Good day and welcome to the V. F. Corporation Fourth Quarter 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Lance Allega, Vice President of Investor Relations. Please go ahead sir.

Thank you operator, and good morning to everyone, and thanks for joining us today on our fourth quarter and full year 2014 results earnings call. Before we begin, I'd like to remind everybody that participants on the call will make forward-looking statements. These statements are based on current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in documents filed regularly with the SEC. Participants may also refer to non-GAAP financial measures. Where applicable, you can find presentations with comparable GAAP measures in our press release, which was issued at 7 AM Eastern Time today and on our website at vfc.com. Joining us on today's call will be Chairman, President and CEO, Eric Wiseman; Bob Shearer, our CFO; and VF Executives, Scott Baxter, Steve Rendle and Karl Heinz Salzburger. Following our prepared remarks, we'll open the call for questions and ask that you please limit yourself to two questions per caller. Now, I'll turn the call over to Eric.

Thanks, Lance. Good morning, everyone, and thank you for joining us. Our fourth quarter and full year results demonstrate the strength of VF’s business model, our powerful brands and the powerful platforms that support those brands to consistently deliver strong returns to our shareholders. Consistency is in VF's DNA. It is part of how we manage our business. It is what we expect from our people and it's consistency that our shareholders have come to expect from us. We take pride in it. One year ago, we laid out expectations for 7% to 8% revenue growth and 11% to 13% EPS growth for 2014. And while this past year has presented plenty of challenges we achieved our top line target and actually exceeded our bottom line goal delivering record returns to our shareholders. Last year, we spoke about momentum and 12 months later it is the same story, outstanding performances from our four largest brands as well as some notable up and comers and the powerful platforms that became demonstrably stronger during the year. And before we dive into a few highlights of the quarter and the year, let's first touch on a non-cash accounting manner. During the past few years, our Contemporary Brands business which represents about 3% of VF’s total revenues has operated in a challenging environment. In this morning's release, you saw that we concluded that the carrying value of our 7 For All Mankind, Splendid and Ella Moss brands has declined. As a result, in the fourth quarter we took an after-tax impairment charge of $307 million which is about $0.70 of EPS to reduce the carrying value of those brand's assets on our books. Bob will take you through more detail on this in a few minutes. With that said, on an adjusted or underlying…

Well, thanks Eric for the kind words and also the unique opportunity to serve alongside you throughout much of my time at VF, I just have way, way, way, too many good things to say about VF in my experiences during an earning call, but I will say that I couldn’t be more proud of being part of the incredible transformation this company has successfully put in place. What an honor it's been for me. And I've also enjoyed working with all of you on this call over the years and I'll miss that for sure. But first, I am still the CFO, so back to the business at hand. Our fourth quarter results and overall performance in 2014 once again illustrate the strength of the VF business model and how our operational excellence enables us to deliver on our growth objectives year after year. Fourth quarter revenue increased 9% led by exceptional results from our Outdoor & Action Sports coalition as well as our International and direct-to-consumer businesses. For the quarter, foreign currency fluctuations hurt the revenue comparison by about three percentage points while the incremental week that Eric referenced helped by about that same amount. Our gross margin reached a record 49% in the fourth quarter with an 80 basis point improvement driven mostly by the continued shift of the revenues toward our higher margin businesses and a small lift from an accounting change made earlier in the year related to retail concession fees. SG&A as a percent of revenues in the fourth quarter increased 20 basis points. This increase was primarily due to that same accounting change as retail concession fees are now included in the SG&A line rather than netted against revenues. And now a bit more on the fourth quarter impairment charge we recorded for…

Starting with Outdoor & Action Sports coalition. Fourth quarter revenue was up 13% or 16% on a currency neutral basis. This strength was broad-based with strong growth in wholesale and D2C as well as double-digit growth in nearly every brand including The North Face, Vans, Timberland, Kipling, Napapijri, Reef, lucy and Eagle Creek. What a portfolio and what an engine it is firing on all cylinders and housing VF's next billion-dollar brands. Now let's take a look at VF's three largest businesses. Starting with The North Face. Fourth quarter global revenues were up 12% or 14% on a currency neutral basis. Global D2C revenues were up 30% and included double-digit comps. So, continued fantastic strength in that business. In the Americas, which represents about 70% of TNF's full year sales, fourth quarter revenues were up at a mid teen rate with D2C growth of more than 25% and a high single-digit wholesale growth. 2014 had one of the strongest product offerings in TNF's history, innovations that defined new subsets of the outdoor performance category, products that expanded our reach into all four seasons of the year attracting new consumers and a precursor to what we believe is one of the most revolutionary fabrication technologies in more than a decade. Let me give you some highlights. Our ThermoBall line has continued on its incredible growth trajectory. At the end of only its second year ThermoBall has clearly established itself as the consumer choice for transitional weight outerwear. The line was a top seller throughout the year and ended 2014 with global revenue exceeding $100 million. 2015 will see an even more robust expansion of this high-performance innovation and we really feel like we're just getting started. Launched last spring our Mountain Athletics training collection continued to drive growth throughout the year…

Thank you and good morning everyone. The North Face international business was up at the high single-digit rate on a currency neutral basis in the fourth quarter. In Europe, which is about 20% of the brands full-year sales, fourth quarter revenues were up at low single-digit rate currency neutral. For the full year, revenues were also up at low single-digit currency neutral rate reflecting a tough microenvironment and a general weakness in the outdoor market. In 2015 we are expecting a slight improvement in currency neutral revenues due to our strongest ever product offering and successful go-to-market strategies. Asia, revenues were up more than 25% in the quarter, where we continue to make good progress building brand awareness. This is evidenced by the incredibly strong launch of our Thermoball product during the year and great initial response that retailers are showing for FuseForm. Our online business also remains a key driver of growth with sales up more than 80% for the quarter. We saw very strong results in Hong Kong for the year, great momentum with our Taiwan distributor and great momentum in China, where sales were up nearly 20%. We're pleased that we are creating deeper, lasting connections with the Asian consumer and look forward to building on this momentum. Taken together, The North Face is in a leading position as we wrap up year two of our five-year plan and remain on track with our financial targets. Now, let's turn to Vans.

Vans showed strong performance in the fourth quarter with revenues up 17% or 20% on a currency neutral basis. This marks the brand's 25th consecutive quarter of double-digit growth, a big result that helped Vans become the second $2 billion brand in VF's portfolio. In the Americas which is about 60% of the brand's full-year sales, fourth quarter revenues increased 20%, slightly ahead of our expectations, connecting with consumers through the creative expression in action sports, music, art and street culture is something the Vans team does extremely well and the fourth quarter was no exception. A great example was the 32nd annual Vans Triple Crown of Surfing, which took place in the North Shore of Oahu. Surfers from around the world entered their year on Hawaii's iconic waves and this year 10 million people who couldn't make the trip viewed the action live online. We also garnered more than 100 million social media impressions and press coverage in more than 50 countries worldwide. This is a clear indication that a lot of people choose the Vans brand as the epicenter of youth culture. In 2015 there's no slowdown as we'll continue to build on this momentum with events such as custom culture, the Vans Warped Tour and House of Vans to drive home Vans unique Off the Wall culture. And of course a few product highlights. We recently introduced weatherized footwear designed to keep you warm and dry in the outdoor elements. So just like The North Face moving forward toward a four season offering so was Vans and that's important because consumers shouldn't have to step out of their vans because of weather. It's their flag. It expresses their creativity and now they have more choices for different climates and really exciting the response thus far has been incredible and we have plans to significantly expand this collection in the back half of 2015. We're also introducing a new footwear concept, Classic Plus that will feature restructured trend focused product. We're really excited about this concept and can't wait to talk more about it in the coming months. Global revenues for the Vans brand in 2014 were up 17% on both a reported and currency neutral basis. This increase is ahead of our 2017 plan and clear evidence that is the world's largest youth culture brand we are firing on all cylinders globally and our momentum is strong. In 2015 we expect Vans global currency neutral revenues to be up in a mid teen rate consistent with our 2017 plan. On a reported basis, revenue should be at a high single-digit growth rate, strong brand, strong plan and a fun year ahead. KH

Vans international revenues were up at 18 percentage rate on a currency neutral basis in the fourth quarter. In Europe, which is about 30% of the brands full year sales, currency neutral revenues were up at high single-digit rate in the quarter. Vans continued to deliver amazing consumer experiences with many events and interaction to London's House of Vans. This venue has quickly become a fantastic destination for youth culture to experience the brand. We look forward to using this showcase in an even greater way in '15 and just like in the Americas we're also focused on growing our relevant, innovative products such as weatherized footwear and apparel as well as updating classics to reflect current trends and getting very strong response from our efforts. Our e-commerce business also has been a great success story for Vans as we reach even more consumers. In Asia, we are seeing strength across the board. The quarter's revenues were up more than 50% with particular strength in China and Korea. Like Europe, we are seeing strength in our weatherized lines and continue to get traction against our localized products, specifically apparel. In terms of brand activation we completed an incredibly successful House of Vans store across three countries, our Vans China retail road show across several cities and an Asia Pacific skate tour. We also opened up an experimental retail store in Seoul, Korea that brought the House of Vans elements of live music, local artist galleries and special edition product into our retail environment. Definitely been busy making some great connections with our consumers in 2015 and look forward to building on this momentum for 2015. And now on to Timberland.

Four quarter global revenues for Timberland were up 11%, up 15% on a currency neutral basis. In the Americas, which represents about 40% of the brand's annual sales, revenues were up nearly 25% in the fourth quarter, driven by incredibly strong growth in our wholesale business. This represents the fifth consecutive quarter of double-digit growth in the Americas momentum we look forward to building on in 2015. This is a testament to great brand strength driven by strong consumer reception for our products, high customer demand for future collections and our intense focus on amplifying our connection with the outdoor lifestyler consumer. On the product front growth continues to be really well balanced across our all footwear and apparel categories with particular strength in casual and outdoor footwear for men and women. Our Pro Boondock family of footwear also continued its solid momentum. On the apparel side sales are driven primarily by outerwear from shirt jackets to insulated product to beautiful leather bombers really strong and balanced growth. In marketing, we continue to build brand heat in relevance with our core target the outdoor lifestyler consumer. In Q4 alone Timberland created a shared more than 350 pieces of engaging style rich content anchored by the highly successful Mark Maker's Influencer Program. We gained extensive coverage of our new fall collections and influential print and digital outlets garnering some 800 million media impressions. In 2014 full-year global revenues were up 13%, up 15% on a currency neutral basis, which is actually ahead of the 2019 plan we set in September. With $1.8 billion on the top line in 2014 this marks the brand's highest ever revenues, something the team is very proud of and they should be. Looking at 2015, we expect Timberland's global revenues to see low teen currency neutral growth rate right in line with our 2017 plan. On a reported basis revenue should be up at a mid single-digit growth rate. Now back to KH.

Timberland's international revenues were up at the high single-digit percentage rate on a currency neutral basis in the fourth quarter. In Europe just about 40% of the brands full year sales fourth quarter revenues were up at the mid single digit rate currency neutral. The quarter was driven by strong sales of SensorFlex, our newest technology platform as well as Cupsole for men, while casual boots were strong on the woman's side. During the quarter, we continued to grow our footprint in the region opening two new stores and 20 franchise locations. We also rolled out our new e-commerce site design, which drove a big jump in conversion and an increase in sales. We expect growth in the region to continue in 2015. In Asia, fourth quarter revenues increased at double-digit rate currency neutral. In this region the classic yellow boot performed well in all markets and we saw great early success with the launch of the Britton Hill line. Additionally, apparel had a particularly strong quarter with great results from our men's outerwear including rainwear and jackets. We are more confident than ever about the Timberland brand. The global team and efforts to significantly move this brand forward are working well and they're just getting started. Before I move forward, I'd like to talk about two brands that are based in Europe and continue to perform exceptionally well, Kipling and Napapijri. Kipling's global business posted an 18% increase in 2014 global revenues, just on top of the 29% growth it posted in 2013. This marks the second year in a row that Kipling has been Vans fastest growing brand. Napapijri finished strong in 2014 with fourth quarter revenues up nearly 30% or more than 40% currency neutral and really winning Vans fastest growing band of the quarter award. For the full year Napapijri was up at low double-digit rate. Both of these brands have fantastic long-term potential and might one day join the billion-dollar brand category. And now back to Steve.

Turning to our Sportswear and Contemporary businesses. Sportswear's fourth-quarter revenues were up 4% driven by growth in the D2C channel. Nautica's revenues were flat, with low teen growth in D2C including significant e-commerce strength, partially offset by a mid single-digit decline in its wholesale business. Kipling's North America business continued its run of double-digit gains posting 25% growth including a 35% increase in D2C sales and a mid single-digit growth in wholesale during the fourth quarter. We continue to expect Kipling to achieve strong double-digit growth throughout the year. Revenue in our Contemporary Brand coalition was down slightly in the quarter, were up slightly on a currency neutral basis due to as we've already discussed category and channel challenges. Where we control the brand ourselves, in other words in our own D2C businesses, we did see a double-digit currency neutral revenue increase. Our data shows that we're not only maintaining, but also gaining market share from our competitors in a pressured category. Now, I’ll pass it to Scott to discuss our Imagewear business.

Thanks Steve. Our Imagewear coalition posted revenue growth of 4% in the fourth quarter, up 5% currency neutral, consistently solid top and bottom line growth from our Imagewear group all year long. Both our workwear and Licensed Sports Group businesses contributed to the growth. Our workwear business was driven by new product introductions at Red Kap and Bulwark, for example the iQ product at Bulwark as well as strength in the core business. LSG saw double-digit gains in the quarter from its MLB business due to strong postseason sales. And now, onto the Jeanswear business. Fourth quarter global revenues for the Jeanswear coalition were up 3% or up 5% on a currency neutral basis. For the full year 2014 global Jeanswear revenues were flat at $ 2.8 billion on a currency neutral basis. Revenues were up 1%. In the Americas region, revenues were up at a similar rate as the global results and were driven by particular strength from the Wrangler brand and its Western Specialty business. Revenues for the Wrangler in the fourth quarter were up at a low single-digit rate or up at a mid single-digit rate currency neutral. Customers have responded very well to our recent new product introductions including the Advanced Comfort in Heavenly Touch lines as well as our no iron khaki pants. Our Western specialty business had a very strong quarter with revenues up 13% driven by strong holiday sales in Western retail and mid tier accounts as well as the successful launch of men's Rock 47 jeans targeting fashion conscious Western consumers. We have also elevated the brand with our expansion into the mid tier department store channel and are planning to add more doors in 2015. Our marketing campaigns during the quarter were a big success including great response to our TV…

Our international Jeanswear business which is about a quarter of the coalition's global revenues was up 9% on a currency neutral basis in the fourth quarter. By region, European revenues for Jeanswear were up 10% currency neutral and in Asia revenues were up at high single-digit rate on a currency neutral basis. Our international Wrangler business was up at mid single-digit rate on a currency neutral basis in the fourth quarter. Innovative products continued to lead the way including great response in Europe from our denim performance programs and outerwear category supported by the latest campaign featuring Formula One Champion, Kimi Raikkonen. In Asia, the largest growth driver was also denim performance which was up 26% over last year including a standout performance from our Silver Shield antibacterial denim product. Lee's international revenues were up at low double-digit rate in the quarter with strong growth in both Europe and Asia, particularly in the U.K., Scandinavia and China. In Europe Lee's 125th anniversary collection featuring guest designers is generating a tremendous buzz around the brand with all of our key accounts showing double-digit gains. In Asia, we also saw really strong performance from our 125th anniversary product along which strong sell through of our 101+ collection, great testament to the work we have been doing in the brand and the strong products that we are producing that resonate well with consumers. In summary, we're making great progress in our global Jeanswear business.

And with that we concluded our prepared remarks and we're about to turn it over to the operator to open the line for question, but before I do that, I just want to share with you all that as Bob Shearer and I have discussed his departure from our company over the last six months, the one thing he said he is going to miss most is taking your questions. So I would ask you to load up and direct a lot of questions to Bob because it will just make his day. Operator, we'll take questions now.

Thank you. [Operator Instructions] We'll take our first from Michael Binetti with UBS.

Hey guys, good morning. Congrats on a great quarter.

Thanks Michael.

And Bob, first of all, it has obviously been a great pleasure working with you all these years.

Thanks so much Michael.

Regarding the comments on gross margin, you guys obviously went into it a bit in the prepared remarks, but you're going to be 30 basis points shy of your 2017 target. I know you don’t want to update your guidance with us here during Q&A, but maybe just a few thoughts on how you think about that after you pulled forward that expansion in your five-year window and I don't think you want us to assume that the gross margins flatten out in our models here quickly after that?

Yeah, Michael, you didn’t have to take Eric seriously on that.

Thank you, Michael.

Yeah, Michael, the way to think about this going forward is pretty much what we've seen. You know, as I said in the comments that we just don't see any change in terms of that mix benefit being any different going forward. So that 60 or 70 basis points of benefit that we've seen from mix consistently year-after-year over the past number of years, we'd expect to see that kind of expansion going forward as well. So you know, barring any other unforeseen changes in product costs or pricing or something like that which we wouldn’t expect at this point you know, we expect to see that continued expansion pretty much related to the mix just like we've been seeing.

Okay, and then maybe a followup if you could tells us a little bit about the backlogs for the big brands as we think about the organic revenue growth here and it looks like you expect it to accelerate a little bit in a tough global macro here? And maybe also your long-term guidance, I know it includes a little bit of SG&A deleverage [every year] [ph] is probably related towards the shift, towards more retail, but I think you've said most of the SG&A in 2014 was due to an accounting change. So as you lap that maybe there could be a little more room to step up marketing to drive the top line in 2015 or maybe just a few thoughts on marketing spend year-over-year? Thanks.

So, Michael, your question is mostly around what we see in terms of SG&A going forward, is that…?

Well, I'm trying to figure out what you’re seeing maybe in the backlogs to help the organic revenue growth rate accelerate into 2015, it's a tough world and then as a corollary may be there is some incremental marketing spend that helps drive that if you're comfortable with it?

Well I'll speak to that, I can speak to the marketing spend and what's planned. You know, we are looking obviously for another increase and as we said, what we've been really, really successful in doing in the SG&A area is we've been able to spend against DTC and as you know, that would naturally lift our SG&A ratio. We've also been spending more particularly in the dollar side and you also know that we've incrementally been increasing our marketing spend as a percent of revenue as well. So, as we look at 2015 yeah, we expect to spend another $50 million or so against marketing. We'll keep the ratio relatively flat, just around the 6% mark, maybe just a little below the 6% mark. So it will give us some additional dollars and we have been spending those additional dollars and all the analysis that we've done and the analytics say that we've been getting a great payback from that and it is giving us that momentum that you mentioned. Anything more from that?

Yes, so Michael, I will add a little bit on our big brands. We stopped giving really information or guidance on our backlogs a few quarters ago. What I can tell you is, is the backlog information that we have to-date is baked into our guidance for '15. But as we think about how to drive additional organic growth, I would tell you two things and you referenced marketing. I think we continue to get better and better as marketers of these brands as we become more and more knowledgeable of our consumers and I think the TV campaign that The North Face put out this fall, This Land is Your Land, what you see the Vans do with events to the in-store experience that we're bringing across to all of these big brands really helps drive awareness and builds that loyalty. But I think probably one of the largest factors that we feel really strong about is our improving digital capability and what we're able to do online through communicating, but also transacting through our expanding VF e-commerce platform and all of these big brands have access and are growing in that capability.

Thanks a lot guys.

Thanks Michael.

We'll go next to Bob Drbul with Nomura.

Hi, Good morning.

Good morning Bob.

Bob Shearer, congratulations, best of luck.

Thank you, Bob.

Yes thank you for being my friend.

That's good.

Great job.

Thank you very much. Thank you

I guess this following Eric's lead on the questions Bob, can you talk a little bit about the expenses in Europe and sort of the European headquarters, you know sort of how that shrank through the P&L and how we should think about your positioning maybe in Switzerland specifically?

Yeah Bob, so back to some of the comments on currency, just to reiterate, you know, nearly all of the currency impact that we're talking about is related to translation, you know, which we don't hedge. We do hedge the transactional side and it's very seldom that you ever hear us talking about the transactional side and that's because we have a really effective and efficient hedging program that covers those risks. To your point relative to the Swiss franc that was one that we kind of couldn't see coming, you know, which had always been pegged to the euro and so the change, the move by the Swiss government you know, caught us with some increase in our reported expenses. So what happens is the Swiss franc strengthened actually. We had to record higher dollars as expenses. So it’s just an expense item, not revenues, just expenses went up just because of that move. And that's pretty much what we were talking about on the transactional side. It's almost all related to that. Now, you know, going forward and related to our headquarters in Switzerland we don't see that changing at all. Now we’ll see what happens with the Swiss franc, but you know in terms of any operational changes or anything like that we wouldn’t contemplate any changes.

Great, thanks. And just a question on Timberland, how much of the success has been the yellow boot and sort of how broad has the business really increased throughout the world?

Yeah, Bob, I'll take that. This is Steve. Certainly the yellow boot has played a part in Timberland's growth, but it is a high single-digit contributor from a revenue standpoint. It is not the primary driver. Our growth has been balanced across all categories, both footwear and apparel across wholesale and DTC, across men's and women's and really balanced across all of our regions. So, you know the boot though important really just informs the best then better now mentality that Timberland is putting against this brand as they expand the reach and accessibility of this brand.

Thank you very much. Good luck.

Thanks Bob.

We'll go next to Omar Saad with Evercore ISI.

Thanks, good morning. Great job on the quarter guys. Bob, congratulation on a great career and thanks for all your help over the years.

Thank you, Omar.

I wanted to ask another question on FX and Bob, you did a great job helping us understand the transactional impact on you guys hedge it, but how long are those hedges and how should we think about what happens to those dollar-denominated costs, whether it's on the SG&A side or on the cost of goods side, when those hedges roll off and I don’t know six, nine, 12 months. Just kind of help me understand how the gross margin might look in '16?

You know, so what we do is our hedging actually covers us for 12 to 18-month period. So we go fairly long on that. Now over time you know, however, over a longer period of time, we have to look at leverage points for us like pricing. You know, so if currency rates stay where they are today you we'll look at pricing our goods to offset those I’ll call them cost increases. So you know, we do have those that kind of flexibility, but that’s a longer-term view. So, we take a fairly long approach in terms of our hedging practices. So it covers us exactly to your point over the next 12 to 18 months and then on a longer-term basis we look at pricing. You know, for example to [hold] [ph] our margins improve. So over the longer-term if you look back over time that's worked really, really well for us. You know, what it gives us is certainty for the upcoming year and then it gives us the ability to make pricing adjustments over a longer period of time to hold and continue to grow our margins.

Thanks, it's super helpful and then Eric, a question for you. You know that VF is always kind of looking for other brands to acquire and with the news around right after they are in Splendid, 7 and Ella Moss, may be you can take the opportunity to talk about kind of some of the learnings from those acquisitions and how it pertains to how you think about future brands that you may acquire?

Sure, you are right. We are an acquisition minded company and we are probably as frustrated as those of you who want us to make acquisitions. We're probably as frustrated as you are about our lack of getting anything done recently. However, we remain very disciplined and when we find the right opportunity to make strategic and value creation sense for us we are in a great position to pull the trigger and go. We have a lot of capacity to acquire. One of the things, that we do a postmortem on a decades worth of acquisitions every year with our Board of Directors. We review everything we've acquired in the last 10 years and look at their performance and there's always ups and downs. The truth is about what happened with these contemporary businesses is the impairment charge we took was mostly a reflection of the difference between our current assumptions and the assumptions that we made when we acquired and purchased these businesses. We bought 7 For All Mankind in the summer of 2007 and our outlook for it didn't anticipate a lot of the environment that we've seen since then. That means we're standing today not where we thought we'd be and that's resulted in the accounting charge. It doesn't mean we're not committed to that space. We talked about our overall strategy is mainly needs of apparel shoppers whenever and wherever they shop. There is an important segment that shops in the contemporary space worldwide and we have great brands to meet their needs. We do expect as Bob said in his comments I think, from the standpoint growth and profitability improvement in those businesses.

Does the strong dollar at all make the potential for maybe European acquisition look a little bit more attractive with the dollar up so much against the euro?

Of course, yes it does.

Thanks guys.

Thanks.

We'll go next to Kate McShane with Citi Research.

Thanks, good morning.

Hi Kate.

Hi Kate.

Just following up on the question on the acquisition side Eric, you had mentioned that a little bit frustrating getting something done. Could you elaborate on that all, is it more to do with willing sellers, is it valuation, is it the competition for assets in the market?

We are, there's a series of things going on there. We have certainly been involved in discussions with companies as we always have been. If I look back over the last 15 years that I've been involved in that process we always have a bunch of businesses that we're actively engaged in, but we can never anticipate when those discussions will result in an acquisition, using Timberland as is a great example. We were in discussion with them for decades and finally found the right moment for that one to activate. We have very clear internally, we know where we are hunting. We've talked externally that it's primarily in the Outdoor and Action Sports base. I said primarily not exclusively. To the last question, yeah international is looking more and more attractive to us because of the strength of the U.S. dollar and we're continuing to have discussions with people. We just don't have anything we can talk about today.

Okay, that's helpful, thank you. And maybe if I could ask a question about denim, on denim with the lower gas prices, are you seeing any positive impact from that and how should we think about the cadence of denim growth and is that some of your innovation initiative this year?

Hey Kate, this is Scott. How are you?

Good, thank you.

Well, you asked about the gas prices and absolutely when you see gas prices contract like they have in the economy, that is absolutely helpful for us, especially when you think about the channels that we traded mid tier and mass that frees up a lot of income for the folks that are in those channels. And we have really big franchises with our Lee and Wrangler brand in those channels. So, we saw some really nice momentum in both our Wrangler and our Lee brands in the fourth quarter, that's carried over here after the first of the year and it's not just the gas, I think there's a little bit of confidence that's going on in addition to the gas and also there's a little bit of a job recovery that's going on. So all those factors combined have really helped our business and we've seen some momentum and we're pretty happy with it. And I think if you just couple that Kate, with the fact that our new products are really working, so we've had a series of new product introductions and some really innovative ones whether it's Advanced Comfort or No Iron Khaki or an Easy Fit or a Comfort Fit in the mid tier channel, those things have really worked and that's really helped us. So the consumer that's coming in that has a little bit more income right now, they're seeing some new products. They really like the new products like a Heavenly Touch and they are purchasing those new products. So it's been a nice combination for us here in the last five, six months.

Okay, thank you and if I can just squeak out my congratulations to Bob as well and thank you for all the help. Thank you.

Thank you, Kate.

We'll go next to Laurent Vasilescu with Macquarie.

Congrats on a strong finish to the year. I believe during the 2013 Investor Day it was noted that the international gross margin was 700 bps higher than the overall company gross margin. I was curious to know where it stands today, what is the potential FX impact to the 700 basis points relative for 2015 and are you raising prices in Europe to offset U.S. COGS?

Yeah, the international gross margins are similarly as strong as they were if not little bit stronger. You know, one of the things we're seeing in 2015, what happens is from a gross margin standpoint, is as we translate our international currencies into dollars and results in fewer dollars it's a little bit more of a mix impact than anything else. So what we're not seeing, we're not seeing any decline on a euro basis for example in our gross margin rates. What we're seeing overall for VF Corporation is we have fewer converted dollars, translated dollars right, which impacts the overall mix. So our margins, our profitability on our international businesses is quite strongly. We made the point in the past that the ratio of our overall revenues to international in our earnings contribution from international is very, very strong. It's the highest within the company. So again, it's a little bit more of a mix issue than anything else and not a rate issue. So I'm glad you asked the question because we want to make sure that that's really clear. That's where our hedging programs really help protect us against gross margin rates on a euro basis for example.

Okay great and then on Timberland, Timberland Americas continues to be reporting very strong numbers, up 25%, last quarter was 22%. I was curious to know how we should think about the guide of 14% growth in the Americas? And then I think during the Investor Day it was noted that the operating margin at that point was around projected to be 13% for 2014. I was hoping to know how that pended down, how we should we think about the long term guide on the operating margin?

I’ll take this question for you Laurent. So how should you think about the long term growth rate, we've have guided on a global basis up low teens. That certainly would hold true with our Americas businesses and we see it to be very balanced. Wholesale been a significant driver as the brand is really focused on placing the right products in the right channels segmenting the product and allocating their product and supporting that with really, really strong marketing. Our D2C business will continue to grow. We are now at a place where we are comfortable opening new stores as we've right sized our model and we'll look to start building up full price to really balance out with our current outlook mix and then Timberland will be coming on the VF e-commerce platform here in the United States in the second quarter and we are looking for accelerated growth in the back half based on that enhanced content and commerce capability. Operating margin, Bob will go ahead and take you there.

Sure, on the operating margin, you've obviously seen and we talked about it in our comments as well that our operating margins in Outdoor & Action Sports continues to expand. And while most of our businesses are growing particularly gross margins as well as operating margins on the Timberland component of that is a big factor. We said earlier in the acquisition that we saw that as a significant opportunity at the time of the acquisition operating margins were in the 8% or 9% range and that's improved dramatically over time and we're just continuing to improve. So we're getting back close to that 20% operating margin that we enjoyed prior to the Timberland acquisition and we're moving back closer and closer to that. And we will continue see expansion in the operating margin at Timberland.

Okay great, best of luck.

Thank you.

We'll go next to Robby Ohmes with Bank of America Merrill Lynch.

Oh, thanks and Bob you will be missed and best of luck to what you do next.

Thanks very much Robby.

Just a few followup questions, the first one I was wondering if you could give us any color on how the sort of followup, how the outlet store business is relative to full line, some others that have commented have seen more difficult outlet business? And then second question would just be, I think sports were, I think you guys in the release kind of highlighted the challenging U.S. department store channel, was that primarily Nautica or was that across brands and sort of how do you think about that channel for 2015? And then the third one and I'm sorry if I missed it, but did you guys comment on Lucy and if not sort of an update on how that brand is doing? Thanks.

Do you want to start with the department store?

I’ll take the Sportswear and Lucy question Robby and then we will catch you on the outlets on the back side. So the comment you saw on Sportsware related to the department store was primarily Nautica. They are most heavily penetrated in that channel. And certainly we compete for our consumers in that space and some of that sits on us with a better and better product that we put into that product and how we are able to represent that. But I think it has been pretty well documented that that channel through this year has seen some opportunities for improvement and we certainly worked very diligently with our partners to help drive our brands through those channels of distribution. Our Lucy business, we could not be more proud of and excited. We have seen really consistent growth. We expect that business to grow in the mid single-digits coming into this year with more than 20% growth in our whole sale business and that is coming with our relationship that started with Dick's Sporting Goods at the end of '13. We're now in 365 Dick's Sporting Goods stores in the Women's performance or studio area and have seen really good growth as our team learns how to operate with a large dynamic retailer such as Dick's Sporting Goods. We're seeing improvements in our own stores as we look to really improve our traffic in conversion through really growing awareness within those markets where we have stores. So, Lucy continues to get better and better and we think this push into the wholesales channel is certainly helping it gain more and more traction.

Yeah, sorry, just the Outlets versus sole line and any color you can give us across your brands?

So Robby, I’ll make a couple of quick comments. This is Scott on the VF Outlet stores. As you know, we have roughly 80 of those stores and we have seen some nice momentum in the fourth quarter moving into the first quarter from an outlet standpoint. That channel was very vibrant. The shoppers were actually moving to that channel and have really seen that there is value in that channel for our brands and value for the consumer there. So we've seen some momentum. It's carried forward this year and we are really happy and pleased with where our business is positioned there right.

Robby it's Eric. I'm going to try to peal this back a little bit about the outdoor and full price. It's a complicated question because we have outlet and full price stores around the world. In the United States, most of our business other than the VFO business that Scott referred to is full price retail. We certainly do have outlets stores, but most of our brands use them as a place to manage their distressed inventory. The exceptions to that actually are Nautica and Kipling both of which have primarily outlet store businesses and they are working really hard to make those stores, Nautica no full price stores. I am going to guess that 80% of the Timberland stores are outlet versus full price. So, their whole business model is making the outlet model work for them. They don’t have a full price comparison. Where we have full price stores, which is primarily around our Vans and The North Face brands we have really strong full price business. We bring our very best stuff to those stores and that is where we see those as our way to develop the digital economy channel strategy. We want to go into cities and have people be able to come into a Vans as a North Face store and really see everything that is true about the brand. Europe in general is a full price retail store market for us. We do have some outlet stores there, but they are almost exclusively for excess inventory sell off. So it’s a different strategy than some people use for their outlet stores. Did that help you?

That does. That’s really helpful. Thanks Eric.

Okay Robby.

We'll go next to Matthew Boss with JPMorgan

Good morning guys. Eric, can you talk about the global consumer backdrop? I guess specifically have you seen any fundamental trend change at all in Europe and just promotional levels post holiday, how you are thinking about things?

Yes. I am actually going to ask Karl Heinz to speak about the Europe consumer and what we're seeing with our brands. He spends more time there than as I do. It's home.

I do spend more time, at the moment I'm here in the U.S. so I think Matthew there is a lot going on in Europe as you related. So I really reported that in the press from an economically point of view and political which I am not touching. Having said that, it's not really helping consumer sentiment and making consumer spend, but having said that, as you heard from the release we do pretty well, and we see some come back from consumers surprisingly and especially from the southern European part, you know where we see our orders coming in pretty nicely and strong. So, all in all we are pretty positive about the performance of Europe and the outcome for the year, so which we expect as we said to be up. So, all in all I guess it’s a better picture than last year.

Great. And then just any disruption that you've seen so far from the West Coast port strikes? And Eric I guess more importantly, just how this process works in terms of late orders kind of who is on the hook between the vender and wholesale partners, just any color you can provide?

As a backdrop the West Coast port situation really began last summer. Our team has been navigating through that incredibly effectively, so much so that we haven’t had any material misdeliveries or incremental costs. Have we had some misdelieveries? Yes. Have we had some incremental costs? Yes, but nothing that we need to call out anybody's attention. We have diverted stuff to other ports. We've moved part of our truck fleet out there to get our through the docks and off the platforms. There's a lot of things we've done that just haven’t been material enough to talk about. But it is a complicated situation. If it does go to a full on strike and shutdown it will be material to everybody. Now the question is, how material and the answer to that is, you tell me how long the strike will be and I’ll tell you how material. If it is one weekend, if it's one weekend we'll get through it. If it's three months, well I don’t think that's even possible for it to be three months. It would be really important. Most of the cost associated with that sit with us. If our orders are late getting to customers, customers don’t have to take them so. That’s we bear the risk, but I would tell we've had that risk now for eight months and we have managed it really, really well. Is that helpful?

Yes. That’s very helpful. Congrats on a great quarter and Bob, sorry to see you go.

Yeah, thanks a lot, Matt.

We are going next to Jim Duffy with Stifel.

Good morning everyone. Hope you are all well. Bob, a sincere thanks for all your time and help over the years. Let's appreciate it.

Thank you.

My retirement gift I am going to direct my question to you colleagues.

I'm sorry Jim, we can't hear you, you're breaking up.

Couple of questions, one on Vans and then a question for Karl Heinz on the outside category in Europe. The Vans growth has been phenomenal, domestic in particular. As you look to build on this, can I ask that you elaborate on some of the specific drivers and geographies to watch for looking into 2015 with the Vans brand? Help that will be appreciated thanks.

Sure, I'll go and start that Jim and Cage can beat in for what's going on internationally. I think what we see currently driving Vans growth and what we see continuing to drive Vans growth is really broad based against all the tools that they have from a product standpoint just continuing to be the expert in the pool where category is specific to their consumer, bringing weatherized footwear this last year really showed us the opportunity to expand our offering to four seasons across the year and being able to complement that with apparel and accessories. So, continued just dialed focus on the appropriate products on a year around basis in footwear and apparel. Really the partnerships that we have in wholesale here in the North America business are second to none in how our teams work with our partners to bring our brands to life and assort this expanded set of products. How we are able to bring to life in our own stores to really set that experiential tone for our consumers is a great strength and we've been very systematic in how our retail footprint has expanded geographically throughout the United States into Canada and most recently into Mexico. And then you just think about our ability to connect digitally with our consumer. Vans is our most powerful social and digital brand and has been a big part of helping bring our VF e-commerce platform to life and how they use that to not only communicate and connect, but also transact will be another powerful tool that they have to drive growth.

Yes Jim and may be starting with Asia the outdoor market, you heard us saying we did pretty well in our up double digit both on the North Face and Timberland. So I would say that market is good. We had a few issues. There were some issues in China may be two years ago with the inventories, but that has sorted out. So that is pretty healthy market. Europe is a little bit more complicated. It’s a very fragmented market as you know, many brands don’t do well, some do okay. We have been consistent growth in the past. We have growth rates now where we're not really happy about, but we are confident we can improve our growth rate especially in the North Face in the future. There is a lot going on. You heard us saying with product innovation we have great market, go-to-market strategies. We show, we just did a show, actually the largest show in the Sporting Goods in Munich last weekend. There was a lot of noise and excitement about the North Face with our new approach we're doing better storytelling, a lot of product innovation. So going forward, I think even in a complicated market we are pretty confident.

And Karl Heinz, the challenges in Europe for the category, is that a weather dynamic or are there larger issues in that?

I would say both. The weather was so-so. You heard that it was widely in the press. We had no winter up to December. We got I think some snow in January, so it is normalizing now, but the last two years were not so good from a weather point of view. Plus the economy, I think it's widely in press. There is a lot of noise going on in Europe at the moment, so that is not helping. But it can't be an excuse and we have to react and we are reacting and our product innovation is a strong answer to stimulate consumption. And you know, probably better and more digitalized approach and storytelling, which to make consumers spend on our brands.

Very good, thank you.

Thank you.

We are going next to Erinn Murphy with Piper Jaffray

Great, thanks good morning and thank you for sneaking me in Bob and I wish you all the best on you future endeavors.

Thanks so much, Erinn.

May be you guys could talk a little bit more about the three innovation centers that you are developing. When is the first time that we should start to see some of the benefit across the various product lines? And then just secondly, a quick follow up for Karl Heinz in Europe. Can you just speak to any volatility that you are seeing from a tourist world perspective into the region? Thank you

Yeah, so Erinn, I’ll start and then Scott can jump in. We are standing up three innovation centers this year. You have certainly heard and seen us right about this. From a technical apparel and footwear standpoint those teams are in place and we are adding capabilities as we speak. And the pipeline that they are working on with the brand has in many ways already been in motion over the last 12 to 18 months and you see some small things coming into the product mix like the FuseForm is an area where we are bringing that capability to life near term. But it really is a longer term play as we add this skill and capability to complement our business teams it will about 12 to 18-month push till you see some of the real new ideas that have been percolating this team is able to work on.

So, just a few quick comments on the Jeanswear innovation center. We hired a leader last year and we have taken some time and really worked with the outdoor and the foot work group and we have cohesive strategy now between the three centers that will be working real closely together going forward because we want to share ideas, we want to share innovations and we want to go ahead and work together on platforms. And our leader has gotten us to the point where we've hired some folks and we have a few more to go, but we've really focused on capabilities that are important for us going forward to ensure our success. So getting the right people in place has been the key thing for us in the Jeanswear innovation center and I would say we are about 50% of the way there and we should be finalized here by early spring as far as having our key senior team all in place. We move into a physical location here this spring and then we are going to work on short term stuff to get the momentum going as we get in there. And that is just taking some ideation stuff that is actually happening right now within our Jeanswear group and having that team that is really capable working with those two groups to help them bring that to the goal line a little faster. And then that team will come into a cadence and they will start working on things that are a little bit more long term.

And on the last question, I would try to answer it, it is I'm not sure I can, but so much happened just in the last 30 days with all the currency, the euro, the Swiss franc, the dollar, the Ruble, and pound, so it's really to say what is going to happen for sure. I mean it has, the country has become cheaper for you. So you are welcome to come to Europe and spend you money. You got to take your weight. So, I guess I would say it's early to say what's going to happen.

And I'd like to build, I'd be remiss if our Timberland teams are listening. When we acquired timberland they came with an innovation capability and it in fact it's that capability that we are adding to in products like our Anti-Fatigue footwear that you see across our PRO and tree business. The Sensorflex that we've spoken about this last year, those are technologies have come out of that teams, skill and capability and that is exactly what we are building behind and building so all of our footwear businesses are able to tap into that skill.

Great, thank you guys and best of luck.

Thanks Erinn.

We'll go next to Mitch Kummetz with Robert Baird.

Yeah, thanks. Bob congrats and good luck. I've got a question for you if you don’t want to answer you can always give it to Scott. So, how should we think about kind of quarterly gains of gross margin expansion this year? From you remarks it sounds like may be the cost outlook is a little better in the back half particularly on denim. But if I recall correctly, I think Jeanswear has got a pretty easy Q2 compare. So how should we think about that 40 bips over the course of the year?

Yeah, so Mitch, it has a lot to do with currency moves. So our bigger quarters for international businesses or our first and third quarters. So those will be the tougher comparisons when it comes to gross margin expansion. So, in other words the second and fourth quarters and that is where we will see the biggest gross margin expansion for the year. Again as I said earlier, that is mostly because of mix. Our international businesses are the profitability including the gross margin rates are really strong and when there is fewer dollars a very strong gross margins it just impacts the overall gross margin rates. So, it is not a rate within the international side of business. It is really a mix overall for VF.

And just a quick followup on Vans in Asia Pac it looks like a 40% plus this year, still growing after a relatively small base. Talk about kind of the outlook for that business in 2015 and can we expect to see continued sort of momentum of that magnitude going forward?

Mitch, I’ll try to answer here. As you said, correctly we had really great numbers in the last quarters in Asia 40% to 50%. We just reported 50%. For sure we have great momentum. Going forward we see the advantage is really strong, it connects well with consumers. There is a lot of storytelling. So, we are pretty confident the momentum will continue. Will it be always 40% to 50% that is probably hard, but we are confident and we will look forward to very nice growth rates in the next quarters and hopefully years to come in Asia.

Okay, all right, thanks guys.

Thanks Mitch.

Due to time constrains, we'll take our final question from Lindsay Drucker Mann with Goldman Sachs

Great, thanks for taking the questions. So starting with the first one, Bob it was really helpful all of the detail on currency and costs. I was hoping that if we would assess forward to when your hedges and forward purchases roll off and we're just sort of marking to market, whether you could dementionalize how much the foreign currency transactional pressure on you cost of goods would be relative to the cost savings that you are likely to see from lower cotton and may be some lower energy prices in your factory, whether one is much bigger than the other or they are neutral or how we should we think about that? And on that topic also whether you will be able to divert some of your sourcing to non-U.S. dollar dominated factories to help sort of offset the pressure?

Yeah, on the gross margin side as we talked about earlier, the puts and takes from material cost standpoint and labor all inclusive kind of nets out with pricing. So, that’s true whether it is in the U.S. also on the international side as well. Again it's just really important that our rates, our gross margin rates on the international front are holding and actually growing somewhat in our international businesses just the conversion of this in the U.S. dollars that are impacting us overall and even the gross margin rate. So, the commentary holds true that we talked about earlier relative to the inflict costs related to the international side as well as the U.S. side and that’s because of hedging. So, we lock in those costs in essence over that 12 to 18-month period, we know what those costs are going to be, we lock it into our currency hedges and we don’t get surprised.

In terms of changing relative to the dollars, not so likely. Frankly, given where we are again we will continue to hedge and our hedging practices will offset that. I think the question is more about if the rates stay where they are, what kind of actions do we take relative to our international business and again we discussed that earlier as well, but we'll have to look at pricing and some other levers, but that is a discussion relatively more to 2016 than 2015.

Great. And just a quick follow on, I was hoping you guys could talk a little bit about you strategy and accessories. There's been a really high quality category and you had some great momentum with Napapijri and Kipling. Can you may be just expand a little bit on what your plan is for accessories as a broad product category across your portfolio?

Yeah, Lindsay thanks for the question. What we are doing right now is, we are focused on the accessories businesses we have. We think Kipling is an enormous growth opportunity for our company and to put some context around that, it was less than $70 million business when we brought it and it is bigger than the $300 million business today and VF's fastest growing business in 2013 and '14 and it is planned to be our fastest going business this year because we have very capable people working on that business and we are investing in them disproportionally. Beyond that, we don’t have any other big strategy to announce. We are focused on anything that strategy continue to work for us and Bob Shearer would add it’s a very profitable business for us as well.

Great, thanks so much.

All right, thanks everybody. I'm sorry that we have to cut this call off. I know there were a few of you still waiting with questions. Several others have media interviews that begin in 60 seconds, so we need to run from this room and go handle those. I appreciate your interest in our company and your support. Thanks, bye-bye.