Good day and welcome to the VF Corporation First Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Lance Allega, VP of Investor Relations. Please go ahead, sir.

Thank you, operator, and good morning to everyone, and thanks for joining us on our call today to discuss VF first quarter 2015 results. Before we begin, I'd like to remind everybody that participants on this 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. I would also like to everyone know that unless otherwise noted, amounts that our participants refer to on today's call will be in currency neutral terms. By our definition which is detailed in our press release issued 7 AM Eastern this morning, currency neutral amount exclude both the impact exclude both the impact of translating foreign currencies into U.S. dollars and the impact of currency rate changes on foreign currency denominated transactions. You may also hear us refer to reported amounts which are in accordance with U.S. GAAP and include translation and transactional impacts from foreign currency exchange rates. We've chosen these currency neutral amounts as a lead number in our discussions, because we feel more accurately represents the true operational performance in underlying results of our business and brands. Reconciliations of GAAP measures to currency neutral amounts can be found in the supplemental financial information included within the press release, which identify and quantify all excluded items. Joining us on today's call will be Chairman, President and CEO, Eric Wiseman; Scott Roe, 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. Thank you and now, I'll turn the call to Eric.

Thanks, Lance. Good morning, everyone, and thank you for joining us today. You once hear us speak about consistency in VF's financial performance and the strength of our business model about our powerful brands and our powerful platforms, which worked together to deliver strong returns to our shareholders. Along with consistency we also underscore the confidence we have and our ability to execute against our long-term goals while delivering near-term result. I am happy to report that our fundamental business is incredibly strong and the momentum we've established continues to build. In fact our performance in the first quarter of 2015 clearly demonstrates how we're expanding on that momentum. Currency neutral revenue, gross margin and earnings showed strong gains during the quarter making it a terrific start to the year. Taking a look at our operational highlights which are currency neutral, revenue was up 8% with growth in nine of our 10 largest brands, four of our five coalitions direct-to-consumer and wholesale and in every region around the world. Our Outdoor & Action Sports coalition was up 10%, we also saw solid growth from our Jeanswear coalition with a 6% increase and our Imagewear coalition which grew by 8%. And congratulations to the [Eastpac] team, which was VF's fastest growing brand in the quarter. Our direct-to-consumer business grew 11% and included mid-single-digit comps. Our international business grew 9%, with Europe up 4%, Asia up 17% and a 16% increase from our Americas non-U.S. region. Gross margin which I'll discuss on a reported basis was 49% in line with our expectations and not surprisingly held back by the continued strengthening of the U.S. dollar actually by about 50 basis points in the quarter. All of which led to 13% earnings per share growth for the first quarter, indeed a very strong…

Thanks Eric. Revenues for the North Face in the first quarter were up 7% which was in line with our expectations and included growth in all regions and channels. Globally we saw particular strength in our D2C business with revenues up 20%. Exiting the fall winter season inventories in our stores as well as our whole sale partners are very clean with excellent sell through as the colder weather wrapped around the world. Looking towards the coming fall winter season the brand's order book is in line with expectations and we feel very confident in our ability to deliver low double digit global growth for the full year. Now back to the quarter in the America's revenues were up at mid-single digit rate with D2C up more than 10% including strong growth in our e-commerce business driven by solid increases in both traffic and conversion. And speaking of e-com we're getting ready to re-launch new websites for both the North Face and JanSport this month bringing them on to same newly upgraded platform as Vans and Timberland a great example of our one VF approach as we leverage core competencies within centers of excellence across our portfolio. During the quarter, ThermoBall continued to build even greater momentum with triple digit growth at both wholesale and D2C. We also launched the North Faces FuseForm technology a bit more broadly with the Dot Matrix jacket and Ultra-Light Rain Shell that utilizes our revolutionary reading process to form multiple fiber types into a single fabrication to maximize functionality and performance. The launch was supported by a meaningful increase in demand creation to inform and amplify connections with consumers. And the performance of the product and feedback from consumers thus far has been solid. We are encouraged as we look to continue to build momentum this fall with an even broader exposure in the re-launch of our summer series collection. We're also increasing demand creation investments for the North Faces Mountain Athletic training collection including our first ever spring TV commercial. Launched only a year ago the line continues to gain momentum and is helping further shift the consideration set of existing in new consumers towards the North Face as four season brand. This year's collection also includes women's products for the first time. Now to Karl Heinz.

Thanks Steve, and good morning. The North Face international business was up at a low double digit rate driven by more than 30% growth in D2C revenues. In Europe revenues were up at high single digit rate driven by significant strength in our D2C business and comps greater than 25%. During the quarter we celebrated 30 years with our anniversary Mountain Jacket to great success and so continued momentum from our ThermoBall, FuseForm and running footwear products. In Asia revenues were up at low double digit rate with both wholesale and D2C showing solid growth. A few highlights included launching our first ever Chinese New Year collection and collaboration with Tmall to promote our TNF 100 event on ultra-marathon trade running race. Based on feedback from both of these efforts we have great confidence about how we are positioning the brand and it is very important goal for market. Overall we continue to feel really good about the North Face international business and our global outlook for the full year. Now let's turn to Vans.

The Vans strong momentum continued with global revenues up 16% and bounced strength in both D2C and wholesale. This marks the brand 22nd consecutive quarter of double digit growth that's five and half years another amazing result in this team. In the Americas revenues were up at a high teen rate with mid teen growth in D2C and more than 20% growth in our wholesale business. We saw very strong growth in both footwear and apparel and are very excited to see significant momentum in one of our newest categories and lines the mountain addition collection. Designed for the elements mountain addition products still look just like iconic Vans product but feature weather proofing heat retention and traction technology as well. This is a critical growth strategy for Vans as we seek to become more meaningful in all four seasons especially when cold and wet weather sets in and people tend to think less about canvas. And after selling out of the entire line in its first season, demand for this coming fall winter is very strong. We also continue to find interactive innovative ways to bring the Vans brand to life, are seeing the creative expressions on an art, music, action sports and street culture a great example of this is the continued expansion of our House of Vans concept using prop ups at exciting events like the South by South West Music Festival in Austin and the SIA Tradeshow in Denver. And finally to sneak this in a bit of ahead of time, next year is a big year for the Vans brand given their 50th anniversary so we're already gearing up to celebrate in a way that only Vans can do, definitely stay tuned for this one.

Vans international business was up at mid-teen rate, driven by balanced wholesale and DTC results. In Europe revenue grew at the mid-single digit rate, driven by more than 20% growth in DTC and solid results in our wholesale business. Key footwear product highlights included a great performance from our enhanced comfort ISO collection as well as strong response to our printed styles. We also have strong growth in our apparel and accessory lines driven by DTC and wholesale. Both men and women's products are showing strong momentum with double digit pace. We also continue to engage consumers through unique events such as Vans Snow Day, [indiscernible] and High Standard all fantastic ways we're bringing the Vans to even more European consumers. In Asia, Vans continue to outperform with revenue increasing more than 45% and equally strong DTC and wholesale growth. Momentum continues in this region due to smart localized products especially in apparel, relevant brand right demand creation investments, events that speaks to the authenticity of our brand and a really sharp presentation at retail. The business is firing on all cylinders, in an ecosystem that has the consumer at the centre of everything it does. So overall really great momentum at Vans and globally we've continued to see a mid-teen increase in revenues for the full year and now on to Timberland.

Timberland revenues were up 10% driven by a mid-teen increase in global wholesale sales. The Americas recorded its sixth consecutive quarter of double digit growth with revenues up at a high teen rate driven by nearly 30% wholesale growth and this resulted balanced with gains across the portfolio including both men's and women's and footwear and apparel. In footwear it's been particularly exciting to see continued momentum in our women's collection as new products hit the mark in terms of style, relevance and trend. In our industrial Pro line the Pro Boondock and Powertrain collections had especially strong results as work consumers continue to respond favourably to these new innovative platforms. On the demands creation side, Timberland continues to drive brand heat and relevance through its Mark Makers program, for seasons now the brand has been outfitting influential trend setters from head to toe and creating compelling content to engage consumers across multiple media platforms. And finally as I mentioned earlier we just launched Timberland's new website on April 14, marrying great content with new functionality to create a holistic brand and product experience for Timberland outdoor lifestyle consumer. And so far we're very encouraged by the early results, especially related to traffic and conversion. So, continued success, balanced growth and amazing product, all reasons we continue to be very bullish on Timberland.

Timberland's international revenues were up at the low single digit rate. In Europe revenues were also up at low single digit rate. The men's business since reflects an Sensorflex and Cupsole product continue to build on the strong momentum from last year and casuals began to gain traction on the women's side. And our new website has seen very positive early results, a great indicator that our one VF approach has meaningful global benefit. Turning to Asia. Revenues increased at high single digit rate with strong wholesale growth. A couple of highlights included our new catalogue out sole boots and the [indiscernible] boots in particular that had great marketing support. Additionally apparel had a strong quarter driven by outerwear and tops. For the full year global Timberland is right on track to grow revenues at the low teen percentage rate. Now let's turn to Scott and Jeanswear.

Thanks K.H. Our global Jeanswear business was up 6% with positive results in all three regions wholesale and D2C in both the Wrangler and Lee brands. In the Americas region Jeanswear revenues were up at a middle single digit rate despite ongoing challenges and softness in the overall denim market. Revenues for Wrangler in the Americas were up at a low double digit rate. In the mass channel we saw continued momentum driven by new products, improved brand presentation and category expansion which created higher demand and conversion in our core pants business. Additionally, the expansion of our lifestyle products including broader offerings in both men's and women's tops gives us confidence that we're on track for meaningful growth in this important channel in 2015. In our Western business customers are responding well to our new product introductions including the advanced comfort line which will see greater mid-tier expansion in the second quarter. We've also seen positive reaction to our expanded Western performance platform with the launch of our Cool Vantage line a jeans for hot weather that maximizes breathability for work or play. And on the workwear side our new Wrangler Riggs campaign that features [indiscernible] has been a big win with both retailers and in consumer tests, giving us confidence as we roll this out nationally. Turning to Lee. The Americas business was down slightly yet we are encouraged by strong seasonal sales and continued momentum of our modern series products for both male and female consumers with continued traction in our department store business and enhanced demand creation support especially for the crucial fall season. We expect this brand to show slight growth over last year. KH?

Our international gents wear business was up at the mid-single digit rate driven by a mid-single digit increase in Europe and a high single-digit increase in Asia. In Europe the Keeps You Cool product continues to drive outstanding performance for the Wrangler business and we've also seen initial strong response to [born and ready] platform. In Lee we saw brand momentum continue which led to our eighth consecutive quarter of revenue increases in the region. We are also excited to report that our women's business has returned to double-digit growth driven by a number of new product initiatives. In Asia our Wrangler business continued to focus on the denim performance range launching new finishers including water repellent and dust [indiscernible]. At Lee we continue to see strong reception for our key product collection stores and introduced new assortments in a number of lines during the quarter. In summary, we're off to a great start to 2015 in our global Jeanswear business and expect momentum to continue throughout the year to reach our target of low single-digit revenue growth. And now back to Scott on Imagewear.

Thanks KH. Our Imagewear coalition posted strong revenue growth of 8% in the first quarter driven by mid-teen growth in our workwear business particularly the Red Kap brand with a very strong start to the year we're on track for mid-single-digit revenue growth in 2015. And now over to Scott Roe for our financials.

Thanks Scott. Well that sure is a lot for a CFO to like in this quarter. Our diverse portfolio of brands continues to thrive based on innovative products, connecting with consumers where, when and how they shop and the amazing opportunity that we have to expand our business around the world its look more robust. In our first quarter revenues on a currency neutral basis were up 8% and as Eric mentioned we saw growth in nine of our 10 largest brands four of our five coalitions and in every region around the world. By channel our direct-to-consumer business grew by 11% and we saw a high single-digit increase in sales to our wholesale customers. The Outdoor and Action Sports coalition continue to lead the way and the Jeanswear and Imagewear businesses maintained the momentum we saw at the end of 2014. Growth in all regions, all channels and across multiple coalitions underscores the power of VF's portfolio. As expected our gross margin rate was down 40 basis points to 49% in the quarter due to the negative impact of foreign currency however to give a bit more context around this on the plus side and in line with our expectations our typical mix benefit of about 60 basis points from our highest margin businesses was closer to 40 basis points as strong growth in Jeanswear and Imagewear which carry relatively lower margins tampered our normal mix benefit, more than offsetting this mix benefit was about 30 basis points of higher cost due in part to timing factors we discussed during our last call and about 50 basis points of foreign currency headwinds driven by the continued strengthening of the U.S. dollar. In fact with an average euro rate of 112 versus 137 in the first quarter of 2015 and…

Thank you. [Operator Instructions] We will take our first quarter from Bob Drbul from Nomura.

I guess I had two questions, the first one is on the inventories, when you look at sort of the revenue base in real dollars and then the inventory levels, can you just talk us through how you're balancing those numbers and like with inventories up seven and the revenues up two just sort of reconcile that for us a little bit?

This is Scott, I'll take that. It's matching supply and demand in any case difficult and it was particularly difficult in the first quarter give the disruptions relative to the port strike. We in general manage through that very well we saw that coming, we did things like extend lead times in some cases broaden inventory early. And you really didn't hear us talk about the impact to our quarter for the port strike, that's because it was relatively significant. Sure we have some disruption but it was minimal and not big enough to talk about. So as it relates to the inventory we see we are very confident and the quality of the inventory it's matched with future orders and as a matter of fact our days are down slightly compare to a year ago.

And I just have a question on the jeans wear business. Scott can you elaborate a little bit on the Americas business I guess specifically the Wrangler and the mass business. What's going on there and those numbers are quite impressive. So if you could elaborate little bit that would be helpful for us.

Over the last couple of years you've heard me talk a lot about our product and our product engine, our innovations our demand creation. And what you're seeing as a combination of a lot of hard work from the Wrangler team on new product innovations that have come to like. So you've got advance comfort, heavily touch, couple of just examples that have now gained broad distribution within the mass channel. And then with our demand creation platform the consumer has really taken those products both male and female. And then in addition to that if we're speaking just specifically in that channel in the mass channel, we've got a really strong selection this year from the seasonal standpoint. So our consumer has loved our assortment and the takeout has been fantastic, so more to come in the future. We feel really good about where the business is, feel really good about our innovation pipeline and the products that are in that and we'll continue with a more assortment, more product innovations and better distribution within the products that I just spoke of.

And we will take our next question from Michael Binetti with UBS.

Scott just a little bit more color on direct-to-consumer perhaps. You guys plan that business to grow I think double digits this year versus only five in the quarter 5% in the quarter. You mentioned that store growth rate would accelerate a little bit. But there are some pretty big comparisons coming in the back half. Can you walk us through some of the big line items like footage cadence and comp sales to get back to the run rate that you pointed for the year.

Yes I guess first just in terms of some stats we're going open about a 125 stores this year on an annual basis. And from a comp standpoint we're more or less the same as we saw last year, a little better than acceleration and obviously that's in the back half of the year during the peak season.

And Michael one way you can think about that is we're going have a 125 net new stores open this year so that will help us. We also have a lot of top most stores going into the first half of this year. The way we've talked about comps is overall comps are in the mid to single, so low to bit single digits. But it varies by geography, obviously much stronger in the Asia Pacific region then in the United States and all that's really about our brick and motor stores. You have to remember that our e-com business is going to grow by over 30% has the last few years and we expect it to happen this year too. So that's a really strong horse pulling that wagon for us.

And then just one quick follow up Scott hate to do this to you, but I'm going to ask you to ask you to one of Bob's comment some last quarter -- last quarter, Bob mentioned it, you guys have mentioned him a few times that you'll be at your 2017 guidance for the gross margin by the end of this year and made a lot of progress on that early. So as we look into next year Bob mentioned that obviously he doesn't want us flat lining on our longer term model starting in 2016 just flat lining the gross margin, so he said to us I believe to still expect the 50 to 70 basis points of gross margin expansion per year that you guys guided to in your Analyst Day. We are all staring at the gross margin pressure and we've heard from other companies that the transactional pressure will have an impact in the first half of 2016. So are you guys are going to see the same dynamics on gross margin from FX as your hedges roll off into the first half of '16 and then how do we get to the expanded gross margin reported rate next year if that is the case. Thanks.

You partially answered the question in the way you asked it, because we will see that 60 basis points plus or minus mix benefit going forward. We've seen that for the last several years, there is no reason we wouldn't expect that going forward now. We're not going to give guidance on 2016 it's not time for that. But in general of course if the euro were to stay where it is today and few can predict that you are better than anybody else. Sure that would have some pressure, on the other hand we've talked about input cost generally are lessening and of course we always have pricing levers that we can pull which we have in the past. So again I can't give you exact guidance on '16 but we would say the mix there is no reason that mix benefit won't continue to be there and there are many other levers besides currency which will be impact in our 2016 guidance.

And we'll go now to Kate McShane with Citi.

I appreciate the commentary on the outlook for 2015 and the raising of guidance on the bottom line. But I think one of the reasons why you are raising it because you have more confidence in what you're seeing for the later part of the year. But I don't think revenue guidance is going up. So can you reconcile that for us?

Yes, so you're right Kate we have maintained the 8% currency neutral and 3% as reported. But that confidence within that obviously we're feeling better about the year and that means that we see some slight improvement on the top line if you are trying to model that out. It's not enough to change the overall guidance but yes we're feeling more bullish and that really should translate into a little bit better top line.

And then my second question is on contemporary, down quarter but guiding flat for the year. Could you walk us through the cadence of growth for the rest of the year and what's giving you confidence of accomplishing that in the contemporary category?

Kate this is Steve. So, contemporary as we mentioned continues to see pressure in the sectors that they do business in specifically women's premium -- men's and women's premium denim and women's contemporary. As last year we saw our D2C as a bright spot in our go to market in our ability to tell our stories to our consumers in a really clear and productive way. We're seeing strength in some of our wholesale partners, it's giving us confidence this year to couple with our D2C carrying forward into the balance of the year. And really good balanced growth between both 7 For All Mankind and Splendid Ella Moss is giving us confidence that we'll be in that flat range from a full year standpoint.

And we'll take our next question from Matthew Boss from JPMorgan.

So you have three brands that are all more or less around the $2 billion level today. Can you guys talk about market share penetration today and broader growth in each category as we think about the longer term complexion of your portfolio?

I will take this one. I am going to try to pull some things out of my memory bank. North Face at about 2.3 billion and we've come out and stated really operates in a market that's about 26 billion in total in that outdoor performance category, that will put them in an 8% share. Vans is just over 2 billion pressing that mark last year action sports at 29 billion market has been then around that 7% range and Timberland approaching 2 billion at 1.8 in that outdoor lifestyle category we have somewhere around 36 billion so quick math would say that's mid-single digit market share. What we don't capture in that is the athletic, training, lifestyle and some of the youth culture numbers. And we were to layer that in against each one of those three segments each one of them would be about 70 billion in total which really translates into a lot of headroom for each one of these brands in their respective sectors.

So as you think over the next couple of years -- over the long term I mean is it -- seems like there is the ability that every single one of these brands could potentially double. Is that out of the realm a possibility?

It's absolutely not out of the realm of possibility. I think as we speak to you at our Investors Day, we really lay out those strategies that are deeply embedded in our knowledge of our consumer and how that informs product and demand creation in our go to market with our D2C. We are extremely confident in these three brands continuing to grow but also taking that knowledge that we've developed with these three brands and applying it to other brands within our portfolio and I think you see some of that going on right now with our Wrangler brand and you will see that really coming to life in other brands like Kipling and such.

And then quick follow up on the balance sheet, so $1 billion increase in short term borrowings. Is that more seasonality related? And then if you just kind of think forward, any line that you've drawn in the sand to think about potentially increasing the capital allocation just given the building cash balance if you were to remain patient on the acquisition front?

Matthew, this is Scott I'll take that one. First, you are correct. The CP balances are seasonal, that's really what that is. It's a seasonal timing issue. We will be out of CP by the end of the year and that's just the way that the ups and flows come through the year. And as it would be typical we're a little ahead of where we were last year but we'll be out of that by the end of the year. As it relates to capital allocation really no change in the way we've talked about that, acquisitions remain our first priority, followed by dividends and we said consistently and we demonstrated we won't accumulate cash. So in the event that one of the first two leverage are not available, then we would look at returning that to shareholders through repos which we have done over the last two years.

And we will take our next question from Laurent Vasilescu from Macquarie.

I have two sourcing related questions. First is on input cost. I think Scott mentioned that input costs were up a bit during the quarter. What are you seeing in terms of input costs going forward? Do you anticipate a benefit in 2H 2015 regarding cotton, and oil-based synthetics and if that's the case could you potentially quantify it?

Scott here and I will take that Laurent. What we're seeing is that we did indeed see a higher input cost in the first quarter and we see that through the first half, that's starts to mitigate in the second half slightly particularly more in leather than cotton although there is a little benefit there. On the other hand we did see that labor in overhead is an increasing cost. So really not significant in the second half. Going into next year we should see some tempering petrochemicals, leather again which we've seen high cost come down. But again we're not -- that's directional and these things change along with currency. So right now I can't quantify that nor would we give any kind of guidance into 2016 at this point.

And then my second question on the Trans-Pacific Partnership. U.S. is at the cusp of a free freight agreement with much of Asia which could potentially eliminate footwear and apparel tariffs. Curious if you are factoring in the TPP in terms of your long-term view on sourcing across geographies and if you could see any potential savings on tariffs what would you do with the savings? Would you reinvest it in marketing, R&D, reduced prices or flow it to the bottom-line?

I guess I will take that one. We have been watching this for a number of months even years this has been going on, and it does appear that maybe making some progress. It will have some benefit to us, we're still evaluating that. I mean the details aren't fully worked out, and we would have to look at it. Our priorities in terms of should there be some opportunities our priorities remain the same. We would be investing in those growth drivers which have been successful for us so far. Our lifestyle brand international and D2C would be our priorities from an investment standpoint.

And we do that because that's in the best interest of our shareholder contract.

And we will take our next question from Omar Saad from Evercore ISI.

Outdoor Action Sports it's been such a big segment of the business for so long, it seems like it slowed this quarter even I know the reported numbers non-indicative of the underlying growth, but still seem to decelerate a little bit price lower than it's been in a while. Are there timing issues going on there and you also sound really confident about the outlook for that business for the rest of the year in North Face for example the retail reported numbers look really good in the quarter. Help me understand some of the dynamics going on in this quarter if there is anything to call out.

Omar this Steve, I will take that [indiscernible] might want to fill in from international standpoint. So we absolutely remain very confident in our Outdoor and Action Sports businesses. I think the effect that you see in Q1 that we didn't detail necessarily in our remarks was that impacted the 53rd week to specifically the North Face and Timberland two big drivers was equal to 3 percentage points of growth. So if we were to put that each one of those brands North Face would have been at 10 and Timberland would have moved in to the low-teens. Kind of factoring that and understanding that we had that in our plans, we saw that coming, continues to give us confidence in the guidance that we gave last quarter.

Omar there is not too much to add on the international side, it's a similar picture. Starting with Asia you heard us we're doing really well in Asia, we expect nice growth in most of the Asian markets on the large brands. And similar picture in Europe, the guidance we gave for Europe is to grow high single-digits. So there were some issues by quarter but the full year outlook is really good.

And Omar its Eric I will finish that comment, Steve mentioned that the 53rd week switch that we had cost Timberland and the North Face 3 percentage points of growth which is true. For the global Outdoor and Action Sports coalition it cost us 2%. So what we reported -- what we talked about is 10 is our constant currency number would have been a 12.

I think you called out Kipling and Napapijri a quarter or two ago as the potential next billion dollar brands. Any updates there?

Starting with Kipling, you heard us saying Kipling was the fastest growing brand in last year and two years ago, and based on the outlook we have this year it would be the fastest brand again for the third year in a row, so it's good. We had a good quarter we don't release that numbers but we had a good quarter in all three areas, I guess that's the good news in the U.S. in Europe, and in Asia and in several channels in wholesale and D2C. Napa is a similar picture, Napa is predominantly Europe we see a good year for Napa and up high single-digit. So the smaller brands are growing, especially Kipling is becoming a meaningful business for us.

And maybe one last quick question for Eric and Scott. The acquisition environment kind of remains a little bit stuck and the willingness is [indiscernible] there. Can you talk about your willingness to pursue other strategies in terms of maybe not just capital and using debt and cash but is there potential to use issue equity to make a bigger acquisition, maybe help loosen the wheels a little bit?

We get that kind of discussion from last week when we talk with them, we're very, we continue to remain very disciplined about exploring our acquisition opportunities and creative about how we might bring one in. Of course the good news as a shareholder is we're real disciplined about what we'll pay to, it's not part of how you pay for and what you pay and we just haven't found the right combinations to unlock that opportunity and just know that we are diligent and something that we work on every single week and eventually, we will bring something in, but nothing to report today.

Creativity is on the table.

Yes it is.

We'll take our next question from Robby Ohmes from Bank of America/Merrill Lynch.

This is actually [indiscernible] for Robby. Thanks for taking our questions. Scott can you give you an update on the trends in the mid-tier channel for Jeanswear in the U.S.? And then have you seen any change or improvement in the -- kind of low to middle income consumer in the Jeanswear business?

We've seen very positive trends in the mid-tier channel, so we've seen enough fix in our business; we're really pleased with it. The consumer is coming back to that channel for sure, I think the consumer is really dialed into innovation in that channel. So we spend a lot of time on some innovative products, our Easy Fit, our Comfort Fit, our Modern Series. Those products are really taking with the consumer very well. So really feeling bullish about that and I think the single most important thing for us right now in the mid-tier channel is that we've introduced Wrangler to mid-tier channel very successfully. So we're rolling Wrangler out, still has a lot of opportunity, a lot more distribution in the mid-tier channel. And so we've got a really powerful two brands that we're bringing to the mid-tier channel in that bottoms category right now, that's pretty important for us. That answers your question?

Yes. And then just in terms of the really strong growth Vans in Asia, how should we think about that growth longer-term? And then can you maybe talk about how many doors you have in China now and where that could go overtime?

You heard us saying Vans had an amazing run in the last quarters in Asia and it has been a meaningful brand for us. Now we have declared that growth which was in the [aisles] of 50%, will that stay, probably hard going forward. But we are very, very confident on our long-term goals. The good news is the brand is doing well by geography, not only in China but in Asia, allover in Asia and the more developed countries Korea, Japan but also in developing markets like Malaysia or Indonesia. It's doing well by channel; we see good comps on who it's doing well and who sell. And it's doing well by category and Footwear and Apparel. So yes, we are very positive for the long-term outlook for Vans in Asia. Now the question on the doors, was that related to China?

Yes.

Yes, I always say, we have now, I think we have around 2,500 doors altogether on primarily five brands, which if you benchmark that with the big, big brands which are playing in Asia they are all working around 5,000. So, I think the answer is implied we still have room to grow by adding doors overtime.

The new markets we started, we want our VF subsidiary in Korea two years ago and we built -- we want the Vans brand there with our starting point and Karl Heinz and I were actually there last month celebrating the success of that team it is off to a fantastic start and we think the brand has a lot of legs particularly in the Asia Pacific region.

And we'll take our next question from Barbara Wyckoff from CLSA.

What percentage of Vans sales came from footwear versus apparel? And can you talk about the penetration of men's versus women's in Vans and the opportunities there, where is the growth is going to come from besides just more doors?

This is Steve, from an America standpoint the predominant percent of our growth with Q1 was footwear. So we are continuing to see expanded growth in our apparel, high-teen growth this last quarter. Right in line with what we see going on with our footwear. Men's and women's in footwear, it's kind of hard to tell because many of our styles are unisex, but we were to try to overlay, we're probably about 60:40 men's to women's if we were to try to capture the meaning of that unisex sizing. And where will the growth come in the future? We have a tremendous amount of opportunity here in the North America market. You've heard us talk about our expansion strategies we move geographically with our stores that help supercharge our wholesale distribution, the brand is moving into athletic. We opened up with sporting goods this quarter in a significant number of doors and new initiative that they have and we're continuing to work with our partners at foot locker to expand the growth there. So a lot of opportunity here in United States, Canada, our Mexico business is extremely strong and at the front end of its growth and we're just beginning to convert distributors in South America. It will give us a tremendous amount of upside in those developed markets there as well.

And seeing that picture for us on the international side you hear that I've saying before we have it by geography we just opened a subsidy in Korea where Vans is doing extremely well. It just started two years ago long, long way to go we still have the South Asian market which we just started. We also have distributors there which one they would probably can convert. So geography for sure the other one is category similar picture for us apparel is small but it is growing faster than footwear. So that's a big expansion and then the other one is our DTC like e-commerce doing well and stores. So very, very articulate rate going forward.

And we'll take our next question from Lindsay Drucker Mann from Goldman Sachs.

I wanted to ask about Outdoor and Action margins in the quarter it wouldn't make sense -- margins came under pressure would make sense as you had if you re-trading 53rd week and you had less productive week. So maybe you would have delivered on some of the fixed cost. But you guys also mentioned some demand creation expense in the quarter. So I just wanted to get your view on how we should think about Outdoor and Action margins across the full year and maybe some perspective on what drove the compression in 1Q.

So as I mentioned in my comments Lindsay this was a particular big international quarter and also the delta on currency we had a 137 average year ago versus 112 in the first quarter. Combination of those two things put a lot of currency pressure on outdoor as margins in the first quarter it was 80 basis points and again you said it in your question also those sales that Steve mentioned under 53 week those are profitable sales. So really those are the two largest factor that impacted the quarter but now when we zoom out and look at the full year we see kind of the normalizing of the margins and we see expansion outdoor action sports margins will grow faster than revenue for the full year.

The demand creation expense is that sort -- was the call of because it was timing that was particularly one queue weighted or is there an incremental step up versus what you were expecting?

We continue to invest in demand creation it's roughly growing with sales. So wasn't a big factor in the quarter.

Just real quick Lindsay where we put those dollars here in the Amercias was first in Q1 around the FuseForm launch in really driving that story to support the placement and as well as I mentioned in my remarks we're putting significant effort behind mountain athletics as we look to expand the North Face into more of a 12 month out of the year brand and really help drive that shift in outdoor towards via outdoor athletics space that we've been talking about over the last couple of years.

And then Karl Heinz I wanted to ask about Europe on an organic basis we were a little surprised to see the sequential deceleration in the first quarter versus the run rate you had the last few quarter especially because it feels like the economy is getting better there. I was just -- if you could shed some light on if there was anything particular to happen in the quarter if you are looking for reacceleration across the back half of the year. Thanks.

I guess you heard those saying we are full year outlook is intact. So the good news we have seen no changes in our potential for the full year. We have some issues sometimes in the quarter but no the answers were pretty confident we have seen no signals which would change our mind for the full year goals which we have given. And this is true for the large brand but also for the smaller brands which I commented before.

And just to add to that Steve mentioned the 53rd week impact could also be a factor in Europe as well which will hold down your growth rate little bit in the first quarter. We still high single digits for the year and there is no change in the overall.

First quarter came in as we expected.

And we'll go now to Chris Svezia with Susquehanna Group.

I guess Steve for you just on Timberland for a sec. The growth in Americas is 30% whole sale growth. I was just wondering may be you can talk about you mentioned women's, you mentioned the pro-line. But a little color maybe on anything on distribution or pricing may be how we think about that momentum for the balance of the year. Just a little more color about that business please.

We've been very bullish for the last umpteen quarters about the growth of Timberland. And I think you can probably hear that in our comments today its broad based, we are seeing success across all of our collections certainly driven from the heritage of the boot but absolutely moving into casual silhouettes both spring and fall. We're seeing it across all channels our own B2C as well as wholesale and the across wholesale the various points that we come to sell in and we're seeing it in men's and women's as well as youth. I think it's really safe to say that these brand are our leaders there have really embraced the information that they've taken out of our consumer research applied it to their product strategy, that's a global comment and we really have understood how to bring our brand to life to our consumer, delivering content to where they are. We see this continued growth, we're very bullish and we see great upside not just in our footwear but also in our Pro Workwear business and as well as apparel.

Any color Steve at all on how apparel's been doing for you, what some of the [learnings] just some of the data points [indiscernible]?

We are learning it's a really good word to use and I think we've been clear, we started slow and we are incrementally increasing doors with the partners that we've launched with. And each year or each season we continue to see good growth. We're seeing Riggs -- we sell through Riggs here in the U.S. market in the high single digit rate, that's good from a retail sale point and that's helping us gain confidence to expand our collection, expand our doors and really move towards that long term projection. Apparel is much larger on an international standpoint with our largest penetration in Europe but also significant growth and opportunity in Asia.

And then Scott real quick to you just on the inventory growth, just maybe how we think about that throughout the balance of the year, is that's such a trend more in line with sales or reported sales in back half of the year just a little color there please.

Sure. I mean we don't give quarterly outlooks but I would say for the year when you look at our cash flow and our balance sheet projections we see no issue with inventory, we're really confident that the quality is there, and we're not concerned about the inventory.

And we'll take a question now from Matt McClintock from Barclays.

Good morning everybody. I just wanted to ask a question on e-commerce. Could you just give us some color on how e-commerce businesses for your various brands are performing? I know you have a bunch of digital platform launches and re-launches over the last few years. So, how has that impacted those businesses and how should we think about the performance, the ecommerce performance of those businesses as you start to compare against those platform re-launches? Thank you.

Let me make an opening comment on that and I'll hand it over to Steve and Karl Heinz. Some context Matt in 2007 now I know I just went way back in history but I have to know the numbers so I'll do that. Our global ecommerce business across all brands was $7 million. So we have been working hard since that time to try to put in place e-com platforms around the world that make sense. And we are -- when I look at that as part of our future growth I look at it as being one of the largest sources of our future growth because of how underdeveloped we are versus all the other levers we have to pull. And as you would expect while we're building these sites brand by brand and country by country, we're focused most on our biggest brands and we have a lot of brands to add and a lot of countries to add and a lot more to deal. And with that I'll turn it over to Steve and let you [wane] on this.

I mean ecommerce, to Eric's point, is really new. I mean it's one of the tools and it was North Face that has led the [indiscernible] to really understanding how to really bring to our brand to life digitally. Year-to-date our ecommerce business is about 18% of our D2C we talked a lot about our new platforms, Vans came live on last year and we saw a great acceleration to the second half of the year and that absolutely continues to be the case here this year. Timberland has just launched in April. North Face and JanSport are going live today. And following them will be our Wrangler and Lee businesses, our Lucy, Reef and SmartWool towards the back half of the year. So, we are really happy with our website it's an adaptive responsive Web site and I don't want to get too geeky here, but our brands have rich-rich content. And we've developed a content a platform that marries content with product, helps us tell very-very strong stories connected with our products with drive conversion and ultimately help drive sales. It's also a site that's very easy to adapt content mobile as we see our consumers shift to accessing our sites from their mobile devices.

Thank you. And operator that will conclude our remarks today I think Eric might have a couple words and we'll close the call.

Yes sir.

I'll just thank all of you for spending your morning with us, talking about the current status and future of our company. As I said in my comments, we are confident about where we are this year. And I think I also mentioned that we are heads down ensuring that we deliver the results that we've promised for this year. And the last comment I'll make is a special shot after Bob [indiscernible] we know you're listening.

Bob give me a call let me know what's like on the other side of this line. Thanks everybody. See you in 90 days. Bye-bye.