Greetings, and welcome to the VF Corporation Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allegra Perry, Vice President of Investor Relations. Thank you. You may begin.

Good afternoon, and welcome to VF Corporation's third quarter fiscal 2024 conference call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. Unless otherwise noted, amounts referred to on today's call will be on an adjusted constant dollar basis which we've defined in the press release that was issued this afternoon, and which we use as lead numbers in our discussion, because we believe they more accurately represent the true operational performance and underlying results of our business. You may also hear us refer to reported amounts, which are in accordance with U.S. GAAP. Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. Joining me on the call will be VF's President and Chief Executive Officer, Bracken Darrell; and EVP and Chief Financial Officer, Matt Puckett. Following our prepared remarks, we'll open the call for questions. I'll now hand over to Bracken.

Hello, everyone. Thanks for joining us. It's nice to be here with you for my second earnings call with VF six months in. Before I get started, I'd like to let you know about an important development within my leadership team. Matt Puckett, who's sitting right next to me, will be stepping down as our CFO later this year. He and I have agreed that it's time to make a change as part of the overall transformation efforts we're introducing across the company. Matt will stay on until we appoint his successor to help ensure a smooth transition. I want to thank Matt. His tenure at VF spans almost 23 years with roles across the organization and around the world. Since my arrival last July, Matt has been a valuable member of the team and an important player in helping to advance our transformation agenda. I really appreciate his contributions and his continued service to VF during the transition. He's also just a great person and we'll miss him, but not just yet. He'll be here for a while. Moving back to the quarter or back to today's order of business, first I'll review the quarter, then I'll update you on our four near-term priorities we described in last quarter's call, which we call Reinvent. I'll then talk briefly about our newly announced strategic portfolio review, and then I'll hand it over to Matt to cover the financials a little more deeply. Q3 was a particularly disappointing quarter with total revenue down 17% compared to down just 4% last quarter, where the results did benefit from timing shift in deliveries. Results were challenged across our brands, including The North Face and the rest of the outdoor brands. The big Delta came down to five things. Number one, unseasonably warm weather…

Thank you, Bracken. Before I get into the financial update, let me take a minute to reflect on my time at VF. I've lived and loved VF for over two decades and my time with this great company has provided me with many enriching and fulfilling experiences across our business and across the world. I'm thankful for those many opportunities and more importantly, for the great friendships and relationships that have come from it. However, there always comes a time for change and Bracken and I are aligned on this being the right time. While I'll be stepping down in the coming months, in the interim, I remain committed to helping pursue the transformation agenda, leading the finance organization and supporting the transition. Now turning to the quarter. Throughout Q3 we remained highly focused on strengthening both our business fundamentals and our balance sheet. At the same time, we are advancing our transformation program Reinvent with a sense of urgency and resolve to execute against and identify new and additional opportunities to reshape and improve VF. Now I'll start with a review of the quarter, then provide an update on Reinvent and finish off with some thoughts on the year to go period. Total revenue was down 17% for the quarter as both global Vans and the Americas results remained pressured as expected. On a global basis, wholesale led to decline at down 28%, while DTC was down 9%. Excluding Vans, DTC was down 3%. Before going into a review of the regions and brands, I'll spend a few minutes outlining some items which impacted the quarter. First, Q3 was impacted by the expected timing related shifts in wholesale, where on-time deliveries this year benefited Q2 while impacting Q3 relative to the prior year period. This had an overall impact…

Thanks for taking our question and I just want to Matt wish you well on your next adventure. It's been a pleasure talking with you over the years here. I guess Bracken and Matt, I get the big question on our mind here is what, maybe you could walk us through some of the filters you're looking at as you focus on which of the brands make sense in this portfolio in the strategic review. And then I guess I'm curious, Matt, maybe you could walk us just a little bit more through the puts and takes on gross margins. If there's any numbers you could offer with, especially the comment that promos were in line to last year, just looking at the revenues and the commentary on brands in particular, you guys seem to be really pushing hard to get through a lot of the inventory. It wasn't intuitive to us. The grosses would be positive in the quarter. So maybe just a little help understand the puts and takes there?

Okay, I'll go really quickly, Michael. So first of all, the number one thing is being in a good market I think. So first I think I said this on the last call. I love businesses that sit in growing markets. I also love businesses that are leaders within their markets. And then the third filter would be really, do we add value to the business within that market? So I think those are the three primary filters we'll put on this and are putting on this and we'll have a lot more to update over time.

Hey Michael, thank you. Great to speak with you today. You know, I'm not going to give exact numbers, but I'll tell you the primary drivers on the margin line. So positives were mix and it is a bit larger than what we would normally see considering the mix of the business, particularly associated with the big decline that we saw in wholesale and the relative strength in the international markets and primarily in the APAC region. So mix is a bit bigger number. Freight continues to be a real favorable number for us and a really modest benefit from price. Big offset is FX. FX is almost offsetting that mix benefit. So that's probably the single biggest drag is FX. This will be the worst quarter for us from an FX transaction standpoint that we'll see. A bit higher inventory reserves, modestly higher product costs. Promotions about flat, really. Part of your question was there. I think there's a couple of things to remember there. We've made a lot of progress across the last twelve months in reducing inventories. We continue to be aggressive about doing that, but we're in a better place than we have been. So while we continue to see a lot of promotional activity in the marketplace, particularly with our wholesale accounts, to some degree, particularly in the Americas, we're a little cleaner in our D2C channels. We're moving a lot of inventory through our outlets. But if you kind of pull up and look at our margins this quarter, our DTC full price channels, really across the board, including in Vans, were a bit better full price stores and our online business. And so that's where we're seeing the business start to get healthier more quickly is in our own channels.

Okay, thanks for all the help.

Thanks, Michael.

Our next question comes from the line of Brooke Roach with Goldman Sachs. Please proceed with your question.

Hi Brooke.

Hi, good afternoon. Thank you so much for taking our question. And Matt, thank you as well. I was hoping you could expand on the north face and the results that you saw in the quarter as well as your outlook for TNF wholesale in the U.S. to remain challenged. Can you talk to your view of maybe the impacts from underlying macro and weather that we've seen this quarter and what we might see in U.S. wholesale for the next couple of quarters versus the underlying growth opportunity of that brand in calendar 2024 and longer term?

Yes, I think Matt and I will split this. I'll give you a view of the underlying growth opportunity. I continue to be super excited about the north face. I think the brand is very strong. All indications are that, the brand strength continues to be in place and the activations that we're doing, the various marketplace activities we're doing are working. But underneath it, as you said, we've got a pretty tough marketplace, both on wholesale, and the weather was obviously really tough. You want to answer that last part of the question on wholesale, Matt?

Yes, I think Brooklyn wholesale. I mean, what we're seeing is we knew coming into the season it was going to be a little more difficult. Order books were down. We've said that all along and part of that is our own issue from the last year where we didn't really service the business. So we kind of behind the eight ball coming in and then weather didn't help. The marketplace remains pretty dynamic and pretty promotional, particularly in the outdoor segment. I think that's kind of what you see and what we see and understand across the market. And I think we're going to see that play out over the next couple of seasons as wholesale partners continue to plan very cautiously. We're seeing that, and that's how we're thinking about planning our business. All that said, the strength of the brand remains really good. All the metrics that we look at from a consumer standpoint continue to be good. Our D2C business generally is good when the weather's gotten better here in January. Our D2C business is up in all three regions. In fact, the brand is up in all three regions, but particularly in D2C. So I think the underlying drivers of opportunity and the underlying drivers of the business are really strong. The wholesale channel, particularly here in the U.S., is difficult in the near term, and we expect it to continue to be.

Great. Thanks so much.

Thanks, Brooke.

Our next question comes from the line of Adrienne Yih Barclays. Please proceed with your question.

Hi, Adrienne

Great. Thanks so much. Hi, Bracken. Matt, thanks for all your help in the partnership over the years. It's been fantastic. So thanks. Just want to put that out.

Thanks, Adrienne.

You're welcome. My question is going to be on the marketplace cleanup. How much of it was the shift into 2Q and how much of it is going to be an overhang as we go into fourth quarter, and I'm going to split it. So, Bracken for you on that same question. We've seen sort of marketplace actions. Is it to get out of particular channels, to reduce stores in accounts? We've seen sometimes where they go pretty deep and the brand visibility kind of goes away, et cetera. So I'm just wondering where the push point is on that. And my last really quick one is how are you going to be taking advantage of the Escape moment at the Olympics.

Thank you. On the Q2, Q3, I would say Q3, Q4. The reset is kind of equally distributed across both quarters, and most of it is not exiting channels. That's not the reset we're talking about. It's really pulling inventory, unproductive inventory, out of those channels so that the productive inventory can move the faster movers. There is a larger marketplace change that will happen in Europe and to some extent in the U.S., but that's going to happen more gradually in terms of what we'll be doing at the Olympics, we're obviously not talking too much about it yet. We keep that close to our best. But we do have some pretty interesting plans.

Fantastic. Best of luck.

Thank you.

Thank you. Our next question comes from the line of Laurent Vasilescu with BNP Paribas. Please proceed with your question.

Hi, Laurent.

Hi, Bracken. Good afternoon. Thanks so very much for taking my question. Matt, it's been a pleasure over the years. I wanted to just ask about debt pay down. Bracken, I think you mentioned you're confident about not refinancing the $1.75 billion that's come to due, I think December and then spring of 2025. Maybe can you just, for the audience, can you just help us bridge through. How do you get that from a free cash flow perspective? Any update on the PAX [ph] business? And then, I think Matt, you mentioned the non-core physical assets. There's some corporate aviation program that you might sell off. Are there any assets, physical assets you might sell off? And if that's the case, could you potentially size that up so we can model the free cash flow over the next few quarters?

Yes, Laurent let me jump in and try to take that one and great to speak with you. So I'll start from the back end. The non-core physical assets, which are largely related to the elimination of corporate aviation program, there's also a couple of buildings that are involved as well. It's a meaningful number. I wouldn't give you the exact number, but kind of north of $50 million and maybe pretty close to $100 million in the end, but so that's kind of what you're looking at. And that'll likely play out over the next two to three quarters. I think we'll be able to get most of that done. So that's hopefully helpful there as it relates to the debt pay down. Yes, our objective is to not refinance those two tranches of debt that are due this December and next April. To do that, we obviously need to sell the PAX business, and we're continuing to work toward that. We expanded or opened up the aperture from a marketing standpoint last quarter, and that's been really good. We've got a number of parties who are highly interested and engaging through kind of a round of bids and in the middle of pretty substantive due diligence as we speak, so good progress there as it relates to the underlying business. We're going to generate a reasonable amount of cash flow this year and we've kind of confirmed that $600 million. I'd suggest that next year will be a bit stronger than that as we kind of normalize and continue to drive down inventories. We're going to make a lot of progress reducing inventories this year. But given where the business is from a top line perspective, we'd expect more opportunity next year. I think I've said before that cash flow next year could be kind of in line with where we started this year, and I still think that's kind of a fair assessment.

Very helpful, thanks very much.

Thanks, Laurent.

Our next question comes from the line of Matthew Boss with Morgan. Please proceed with your question.

Thanks.

Hey, Matthew.

So, Bracken, could you elaborate on your confidence in VF's future rising the statement in the release or maybe how best to gauge sequential signs of progress that you may be seeing under the surface relative to the reported results? And then, Matt, I guess may be what's the best way to think about the right structural gross margin multiyear for the business and what portion of the $300 million cost savings should we anticipate to fall to the bottom line?

Yes, I'll go quickly on your first question, Matthew. First, I have a lot better transparency on the business today than I did three months ago and certainly six months ago. I have a better sense for where the business is going to land. I feel much more comfortable that I understand where the business is landing in the Americas in a nearer time frame, despite the terrible quarter we just had. I feel like I have better transparency, especially in the last couple of months, than I've had since I've been know I went through guidance earlier, Matt and I talked through it. We went through guidance because of that lack of transparency, lack of clarity. So that's number one. The second one is I feel just really, really good about the brands. The deeper I get into them, the better I feel. I was excited coming in and the more I look into what's out there, what we're capable of. And really what the fundamental consumer power of the brands is I'm really excited about them, even the ones that some -- they probably won't be part of VF, I feel really good about. The third one is the team. Since I've been here, I think we've promoted two very strong people within V.F., and there are a lot more strong people than VF. In fact, we'll be promoting another one to a big job here shortly, which we haven't announced yet, so I can't. But we'll also be bringing in some from the outside. In fact, internally, we're announcing one of those today. It would be on my staff. So we've got -- we've just got a lot of really strong people in this team as much as I hate to see mate. I think the team itself is very strong here, all up and down. So I'm very excited about it. And I guess the last part is the -- Matthew, I think you were on our first earnings call, where I said, guess feels a lot like my last company, when I went into it at the beginning, it really does. And I feel about the same and about the same time frame, right? You hate to see numbers like we have right now. I absolutely despise it. But I have -- it's a bellwether and it feels intuitively feels to give me a stronger sense for where we're going. And I feel you don't know you're coming out of it until you balance, and we certainly aren't bouncing yet, but we will and I feel more confident about that than ever.

Hey Matt, in terms of gross margin. So I'm going to be careful here to not guide you to anything. But what I would say is if you kind of step back and look at where we are, and good to see our margins turn positive and that will, that will continue, I think, moving forward as we think about Q4 and beyond. We're sitting today a couple of hundred basis points, maybe even a little bit more below where we were just a couple of years ago, all attributable to promotional activity and higher inventories and inventory reserves, et cetera. We're not assuming that, that's going to snap back overnight, but we also expect that there's an opportunity there as we manage the business more effectively as we have cleaner inventories. And as we obviously benefit from a marketplace that presumably over time, will get better. So I think gross margin expansion opportunities are there. Aside from the promotional scenario, which can play out over time. If I just look at the nearer term, right, over the next several quarters, mix will continue to be a good guy. We think about channel mix, we think about geographic mix. Inflation is -- which has been pretty significant this year is waning. In fact, we see that waning here even in won't be as big of an issue next year, notwithstanding the current issue that we're dealing with relative to the cost of freight and what's going on in the Suez canal, that could that could dent that a little bit, and that could be not an immaterial number. But overall, inflation in the near term is a lot more manageable. FX will be less of a headwind. And there's a little bit of benefit, not significant. Most of the reinvent benefit sits in SG&A, but a little bit of benefit in gross margin. So there's more, I think, good guys than bad guys in front of us, but the big lever for us and for our businesses over the course of the next several quarters and really the next couple of years is how do we just get healthier and how do we sell more at full price and drive down promotions. I think that will be really critical. As it relates to the second question, I think on Reinvent and we've said we plan to reinvest 25% to 35% of the savings across time particularly in product and marketing.

Have you got it Matthew?

Thank you. Our next question comes from the line of Bob Drbul with Guggenheim. Please proceed with your question.

Hi, Bob.

Hi, Bracken. I just got a couple of quick questions. First on Vans, is there anything more you can share with us on your 18-month plan just around I don't know, marketing? Are you planning to bring the work to back pricing within the brand? Anything along those lines would be helpful. And second question is just around inventories. With the inventories down, I think was at 17% are there any pockets by brand geographically that you're concerned about, either both in your business or at the wholesale level? Thanks.

Thanks Bob. I'm going to let Matt take the second question, but I'll take the first one. I'm not ready to be too specific on that yet, partly because I know that I've got a new brand president coming in, so we'll have a latitude to make some changes. But what I would say is we've got a great – I mean I think a strong kind of very punctuated plan that combine – that integrates the marketing insights and then the marketing programs with the new products that are launching. And I've been through both sides of that equation, the two of them together, two or three times now, and I'm still not done, but I feel good about it, very good about it. We do not have plans to bring back the work tour, although we're certainly crossed our mind and we're talking about it a little bit. The work tour was a really powerful thing, but it took time to drill. It would take quite a bit of time to rebuild. I think the objective though, of making sure that we're really deeply in the hearts and minds of the youth audience is mission-critical for us.

Hey Bob, so on inventory, a couple of things. I will give you one number here that maybe is really useful. Relative to the 17%, Vans is actually down almost 30%. So Vans is in a really good place, I think, relative to where we sit from a top line and the reset actions in the Vans marketplace with the actions we're taking is, by and large, going to be about where we would like it to be as we get towards the end of the fiscal year, maybe just modestly higher from a weeks of supply standpoint in the U.S., but pretty close. So I think we feel pretty good there. If you look at the overall average of 17%, Vans is on the higher side of that. Dickies is on the higher side in terms of reduction. The North Face is kind of right on the number and Timberland and all the other brands are lower. And Supreme is actually probably the only brand where the inventories are modestly higher, and obviously, the business is performing well. So I think overall, we feel pretty good about where we are. If I say if there's a pocket or two of inventory, it's certainly coming out of the outdoor -- in the outdoor segment coming out of this fall/winter selling season, and I think probably particularly in the Timberland business here in the U.S. is something that we're taking a hard look at. But relatively speaking, Bands and The North Face are in pretty good shape.

Thank you.

Thank you, Bob.

Our next question comes from the line of Paul Lejuez with Citi. Please proceed with your question.

Hi, Paul.

Hey. Thanks guys. You mentioned some of your wholesale partners are being cautious, I think, on their ordering. But curious where you're seeing sellout performing better than sell-in, what brands, what regions? And how long do you see that dynamic lasting before sell-in and sell-out more aligned? And then just a quick second question. On the strategic review, is that all being done internally by you guys using some outside consultants. Sorry if I missed it, I'm just curious who's involved in that.

Yes. I'll take the last one, and I'll let Matthew take the first one. Yes, the strategic review. It's an internal exercise. We do we get the advice of the people you would expect us to in that context, but we don't have a consulting or someone we're working with. We have a really strong team internally that's doing the analysis and we're working with the Board on that. We've got two different -- I would say, two different groups on the Board who are really strong in this area, a lot of portfolio experience there. So that work has been ongoing -- has been going. So I feel really good about it. You want to answer the first question on the...?

Yes, I think the most obvious place I would point you toward to where the sell out or sell-through is better than the sale-in is in Europe. We're seeing that I'd say, generally across the board, maybe a little less so in Vans. But generally, across the board, the business is a little stronger, I would suggest, and maybe what the financial results imply. And I won't be surprised to be surprised if that doesn't continue for a little bit of time as wholesalers continue to be pretty cautious, but in Europe, that's true. Certainly, with Vans and the reset actions, there's a lot of noise in some of those numbers that distort the wholesale results for Vans as we do that. So the sellout is certainly a little bit better, but not good, right? It still continues to be in a place that we're not happy with.

That probably goes without saying, but Supreme sell-out continues to be very strong.

Yes. Europe. The only the thing I'd say about Europe is inventories in the marketplace across the board are really well positioned. U.S., a little -- there's a couple of pockets, as I said earlier, I think particularly Timberland, where we're probably a little bit higher than we like to be. But Europe is in a good place from an inventory standpoint as is Asia, by the way.

Got it. Thanks guys. Good luck.

Thank you, Paul.

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

Hi, Jim.

Thank you. Hello everyone. Thank you for taking my question. Bracken, I want to dig in on the portfolio review. Your message last quarter was no sacred cows, bores aline [ph], et cetera. The announcement of a portfolio review doesn't seem like new news. Can you give us sense of where you are in the process? Have banks been appointed to shop brands deemed unstrategic? And then when I think about the criteria you've outlined, growing markets, leaders in the markets it seems kind of a short list of brands that fit. Am I correct to interpret that that suggests a large-scale realignment of the portfolio as possible?

I wouldn't go that far. But I would say you're right that we've been working on this for longer than we've been talking about it. That's kind of the -- I will try to do that regularly so that we don't just come out with things that aren't really pretty well along. So we are well along the way on this portfolio review. And while we haven't hired bankers beyond the discussion that you know of, we're certainly downstream on discussions on exactly what we do from a portfolio standpoint. And I don't have more to say about that now, but you'll hear more as it comes.

Okay. And then may be just a question on the mechanics of the Vans realignment, can you help us maybe better understand what that means? What were the specific tactics to try to clean up inventory in the channel? If you could explain more, that would be helpful. And I'm curious, like in that context, how did you miss on sales, but over-deliver on the inventory.

Yes. Let me try to answer that one, and then Matt can also help. We -- it's essentially tapping in two steps. The first one was this quarter. The last quarter, the second one will be in the next quarter. And our -- what we're really doing is pulling kind of the icons that are not selling that inventory is too high in the channel. So we're pulling that back out or they're returning it, and then we're opening up basically an open to buy for the product that is selling. So it's really just cleaning out the channel. You want to add anything about that, Matt?

I mean, Jim, you're right, there's a little bit of an inventory impact when you bring back returns or accrue for returns in this case. I think in most cases, the product is still kind of flowing and the work is happening, but you're accruing for returns, which has an inventory implication in that entry. That's in the number. I think overall, we've just been able to aggressively sell through excess inventories, again, in our own outlet stores, in particular, as well as leveraging, in some cases, the off-price channel within the wholesale space. Working aggressively to pull back on buys, which we said all along, we're working to do and probably been a little bit conservative in some of our planning in terms of that may ultimately play out, so a little bit of favorability there as well.

Understood. Thank you.

Yes. I'll give you a quick example of the impact it's had. I had over the holidays, we had several people tell me they couldn't get -- couldn't buy new school product because it wasn't available in their sizes yet. The inventory is overstocked inside the channel. This was before we started doing this reset, so this should clean that up.

Our next question comes from the line of Jay Sole with UBS. Please proceed with your question.

Hi, Jay.

Hi, Bracken. Thanks much for taking the question. Matt can you sort of help? I have two questions. The first question is, Bracken, you talked about promoting two people and you're recent teams, how far are you along from having the teams really -- the go-forward team really full. So in other words, like how many more months your core you expect to be working on this before you feel like, okay, the team is in place now it's about executing? And then maybe for Matt, on the free cash flow guidance, it sounds like there's probably some a little bit less net income than you expected before, but more from inventory and it sounds like there's some other asset sales that are impacting that. If you could just sort of give us like the pieces in qualitative terms, just say help us do a little math on how the free cash flow guidance is same? That would be helpful. Thank you.

That's a hard question to answer. I would say we've made a lot of changes already. So our team has evolved forward quite a bit. The structure of the company now has changed quite a bit. Our operating model, all those things are rolling aggressively forward. And as we enter Q4, especially as we move into the beginning of next fiscal year, I think it will be very far along in terms of having an organization that I think is really poised to win in this turnaround. So I'd say we're pretty far along Jay, and I'm excited about it. I really feel like we have a team that can -- is here to win. And I think you we roll forward a couple of months and we'll be there.

Yes, Jay, I think how you described it is probably fair a little bit tougher this quarter than what we anticipated. We talked about that relative to the Outdoor segment from a revenue standpoint, but better on the inventory line. I think there's a lot in free cash flow there, right? And when you look at the year-to-go period, the biggest levers are on the balance sheet, not on the P&L, right? And as you think about not only inventory, but accounts receivable, all the liabilities, et cetera, CapEx, honestly, the sales of assets, I wouldn't suggest that's free cash flow necessary. We're not counting it that way, kind of below that line, so that's not really in the number. But we're still in line for the $600 million, a few puts and takes, but we really encouraged by the inventory, I think, particularly great to see where we are at the end of the third quarter ahead of schedule.

If I could just go back to your first question, Jay, maybe use the question to make a comment about how fast we're moving on the org side. We have -- since I've been here, we have a new head of people, so CHRO, new Head of Commercial, which is an internal promotion. We'll have a new head of design within -- by the end of the fiscal -- by the beginning of the next fiscal year. That's kind of agreed to. Matt will be leaving, so we'll have a new CFO at some point early in the next year. We have a new Head of Timberland. We'll have a new Head of Vans. So we've actually changed a lot – we will have changed a lot of the team here and promoted a lot of people in this company during that time frame. So I'm really excited about the team we have in place, and I think it's going to get stronger and stronger.

Okay. Thank you so much.

Okay. Thanks Jay.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Hi, Dana.

Hi, Bracken. As you think about the DTC channel, which you talk about is more improved than what you're seeing out of wholesale, how does it differ by digital and DTC what are your plans for each brand on the physical store side? And are there any -- is there any color by brand performance differentiation in the DTC channel? Thank you.

I'd say everybody -- every brand has a sizable DTC e-com and not every -- not every brand has a sizable footprint in bricks-and-mortar, and it really varies around the world. In the -- I'll start with Vans, Vans has a very large, especially U.S.-based bricks-and-mortar business as well as an online business. A lot of people may not realize that we're one of the most developed DTC businesses. Our North America business one of the most developed DTC businesses in all of footwear and apparel. I mean we're something like 60% of our total business is DTC in the U.S., maybe even higher than that. So it's very developed. I don't expect that to changed dramatically one way or the other. I imagine the e-com will grow and the bricks-and-mortar will shrink relative to each other. And hopefully, wholesale will begin to grow relative to the brick our own bricks-and-mortar. So I would expect that. The North Face, you have a great DTC business that can be even bigger. It's mostly e-com in the U.S. We have very little of our own stores, relatively speaking, in the U.S. And that's kind of true in Europe. But in that case, we're adding more stores in Europe, probably going to be in the U.S., I think, if I have my facts right. And I would think that will continue and I'm going to keep holding APAC out for a second. Timberland has a very developed DTC bricks-and-mortar business in Europe and very, very little in the U.S., which is one of the things that we struggle with here in the U.S., big business, all wholesale, less control. I don't think we have any plans to change that. But I would say, generally speaking, all those businesses are going to have a larger and larger e-com business. It's a core part of our strategy.

Got it. And then just on the CapEx side for this year, any changes to CapEx and how you're thinking about it going forward?

No, I don't think we have a significant plan to alter the way we're thinking about CapEx. We don't have a big investment plan in CapEx, at least not an abnormal.

Most of our CapEx moving forward will be related to DTC, honestly, Dana. We'll be continuing to support the expansion where it makes sense and the brands that have expansion opportunities in The North Face is one, Supreme is one for sure and kind of the ongoing refreshment of those stores. Infrastructure-wise, nothing significant planned and obviously, we're working aggressively to kind of reduce our footprint in many cases, it's kind of the opposite.

Thank you and best of luck, Matt.

Thanks, Dana.

Thank you, Dana.

Thank you. Our final question comes from the line of Ike Boruchow with Wells Fargo. Please proceed with your question.

Hi, Ike.

Hey, Bracken. So just two questions from me. I guess, maybe Matt, the first one is on North Face. So just trying to fully understand the -- I know you're not giving guidance, but on the North space specifically, trying to marry the quarter, even extra shifts down mid-single with the comment on January being positive. Just -- should we not read too much into that January because of the cold. So I'm just kind of curious, any thoughts on the brand trajectory from here? And then Bracken, just not to be too direct but to Jim's question about the no secret to us, I mean, is it fair to say that the three big brands are not a part of the strategic portfolio review or is everything, are all options on the table right now?

We've been very explicit about saying we're not going to address that comment, any question about that. We meant it when we said no sacred cow, so we're really taking an objective look at all the brands. And other than that, we'll come back and update you over time.

I think your question on The North Face, as we look forward, we expect D2C to grow, and we expect D2C to grow in the fourth quarter, and we expect the D2C to continue to grow. It's good to see the business bounce back in January, particularly the early part of January, really strong as the weather turned here and to some degree in Europe as well. So -- but what we've said, wholesale is going to be pretty choppy. We've got order book visibility obviously for spring and how that will shape -- play out and pretty good understanding of what fall is going to look like. So we'd expect that to be more difficult over the next few quarters.

Yes. I'm sorry I just don't want to piecemeal out that answer. I think we need to give it a more complete way later.

Okay. Understand. Thanks guys.

Okay. That was the last question? All right. Well, thanks all of you for tuning in. Despite these clearly disappointing results, I am super excited about VF's future, as I said earlier. I think the steps we're taking to turn things around are happening. The implementation is real and the change is happening fast internally, even though you probably can't feel it, you certainly can't see it yet in our numbers. I've said it before; we have world-class brands and amazing talent. The foundations on the ways to rebuild this are here to have a great business. So I look forward to talking to you again during the quarter and as we close this next quarter and start the next fiscal year. Thanks again. And Matt, thank you.

Thanks, Bracken. Thanks, everyone.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.