking Vans; they still wear them, but the market is responding differently now. To address these challenges, we are innovating and implementing franchise management strategies. We are introducing new styles such as AVE 2.0 and Knu Skool, along with three new styles this quarter, with more on the way and some key collaborations to revitalize interest. Our franchise management will involve scaling back on some older styles temporarily and reintroducing them once they capture the interest of key influencers in the culture. This approach combines franchise management fundamentals with innovation and is essential for growing a footwear brand. Additionally, I see a significant opportunity in our apparel segment, which currently represents only 19% of our business, although it isn't our primary focus in the near term. I believe there are numerous opportunities ahead for Vans.

Looking forward to meeting you, Paul. So Bracken, my first question is going to be more of a, I guess, a philosophical one. So you had talked about on the last quarterly call, I think Martino had said 5 consecutive months of making plan across the portfolio. I'm assuming based on today's results, that's now at least 8 months of consecutive months; it sounds like you're confident at an all-time high and then we're going to get a 2-parter on the Analyst Day, where typically we get numbers or some long-range plan numbers. Can you speak to that; you're confident turning into guidance? And then my second question is on gross margin. Can you give us some help on the shaping of the gross margins? Inventories are so clean for the second consecutive quarter. I would imagine that you're not delivering or not having to resort to a lot of vendor concessions. So should we see the wholesale gross margin start to improve meaningfully in the back half?

I will address the gross margin comment first. We do expect gross margin to improve throughout the year. We faced significant promotional pressures on gross margins over the past couple of years, but this should begin to ease as we reach the latter half of the year. If everything goes as planned, that's our expectation. I am optimistic about this. For me, gross margin is always the most crucial figure in the profits and losses statement, and I can see that Paul shares this enthusiasm. We are both very focused on improving gross margin. While I cannot guarantee exact outcomes for every quarter, I do anticipate that it will improve over time. And consistent with that, when we talk about our guidance, our lack of guidance when we get to October, we'll come up with a formula for how we're going to do this. I don't want to spoil the fun now. We kind of have a game plan. But we will give you more than we've given in the past and we'll certainly give you something more in the intermediate term, something that you can look to and see where we're really trying to head to. So without saying any more because Allegra will elbow me right in the neck because she's that close; I’ll stop there.

Thank you for taking my question, I look forward to working with you. To follow up, can you hear me better now?

Yes, we can.

Okay. I want to ask another question on Vans. You've mentioned that the market is a lot cleaner than it was before. I'm just wondering what are the conversations with wholesale partners like? Are they seeing the positivity in new products of the Knu Skool that you seem to be seeing in DTC as well? And just generally speaking, what do we need to see to get the wholesale partners to get on board to start to reengage with the Vans brand?

First of all, yes, they are positive. I think all the key partners I've spoken with really want us to succeed in Vans because their success is tied to ours. This is the essence of partnership. Generally, I've received quite positive feedback, and you can see it reflected in our future order books for Vans. Those need to be delivered, but I would say so far, so good.

I guess my question would be, I'm sure you're not going to go into specifics, although feel free if you'd like. But looking at the 4 brands, from a rate of change perspective on where their growth rates were in the first quarter, where is your greatest confidence today across that portfolio and maybe rank order them in terms of where that complement kind of lies across all 4 of the brands?

That's like asking me to choose a favorite channel. I want to avoid directly answering your question and simply say that I see opportunities across all of them. The good news is that this quarter, the trend line is quite consistent across the board and has slightly improved sequentially. That's the type of trend I hope to continue seeing each quarter. I believe you'll notice this in our largest brands, and I hope to see it across all of them. However, I can't really rank them. I do feel very positive about the efforts happening in Vans, the North Face, and Timberland. Regarding Dickies, while we still have a long way to go, there's also a lot of positive activity happening there, and I believe we will make progress.

Hope you have a nice summer. Great job on the gross margin beat; I'm glad to hear it. Could you elaborate on the 20 basis points of pressure from unfavorable mix and your thoughts on where that is headed? Also, could you provide some insight on average selling price in relation to gross margin versus units for Vans and North Face in the past quarter? Additionally, I'd like to know how the inventory composition looks by brand.

Probably it's probably just me but I had trouble hearing part of that. So maybe if you could repeat it all again, that would be helpful.

Sure. So there was 20 bps of pressure from mix shift. So I was just wondering you could elaborate on that and where you'd expect mix to go from here? And then if just Vans the North Face thinking about ASP and units how they look at the past quarter and then inventory composition. So in the down 24%, how does that look by brand?

I can't provide all the answers to that. From a mix perspective, it's a relatively small change. We expect the mix to be a tailwind for the year, but not significantly, similar to what you're observing now. So, while we anticipate some mix benefits, there's potential for it to move in the opposite direction. Additionally, our performance in wholesale depends on the growth of our wholesale vs. direct-to-consumer channels. If direct-to-consumer grows more quickly, it positively impacts the mix; if it grows more slowly, it hurts the mix. I believe we'll have a solid year in wholesale, so I have mixed feelings about the mix performance. It might improve slightly, but we will see. As for average selling price compared to units, I don’t think it’s a significant issue. Hopefully, as we progress through the year and our promotions decrease, we'll have a clearer picture.

Two quick ones on Vans. First, on when we think back to kind of where the brand went wrong over the last 2 years, it felt like one of the things that could have been improved upon was having more segmentation and tiering different products for different retailers. Is there any update on how you're thinking about segmentation or how you're executing against that? And then the second one is just on lead times. I know you've talked about frustrating the long lead times are in footwear in general and then particularly for Vans, anything changing there just in terms of your ability to fast track product?

I'll answer the second one first. The answer is no. It's really not been an area we really try to focus on here in the beginning. I do think the overall lead time, we certainly can't put pressure on move things a little faster but I do think lead times in general and time to market is a big opportunity. But as I think I said in an earlier call, I'm parking that one for a little while until we get the fundamental business in place and then we'll worry about that aspect of the business model. But I do think there's upside there. On segmentation of retailers, yes, I think the thing we've talked about is, I think the key is we just got over-distributed into value channels. And so we've pulled back in Europe, we're pulling back in the U.S. and I think that's going to pay dividends.

As you consider the DTC channel, which you've noted was consistent with the fourth quarter, excluding Vans, you mentioned the closure of some Vans stores. How should we approach the DTC fervor and the other brands? What are your thoughts on retail compared to digital? Additionally, could you provide more details on the wholesale business and how it varies by brand both domestically and internationally?

Retail traffic remains weak across the western world, with lower footfall in malls and non-mall locations than anticipated. While e-commerce performance is slightly better, I would refrain from delving too deeply into the wholesale business by brand. Overall, there isn't a significant difference across the board, although there are some variations that are probably not substantial enough to warrant much attention.

I want to follow up one more question on Vans. Could you maybe just break down a little more of the drivers of the improvement you're seeing in Europe in the EMEA region, given that it sounds like sell-throughs are still a bit challenging at DTC. So just to more color on what drove the sequential improvement? And do you think that's a region that could flip positive first for Vans? Or are there different dynamics going on?

Yes, I don't have much to add except that wholesale has performed better than DTC, as mentioned earlier. I believe there is significant opportunity in wholesale, which tends to be larger in Europe compared to the Americas. I feel generally optimistic, especially about EMEA potentially turning first, though we'll see when that occurs. I may have hinted in a previous call that if asked which region might improve first, I would lean towards EMEA, particularly due to the wholesale aspect. Great. Well, thank you all. It's been a really exciting quarter for us with a lot of changes. As I said, I don't expect that to let up. Can't wait to see hear or both all of you in October and Paul will get to say more than just his name and birthday. So he's excited, too. And I'll have a few more people on with us. So, I think this is going to be a really exciting meeting and can't wait to see you all. And now we'll get back to finish the second quarter. So, thanks a lot.