Bracken Darrell, CEO of VF Corp says sales were down 9% in the first half of the year but are expected to decline 2% or less in the second half, putting the brand on track to turn positive "at some point soon." He said VF is investing in innovation across iconic products, new silhouettes and styles, and pointed to rising search interest as evidence of brand momentum. He speaks with Romaine Bostick on "The Close."
Bracken, when you look at the results and more importantly when investors look at the results, you gave them a little bit more than what they were expecting for the most recent quarter. Still some questions about what the second half of your fiscal year looks like here. Talk a little bit about what actually led to the overall beat that you had in the most recent quarter and whether that's sustainable for the next couple of quarters.
You know, our business just continues to accelerate. You know, we we beat the top line by a percent, we beat the bottom line by a lot, by $50 million. So, we're just having really good momentum across almost all of our brands. And, uh, we expect that to even get stronger as we go through the year. So, we're really in a good place.
Well, obviously, you've done a lot uh with regards to turning this company around. You've repaired the balance sheet, you've cut costs, you've narrowed uh the portfolio. Uh obviously the biggest unresolved issue is still Vans and there was some improvement there in the most recent quarter, but overall, we're still talking about a brand that is still in decline. When do you actually anticipate you might get back to positive growth for Vans?
Well, you know, we're down 9% in the first half of the year, we'll be down 2% or better in the second half of the year. So if you kind of do the math, you're going to see us go positive at some point soon. And uh you know, we're really excited about the Vans brand and the Vans product. You know, we've really put out so much more innovation now and it's going to keep coming. So we're just fueling it with more and more new products on the iconic products and new silhouettes, new new styles and things. So we've got a lot of good stuff coming on Vans. There's a lot of brand heat. Our search interest is up all over the place and we're in a good place.
And you talked about some of the inroads you were actually making with some of the resellers uh and saying that with your existing partnerships that you've had, you're seeing more shelf space devoted to Vans. Why? Is that because of an effort that you made directly or are changes just taking place overall with regards to trends?
It's all about great products. And what what's happening is when we sell through our own channels, through our E-com or our our brick and mortar, you know, we can go direct in there. Our sell in process happens about six to nine months later for those sellers. So they're seeing what we're getting in our own channels and they like it. They're also seeing our brand heat show up online and social media, etcetera. And so there's just a lot of interest in the new products. So they're starting to come in.
Well, give me a sense here. Are are those retailers, are they also giving you more prominent uh shelf shelf space and display than maybe what you had before?
Yeah, it it's a combination. So a little bit more shell space in some cases, different products in most cases and even more uh more more more stores themselves in other places. So it's a combination.
Well, what exactly are the customers returning to with regards to Vans and the styles. You mentioned uh you know, some of the newer styles, but are they gravitating to sort of the the new uh styles or is it more as kind of the old school, pun intended, uh sort of uh traditional uh silhouettes that Vans was known for.
Well, the cool thing is the old school, the old black and white old school or the checkerboard are always going to be popular with a subset of consumers. You know, kind of like our Timberland boot. But we're bringing out so much more new stuff and it's in the old school structure for those old school lovers. And so it's actually those users and then a new generation are discovering old school in in pearized and and distressed, which is where you can tear off the outside, souvenir where you've actually got uh jewelry that's on the outside of the shoe. So we've got a lot of cool things and more coming. And so it's really a combination and we're also offering new silhouettes. We've actually got a a loafer that's as comfortable as a sneaker that you could actually skate in. So we've got just lots of new things coming out for everybody.
Well, give me a sense here. Um I mean you've done a couple of collabs too that's also generated uh a little bit more interest and heat. Do you plan to do more of that or were those just kind of one-off opportunities?
You know, collabs are a regular part of our business now. So we've we just did a Satoshi collab at Complex Con, you know, kind of the biggest sneaker fest in the world and we had to shut down our booth. It was so popular and we then when we put it out online, it sold it sold out in five minutes. So, you know, the collabs are very popular. They they generate a lot of interest. They also qualify new structures and designs that we then can bring into our main line over time. So they're going to continue to play an important role for us.
Well, let's talk about the other brands. North Face is obviously carried VF for quite some time. It continues to do well here. Uh but give me a sense here about what sort of innovation, uh styling changes if at all are needed or that you might have in store.
You know, innovation is the life blood of any business and and so we need it and we have it and we'll keep bringing it. In the North face, we're just relaunched for example, the Nupsi from the from the summit series all the way into our lifestyle brand, summit series is a really high performance part. And then we've got a new one that's completely reversible. So it's basically two jackets in one. So you can wear it on the summit, you can wear it in the street and you can look different in both places. So we've got lots of stuff coming, but we also have a lot of new categories we can go into. You know, we're we're barely scratching the surface on the categories that are important in the spring and summer for example, we're bringing that. We're we're just getting started going into pants. I'm wearing North Face pants right now. You would not know they're North Face pants except they have that nice logo on them. But so we've got lots of cool stuff coming, lots of good footwear, just across the board, we have an opportunities in North Face.
Well, how do you balance out sort of the the technical aspects of the North face gear and for that matter, I guess you can ask the same thing about Timberland with the more fashion lifestyle consumer that I think for a lot of us has come to sort of dominate the face of that brand.
You know, there's got to be a performance story that runs through everything we make. So when and and you might not be able to see it always, but there's always some performance angle to the North Face product and there will always be. Uh but we're we realize how important style, color, everything, you know, is to consumers. And so we're going to make sure we we continue to expand our footprint of people who really want to who admire the people like Jim Morrison who he skid down the North Face of Mount Everest. There's a movie coming out next week about it. Um who admire them but really don't ever aspire to do that and and want to wear the clothes they did or something related to it. So we're going to cover the full spectrum.
Um give me a sense though also uh about pricing power, particularly in a consumer environment where we're seeing hearing a lot more about consumers are a stretch and earlier this year, last year, it was about this sort of K-shaped economy with the bottom of that K pulling back. We're now getting evidence that even some folks at the top of the K, the luxury, more luxury consumer might also uh be, you know, put sort of putting their wallets away. Give me a sense as to how you're addressing that, particularly heading into the holiday season.
Oh man, you man, you're I I wish I'd given you that question. I take credit for it. I love where this company is. I came here because it's not luxury. We really have these brands that are very affordably priced, Timberland, Vans, North Face, but they, but there's the brand strength is almost as strong as luxury brand. So we've got kind of the affordable luxury that really cater super well to the K-shaped economy where if you're on the bottom of that K, we can afford us and it's cool and it's, you know, they're cool products, they look good, great design, great innovation. If you're on the top of the curve, we can sell elevated product and we're going to have more and more to buy. Are you seeing consumers that maybe weren't existing customers of VF brands uh trading over into your ecosystem from other places?
Are you seen consumers that maybe weren't existing customers of VF brands, uh, trading over into your ecosystem from other places?
Absolutely. You know, there's a there's a concept called high low, you know, where people wear, you know, luxury and and affordability at the same time and we kind of fit in both camps. So we're getting it both ways and uh we absolutely are bringing in new users left and right.
With regards to your sourcing costs, tariffs, supply chain issues, is that largely under control? I know those numbers aren't necessarily lower than what they would have been a year or two ago, but are they manageable?
Yeah, we're they're very predictable. You know, and the and the the what I would say about tariffs is as long as tariffs affect everybody equally, which they really do because all of us have the same manufacturing locations, it it's it's something you can just deal with through through cost management, through pricing in very strategic ways, although we've been very measured about that. Um yeah, so so it's very manageable.
With regards to your guidance and, you know, I was listening to the conference call and you talked about how you could guide for next year today, but you didn't. Um give me a sense though, I know you can't give me specific guidance, but give me a sense as to what kind of confidence you have going in to the next fiscal year in deeper into 2027, uh the calendar 2027 that things are going to continue to get better.
I you know, I've I when I joined this company, I pulled guidance because I didn't have confidence because it was our numbers were not predictable. We put guidance back in, we put it in a quarter at a time because we we had better visibility but not great. Then we extended our guidance to a year and then we started to guide a year at a time. That was last year. And now I'm in a position as you said where I have a lot of confidence, I could guide right now for next year and I'd be very comfortable doing it. I probably won't do it now because the rest of my team would kill me, but I am but I but I could do it.
Well, I mean, well, I mean you have laid out this like the longer term targets, a 10% operating margin. Is that still intact? You think you're going to meet that? I think was that by 2029? Was that the goal?
That's correct. Yeah, well it's 10% 10% gross margin target and a leverage target. We're we those are absolutely in our sites and we will deliver them.
Does that require Vans to return to some material growth or can you get to that target even if Vans is still lagging?
We're going to get there, period. We're on the right path to do it and we have a lot of tools to get there. So we're on our way.
Um, there's been this idea of a lot of the changes that you've made and I've heard from analysts, a lot of questions as to whether those big changes are done for now. Um, do you think that what needed to be done to sort of uh get this ship, you know, revving on all cylinders again that largely those changes have actually been made?
Yeah, we've cut the debt by 60%. We've uh reset the SG&A base. We've expanded the gross margins. We've sold two businesses that didn't belong in the company. And we are now we're reinventing the innovation engine for every business. We're going to turn this company into a growth machine and it will sustainably drive profit at the same time at a higher rate. And I feel really good about the steps we've taken so far. Are we done changing? Absolutely not. We'll be changing all the time. This this is a this the world's changing fast and so are we and we'll try to stay ahead of that.
And give me a sense uh as well on just the idea of having a brand portfolio. Obviously, you shed a couple of brands like Dickies and um uh Supreme. Um but you know, there's been a lot of people questioning whether this model overall, not just for you but in your industry is actually viable long-term, whether some of these brands would do better as stand-alone companies.
Yeah, I have I came here in part because the brands were affordable luxury, lots of innovation, a lot of products. and in part because it was a multi-brand business. In every other consumer products business I can see, there's a the biggest players are actually multi-brand players, not in this industry because nobody has actually operated like the players in those industries and that's where we're headed. So what we're doing is we're creating a a a a learning engine where everybody's learning all the time, where we're continuously improving each step of the every process whether it's brand building or innovation and every time one brand learns it's spread to the other brands. And that's our game plan. If we do that right, there's a room for a P&G or a Unilever in this industry or a Diageo, you pick your other consumer products industry and we're we're targeting to be that.
