VFC
#Good morning, <UNK>.
This is <UNK>, I will start that.
Our demand creation is growing a little bit faster than our top line.
So just in terms of modeling it out, we continue to make those investments but importantly we are also improving the effectiveness of those investments.
We are making those dollars work better.
I will give you one simple example, we have had 14 global media agencies and we have embarked on a project to really look at rationalizing that, getting more leverage, the power of one VF.
And as a result, we have taken that 14 down to 3 and that is resulting in tens of millions of dollars of savings over several years and that is really a way to just put those dollars to work in a more effective way.
From a midtier standpoint, <UNK>, I think there are two things I would like to talk about.
One is we brought Wrangler to the midtier and it has been extremely successful.
What I mentioned earlier is our consumer is asking for our product in different channels and that just tells us the strength of the brand that we have and we brought that product to that channel.
It has resonated extremely well and we are rolling it out across the channel across the United States with great success.
On the female side, we are bringing real innovation to the channel.
So not just around denim.
I think the thing that is really interesting and really exciting for the Lee brand is we are bringing some different fabrications and some different performance type products that have been really successful from the female standpoint and the consumer has really liked that in that channel too.
So that is a little bit on the male and a little bit on the female within the channel but we feel really good about what is happening in the second half and what we have in our innovation pipeline going forward.
<UNK>, it is <UNK> again.
It is absolutely fair to say that ---+ how to do this because I will talk about a specific midtier retailer.
But is the midtier sector healthier than it was two years ago.
You bet it is.
Is it healthier than it was last year.
Yes, it is.
Where is that going to go.
I don't know but those retailers in that space have been working really hard to become relevant and to get momentum and they are getting some traction.
Thanks, <UNK>.
As we have discussed in the past, the answer is all of the above are true, all of those are levers and I always just ---+ when we have this discussion I always encourage people don't isolate too much on one single component of our input cost because the reality is the markets are pretty efficient, we see commodities now trending down, we see currency going the other way.
It is really hard to predict how all of those factors are going to come together.
But that is why we have hedging programs and that is why we enter into longer-term relationships and contracts so that we can see those coming and design and merchandise around those known input costs.
Pricing is absolutely a lever, I made the point earlier in the call that it is not necessarily like for like items although that will be part of the equation but really I would say merchandising and the mix and the innovation that we are bringing to market that we get paid for, all those things together mix to allow us to maintain our margins.
The other thing I always say too is that while the speed with which currency change this time is a little unprecedented, the fact that it is changing and the relative amount is not unprecedented.
We manage this every quarter and the best evidence of our ability to do it going forward is the fact that we have done it for many years in the past.
So I think a lot of those factors are going to come to bear, <UNK>.
We see our model is intact and we see no reason why we wouldn't be able to overcome these headwinds.
Yes, you're right, we tend to focus on our big brands because our big brands move the needle for us and that is how we talk on these calls.
We have a lot of smaller brands that are doing fantastically well.
A brand like Kipling which was a brand we don't talk about much, it was a small brand, it is approaching the size that Vans was when we acquired it.
So it is becoming not such a small brand and it is growing.
It is one of our fastest-growing brands consistently over the last four years.
So that is just one.
Napapijri is another one that you called out.
We are having great growth in that brand.
Eagle Creek is a very small brand for us but a really important brand in the outdoor luggage space and for Consumer Reports readers to have discovered it and name it the Best Luggage Brand of 2015 is remarkable.
And I couldn't be more proud of that group.
And we think all those brands have run way and collectively they are an important part of our growth story.
I couldn't do that accurately in my head on this call.
It might be a conversation we have later.
Thanks, <UNK>.
Mountain Athletics is a very important new line extension, new collection that The North Face has been focusing on.
It is really important in being able to spread The North Face beyond its second half concentration into becoming a true 12 months out of the year brand and our consumer insights is what really has led the team to the way it is positioned.
You heard me talk about in my comments, it is about training for the activities that are relevant to The North Face consumer.
It could be that ski adventure, climbing, a long hike that someone has been focused on.
Or if you are just part of that focused consumer group in your everyday life, it is a method of training that really resonates with you.
We see the distribution opportunity being very consistent with where the brand is distributed today.
Specialty retailer is an important part but where we are seeing very good placement and very good sellthrough is in the sporting goods channel.
The department store piece, which is smaller for the brand absolutely has seen good placement.
And then our own D2C and specifically e-commerce where we are able to really present the brand, present the collection and the theory behind Mountain Athletics training we have seen really good strong growth on a quarter-by-quarter basis.
And, <UNK>, just to give you an international point of view, we just launched it a little bit later than in the US and it is in the market right now and the sellout data are phenomenal, really doing well.
So I will start with Vans.
As you saw, they had a spectacular quarter yet again and that is broad-based.
It is across all categories, all genders and all channels and regions.
So apparel is growing is a very important element of that brand's go-to-market strategy and the collaborations that they have brought to market.
Disney wasn't just a footwear collaboration, it came to life in apparel in a really unique and fun way.
And at Timberland, continues to be a big focus for us.
As I have said before, we are just beginning to get placement and penetration here in the US market.
Our greatest go-to-market presence is within our own retail and it is an important focus.
It is part of the three areas that we have committed to really drive, men's footwear, women's footwear, and men's apparel.
So really happy with both businesses' apparel growth.
Thanks, Lindsey.
No comments on outdoor growth for the back half of the year.
I will remind you, <UNK>, that particularly at The North Face, the 53rd week last year was extremely helpful.
You might remember in the first-quarter of this year, we talked about the slowdown in the growth rate of The North Face.
It was because they traded the first week of January for the first week of April and obviously The North Face model first week of January is more important than the first week of April.
But we are up against that in our growth rates for fall.
We are not taking our guidance up on Outdoor in Outdoor or Action Sports but we are very pleased with where we are positioned right now.
I think it was all in there, <UNK>, but you nailed it.
It is really leverage on SG&A is really what you need to make your model work.
Because all of the other factors, shares are the same, we said about 24 on the tax rate.
Obviously we talked about the gross margin.
So the difference is that higher volume is driving leverage and remember that jeanswear business, that is their model, right, relatively low margins based on the channels they play in.
And they drive volume and that drops right to the bottom line, that is why we see that 19% or so operating income for jeanswear.
Maybe I start with Europe.
As you heard us saying, we had a strong quarter, up 11%.
I guess the good news is most of our brands in the portfolio were growing so from a brand point of view, that is the first point.
The second one, we see good strength in most of the geographies.
It is not just bumping in one area so all over.
In Southern Europe, particularly strong, it is good in the Scandinavian piece and the UK, also the Greater German area.
And even Greece.
I looked into Greece.
Even if it is small for us, we have a subsidiary there that is a few percent up to last year which is really surprising considering what is going on in that market.
And then, <UNK>, to your tourist question.
We have seen those large tourist markets of Southern Florida, New York and to some degree, Las Vegas impacted by that international tourist.
What is interesting is the offset is we are seeing really strong comps in our international retail as that consumer stays home.
I think the important thing to remember, the D2C is a smaller percentage of our total revenue, strong wholesale base and very balanced and broad platform by which our business is driving the revenue.
<UNK>, we are happy that we get a few American tourists more now in Europe.
Thank you all for your time and attention this morning.
We are thrilled with how the quarter played out with currency neutral growth of 10% on the top line and 22% on the bottom line.
I hope you sensed our confidence as we face the back half of this year which is when most of our business comes together but we are confident.
Look forward to talking to you next quarter.
