Greetings, and welcome to the VF Corporation Transition Period 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Joe Alkire, Vice President, Investor Relations. Thank you. You may begin.

Good morning, and welcome to VF Corporation's transition period earnings call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. Unless otherwise noted, amounts referred to on today's call will be in adjusted and currency-neutral terms, which we define in the press release that was issued this morning. We use adjusted and currency-neutral amounts as lead numbers in our discussion because we believe they more accurately represent the true operational performance and underlying results of our business. You may also hear us refer to reported amounts, which are in accordance with U.S. GAAP. Reconciliations of GAAP measures to adjusted and currency-neutral amounts can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. During the fourth quarter of 2017, the company reached the decision to sell its Nautica brand business, and the sale was completed on April 30, 2018. Accordingly, the company has classified the assets and liabilities of the Nautica brand business as held-for-sale and included the operating results of this business in discontinued operations for all periods presented. During the second quarter of 2017, the company completed the sale of its Licensed Sports Group or LSG business. In conjunction with the LSG divestiture, VF executed its plan to exit the licensing business, which comprises the LSG and JanSport brand collegiate businesses. Accordingly, the company has removed the assets and liabilities of the licensing business and included the operating results of this business in discontinued operations for all periods presented. Unless otherwise noted, results presented on today's call are based on continuing operations. Joining me on today's call will be VF's Chairman, President and Chief Executive Officer, Steve Rendle; and Chief Financial Officer, Scott Roe. Following our prepared remarks, we'll open the call for questions. Steve?

Thanks, Joe, and good morning, everyone, and welcome to our transition period earnings call. VF's results for the period were stronger than we expected as the broad-based growth acceleration that began in the second half of 2017 continued. Our core growth engines are driving strong global momentum as we begin to enter the acceleration phase of our 2021 growth plan. It is early in our journey, and we continue to deliver on our commitments and remain sharply focused on the foundation we're setting to position VF for sustainable long-term growth and value creation. Taking a look at our results for the quarter. Revenue increased 17% to $3 billion or 8% on an organic basis. Our big 3 brands grew at a combined rate of 18% with our Vans brand delivering another record quarter, up 39%, with strength across all regions, channels and franchises. Momentum in The North Face continues to build with 7% growth. And on an organic basis, international increased 8%, led by 12% growth in Europe. Direct-to-consumer increased 24% with more than 40% growth in digital, and our Workwear business increased 4% with Williamson-Dickie up 11% on a pro forma basis. Our fundamentals remained strong as gross margin, a key driver of our value-creation model, improved 160 basis points on an organic basis to 51.9%, a record for VF. And finally, adjusted EPS increased 22% to $0.67, slightly ahead of the outlook we provided in February. Reshaping our portfolio remains our top priority, and we are committed to optimizing our portfolio to align with our financial aspirations. As you know, during the quarter, we made further progress on this front. On Monday, we announced the completion of the sale of our Nautica brand to Authentic Brands Group. I'd like to personally thank the Nautica employees for their hard…

Thanks, Steve. The broad-based growth acceleration that began in the second half of 2017 continued into the transition period. Our performance for the quarter as well as our growth outlook for fiscal 2019 is stronger than we expected 90 days ago and clearly demonstrates that the investments made in our strategic priorities over the past year are beginning to yield returns. Our core growth engines are driving strong global momentum as we began to enter the acceleration phase of our 2021 growth plan. Our business is strong and getting stronger. And our intense focus on fundamentals and quality growth as well as recent portfolio moves give us even more confidence in our ability to continue to deliver top-quartile shareholder value. So let's dive into the results of the quarter. Revenue increased 17% or 8% organically to $3 billion, which was about $100 million above the outlook we provided in February. Revenue from our big 3 brands increased 18% on a combined basis, led by 39% growth at Vans and 7% growth at The North Face. The growth of Vans remains strong and well diversified across regions, channels and product categories. In fact, every channel in every region grew more than 20%. We are also pleased with the progress in The North Face brand as the initiatives and investments to accelerate global growth are beginning to manifest. Momentum continued in our Workwear business with mid-single-digit growth on an organic basis. Williamson-Dickie again achieved double-digit growth on a pro forma basis led by strong performance in international, lifestyle and direct-to-consumer. Total international grew 16% or 8% organically, led by 12% growth in Europe. Now let me zoom in a click and give you some highlights about Europe. This represents the third consecutive quarter of double-digit growth with continued strength across all major…

[Operator Instructions] Our first question comes from the line of Omar Saad with Evercore.

I wanted to ask -- the first question about the D2C numbers you threw out there, Scott. Obviously, the sales were great, in the 20s, organic with stores down, driven by digital. What are you guys really doing there to activate it? It seems like you're seeing a real inflection. And given the lack of store growth underneath the revenues, is that -- should we start thinking about profitability in the D2C channel globally inflecting as well?

Yes. Well, absolutely. Profitability has been improving over time in D2C, and we see that really accelerating. Omar, this goes back a couple of years. We started talking about reducing the number of openings, focusing more intently on productivity. And this is not just in one area, it's in a myriad of areas. We named a head of our D2C initiative within our company who is leading this effort, Scott Baxter. And it's really a culmination of a lot of effort over a long period of time that has ended up in this result. The other thing is, on the real estate side, we've been more aggressive at closing underperforming stores and getting more selective about where we open new stores. That with some insights and analytics to better sight those stores. We're really seeing we're making better decisions, and that's paying off. But Steve, I think the brand side is even more important, right?

Yes, Omar. I would just add to Scott's point on productivity, we really focused on service and that in-store experience, starting first with the in-store merchandising, really focusing on the product, the stories, but really paying a lot more attention to the level of service, the people that our consumers interact with. And elevating our stores is really -- that most premier expression of just not our product but what our brands stand for from an experience standpoint. And it's really paying off. You clearly see it in Vans. But you see it's coming to life across all of our brands, North Face, Timberland. It's a very important aspect of our integrated marketplace strategy.

And then just a quick follow-up. In terms of the digital component of the D2C growth, what are you doing there to activate such strength there? Is that primarily Vans? Or is it across the brand as well?

Certainly, Vans is a key component, but it's across all of our brands. We had very strong results in our European business, and we see really strong growth in Asia as well, but it's really elevating experience. It's paying attention to the aspects of that digital environment to reduce friction and improve really the search and the storytelling. And we've recently added a Chief Digital Officer. Velia comes to us from Fidelity Financials. She is -- as she starts to get her feet on the ground, it will help us really tease out that end-to-end digital strategy, just not the e-commerce side, but all aspects of how we think about using digital to elevate our skills and get closer to our consumer. We're a year into this commitment, and we're really starting to see it take hold and pay dividend.

Omar, just building on that too, a couple of numbers. While Vans was impressive in the digital area, if you look at our digital growth, excluding Vans, it was over 27%. And our long-term growth target is 25%. So you can see this is broad-based. Just another reminder as well, this is our most profitable channel. So I really like to see when our most profitable channels are fastest-growing. That's obviously virtuous for the P&L as well.

Our next question comes from the line of Michael Binetti with Credit Suisse.

Let me just ask you quickly for the models. I think we have to talk about Vans most today. But on North Face, can you tell us how much -- is there any way to put a number on how much you're pulling back? You mentioned an offset was clearing through off-price sales you're trying to pull back in the quarter. How much has that been impacting the revenues the last few quarters? And can you tell us where out in over the next few quarters that will start to diminish?

Yes. So it's varied over time. I mean, this has been a long-standing series of actions, and even some of that knocks on into next year as we think about the marketplace, cleaning up some of the marketplace activity that I think Steve talked about 90 days ago. But in the transition quarter itself, it was a point or 2 impact in this quarter.

1 or 2 in the quarter. Obviously, most of the discussion's swirling around Vans in the growth rate tier. So maybe we can just talk a little bit more about how you think about your visibility in the longevity of the growth there. I know you tried to help with some color earlier in the conversation. But as you -- I guess the hard question is, as you look out a year and you're lapping 30s and 40s, how will Vans be growing? And then I know we don't get much detail on this on a brand basis, but how much is Vans contributing to the operating margins of the company at this point? Aside from mix, is there an inflection in the margins as the growth shows up the way it has in the last few quarters?

I'll start on that. So sure, Vans is positive to the operating margin, and it contributes both in gross margin and operating margin. But it's not just one thing across VF, too, right? If you look at our most profitable part of our business, international is more profitable than domestic, and our Europe strength is broad-based, right? Every one of our brands grew, and we're seeing substantial growth at very attractive operating margins and even in more important very attractive after-tax margins from an EPS standpoint. So yes, Vans is attractive, but it's not a complete outlier when you look at the rest of the business but it is accretive. The forward view -- first of all, we're already comping pretty big numbers. And I think I said last quarter this is [ really ] the hardest thing for us because the factor that you said, right? We're seeing pretty amazing growth. Now don't forget we're seeing growth broad-based across the company. It's just even more accelerated in Vans. So as we look forward and the comps get harder, we have assumed some moderation. It's implied in our guidance in the back half. Frankly, so far, we haven't seen that moderation occur.

Our next question comes from the line of Laurent Vasilescu with Macquarie Group.

I wanted to follow up on last year's Investor Day. You've been very active on reshaping the portfolio. Can you provide an update on what inning you're in with the reshaping effort? And I think it was called out that strong free cash flow generation should decline the leverage ratio for 2018. What leverage ratio are you targeting for the fiscal year?

Yes, maybe I'll start with the easy part. We've -- given our credit rating and where we've targeted, 2x EBITDA is where we want to be. And we'll be in that neighborhood by the end of the year, plus or minus. Looks like we're in a pretty good track to get there.

And Laurent, on the reshaping of the portfolio, certainly, you've seen us be active on the divestitures with our LSG business; prior to that, CVC; and most recently, Nautica. And that's really being thoughtful around who is the best owner and how can we shape our portfolio in line with our financial aspirations. The addition of WD is absolutely paying off. That integration is going well, and we're right on track, if not slightly ahead of the plans that we have from a full contribution. Icebreaker just coming into the family. We are really excited about their potential. They're right now planned to grow double digits in their first year in our portfolio. And on top of that, the influence that they will have on shaping a natural fiber platform that we'll be able to scale across our VF enterprise, really playing into our purpose-led mantra, will be very, very impactful. And we're anxious to have Altra join. They're growing at a -- continuing to grow at exceptional rates, and we see them having a significant impact not only as a stand-alone brand, but how they'll be able to help influence some of the things going on within our North Face business. We'll continue to be very thoughtful and purposeful in our acquisitions, be it brands or capabilities. We're seeing it pay dividends in the early months here, and we know exactly where we want to take it in the future.

And just to comment, as you think about our long-range modeling, I know, Laurent, you're trying to model this in the longer term, a couple of things to keep in mind. Some of the moves we've made we would say have probably derisked our forward look and give us more confidence as we think about hitting our long-term objectives. And we know that given the assets we have today, we have a plan right now that gives us what we would say is a top-quartile TSR performance. So while we are -- remain interested in acquisitions, you should also think that we don't need acquisitions in order to deliver this kind of performance. In fact, we'd say that's upside, right? The only reason we would make that decision is we believe that it's accretive to the plans that we've put out, and at least from our perspective, those plans are pretty solid. With each of these moves, we gain more confidence in our ability to achieve them.

Very helpful. And I want to follow up on the gross margin guide of 51% for the year. Can you talk about the various moving pieces, whether that's FX, commodity, D2C or Williamson-Dickie? And how should we think about the evolution of the quarters relative to the annual guide?

Yes, so I'll start with your gross margins. So if you look at the organic business, we expect that mix that we've seen for years to be there, and we're saying in that 50% -- sorry, 50 basis point kind of range. When you think of all the other factors organically, that being price, cost, FX, et cetera, we see that as essentially a push. So organically, about 50 basis points largely driven by mix. And then from an acquisition standpoint, again, largely due to Williamson-Dickie, and then you've got Altra and Icebreaker, which are relatively smaller and have less impact, you've got about a 20 basis point negative impact. So that 50 basis point mix is mitigated by about 20 basis points of mix relative to the non-comp, and it gets you to that 30 basis point or 51% gross margin for next year. As you think about the evolution, how to model it, at least from a top line standpoint, we're slightly front-loaded, although not a lot in our first half, second half. Again, don't forget we're on the new fiscal calendar and the shift a little bit. And then from a profitability standpoint, we see that more in the second half of the year. We'll see relatively stronger earnings growth in the second half.

Our next question comes from the line of Jamie Merriman with AllianceBernstein.

You talked a few times on the call about the strength and the success of the European business. So I was just wondering if you can talk about what strategies you think are seeing particular success there and if there's any learnings you can take from that to North America or the Americas in particular.

Sure, this is Steve. So our European business -- this is just -- the way we're structured in Europe provides us a really unique way to share best practices and ideas across all of our businesses. And I think that's one of our key strengths in how that team really looks at their overall marketplace and how we utilize that collaboration to drive our brands with key retail partners but also how we're able to leverage that scale and expertise across our own D2C. These brands are all deeply connected on a global basis as -- with their global team members, but our teams there just have a very strong and personal understanding of their individual consumer. They're driving products, in some cases, from global ranges, but also creating products that are unique and special to that European market. And our model allows for that and actually supports and encourages it, being able to satisfy that consumer and how we tailor our messages both in our marketing online but in our stores. And that team just has a unique way of working together to drive that consistent growth that we're getting.

Yes, and just to build on that, the model itself, if you think about the brands that individually operate in a region like Europe -- and that's just one example; you could say the same for Asia or other geographies. The relative friction of growing the business with that common model and those efficiencies that Steve just mentioned is really low. So when you have growth like Vans as seen today right now, for example, the ability to chase that, feed it, have the infrastructure in place and getting leverage on those expenses, that's a powerful weapon. I would also -- of course as CFO, I'm going to talk about the profitability side of that. So there's efficiency in that model and then also the ability to organize from a tax efficiency standpoint also. So the combination of all those things together, operational advantages that Steve talked about, the leverage on the model in the back end, coupled with the tax benefit, makes it a really powerful weapon for us.

And then just as a follow-up, so is there a way to apply some of those things to other parts of the business? Or is this -- you said that's unique, but is there learnings you can take to the other regions?

Absolutely. In fact, in prior calls, we've talked specifically -- I'll use The North Face as an example. We've seen exceptional growth -- a return to growth beginning about 7, 8 quarters ago. And last year, we made management changes within our North Face businesses. We brought our head of Europe to be our global president here in Alameda, California. And why we did that was to bring the discipline, the skills and actually some of the learnings from the turnaround that we had in Europe to be able to apply it to our Americas business, but also how to take those learnings and apply it globally. Thoughtful integrated marketplace management, the segmentation of customers, tiering products, bringing in some of the more lifestyle outdoor pieces that had been created in our European market, proven, tested. We brought those in and starting to see really good growth within our urban and lifestyle collections. Just really kind of grabbing those best practices and sharing them by movement of management. We've talked about Timberland and how we've seen the diversification strategy from a product standpoint in Europe pay very good dividends and assure that we're getting this consistent quarter-after-quarter growth. We've brought that same diversification mentality into our European -- into our U.S. market as well as Asia. And we're starting to see growth with some of the new collections. The FlyRoam, the SensorFlex, they're small today compared to our classics, but we're starting to see good results. And that's learnings coming straight out of our European platform to help energize the business here in the United States.

Our next question comes from the line of Erinn Murphy with Piper Jaffray.

I guess, I first had a question on the model. You guys had obviously very strong sales growth. We're still not seeing the leverage in the model. So I was curious if you could just unpack some of the investments you've made in the sub-quarter. And then what gives you confidence that you're now in a position to kind of pivot as we get into fiscal '19 to see that SG&A leverage?

Yes. So a couple of things. The story here, Erinn, is really unchanged. If you even want to go all the way back to Boston, and when we laid out our intent and the things that we're investing in, so our investments around our strategic priorities, and those are on our website. We've laid them out very consistent with digital D2C being some of the most significant and the technology around that. And those continue. And what we said is, if you think about the shape of our P&L evolution that we increased our investments a year ago. We said we would maintain those investments, but the pace of increase would moderate, i.e., be less than sales as you move through the model and the sales curve would accelerate as you continue to move through that 5-year period. So that's exactly what we're seeing. Maybe we're a little ahead on the top line side. So obviously, as you moderate your investments and you see the acceleration on the top line, you're going to see that leverage. That's implied in our 2019 guidance, and that will accelerate as you move through that horizon. I think the other thing that gives us confidence, in addition to the top line, is also the gross margin, right? So as you see, our gross margin continue to come through. That's a key linchpin of this whole financial model. And the combination of seeing the acceleration and the payoff of those investments, which again you're seeing evidence of that right now, on the top line plus that gross margins collectively is giving us that confidence. Now of course, we can moderate these investments. It's our choice. And we're only going to -- we're not investing just because we said we would. We're looking very carefully at where those investments are paying off. And where they are, we're leaning in. In some cases, we don't always make great choices. In some of these initiatives we test and learn and fail, and we course-correct. So this is a dynamic process underneath, but general direction is unchanged. But beneath that, there's a tremendous amount of activity to try to find those points of difference that will give us sustainable growth over the long term.

Got it. And then just within jeans. I would love to talk a little bit more about the Lee business. It was down 11% globally. I guess, what needs to change there to see a more steady rate of growth? And then I guess, on the margin side for the overall Jeanswear business, I know you're reworking to kind of restructure the cost basis. When do we start to see the -- or, I guess, how should the operating margin opportunity kind of shape over the next couple of years?

Maybe I'll start with the margin at the end. So what we -- we're prioritizing the margin expansion. If you look at the decline over the last couple of years, a couple of hundred basis points in margin, about 2/3 of that has been through deleverage. So that's good news from our standpoint because that's -- we know what to do there, and it's addressable. We've already started some of those actions, some of the investments that you've seen around restructuring are in place. And this is something we'll look at over the next couple of years. I would caution, though, this is not an immediate kind of impact, and you should think of a couple of year horizon as you think about getting after some of that margin expansion. And the other side is -- part of that equation is the top line. And what you will see and what we've said in our guidance is that the business is stabilizing. So our guidance says about flat. Our Wrangler business has been relatively stronger. We've seen a little bit more pressure in Lee, particularly on the women's side. What we're seeing as we look forward is indications that we're gaining programs in relatively better in the mid-tier. I've seen evidence that some of the initiatives are starting to pay off. But fundamentally, jeans has not changed. If you go back, and the story that we've been talking about for the last 12 months is still in place. Quarter by quarter, we're going to see some variability. We said visibility in the short term is a little hard to predict, but if you zoom out and click and look over a longer perspective, we've got great brand franchises. We're the low-cost producer. And we're seeing evidence that we're stabilizing this business to create a more solid foundation.

And Erinn, I would add, for the quarter, there was quite an impact on timing of shipments, which we have line of sight to see how that will come back next quarter. We've talked for the last year about the strength of our men's business, specifically in the mid-tier, and it continues to do extremely well here with some of the key innovations that they've brought both in denim and some of the different bottoms. Our women's business has been a source of challenge, specifically in mid-tier. We are beginning to see returns to growth with some of our key programs that we've placed in the last quarter or quarter and a half, giving us confidence in what the new management team at Lee is doing to re-energize that aspect of the business. We continue to have some challenges in the women's mass business, and we have line of sight to how to bring that back into control, to Scott's point, to stabilize, while we also are paying a lot of attention to profitability and how to begin to get that business back to the growth that we've seen historically.

Our next question comes from the line of Sam Poser with Susquehanna.

Sam?

Can't hear you, Sam.

Sorry, can you hear me?

Now we got you.

Now we do.

Okay, I apologize for that. I just wanted to know, can you talk about potential synergies between Jeanswear, Workwear, Williamson-Dickie and maybe behind the scenes or getting brands into different retailers, sort of leveraging relationships between those guys? Can you give us any color if there's anything there?

Absolutely, Sam. We do see synergies. And in fact, that reports into our group president, Curt Holtz. Those businesses are grouped together. They share a lot of similar customers, also similar models. We get a lot of synergies on the back end in manufacturing, where we're able to really leverage that skill and capability in not only just the manufacturing side but on the materials. So great synergies and leverage that we're able to apply there in all the other back-end support systems from HR systems and finance. There's another interesting synergy beyond Jeanswear, but our Dickies business has -- and we're seeing a real growing strength in the lifestyle areas, not just in China or Asia and Europe, where the business has been strong, but we're starting to see it wake up and trend even more so here in the United States. And there are synergies there with our Vans business and really tapping into that creative self-expression element of Vans and how to bring that to life with that consumer. And our Dickies team is excited to be able to share best practices, and where possible, relationships to drive the brand in that category as well.

And 2 other things. How many of those synergies are sort of built into the guidance on both sides that we discussed? And then on a different note, can you give -- Timberland North America has been struggling. Where are we on the evolution there to where you need to be?

So I'll talk about the first -- what's built in. So as you look at the acquisitions that we've made in total, we said there's about $0.10 worth of EPS, and about $0.07 of that relates to Dickies and the remainder would be Altra and Icebreaker. Now if you look at the cumulative effect with 2 quarters behind us and then the 2-quarter non-comp ahead, that would imply that we're a little bit ahead from what we originally said on the Dickies synergies. We've gotten after those a little bit earlier, a little better top line, particularly in that lifestyle piece that Steve mentioned, which I think we said it in our prepared remarks, in Asia alone is -- on a relatively small basis is up substantially year-on-year.

So on your Timberland question, Sam, we've been pretty upfront with you on where this business is. We're working diligently on the diversification. There's been a high dependency on the classics business. And though we see that as a very, very important long-term franchise, we have opportunities there to evolve that aesthetic and bring the consumer along with some new thinking in how that design comes to life across the classic category. But it's very key for us to get the diversification into SensorFlex, FlyRoam, the apparel category. One of the key tools for us to do that, Sam, is D2C. We're able to really move our business in Europe due to the significant footprint of direct-to-consumer stores that we have where we're able to really position our brand. We don't have that footprint here in the United States. We're testing and proving models that we'll be able to use to be able to extend our brand storytelling to help the U.S. consumer move beyond that historical classic interest that they have. We've -- we're bringing new skills and capabilities to that team to help think about the merchandising, the integrated marketplace and to be able to re-energize the growth here. We still have conviction and confidence in the longer-term plan that we laid out in Boston. The work here in the U.S. is on its way, and we're confident in the team's ability to get that done. It will just take time as we -- we depend on the wholesale channel to move with us. And it's, as you know, difficult to be able to move wholesale compared to the less friction you have within your own D2C environment.

Our next question comes from the line of Jim Duffy with Stifel.

This is Peter McGoldrick on for Jim. I was curious about the growth rate in China for the quarter, the 1% constant-currency organic, and the high teens expectation for 2019. Could you call out the puts and takes for the slowdown and then the drivers of the re-acceleration?

Yes, this is Scott. First of all -- so this is exactly as we planned and been talking about. We talked about working with our retail partners. We've started that last quarter and actually it even goes beyond that. And this is really the end of that. Just for reference, I think in my prepared remarks, I talked about high teen growth in China for 2019. So that shows you, you can bookend this, and this is behind us, although we're either somewhat evergreen activities in terms of working on partner productivity as it relates to the actions that we had in place, we're at the end of those. So that's really what impacted the quarter. Obviously, there's 2 aspects of that as you're cleaning up some stale inventory as well as reducing your shipments in. And that's an activity that started quarters ago, and it's really setting us up for a stronger foundation for growth as we look forward.

And Peter, I would add, as we've really modulated the sell-in and allowing the market to rightsize itself and helping some of our key partners move through the excesses, we've brought new discipline. This is really a great example of where we are becoming more consumer-centric and retail-focused in our skills and capabilities. Kevin Bailey, our leader of our Asia business, is a retailer by background and really bringing those disciplines to how we think even through our wholesale model of being able to really concentrate on sell-through and making sure you've got the right assortments, the right flow and the right experiential marketing to keep the interest level high and continue to pull the consumers into not only our own environments but into our partner environments. And with the cleaner marketplace, we're now able to place these new fresh assortments. And in Asia, our Urban Exploration category for North Face, more broad-based for Vans and the same strategy in Europe being used in Timberland. With that sell-through retail mentality, our teams are becoming much more proactive managers of that retail floor space.

And then just within Jeanswear, is -- are those growth rates that we're seeing across the Wrangler and Lee brands representative of also the denim products specifically? Or is there any difference across categories within the brands?

We mentioned in Wrangler that, for the quarter, we saw our men's denim up mid-single digits as the brand was up 1% here in North America. So we're seeing good growth in our men's denim both in Wrangler and Lee. And we're seeing some softness in our women's business. But what's also encouraging is our brand, especially Wrangler, extends into new distribution channels. Our Modern Series that was launched last year is really taking learnings from our European platform. We're seeing new placements in new upscale specialty distribution as well as better department stores. I'm seeing good sell-through, confidence to build off of this as we come into the fall, but we're also seeing extensions into new categories, new usages like outdoor in our Wrangler brand doing extremely well too.

Our next question comes from the line of Bob Drbul with Guggenheim Securities.

I was wondering if you could just talk to your digital wholesale business a little bit. I'd love to hear an update on the Amazon relationship, how North Face is doing there. And also just within the Walmart -- walmart.com and the Walmart digital business, how your brands are performing there and just where you see the growth opportunities going forward by brands. And has Vans decided -- will they start selling Amazon? Is that anywhere on the docket here as well?

Those are a lot of questions, Bob. I'll start with Amazon. We're -- we've really increased our attention and interaction with the Amazon team, not just as an individual brand, but we've brought a key account team together focused on really learning Amazon and learning how to really utilize that platform as part of our integrated marketplace choice. We've spent last year, specifically with North Face, working collaboratively to clean up the marketplace. And as we do that, allowing us to put better-targeted assortments onto that platform and also beginning to work with them on how to assure traffic is moving in a proper way to drive sales. So I would tell you our relationship is improving. Our commitment to a key account team sitting in Seattle to really work from a One VF point of view, we think, will be a real positive. That really is playing off of something we've already done in Europe where there's a key account team working there. On that, Bob, I'd tell you, we've got a lot of experience specifically in Europe with partners like Zalando, where we really have learned how to partner with these new unique selling environments, how to utilize them to tell our stories. And we're bringing that knowledge back here to work with Amazon. Walmart, a really key partner. We support the work that they're doing to expand their platform. And we continue to work collaboratively with them on how to bring additional brands within our portfolio into their environment to not only help our partners' business grow but also help us access our consumers shopping in that environment. And then your last question was...

Vans, Amazon.

Vans and Amazon. That's a brand-by-brand decision, Bob. And at this point, our Vans business has not decided to move on to that platform on either a 1P or 3P, but they're part of the One VF conversation learning along with our other businesses specifically on how to utilize that in the future in their integrated marketplace strategy. I will tell you, part of the Amazon platform, Zappos, all of our brands are there, so you could argue that we are -- Vans is within the Amazon environment, but it's there selling Zappos directly.

Our final question comes from the line of Dana Telsey with Telsey Advisory Group.

As you think about pricing, how are you thinking about the average unit cost inputs by brand through the balance of the year? Is there any changes or adjustments that we should be thinking about? And then digital media, given its prominence, what are the costs for you? And is it -- does it vary by brand? What changes are you seeing there?

Dana, this is Scott. I'll take the first part. So input cost, there's a lot recently with a stronger dollar and some of the movements in a few commodities like cotton and others. Yes, there is some input cost pressure. But when we look at pricing, which is in that historical kind of 1% range that we've seen over the last several years, we see that pricing is really offsetting input cost. So from a margin standpoint, for us at least, today, we see that as not really a big factor. We'll have to watch it, see what happens. In a strengthening dollar environment, that could drive commodities higher. But so far, we really haven't seen a big impact. Labor pressures also are generally up, although not at an amount that's significant enough to make a material difference to us at this point.

And then, Dana, on your digital media cost question, I'll be honest with you, I don't have that level of detail. I've not heard of any change in cost that would be guiding any different decisions as an important part of our media mix and how we connect with our consumers. I will tell you that the use of consumer data and the analytics capability to be more purposeful and directed with our messaging is growing. You heard us talk about the investments in shifts within Vans and the rise of -- the use of their consumer file in just a very short order of getting 1 million consumers signed up and active. The digital platform and how we interact there is very, very important. I do think there's probably a cost-per-click increase. I'm not sure if it's meaningful enough to modify any of our decisions, but I think it's more about how we can be more one-to-one in the use of our information in the broader long-term media platform we've all become accustomed to.

There are no further questions at this time. I would like to turn the call back over to Mr. Steve Rendle for any closing remarks.

Well, thank you, everybody. Really appreciate you spending your time with us this morning. I'd love to reinforce a couple of points. We are moving now into the acceleration phase of our 2021 plan. We're very confident in the growth drivers we laid out in Boston. The strength of our Vans business, we see continuing. The momentum returning to The North Face gives us confidence against the commitments we've made there. And the work that we're doing to re-energize Timberland, you can see kind of the sequential set of actions bringing the portfolio up to the high single-digit growth commitments that we made to you all in Boston. We are very committed to continue our transformation to become a more consumer-centric enterprise. And we're excited to unlock the power of both being purpose-led and performance-driven as we create value for our shareholders, our employees, partners, and ultimately, our consumers. So again, thank you for joining us today.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.