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V.F. Corporation (NYSE:VFC)

Q1 2014 Earnings Conference Call

April 25, 2014, 08:30 AM ET

Executives

Lance Allega - Director of IR

Eric Wiseman - Chairman, President and CEO

Bob Shearer - SVP and CFO

Steve Rendle - VP of VFC, Group President of Outdoor & Action Sports Americas

Karl Heinz Salzburger - VP of VFC, Group President of International

Scott Baxter - VP of VFC, Group President of Jeanswear, Imagewear & South America

Analysts

Michael Binetti - UBS

Bob Drbul - Nomura Securities

Matthew Boss - JPMorgan

Kate McShane - Citigroup

Omar Saad - ISI Group

Dave Weiner - Deutsche Bank

Erinn Murphy - Piper Jaffray

Dana Telsey - Telsey Advisory Group

Lindsay Drucker Mann - Goldman Sachs

Barbara Wyckoff - CLSA Financial Services

Robby Ohmes - Bank of America Merrill Lynch

Laurent Vasilescu - Macquarie

Edward Yruma - KeyBanc Capital Markets

Operator

Good day, and welcome to the VF Corporation First Quarter 2014 Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the call over to Lance Allega. Please go ahead.

Lance Allega

Thank you, operator, and good morning to everyone joining us today to discuss VF's first quarter 2014 results. Before I begin, I would like to remind everyone that participants on this call will make forward-looking statements. These forward-looking statements are based on current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially.

These risks and uncertainties are detailed in documents filed regularly with the SEC. Participants may also reference non-GAAP financial measures. Where applicable, you can find presentations with comparable GAAP measures in our press release which was issued at 7 am Eastern Time and also at the vfc.com.

Joining us on today's call will be Chairman, President and CEO, Eric Wiseman; Bob Shearer, our CFO, and VF executives Scott Baxter, Steve Rendle and Karl Heinz Salzburger.

Following our prepared remarks, we will open the call for questions and ask that you please limit your questions to two per caller. Thanks.

Now, I'll turn the call over to Eric Wiseman. Eric?

Eric Wiseman

Thanks, Lance. Good morning, everyone. Thanks for joining us. Our strong first quarter results demonstrate more than just our solid performance over the last three months. They show the value of how we build our business and how we've executed against our growth strategy during the last three years.

By consistently leveraging our powerful brand portfolio and our business platforms, we continue to create and transform the market to outperform the industry and position VF for consistent long-term growth. 2014 is off to a great start.

So let's dive right in with the top line. Total first quarter revenues were up 6.5% driven by continued strong momentum in our Outdoor & Action Sports coalition. Of note, that coalition grew at a faster rate in the first quarter and in the fourth quarter of last year with revenues up 14% versus 12%. The three largest brands; the North Face, Vans and Timberland all posted outstanding results with strong double-digit growth in each.

Our international business was up 11% and included double-digit growth in both Europe and our Asia Pacific regions. And our direct-to-consumer business grew 16% with double-digit growth in both our U.S. and our international business. Combined, this performance translated to a 130 basis point gross margin expansion lifting us to 49.4% in the quarter including improvements in all five of our coalitions.

First quarter operating margin reached 14.5%, an 80 basis point improvement over last year and our earnings per share increased 12% to $0.67. So overall, we're very pleased with the strong momentum in our business and what is setting up to be another record year for VF. And given our first quarter results, we now expect revenues to increase to the upper end of our previously guided 7% to 8% range, so nearly 8%.

Supporting this higher growth was an increase in our expectations for Outdoor & Action Sports coalition which we now expect to be 12% to 13% higher than last year's already strong results. Additionally, we now expect earnings per share of $3.06 which represents 13% growth over 2013's results. With a great start to 2014 and our outlook for the full year, we are squarely on track to achieve the goals outlined in our 2017 plan.

While the past few years have revealed many changes in the world from macroeconomic challenges to consumer trends to a changing retail environment, that dynamic operating environment has highlighted the considerable strength of VF's powerful brands and powerful platforms.

Our ability to deliver consistent, sustainable financial performance remains grounded in the cornerstones of our growth strategy; leading innovation, connecting with consumers, serving consumers directly and expanding geographically. When we deliver on each of these in concert, VF is at its best. As I look out across the balance of the year, I can say that I've never been more confident about the potential in front of us.

So with that, I'll turn the call over to Steve, Karl Heinz and Scott to take us through our five largest brands and then Bob will go through our financial results. Steve, over to you.

Steve Rendle

Thanks, Eric. Starting with the North Face, industry-leading product innovations and amplified marketing efforts continue to build on the fantastic momentum we saw at the end of 2013. In fact, not only did it carry over but it accelerated to drive 14% global revenue growth for the North Face in the first quarter.

The America's business showed great strength posting a high teen increase in revenues led by successes in both winter and spring products. Product highlights like Thermoball and our premium Steep Series line saw consistent strength over the winter season. And as we made the transition into spring, Thermoball which is engineered as a transitional-weight product remains quite strong along with the spring '14 launch of our ultra performance footwear collection and the mountain athletic training line, which are driving continued momentum and further validating our expansion into a four season brand.

Looking out towards fall '14, we continue to have great product stories from significant expansions in Thermoball styles, in the mountain athletics collection to the launch of our new Quantum outdoor training collection and the debut of FuseForm in our Steep Series line, 2014 will be one of the strongest product offerings in TNF's history. To support all this, our targeted brand level campaigns like Mountains are Calling and the Explorer have created significant social media momentum and driven the highest TNF brand equity scores we've ever posted.

In our retail stores and online, we're focused on telling big stories through curated assortment amplified by visual merchandising and superior customer service. To wrap it up, the first quarter in the Americas was a success. Inventories in both the D2C and wholesale channels are in great shape and with amazing product on deck and solid booking in hand for this coming fall, we have great confidence in our ability to deliver 12% global growth for the North Face in 2014.

Now here's Karl Heinz to run through Europe and Asia.

Karl Heinz Salzburger

Thank you, Steve, and good morning, everyone. In Europe, the North Face saw a low single-digit increase in revenues in the first quarter, which given a much warmer than normal winter, we consider a solid result. DTC revenues were up at the mid teen rate including more than 30% growth in online sales. So we did see some strength in a somewhat challenging market, but perhaps most importantly I have great confidence that we remain ideally positioned in the European outdoor industry.

On the product front, we continue to make significant progress on transitioning apparel to the European fit as well as greater expansion of our snow sports and activity inspired categories to better meet local demand. These are important initiatives that will help the North Face create an even greater connection with our consumers' active lifestyles.

Turning to Asia. We saw a mid teen increase in revenues during the quarter with significant DTC strength. In China, the brand was also up at the mid teen rate. We continue to build brand awareness and engage consumers and recently (indiscernible) we campaigned in China to build off the strong momentum that we gained from our advertising campaign last fall. With a solid start to the year, 2014 should see another record year for the North Face in the region.

Now let's move on to Vans.

Steve Rendle

Global revenue for Vans in the first quarter was up 20% with similar growth in both wholesale and D2C businesses, another phenomenal performance by the Vans' team and the 18th consecutive quarter of double-digit revenue growth. Revenues in the Americas region were up at a low teen rate, driven by balanced strength in both our D2C and wholesale channels.

On the product front in the Americas, there are several exciting things happening in footwear including a great response in our women's business, particularly in Slip-ons in both sell-in and sell-through. Additionally in classics, we have seen great success with our collaboration product including our Beatles collection which coincided with the 50th anniversary of their appearance on Ed Sullivan.

On the technical skate front, the Gilbert Crockett Pro model has been successful elevating the brand into higher price points. We also continued to accelerate our apparel rollout with the re-launch of our women's apparel this spring. 2014 also marks the first year for Vans moving into a four season apparel model with a true summer collection.

Finally, we launched a new Vans digital platform in late March at vans.com that merges content and commerce in a new and transformative way for our consumers. We've created what is a truly comprehensive and exciting experience for consumers and we're showing both loyal fans and newcomers that they can turn to vans.com to not only connect with the brand but also to stay connected to what's happening in the skate, surf, snow, music, art and street culture. Early reads on the new format in both sales and sentiment have been nothing but positive. All-in-all, Vans Americas posted a great quarter.

Karl Heinz Salzburger

First quarter revenues for Vans Europe were up more than 20% and included D2C growth of more than 40%. As in Americas, we continue to rollout new and innovative ways to connect with consumers and are working to ensure that Vans is synonymous with the youth culture. A great example of this effort is the addition of House of Vans in London which is set to open up in August.

This location which is similar to the one many of you have been to in New York will bring youth culture together in the heart of the city and provide a unique opportunity for us to engage consumers with an intersection of action, sports, music and art. We are also in a process of redesigning the brand's website in Europe. Our European ecommerce business, although small today, represents a terrific opportunity for significant growth.

Vans Asian business grew by more than 40% in the first quarter including its China's business which more than doubled. Throughout the region we have seen great success with our collaborations including the Beatles collection which has seen significant sell-through since its launch.

Our core classic products also continued to do incredibly well in this region. In addition to launching the Living off the Wall brand campaign, we also officially opened the first indoor skate park in Korea which given we have only been in the country for a little more than a year, represents an incredible opportunity to connect with consumers. Globally, a great start to 2014 and we're on track to deliver a mid teen increase in revenues for the full year.

With that, let's move on to Timberland.

Steve Rendle

Carrying the theme forward, Timberland also saw great momentum in the first quarter. Global revenues were up 12% and included balanced strength across channels and geographies. So what's working? Pretty much everything. In fact, based on our strong first quarter results we now expect Timberland to grow 12% in 2014 versus the 10% we discussed in February.

In the Americas, revenues were up at a high teen percentage rate driven primarily by our wholesale business. Sales of core Timberland men's and kids boot styles as well as our hiking boots almost doubled versus last year. And our Pro line continues to be a game changer in the marketplace led by the Direct Attach collection.

Four of our top six Timberland product families are now built on the anti-fatigue platform. And we also rolled out our spring collection of apparel during the first quarter and it's off to a very good start. In the first quarter, we also launched the new Bradstreet collection with the SensorFlex technology. Originally inspired by the technologies for trail running, this platform infuses a new level of comfort and shock absorption that we plan to expand across many of our casual products.

To support the launch, we activated TV ads and retail merchandising displays to communicate a message of comfort and versatility and it's a global effort with more than 1,000 windows that encourage consumers to come in-store to learn more about the innovation. Our efforts are definitely paying off as customers are responding really well to this new product. Overall, we are feeling great about the Timberland business.

Karl Heinz Salzburger

Timberland's revenues in Europe were up at the high single-digit rate, an indicator of what we anticipate being a consistent growth story throughout the year. We also saw a strong launch for the new Bradstreet collection featuring SensorFlex technology and in particular we saw strong results from our classic footwear for women where we introduced a line of new casual transitional products.

Similar to Vans, we see ecommerce as a huge opportunity. Hitting off the existing success in the UK market, Timberland is now live in three new countries; France, Germany and Italy. In Asia, first quarter revenues were up at low double-digit rate, including positive results across all our areas of business driven by strength in our classic boot in the both man's and woman's.

Men's apparel performed well during the quarter driven by outerwear as consumers responded well to the new materials and silhouettes that we rolled out. Woman's apparel also saw an increase driven by outerwear, in particular lifestyle waterproof jacket. Consistent with the North Face and Vans, we are very happy with the momentum of the Timberland brand and really proud of the way the team continues to execute against our long-term growth targets.

Now, I'll turn it over to Scott to take a look at Jeanswear.

Scott Baxter

Thank you, Karl Heinz. Globally, revenues for the Wrangler brand were down 2% and revenues for Lee were down 1% in the quarter. The Jeanswear Americas business was down at a high single-digit percentage rate due to ongoing challenges in the U.S. mid-tier department store channel and to a lesser extent, consumer trends in women's denim. These challenges resulted in a lower single-digit decline for Wrangler in the Americas region and a high single-digit decline for the Lee brand.

Of the high single-digit decline in the Jeanswear Americas business, roughly half of the decrease was due to a combination of a decline in the Rock & Republic brand as we worked to realign styles to meet consumer preferences and the exit of a lower profit private label business. That said, our results were consistent with what we expected. We're on track for our full year expectation of low single-digit growth. That implies acceleration in the Jeanswear Americas business in the second half of 2014.

So given the environment, why the optimism? Product innovation, expanded distribution and focused integrated marketing campaigns. Let's walk through these drivers and I think you'll better understand what gives us confidence that we'll finish strong in the second half of the year. First, as I just mentioned, we're launching innovative new products focused on comfort which is what we know our consumers want.

In Wrangler, you'll see the introduction of new products in our advanced comfort line and for the younger Western consumer, we'll be launching Rock 47. To address current trends in Lee's mass business, we plan to launch Heavenly Touch and in our mid tier business Easy Fit, both of which have stretched fabrication that combines the comfort of leggings with the structural benefits of denim. Mid tier will also see the launch of modern series Curvy Fit, a new line that features figure-enhancing contoured waist.

Second, we're expanding our distribution to give more consumers greater access to our brands. Wrangler is moving more significantly into the mid-tier including JC Penney where we've already had a very successful test over the past few months. For Lee we will see additional door expansion into the department store channel including Macy's and Bon-Ton.

Finally, we're connecting even better with our consumers. As you know, marketing science is a key asset VF offers its brands and our findings have been extremely valuable in sharpening our storytelling. We're starting to see great traction from these efforts including response to campaigns for advanced comfort which continues to resonate quite well with the consumers in the mass channel, and heightened visibility for Lee's modern series which successfully launched last fall. We've also upped our investment in Lee's point-of-sale which is currently rolling up to 2,000 doors across the U.S.

Another great example of how we're connecting with consumers is our Wrangler network, which started live streaming PRCA rodeos in country music concerts, an effort that continues to be the cultural echo system with Wrangler at the center. The second quarter will remain challenging for the Jeanswear coalition but we're confident that that will return to growth in the second half of the year.

Now back to Karl Heinz to discuss Jeanswear international businesses.

Karl Heinz Salzburger

Our international Jeanswear business performed really well in the first quarter. In Europe revenues were up at high single-digit percentage rate including strong growth in both the Wrangler and Lee business. And sales in Asia were up at low double-digit. Across both regions, key accounts and consumers alike have responded well to the continued evolution of our collections. We look forward to 2014 being one of the strongest years for our Jeanswear business in quite a few years.

We remain focused on creating and marketing our innovative products in ways that form an stronger connection with consumers. In Europe, Wrangler has had success with its denim performance product. The Lee brand continues to see great strength with its stretch deluxe line for women and its blue label collection for men which features superior fabrics and comfort at competitive price points.

In Asia, Lee returned to strong growth in the first quarter. We saw great performance from lines like our 101 plus collection which is a contemporary premium interpretation of our heritage denim offering. This line is seeing great consumer response and sell-throughs in both China and Hong Kong.

Now Bob will take you through our financial highlights.

Bob Shearer

Thanks, Karl Heinz. Our first quarter is a great example of why VF's business model is successful in delivering consistent, profitable growth and meaningful returns to shareholders with diversity across products, brands and consumers, across channels, geographies and our supply chain, our unique competitive strengths have us well positioned to deliver yet another record year for VF.

In fact, based on first quarter results, I'm happy to report that we're raising our full year revenue and earnings per share guidance but more on that a little later. Let's take a look at how we did. VF revenues were up 6.5% led by our Outdoor & Action Sports coalition with 14% revenue growth, which as Eric pointed out is even higher than the strong 12% growth we posted in the fourth quarter.

Our international and direct-to-consumer businesses also showed strong gains with revenue growth of 11% and 16%, respectively. Gross margin was a great story as well reaching 49.4% in the quarter, an all-time record for any quarter in VF's history. This marks a 130 basis point improvement over last year. Of this improvement, about 90 basis points was due to mix.

In other words, strongest growth in our highest margin businesses and about 30 basis points was due to the previously disclosed reclassification of retail concession fees. Also, great to notice is the fact that despite some headwinds in a few parts of our business, all five coalitions saw gross margin improvement in the first quarter.

Now, I know you're probably questioning how after a 130 basis point improvement in the first quarter, we're holding our outlook to 49% for the full year. The answer is that as we look forward, we see some foreign currency headwinds and that's especially in the second quarter. In addition, the mix benefit was particularly magnified in the first quarter given the strength of Outdoor & Action Sports relative to other businesses.

SG&A as a percent of revenues rose by 50 basis points. However, the increase was driven primarily by that same reclassification of retail concession fees. Excluding that, SG&A was relatively flat year-over-year even though we continued to invest heavily in our D2C business and marketing. Obviously this implies that we're successfully getting meaningful leverage elsewhere in our expense structure.

And that's just how we think about our model. We invest heavily against our highest growth and most profitable brands and businesses supported by marketing science which drives our top line creating leverage elsewhere in our expense structure, and the result continuous improvement in our operating margin. At end of first quarter, operating margin improved 80 basis points to 14.5% all of which brings us to earnings per share of $0.67 which was up 12% over last year.

Now I'll make a few comments on our coalition results for the first quarter. Revenues for Outdoor & Action Sports coalition were up 14% with high teen percentage growth in our direct-to-consumer business and low double-digit growth in wholesale sales, really hitting on all cylinders here; the North Face, Vans and Timberland were up 14%, 20% and 12%, respectively. And needless to say, we couldn't be more pleased with the continued strength and momentum of these powerful brands and the entire coalition. And of course, a 21% increase in operating income in the quarter with an improvement in operating margin of 100 basis points to 17.4%, well, that's not too bad either.

Turning to Jeanswear, first quarter results were in line with what we expected with revenues down 4% due to ongoing pressure in the U.S. mid-tier channel, challenging consumer trends in women's denim and the exit of a lower profit business. That said, revenues outside of the U.S. which was a third of the business in the quarter were up at a mid-single-digit rate with particular strength in Europe and Asia. We do expect Jeanswear to post similar results in the second quarter, however, accelerate meaningfully in the second half of the year, driven by great new product innovations and channel expansion.

For the full year, we continue to expect low single-digit growth for this highly profitable coalition. Our Imagewear group had a solid first quarter with 4% revenue growth driven in large part by our licensed sports business. We saw great success from strong NFL postseason sales. First quarter operating margin was up a healthy 180 basis points reaching 14.3%, driven by gross margin improvement and SG&A leverage.

During the quarter, we decided to exit the youth business for Major League Baseball which hit our top line rate by 4 percentage points, however, sets us up for better profitability in the long run. Our sportswear business grew 3% in a somewhat challenging retail environment. Nautica revenues were flat impacted by the timing of special programs. Reflecting this shift, second quarter revenues for Nautica should grow at a low double-digit rate. Kipling's North American revenue was up at a high teen percentage rate with greater than 20% D2C growth. Globally, the Kipling brand grew 23%. Sportswear's profitability was up slightly with last year's same quarter.

Revenue on our Contemporary Brands business declined 5% in the first quarter with a high single-digit decline in North American revenues offset by a high single-digit increase in Europe. Globally, the coalitions D2C business was up at a low teen rate but this was offset by a similar rate decline in the wholesale business, which continues to experience challenging demand for premium denim. Lower volume caused operating margin to decline to 8%.

Similar to Imagewear, we decided to move a portion of this coalitions youth business towards a licensed model. This decision negatively impacted the revenue results by 3 percentage points in the quarter. VF's balance sheet remains very healthy. At the end of the quarter, inventories were up 7% compared with March 2013 levels including 2 percentage points related to higher costs and changes in foreign currency.

During the quarter, we bought 9.1 million shares of VF stock for approximately $553 million and in the second quarter, we purchased an additional 2.9 million shares for $173 million to conclude the share buyback program that we spoke about in February. No additional share repurchases in 2014 are anticipated at this time.

Now turning to our outlook for the full year, we now expect annual revenues to increase at the upper end of the 7% to 8% range we gave you in February, so close to 8% which is in line with the organic growth of our 2017 plan. Driving the increase is across-the-board strength within our Outdoor & Action Sports brands including the momentum in our Timberland business that Steve mentioned earlier. We now expect revenues in Outdoor & Action Sports to be up 12% to 13%.

Our gross margin and operating margin expectations remain unchanged at 49% and 15%, respectively. With SG&A, as in the past, we will continue to look opportunistically for areas to make targeted investments in our brands, products and marketing to drive future growth. We now expect earnings per share to rise to approximately $3.06 per share representing 13% growth over 2013.

In terms of the second quarter, we anticipate revenues to increase at a similar rate to that of the first quarter and again be driven primarily by continued strength from our Outdoor & Action Sports coalition.

So to wrap things up, I'm really excited about 2014. It's a year that presents terrific opportunities for us to increase competitive separation, further optimize our profitability and create long-term value for our shareholders. So with a great first quarter in the books, we're very pleased by the underlying strength of our business and look forward to successfully executing against our growth strategies in 2014 and beyond.

With that, I turn it back to the operator and we can open up the line for questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). We'll take our first question from Michael Binetti with UBS.

Michael Binetti - UBS

Congrats on a great quarter and a tough market there.

Eric Wiseman

Thanks, Michael.

Michael Binetti - UBS

Bob, if I could, just a little bit housecleaning. First of all, your comments on SG&A that we'll look opportunistically for investments in the brand. Obviously, you give a little confidence in your revenue outlook for the year, but should we interpret that as if the revenues do track in at or above the range that you've given that you would try to dial back some SG&A into investments that might offset some of the upside in EPS for the year?

Bob Shearer

Really the way to think about that, Michael, is – what we've been doing is we've been making those investments pretty consistently over the past couple of years. Last year we increased our marketing spend by about $100 million and this year we're looking to increase by another $50 million. And the reality is it's working for us. It's driving the top line. We had a strong fourth quarter last year and we're seeing a lot of momentum, particularly in our Outdoor & Action Sports business here in the first quarter and we absolutely believe that those investments are part of that. So, the idea is that we would look to do the same. We're absolutely committed to our long-term targets and the 13% that we mentioned. And when we have the opportunity to make some of those investments both to help us on a shorter term basis, but especially on a long-term basis, that's what we'll do. So, again, the point is it's been working for us. And yes, we will look to do the same thing in those highest margin, fastest growing businesses.

Michael Binetti - UBS

Okay. And then a quick follow-up on – a little bit more on two things in the Jeanswear commentary. First off, the low margin business that you mentioned you exited, any more detail you could give us on that? And then more importantly, can we hear a little bit about the – you mentioned I think a new platform launch in the second half that kind of supports your guidance for a pretty meaningful acceleration in the growth rate there?

Steve Rendle

Yes, I think it's a couple of things. Let me take the platform first, Michael, since that's the most important one. I think the confidence really is around expanded distribution, so you know we're taking the Wrangler brand up into the mid-tier and we're taking Lee brand up in the department store channel. But in addition to that, we've got some really innovative products that are hitting the marketplace and that's Heavenly Touch and that's Easy Fit, both products that play into this new trend that we've seen in the marketplace. But what's important about that too is it's not just new products into that trend, its new products into the Jeanswear business also with our Rock 47 which is a big initiative for us for the younger Western consumer. So things like that that also play into our core categories in our business. But also, as you think about that, we've got some really strong integrated marketing campaigns and programs that are coming from POS in the stores to broader marketing programs that nearly support not only our core business but also support the initiatives that we have going forward. So that gives us great confidence in the second half. The first part of your question was it was a lower profit business that we made the decision to exit because it didn't fit our core and it wasn't what we did best, and we want to focus on the things that we do best and we want to focus on our brands.

Michael Binetti - UBS

Okay. Eric, any comments on the acquisition environment out there? Thanks a lot.

Eric Wiseman

No, Michael, no comments on the acquisition front. I will add to Bob's comments about the investment and just kind of go through how we think about it. And Michael you remember last year. We only grew organically 5% and that was disappointing to us and we invested $40 million in the fourth quarter to try to accelerate our growth rate to the 8% target we have in our long-range plan. And as Bob said, that seems to be working. So the way I think about that investment is if we make incremental investments – we will make incremental investments that deliver the results we promised in our 2017 plan, and we'll continue to make those investments to make sure that we deliver the 8% organically on the top line and 13% on the bottom line. And that's why we did it last year. Our growth rate was below what we planned. We wanted to get back on track to close to 8% and that's where we are.

Michael Binetti - UBS

Thanks again, guys.

Operator

We'll go next to Bob Drbul with Nomura.

Bob Drbul - Nomura Securities

Hi. Good morning.

Eric Wiseman

Hi, Bob.

Bob Drbul - Nomura Securities

I guess the first question is with the quarter ending in March and Easter, can you just give us – you have usually a very broad read across retail with the portfolio. Can you just walk us through how it impacted the business and sort of how it materialized when Easter happened and just sort of how you feel about the business at this point in time with Easter now behind us?

Eric Wiseman

Sure. I guess the easiest way for me to talk about that, Bob, is in our direct-to-consumer business where we like, everybody else, saw the impact of an Easter shift. And it was obviously a North American event, was significant in China. And our direct-to-consumer business for the quarter was up 16% and that included mid-single-digit comp store growth which we're thrilled with. We think mid-single-digit growth given all the days that stores were closed and the Easter shift is really strong. So we're confident in our direct-to-consumer business.

Bob Drbul - Nomura Securities

And Bob – thanks, Eric – on the share repurchase program, is that the way that we should think about how you'll approach it going forward as well, just go heavy in the first quarter like you did and just maybe give us an update in terms of the approach that you've taken with that?

Bob Shearer

Yes, Bob, we have been pretty consistent in that. So when we're looking to buy back some shares, we've done that and got in done pretty much in the first quarter. We haven't changed our perspective in term of our buyback. We still look at it as primarily a means of offsetting the dilutive impact of option exercises. In a year like this we got a little bit ahead of that. Our option exercises – the buyback will outweigh the option exercises this year. But yes, generally the timing is pretty consistent. We've demonstrated that over a number of years and again no change in our strategy related to our buyback program.

Bob Drbul - Nomura Securities

Okay. Thank you very much.

Eric Wiseman

Thanks, Bob.

Operator

We'll go next to Matthew Boss with JPMorgan.

Matthew Boss - JPMorgan

Guys, congrats on a good quarter. Eric, can you talk about in general what you're seeing from the consumer today, drivers of the top line confidence here? I mean it's definitely one of the rarities out there. Any visibility you can speak to in fall orders I think would be really helpful?

Eric Wiseman

Sure. The North American consumer is in general struggling we think. I mean they're really resilient. They keep fighting back but it is not easy out there. If you look at the first quarter that we just went through, particularly in the mid-tier and mass channel where people have less discretionary income, they were challenged with higher heating bills and healthcare costs, a lot of things came at them that affected their discretionary income and it showed up there. Where we had great growth was in our direct-to-consumer business worldwide, but we're at a different price level than what a mid-tier and mass is those stores and we did really well. We also know that while consumer spending was tough to find, if you had amazing products supported by impactful marketing, you could win. And one of the reasons we invested so heavily in the fourth quarter behind our brands was we knew we had the right products that consumers would want. We wanted to make sure that they knew that and we really dialed up the marketing in the fourth quarter and that momentum carried forward into the first quarter this year and we're pretty happy with 6.5% organic growth.

Matthew Boss - JPMorgan

Absolutely. So as you look forward in terms of orders, are you seeing your retail partners buy the brands to stock on the shelves that are driving the organic traffic? I'm curious what you're seeing as you see the orders coming in?

Eric Wiseman

Sure. The objective that – we don't disclose our forward order book, but obviously if we're sitting at 6.5% and guiding to close to 8% for the full year with the biggest part of the year coming at us, that sends the message that our marketing was effective, our products sold through and as Steve commented, our product line up coming in the fall in Vans, Timberland and in North Face in particular. Scott talked about our jeans business. We think we have a great product line up for fall and we've got orders to support us giving an increase in our revenue guidance for the year.

Matthew Boss - JPMorgan

Great. And then last question on Timberland. We've clearly seen the top line inflect here last couple of quarters. Can you talk globally about where do you see the biggest opportunity going forward and from a margin perspective, where do you stand kind of versus that mid-teens goal?

Eric Wiseman

So I'm going to pass that over to Steve and Karl Heinz for comment on.

Steve Rendle

So real quick on the Americas business, we're just seeing really strong growth across all of our regions; Canada, U.S., Mexico, all channels and all categories. And it's very much a broad brand momentum. Historically, you've seen Timberland surge in single items or categories. The brand heat that building around Timberland, we give a lot of credit to the work we've done with our end consumer, really understanding who they are, how to connect with them and how that's influenced our product. The product creation component of this brand has been dramatically elevated. You see that at retail today. How we're able to market to and speak with our consumer and connect with them at retail has really been dramatically improved. And as we continue to drive better product at full price through our retail channels, we're seeing strong growth in our gross margins and our ability to really have the dollars to invest behind this brand.

Karl Heinz Salzburger

Matthew, just to add a few color in Europe, you heard me saying last quarter we started to grow. We had a solid growth in this one and it's an indicator that we're looking forward to a good year. We had a lot of work to do in the last year with Timberland. We moved it. It's all set now. We have a strong team in place. It's all working basically. Asia is good also. It had been consistently growing since the acquisition double digit. It's strong in Japan, but we have a great opportunity in China where we basically just started and it's one of our smaller brands in China. So it's a long way to go there.

Bob Shearer

And related to the margin question, we are right on track with our acquisition plan in terms of moving toward that mid-teen percentage that we committed to initially when we acquired the brand. So, I'm seeing nice progress and it's right on track with where we expect to be.

Matthew Boss - JPMorgan

Great. Best of luck, guys.

Eric Wiseman

Thanks, Matthew.

Operator

We'll go next to Kate McShane with Citi.

Kate McShane - Citigroup

Thanks. Good morning.

Eric Wiseman

Hi, Kate.

Kate McShane - Citigroup

Bob, I wanted to ask you with regards to gross margin. Are you currently ahead of where you thought you would be on gross margins at this point in time when you gave your targets in June? And how should we think about the cadence of gross margin for the rest of the year given from the FX headwinds and the strength of Q1?

Bob Shearer

Kate, we're on track with what we expected. We did expect the first quarter to be a little stronger than the overall year guiding to the 90 basis point expansion. In terms of looking out at the last three quarters, as I said in my commentary, a little pressure on the FX side in the second quarter. So we'll likely be a little below the 90 basis point improvement but nice solid improvement in our gross margin. Third quarter should be pretty close to the 90 basis point and then fourth quarter, as you can imagine with the inclusion of the stronger D2C we'll be a little bit above that. So, yes, we're tracking very, very close to what we expected and are really confident in the 90 basis point expansion for the year.

Kate McShane - Citigroup

That's helpful. Thank you. And then my next question is for Karl Heinz with the overall environment in Europe. If you could talk on a comp basis, because I know you have a lot of white space potential and incremental growth in Europe as well, but on a comp basis where have you seen the most improvement in your business? And what region or country has surprised you most to the upside and what area is still struggling?

Karl Heinz Salzburger

Kate, thanks for this question. We announced a good quarter in Europe and it's widely reported the economic situation and we can't do a lot there. It's not the best. But I guess the good news is, and this is the strength of our portfolio, most of the brand, also the brands which we normally don't report, the smaller ones like Kipling or Napa or Reef, they're doing really well. They are all growing. And actually what we see especially in Southern Europe is coming back strongly. Italy is a big market for us. It's the largest market for Timberland. It's really doing well. So, we're happy with that. I would say we play out the strength of our portfolio, a lot of things are doing well and we look forward to a good quarter and a good year actually.

Kate McShane - Citigroup

Thank you.

Eric Wiseman

Thanks, Kate.

Operator

We'll go next to Omar Saad with ISI Group.

Omar Saad - ISI Group

Thank you. Good morning.

Eric Wiseman

Good morning, Omar.

Omar Saad - ISI Group

Eric, first question for you. Your Actions Sports & Outdoor segment obviously has been phenomenal. You've done a lot of great acquisitions there. There's almost a megatrend going on with active healthy living, active lifestyle. But there's many different segments to this whole phenomenon. Obviously you've got a lot of them covered in your portfolio. Could you talk about, I don't know, Actions Sports versus Outdoor sub-segments within it where you see the most attractive kind of opportunity from an industry standpoint where the trends are going? Maybe some areas where you're not as actively involved? Maybe the athletic part of it, the world there, maybe you feel like some of your existing brand assets you could use to go after the athletic segment or maybe you want to bring in more assets for that? Just think on the broader perspective around that whole segment given how much success you've had and it looks like the trend was going to continue structurally? Thanks.

Eric Wiseman

Sure, Omar. Action Sports for us is defined by Vans and Reef with Vans being by far the biggest piece of that business for us, and as we reported not only our fastest growing coalition in the quarter where we up 20% but Vans was our biggest brand in the quarter. So Vans was VF's number one revenue brand in the quarter. So that is a big business for us and it's kind of zeroing on the $2 billion mark here pretty quickly. So, we are really important in that space and the opportunity for us there and was mentioned during some of the comments is our footwear business and that was a footwear brand that we're taking to apparel and we're doing a better and better job of taking it to both men's and women's apparel going to a four season calendar and getting some growth there. The Outdoor coalition is defined by the two big brands really, the North Face and Timberland, which reported growth of 14% and 12%, respectively, in the quarter. So those three big brands are really, really pulling more than their share. They're doing really, really well. The athletics space is a space that we operate in the fringe on. Does the North Face have athletic styles? Yes. The Mountain Athletics program, the new ultra kilowatt line, all of that is geared towards training not towards team sports but towards training and fitness, and that is an emerging trend. And between the North Face getting into that space and Lucy being into that space for her and Lucy had a solid quarter. It had double-digit growth in the first quarter. We think we have the opportunity to do more in that space. Omar, does that address your question.

Omar Saad - ISI Group

Yes. No, I mean just…

Eric Wiseman

If not, we'll turn it over to Bob.

Omar Saad - ISI Group

Of course, Bob, if you have anything to add. But there are just so many opportunities and it's such a secularly growing segment, and there's so many other brands out there having success and it doesn't seem like it's going to end anytime soon. It's become such a big part of your business. It can become really intricate how you think about the different elements within it and what assets you have to use to go after it, and assets maybe you want to bring in, in the future.

Eric Wiseman

Yes, and to the point Karl Heinz touched on is one of our strengths in Outdoor & Action Sports in the quarter was it wasn't just those big three brands I mentioned growing. We had momentum in pretty much every space we were in from Smartwool to Lucy to Napapijri. I mean we had a good quarter in that space.

Omar Saad - ISI Group

All right. One quick follow-up, maybe Bob to an extent. On ASPs we do seem to be seeing industry-wide some premiumization trend or at least a barbell effect in those brands that can generate a higher price point, higher quality, more innovative product. Are you guys seeing that in your businesses or within some of the brands within your businesses?

Bob Shearer

Average selling price is the question. I'm just looking at some of the other folks here in the room as well. Number one, our pricing is up just a little bit and I don't think that's exactly what you're getting at but our pricing is up a little bit and relative to average prices that we're seeing across the board. I might ask Steve to comment in terms of what you're seeing in his business.

Steve Rendle

Sure. Outdoor & Action Sports businesses, we've seen – our average selling price in our own stores move up incrementally and where we're able to do that is where we're adding greater value from a technology, fit function and form. But also as we're able to really drive home that emotional marketing message that links back to the product and how we move our consumers through the funnel and we saw great results of that starting last – in fourth quarter for the North Face and really carried through the momentum that we saw coming into first quarter. And we used those learnings across all of our brands within this portfolio to drive that.

Bob Shearer

I guess what I'd say there, Omar, as well is what we are seeing is consumers are paying for innovation. I think that's what Steve is saying as well. We're seeing that consistently and that's why we think our innovation platform is so important for us.

Omar Saad - ISI Group

Thanks.

Steve Rendle

And that's true for Vans and Timberland as well. I was probably remiss in not mentioning that. Some of the products that we're seeing move through Vans today as we bring in cushioning technology, durability materials into these skate shoes, we're getting a lot of credit for that and we're able to ask for a higher price and capture that all the way through the channel and clearly at Timberland as we've elevated the product. We're seeing starting with the yellow boot all the way through our footwear collection driving full price retail sell-through across not only our own channels but our wholesale partner channels.

Omar Saad - ISI Group

Got you. Thanks, guys.

Eric Wiseman

Thanks, Omar.

Operator

We'll go next to Dave Weiner with Deutsche Bank.

Dave Weiner - Deutsche Bank

Good morning. Dave Weiner. How are you? So I wanted to drill down a little bit or expand a little on gross margin. Clearly you still have mix shifts, the ability to grow gross margin through mix shifts, coalition, geography and channel. But I guess could you talk longer term, maybe the opportunity to – what other drivers can be used to drive gross margin? I'm thinking specifically, I think you have an initiative in place to switch X percentage of your or migrate X percentage of your production of product from sourcing to manufacturing. Maybe an update on how that's coming along and kind of what – are you getting more technical product in that bucket? And kind of what implications that could have for gross margin? Thanks.

Eric Wiseman

Yes. So just to I guess confirm what you were saying is relative to the mix shift, as we look out over the next five years and just as we spoke about when we presented our 2017 plan that mix improvement, the mix leverage will continue without a doubt. So we're very, very consistently seeing that 60 to 70 basis points pretty much every quarter and every year and that's exactly what we expect to see over the period. On top of that we continue to manufacture a greater percentage of our own goods in our plants much, much more so than any of our competition and a lot of that is in our Jeanswear business and we produce a pair of jeans at a lower cost and is available anywhere in the globe. And we're looking at new innovative ways to see even further benefits, I guess, from the capabilities that we have from a manufacturing standpoint. So, building stronger partnerships with people outside of our existing space in terms of where we manufacturer goods today is part of our story. So, the idea is leverage the skill set that we have that can't be matched by anyone else in the industry from a manufacturing standpoint and leverage that skill set and lower cost that is available by others.

Dave Weiner - Deutsche Bank

Okay. Thanks.

Operator

We'll go next to Erinn Murphy with Piper Jaffray.

Erinn Murphy - Piper Jaffray

Great. Thank you. Good morning. I guess Karl Heinz, just for you, a follow-up on the Italian comments you made. You talked about it doing a little bit better. I guess my understanding just broadly in Italy is that the pressure over the last several years has really just been this continued culling away of the independent channels and multi-branded retailers, they've continue to shutter their doors. I guess are you guys seeing some stabilization in the wholesale channel as well or at this point is it really just improvements in the direct-to-consumer piece of that business?

Karl Heinz Salzburger

Thank you, Erinn. I think it's both. We have a pretty strong component of partnership stores primarily with Timberland. We have more than 100 stores, so that is one component. We also see the overall economy is doing a little bit better, which is good and we also see the larger customers having stabilized (indiscernible) and all the guys you know. So, Italy is a very fragmented market as you know, but for sure we have seen a stabilization there and the outlook I think is better than it used to be last year. But again, it's a market where we have very strong partnership stores, especially on Timberland and they clearly help us.

Erinn Murphy - Piper Jaffray

Thank you. That's really helpful actually Karl Heinz. And then I guess on the North Face overall, Q1 versus Q4, really good incremental improvement there as well. Just from a product perspective, if you guys could just reflect on what's driving some of that incremental strength in the first quarter? Thanks.

Karl Heinz Salzburger

Is this question in Europe or in general?

Erinn Murphy - Piper Jaffray

Sorry, in general actually for the entire line.

Karl Heinz Salzburger

Well, I think Steve mentioned it well. They have a lot of new stuff happening and new products primarily. This is a product industry, as you know, and we came out with a lot of innovation and it's paying off. Thermoball is one example, we mentioned that clearly and that's where our strategy is also going forward. Consumers are looking and paying for innovation.

Steve Rendle

I can build on that a little bit. I think if you were to look at it from a four season basis or first half/second half, we had a really significant launch with Thermoball last fall. The emotional marketing with the singular focus against that initiative driving consumer through that funnel to conversion was a very powerful campaign. We brought that into spring with the launch of our ultra performance footwear as well as our Mountain Athletic training apparel, while also continuing to support Thermoball as it really is a three season jacket, a transitional weight, but the only question around the fitness trend – North Face has significant permission to move into this athletic space but we're doing it in a very authentic way where we're using Mountain Athletics as an apparel collection and coupling it with training seminars or workouts; San Francisco, Washington D.C. are great examples where we had these Train Smarter outdoor training events where we were able to bring consumers to train with our athletes and begin to tailor programs for the support that the North Face builds products for. So definitely looking to expand technical collections based on our consumers needs and really link it with emotional marketing and that pull through push through retail.

Erinn Murphy - Piper Jaffray

Thank you and congratulations.

Eric Wiseman

Thanks, Erinn.

Operator

We'll go next to Dana Telsey with Telsey Advisory Group.

Dana Telsey - Telsey Advisory Group

Good morning, everyone, and congratulations. As you think about the product costs and obviously pricing, what are you seeing in terms of product cost? Is it different in terms of region or different in terms of product category? And then on Southern Europe coming back, is that from locals, from tourists? Are you seeing it in wholesale, retail? Thank you and congratulations.

Eric Wiseman

Thanks, Dana. I'll start on the cost side. Really not a lot of movement in costs overall for the year. We came into the year expecting a little bit more and that's been a little better situation than we first thought. So what we're seeing from a cost side is the number would be about a half a point of cost increase overall for our business and that's been offset by little pricing. So, pricing net of cost is neutral for us in 2014.

Karl Heinz Salzburger

The second comment, it's actually very consistent. We see it in our future orders which are nicely up. We see it in our retail trends. We see it in our partnership stores and overall, as I mentioned before, the overall economy is for sure improving this market. I would add also the strength of our portfolio is for sure helping us. Customers are looking to reliable vendors with strong initiative and for sure we are one of those.

Dana Telsey - Telsey Advisory Group

Thank you.

Eric Wiseman

Thanks, Dana.

Operator

We'll go next to Lindsay Drucker Mann with Goldman Sachs.

Lindsay Drucker Mann - Goldman Sachs

Thanks. Good morning, guys.

Eric Wiseman

Good morning.

Lindsay Drucker Mann - Goldman Sachs

I have a question just on Jeanswear. Scott, I was hoping you could give a little more detail on the channel expansion, so maybe more specifics on where you're rolling into, how much incremental square footage that adds to your distribution or sort of how incremental you think it could be for sales? And then the sequence you've got, is it really a Q3 event or is this something where we get an initial start in Q3 and there is more expansion to be had as we move across the next several quarters? Thanks.

Scott Baxter

Sure. You bet. So let's start with the beginning, let's start with mid-tier. We have the Wrangler brand, as you know, has been very strong in the mass channel for many years and also in the Western channel. The brand has gained a lot of strength in the last few years relative to the health of the brand and how people work with the brand and how people lived a lifestyle with the brand. And as these channels merge a little bit closer together, we saw a real opportunity to bring that brand to the mid-tier, to bring it to that mid-tier American consumer and that's going to start really strong probably fourth quarter, first half of next year but the testing has already been done in the first half of this year and we really like what we see and we really like the response that we've gotten from that consumer. So that's a big channel. There are really big consumers in that channel, really big customers in that channel, so we feel like that's a really good thing going forward for the Wrangler brand and it's pretty new for the brand and a lot of opportunity going forward. From a Lee perspective, the Lee brand has the permission to go to a channel a little bit higher and that being the department store channel. What we haven't talked enough about and probably spend enough time talking about is the fact that Lee has actually been at the department store channel for many years with a couple of customers and has full distribution at one large department store channel. And with that we've really expanded that to the other big department store players in the country and has had great traction on Lee female. So, obviously, as we continue to have really good traction on Lee female, we're going to think more broadly about male too and we think that that's going to gain really good traction in addition to what we already have in the second half of this year, so you'll see more traction there in the second half and then we'll expand it to male in '15 going forward. So, all-in-all, there's a lot of opportunity for both brands to expand and grow.

Lindsay Drucker Mann - Goldman Sachs

And then could you guys help us quantify maybe how incremental that might be to sales for you over the second half?

Scott Baxter

That's kind of hard to do right now over the second half, but as the year progress I think that will be an opportunity for us to discuss that going forward.

Eric Wiseman

But it's clearly a factor that as we indicated, we expect our acceleration in our Jeanswear business, the numbers in the second half and it's clearly a factor.

Scott Baxter

We baked into the plan going forward.

Lindsay Drucker Mann - Goldman Sachs

Thanks a lot.

Eric Wiseman

Thanks, Lindsay.

Operator

We'll go next to Barbara Wyckoff with CLSA Americas.

Barbara Wyckoff - CLSA Financial Services

Hi, everybody. Good quarter. Of the brands in your existing portfolio, outside of the top five big ones, are there any that could be accelerated to add more scale, like Kipling, Lucy, Napapijri, how would you do that? And if so, how would you do that?

Scott Baxter

Yes, yes and yes to those three brands. In fact we have active initiatives underway in all of those brands to be amongst the size that our current big plans are. Particularly around Kipling where we've been working for quite a while on a growth program there, Kipling was a very small business when we bought it. It is not a very small business anymore. Last year it was VF's fastest growing brand for the year and grew with our fastest growing brand in three of the four quarters of last year. So, it has terrific momentum. Nautica for the last 24 months has had terrific momentum. Napapijri has great momentum. So each of our brands is part of our growth strategy and we're investing in all of them to achieve what they believe their potential is, different programs.

Barbara Wyckoff - CLSA Financial Services

Okay, great. Thanks. And then could you share any kind of market share information you might have, U.S., Europe, Asia for Outdoor & Action Sports and Jeans?

Eric Wiseman

We really don't have that information in Outdoor & Action Sports because the categories are so broadly defined, it's hard to look at them when we look at apparel versus equipment versus footwear, we don't really have that information.

Barbara Wyckoff - CLSA Financial Services

And Jeanswear?

Scott Baxter

Very similar. It's hard to define exactly from a category standpoint.

Barbara Wyckoff - CLSA Financial Services

Okay. Thanks a lot.

Eric Wiseman

Thanks, Barbara.

Operator

We'll go next to Robby Ohmes with Bank of America Merrill Lynch.

Robby Ohmes - Bank of America Merrill Lynch

Good morning. Thanks for taking my question.

Eric Wiseman

Hi, Robby.

Robby Ohmes - Bank of America Merrill Lynch

Hi, Eric. How are you? I just had a follow-up on China. Could you guys talk about maybe what the overall environment looks? It's pretty incredible, the growth you guys are doing. Is the Chinese consumer sort of reaccelerating again? Others in other categories, they've had more problems, I'd say, over the last 12 months over there or more. And then may be just a shorter follow-up. The 100% growth in Vans, can you help us think about what the sort of annual growth rate for Vans should be? Can you do 100% for the year over there or how long can you maintain that growth? Thanks.

Karl Heinz Salzburger

Thank you. Let me start with the last piece, doing 100% every quarter I think is hard. Having said that, I always give the same answer. China is a great long-term opportunity for us, it's like a marathon and we do well every quarter. I want to remind you we are actually in China with primarily four brands that we're investing at the moment directly and have very long – big opportunities in terms of penetration. Our total door count is, all four combined, 2,500 doors which is still very, very low. So I guess the opportunities going forward is long term. We only have operated four brands at the time. We have opportunities in penetration. And specifically Vans you mentioned, clearly 100% is hard to achieve but Vans is a fast growing brand. It resonates well with consumers. It's one of the top four and it's for sure a big, big opportunity for us in China.

Eric Wiseman

Robby, to add some perspective, two weeks ago yesterday, Karl Heinz and I were in China opening an 850,000 square foot distribution center that we just built for over $60 million about an hour outside of Shanghai. So, we are committed to China. We see enormous potential there. Across our portfolio we're focused on a few brands now and all of them are at the early stages of their development. So we put a bit stake in the ground and plan to grow there in a big way.

Robby Ohmes - Bank of America Merrill Lynch

That sounds great. Thanks so much.

Eric Wiseman

Thanks, Robby.

Operator

We'll go next to Laurent Vasilescu with Macquarie.

Laurent Vasilescu - Macquarie

Thank you for taking my question. Overall, impressive numbers out of Asia. A follow-up on Robby's question on China. With the anticipated DC in Kunshan, can we anticipate additional one-time investments for this region to fuel future growth?

Eric Wiseman

We've been investing in that region – we've been focused on it now for about seven odd years, we've been there for a long time. We opened our first subsidiary there in 1995, so that was Lee and so we're coming up on the 20th anniversary of VF direct investment in China. But a lot of the momentum has happened in the last five to seven years. And our Asia Pacific regions should break $1 billion this year and China is still half of that. We make investments behind our brands. We're making investments in infrastructure to support our brands. We made a lot of investments in marketing in the last couple of years to build categories that didn't exist. A great example of that is the Outdoor category didn't really exist there five to ten years ago and we've been investing a lot to help define what that category should look like in that region and the North Face is the leader in Outdoor in China and I think we launched there in 2007. So, still very early days, lots of potential and we're excited by it.

Laurent Vasilescu - Macquarie

Okay, great. And then in terms of labor costs, are you seeing anything for the balance of the year?

Bob Shearer

No change certainly from what we anticipated. No, we're not seeing any escalation or any reductions either, a pretty stable environment.

Laurent Vasilescu - Macquarie

Okay, great. Thanks.

Bob Shearer

You bet.

Operator

We'll go next to Edward Yruma with KeyBanc.

Edward Yruma - KeyBanc Capital Markets

Hi. Good morning. Thanks for sneaking me in there. You guys recently realigned your management structure I think to more closely mirror the structure you had in international. I guess any outcomes you're looking for as a result of that? And how do you think this will help accelerate your growth in the U.S.? Thanks.

Eric Wiseman

Sure. One of our platforms that – one of the things that we think will deliver more potential to VF is what we call 1VF which is having our – we're organized by brand and we empower each brand to achieve their potential, but we gained most when we work across our company. And our hope is that this structure will encourage more of that because it takes a lot of individual leaders working together to make that happen. Everybody is kind of heads down on their brand, but we find when we – the more we share the better we get. So, that was a big point underline the organization structure change.

Edward Yruma - KeyBanc Capital Markets

Great. Thanks so much.

Eric Wiseman

Thank you.

Operator

Let's turn it back to our speakers for any additional or closing remarks.

Eric Wiseman

Sure. Hey, listen, we've got the year off to a great start. We appreciate your interest in our company. We look forward to catching back up in 90 days and we'll give you another outlook on how we're doing. Thanks so much. Bye-bye.

Operator

This concludes today's conference. Thank you for your participation.

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