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V.F. (NYSE:VFC)

Q1 2011 Earnings Call

April 29, 2011 8:30 am ET

Executives

Jean Fontana - Integrated Corporate Relations

Scott Baxter - Vice President, Group President of Jeanswear Americas & Imagewear and Member of Operating Committee

Eric Wiseman - Chairman, Chief Executive Officer, President, Ex-Officio Member of Finance Committee

Steve Rendle - Vice President, Group President of Outdoor & Action Sports Americas and Member of Operating Committee

Robert Shearer - Chief Financial Officer and Senior Vice President

Karl Salzburger - Vice President, Group President of International and Member of Operating Committee

Analysts

Robert Drbul - Barclays Capital

Michelle Tan - Goldman Sachs Group Inc.

Oliver Chen

John Kernan - Cowen and Company, LLC

Kenneth Stumphauzer - Sterne Agee & Leach Inc.

Andrew Burns - D.A. Davidson & Co.

Robert Ohmes - BofA Merrill Lynch

Jeffrey Klinefelter - Piper Jaffray Companies

Michael Binetti - UBS Investment Bank

Jim Duffy - Stifel, Nicolaus & Co., Inc.

Evren Kopelman - Wells Fargo Securities, LLC

Operator

Good day, everyone, and welcome to the VF Corporation's First Quarter Fiscal 2011 Earnings Conference Call. Please be aware that today's conference is being recorded. At this time, I would like to turn the conference over to Jean Fontana. Please go ahead, ma'am.

Jean Fontana

Thank you. Good morning, everyone. Thank you for participating in VF Corporation's First Quarter 2011 Conference Call. By now, you should have received today's earnings press release. If not, please call (203) 682-8200, and we'll send you a copy immediately following the call. Hosting the call today is Eric Wiseman, Chairman and CEO of VF.

Before we begin, I would like to remind participants that certain statements included in today's remarks and the Q&A session may constitute forward-looking statements within the meaning of federal securities laws. Forward-looking statements are not guarantees and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results, collaborations or financial conditions of the company to differ are discussed in the documents filed with the company and the SEC.

I would now like to turn the call over to Eric Wiseman.

Eric Wiseman

Thanks, Jean, and good morning and thanks, everyone, for joining us today for the 80-or-so of you on the line, who have made VF stellar performance a priority versus the royal first kiss. We appreciate your interest.

With me today are Bob Shearer, our Chief Financial Officer; and our 3 group presidents, Karl Heinz Salzburger; Steve Rendle; and Scott Baxter. And Karl Heinz and Steve are joining us today by phone.

As you saw in this morning's release, we are off to a very strong start to the year, and we expect this momentum to continue as we progress through 2011. The brand investments we made in 2010, and continue to make in 2011, refuel growth in our highest growth, highest profit businesses will allow us to achieve growth this year well above the 7% reported last year, and in line with the five-year target of 10% that we announced last month. To recap the highlights of our first quarter results, revenues were up 12% with higher revenues and operating income achieved by every VF coalition. Our International business rose 20% with strong growth in all regions, including Europe, Mexico, Latin America and Canada, and exceptionally strong growth in Asia.

Our revenue growth in the quarter was also very well balanced across our wholesale and direct-to-consumer businesses, which were up 12% and 10% respectively. Earnings per share rose 25%, and that increase was helped by $0.11 per share in special items. But even without these items, earnings per share were up and very strong 20%. And our gross margin remained at very healthy levels despite the pressures of higher product cost. We were especially pleased by the growth in our International business in the quarter.

To recap the growth rates in key market: Asia in total rose 52%, with China up 56% and India rising by over 80%. Europe revenues grew 12% with double-digit growth in our Outdoor & Action Sports and our Sportswear and Contemporary businesses. Revenues in Latin America grew 41%, driven by strong growth in our Outdoor & Action Sports and Teens Wear businesses. And in both Mexico and Canada, Jeanswear revenues were up over 20%. You will recall that our full year guidance for international growth this year was 15%. And based on the growth achieved to date, there may be some upside to that target.

You may have noticed yesterday's release announcing our new partnership with Kohl's as the exclusive retailer for the Rock & Republic brand, which we acquired earlier this month. This marks the first partnership for VF's recently formed retail licensed brands group. The brand will launch across Kohl's stores and kohls.com in spring 2012 with VF designing and manufacturing Jeanswear and other bottoms for men and women. We are very excited about this new opportunity, which will benefit our Jeanswear top and bottom lines next year.

Finally, before I comment on our full year guidance, I recognize that there remains intense interest around the topic of the product cost, pricings and margins, so a few comments before turn the call over to Bob. In our last call back in February, we indicated, first, that VF's gross margin was expected to decline by less than 100 basis points this year, and then operating margin should be about stable with 2010 levels. Second, the gross margin pressure would be greatest in our domestic Jeanswear business, where product costs are expected to rise at a mid-teen percentage rate this year. Third, that this pressure will be offset by profitability improvements in our European Jeans business and strong momentum in our highly profitable Asian market. So the total operating income for our Jeanswear business will be about flat in 2010.

Two months later, we are still comfortable with these assumptions. We recognize that it's still early in the year and that our P&L has yet to reflect the full amount of higher product cost. We're also cognizant the price increases are just beginning to take effect in retail and there's more to come, and that it's still largely unknown just how consumers will respond to the additional price increases that go into effect later in the year.

We are, however, very pleased by the fact that the initial price increases taken in our domestic Jeanswear business had gone smoothly and have had less impact on unit volumes than we anticipated. We continue to believe that great brands that offer innovative products with compelling value will win in this environment, and we're fortunate that VF has an abundance of such brands in our portfolio.

Regarding our full year outlook. We now expect revenue growth of approximately 10%, up from our prior guidance of 8% to 9%, and we expect earnings per share of approximately $7.25 compared to our prior expectation of $7 to $7.10. We continue to expect another very strong year of cash from operations of $1 billion. In summary, VF's formula for success continues to produce outstanding results. That formula includes the combination of powerful brands supported by targeted investments to drive profitable growth, rapidly expanding international and direct-to-consumer platforms and new tools and processes designed to spur even greater innovation across VF. With all of that as a backdrop, let's hear more details from Bob Shearer.

Robert Shearer

Thanks, Eric. As Eric said, we were especially pleased by the fact that all coalitions achieved impressive growth in both revenues and operating income in the quarter, setting the stage for what is sure to be a very strong year for VF. Now related to our key growth drivers, our International business grew by 20% in the quarter, driven by very strong growth across Europe, as well as in Asia. In fact, the international businesses represented nearly 60% of our total revenue gains in the quarter.

And our direct-to-consumer businesses grew by 10% in the quarter, including new store and comp store growth, as well as an expanding e-commerce platform. We remained on track to grow our direct-to-consumer revenues by a mid-teen percentage on a full year basis, as we accelerate new store openings and see comp store gains. Also of note, both of these growth platforms improved their operating margin by about 100 basis points during the quarter.

Now in terms of gross margin, we pointed out in the release the increase to a record 47.2%, up from 46.7% in the 2010 period. Now there were, however, some unusual items in both periods. In the 2010 quarter, gross margin reflected a 60 basis point negative impact, mostly from actions taken to reduce product cost, specifically the closing of a plant in Poland. By contrast, the 2011 period included a onetime 40 basis point benefit from a change in inventory accounting. At the beginning of the year, we changed our method of accounting for a portion of inventories that had been valued on the LIFO method, to FIFO, so then are consistent across GAAP. So on an apples-to-apples basis, gross margin in the current quarter was down slightly by 50 basis points due to, of course, higher product costs that were not fully offset with pricing adjustments.

Now in the area of gross margin, we're tracking right on our plans that we laid out in our last earnings call. In fact, nearly every one of our businesses was in line with or exceeded our plan for gross margin in the first quarter. Accordingly, we're tracking against our full year guidance of less than a 100 basis point reduction in gross margin. Looking forward, as we discussed in February, the most difficult comparisons in gross margin will be the second and third quarters. The impact will be less in the fourth quarter, considering the more favorable pricing and mix impacts in that quarter.

Our product costs for the year 2011 are now fully locked in. As we said in February, the business with the most significant impact from product cost increases, specifically related to cotton cost, is our U.S. jeans business. Pricing increases there have been implemented and consumer response to these increases has been as planned, if not a bit better than planned. This gives us confidence that we have taken a responsible approach to planning the impact of higher product costs for our U.S. jeans businesses.

SG&A in the quarter was 33.2% revenues, down 80 basis points from a 34% reported in last year's first quarter. As anticipated, the decrease reflects the leverage on the SG&A line from strong revenue growth. Decline in the SG&A ratio is in spite of an 18% increase in our marketing spend year-over-year, as a significant increase in our marketing spend in 2010 mostly occurred in the latter half of the year. In February, we said the SG&A ratio for the full year would be a full point below 2010 levels, and we're on track to achieve this target. At the same time, we'll continue to maintain a very healthy level of marketing investment behind our brand as a percent of revenues. We've said we intend to keep our marketing spend close to the 5.5% level of 2010.

Our operating margin reached 14% in the quarter. For the full year, we expect to -- we continue to expect that our operating margin will be relatively stable with 2010. At 21.9%, our tax rate was slightly lower than the prior year's rate. Both periods included favorable settlements or credits. On a full year basis, we continue to expect the tax rate to approximate 25%. And that brings us to the bottom line. The 25% increase in earnings per share, as Eric mentioned, the comparison includes a combined impact of $0.11 per share from the change in inventory accounting and the favorable tax item. On an apples-to-apples comparison, quarter-to-quarter earnings per share rose by an impressive 20%.

Now a couple of comments related to our improved guidance for the year 2011. We've moved our top line growth to 10%, our earnings per share to $7.25, and we continue to expect it will generate another $1 billion in cash from operations. While foreign currency rates were relatively neutral to our top and bottom lines in the first quarter, the strengthening euro versus the dollar has caused us to reevaluate euro versus dollar rate used for the remainder of 2011. Accordingly, our revised guidance reflects a euro to dollar rate of $1.35 for the remainder of the year versus our original projection of $1.30. This change, along with other currency movements, helped our revenue growth by about $90 million, benefits earnings per share by about $0.10.

Now I'd also like to comment on quarterly earnings comparisons. Our upcoming quarter, or second quarter, will reflect the most challenged earnings comparison of the year. Now here's why. First, this is our seasonally lowest quarter of the year from a revenue standpoint. Now that's important because while revenues are at their lowest level of the year, the increase in our SG&A spending quarter-to-quarter will be highest in the 2011 second quarter.

Now the reason for the spending increase real results from several areas. First, SG&A spending in the second quarter will include a number of costs for specific projects that will not occur in other quarters. A primary factor here is a significantly higher spend against technology projects, including the conversion to a new infrastructure partner and a new system implementation in Asia. These projects are necessary to support our future growth plans. And as I previously mentioned, in 2011, more of the marketing increase will fall into the first half than the second half, considering that nearly half of the $100 million incremental marketing spend in 2010 fell into the fourth quarter.

The bottom line, the reduction in gross margin percentage in the second quarter, coupled with these increases in SG&A spending and a quarter run revenues represents the lowest level of the year add up to a tougher earnings comparison for the second quarter. Now to be clear, this is just as contemplated in our plan. There is no change whatsoever in our anticipated annual earnings flow, but we thought it useful to make you aware of how the year will lay out as we point to $7.25 earnings per share for the year.

I also wanted to touch on a few balance sheet items. The increase in inventories includes an impact from higher product cost, buying some goods earlier to secure lower cost, currency translation rates, as well as higher unit volumes to support revenue growth. Inventory days computed on a forward-looking basis are only up slightly year-over-year. In addition, as previously outlined, we expect cash generation to approximate $1 billion for the year. We continue to aggressively pursue acquisition opportunities, and there are no share buyback assumptions assumed in our 2011 guidance.

So we're right on track with our plans for the year. Our brands continue to win in a challenged economic environment. We believe we've planned responsibly, considering the consumer response to pricing increases remain somewhat unknown. We're confident that 2011 will be another great year for VF and our shareholders. Now you'll hear comments from our 3 group presidents. First up, Steve Rendle.

Steve Rendle

Thank you, Bob. As noted in the press release, revenues in our Outdoor & Action Sports Americas business increased 12% in the first quarter, driven primarily by continued strong growth in the North Face and Vans brands. We have also delivered exceptional performance in the quarter with revenues in the Americas up 21%.

The North Face continues to benefit from the growth drivers that we've outlined to you in the past, which include delivering superior, innovative, technical products, extending the brand to new consumer categories, providing an exceptional brand experience in our direct-to-consumer platform, both in-store and online, and driving out growth participation initiatives. And we're benefiting from the increased levels of marketing investment, which are driving increases in consumer loyalty and brand awareness, as well as revenues.

For example, our sponsorship and large media buy around on the Winter X Games had significant contribution to the strong retail sell-throughs we experienced in the first quarter. During the quarter, The North Face saw very healthy growth in both its wholesale and direct-to-consumer businesses. Comp store sales in the quarter rose over 10%, while our e-commerce revenues were up 30%. We are confident in our ability to continue the momentum with fall bookings for our North America wholesale business, up 16%.

Turning to Vans. Tier 2, we continue to see the benefits of higher marketing investments. Both our wholesale and direct-to-consumer businesses achieved strong revenue gains in the quarter, with an increase in comp store sales and e-com revenues up over 18%. We're looking forward to activating the brand in New York City Metro area, and expect to have 9-owned stores near and by the end of the second quarter, with our first partner store opening in the third quarter. Last year, we acquired the Vans business in Mexico from a distributor, and we're pleased with the significant growth we're seeing there as well.

For 2011, we continue to focus on driving this brand forward with 3 key initiatives which include: One, staying connected to youth culture with action sports, music and art. Two, looking to expand our successful direct-to-consumer platform in markets where we remain under penetrated. And three, working closely with our counterparts in Europe and Asia to explode our growth internationally.

A few words on some of our other brands in the Americas. Reef is seeing a nice turnaround of the comp line, with strong growth stemming from its core sandals and footwear business. Our investments in fixture programs have been well received by our retail partners and consumers alike. We're looking forward to the launch of Reef's new e-commerce site in the second quarter, which will strengthen the connection between the brand and its core consumers.

JanSport is also seeing good momentum, with revenues in the Americas up 7% in the quarter. The product, price points and distribution have all been elevated with very good results. We're also expecting a good year for our lucy brand, as we refined best practices around the product, marketing, new systems and solidify our brand strategy framework. This brand has tremendous potential and we will execute it in the right way for profitable, long-term growth.

In summary, we're confident in our growth plan for 2011 and in the 13% compounded annual growth rate we discussed recently during our Investor Day meeting. We have a long runway for growth across all brands, and the resources to make that growth happen in the months and years to come. That wraps up my comments. I'll turn over to Karl Heinz Salzburger on our EMEA and Asia businesses.

Karl Salzburger

Thank you, Steve. As noted by Eric in his opening, we did indeed enjoy very strong first quarter results. Total international revenues increased 20% in the quarter with double-digit gains in Europe and Asia. In Europe, our largest market, revenues rose 12%. Our growth was led by Outdoor & Action Sports, where revenues rose by over 20%. This is driven by double-digit comp store sales gains at both The North Face and Vans full-priced stores. We expect the momentum in these 2 brands to continue. For both brands, forward bookings are up over 25%, and we have aggressive plans to increase the number of owned stores this year.

Our Sportswear and contemporary business in Europe comprised of Napapijri, Kipling, 7 For All Mankind and Eastpak backpack grew 10% in the quarter. We drove across all brands. Tier 2, we are looking forward to continued strong performance with especially strong forward bookings across our Napapijri, Kipling and Eastpak brands. Our European Jeans business was flat in the quarter, but we are seeing positive reorders and forward bookings are up for both Lee and Wrangler. Our work to reenergize product designed to support both brands with increased marketing investments is paying off. We believe we've turned the corner in our European Jeans business and are looking forward to a positive year.

Turning now to Asia. Revenue here rose 52%, with 30% plus growth across our jeans wear, The North Face, Vans and Kipling businesses. If you recall that Asia is our most profitable market with very strong operating margins. In India, the growth in our jeanswear business continues to be explosive with revenues up over 80% in the quarter. For those who may be wondering, our business in Japan at present is quite small, and so there has not been a material impact on our sales from the devastating events there.

This year, we plan to expand our store base in Asia by 25%, focusing on prime locations, concentrated in The North Face, Vans and 7 For All Mankind brands. We have aggressive store opening plans in both China and India, where we are looking forward to the launch of Vans this quarter. With this initiative in place, we are clearly on track to deliver the 25% increase in revenues targeted for 2011.

At our Investor Day last month, we outlined our plans to grow our Asia business to $1.3 billion over the next 5 years and presenting a CAGR of 28%. We are extremely pleased with our momentum, which has been fueled by very healthy levels of marketing investment across our brands. We continue to strengthen our team and our infrastructure to support our long-term growth targets and look forward to delivering exceptional top and bottom line growth in 2011 and beyond. And now I'll turn the call over to Scott Baxter to review our Jeanswear and Imagewear results.

Scott Baxter

Good morning. I'll start by covering our Jeanswear Americas business, which includes our Lee, Wrangler and Riders by Lee businesses. We have a solid start to the year with momentum building throughout the quarter. As you saw in the release, domestic revenues were up 5% and we achieved strong gains in Latin America, Canada and Mexico, each of which generated growth in excess of 20%. We are pleased that we saw growth in each of our businesses. Mass Market, Lee and Western Specialty. Once again, we achieved market share gains in both our Lee and Wrangler brands, boosted by the intense focus around product innovation that we talked about during our March Investor Day meeting.

At Lee, we saw strong performance in our products that we've introduced over the past 12 months, such as the Lee brand premium select and classic kids [ph] series in mid-tier stores. Our Lee e-commerce business also was growing strongly and was up over 30% in the first quarter. In our Mass business, we continue to reinforce and strengthen the Wrangler and Riders by Lee brands with our comfort, quality and value messaging, which is resonating well with our core customers. We'll focusing on expanding our women's businesses as we regain force base in missy and casual, leveraging the success of our new programs such as the Riders by Lee Classic Fit.

Innovation is also the story behind the strengthening momentum in our Western Specialty business, where revenues increased 10% in the quarter. Our premium performance cowboy cut program is generating double-digits sell-throughs with new finishes in the pipeline to be launched in the fourth quarter. Last year, we opened our first Wrangler store in Denver, which is serving as a learning lab and enabling us to capitalize on the brand's authenticity. This quarter, we are testing a partnership concept store with a second slated to open later this year.

As Eric and Bob mentioned, we're encouraged by the results of our efforts to navigate through this very difficult period of rising product costs. We took some initial price increases in February and preliminary indications are that the consumer pushback is less than we had planned. We believe this is a testament to the tremendous brand equity we have built in our brands and our efforts to connect consumers with the outstanding quality, value and product innovation they offer.

In summary, through product innovation and strategic investments and marketing, we are poised to continue to gain market share across our Wrangler, Lee and Riders by Lee brands. We have programs in place with our key retail partners to drive these gains. We have strong momentum in our direct-to-consumer initiatives, including e-commerce and new retail format. And looking forward into 2012, we're anticipating a successful partnership with Kohl's in the launch of the Rock & Republic brand.

I'd like to wrap up with our Imagewear coalition. As you saw on the press release, we had an excellent quarter with double-digit increases in both revenue and operating income. Revenue rose 12% in the first quarter with strong gains in both our image, for [ph] uniform, and licensed sports group businesses. Operating income rose 62% with operating margins increasing almost 5 points to 15%. The momentum that began last year in our Image business is clearly continuing this year, with revenues up 14% and growth across nearly all channels and brands. Most notably, our fire-resistant apparel business under the Bulwark brand was up significantly in the quarter with gains coming for products designed for workers in the oil and gas industry. Our industrial laundry business is also showing good growth. We continue to benefit from our strong relationships with our big customers and the superior service model that is allowing us to quickly capitalize on replenishment opportunities. While there has been some modest improvement in the unemployment rate, it's yet to translate into a meaningful pickup in overall uniform demand. So our gains clearly point to strong market share gains.

Our Licensed Sports Group or LSG business revenue increased over 9% with exceptional growth in our NFL business due to a strong post-season team mix and good growth in our MLB [Major League Baseball] business. We put a lot of emphasis lately on new and redesigned products for women, fueling double-digit growth in our women's Licensed Sports business across all channels. Given our product mix in both our Image and LSG businesses, we're not immune to the inflation and product costs. To help mitigate margin pressure, we've taken some initial price increases in our LSG business, which has met with minimal resistance in our planning a midyear price increase in our Image business.

In summary, we're very encouraged by the strong start to the year and look forward to continuing the momentum. Eric?

Eric Wiseman

Thanks, Scott. Before we turn the call over to your questions, I wanted to make you aware of an event that took place late Wednesday afternoon. As you may know, devastating storms swept through much of the Southeastern U.S., causing substantial damage. Via Jeanswear distribution center in Hackleburg, Alabama, the Jeanswear's smallest distribution center, but it was completely destroyed by a tornado. And tragically, we have confirmed one fatality. Our thoughts and prayers go out to that associate's family, friends and coworkers and to the entire Hackelburg community. We have a team of VF associates on the ground there right now, working hard to assess the situation and determine the appropriate next steps for helping our colleagues and working on our plan for business recovery.

Of course, our focus at this point is the welfare of our people. But I realize that you may be wondering what this means to our business. At this time, we do not foresee any material financial impact on the year from this most unfortunate situation, though it will put some additional pressure on our second quarter results due to the loss of inventory. As this is very new news and we have not completed our recovery plans, that additional pressure means additional to the second quarter comments made earlier by Bob. With that, we'll turn the call over to your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question will come from Kate McShane of Citi.

Oliver Chen

It's Oliver Chen for Kate McShane. We have a question regarding product costs. We know your plans are locked down through the fall season, but when is the next kind of guidepost for us to see the lockdown for spring 2012? And also, regarding the 40 basis points in the inventory accounting change, should we continue to see a quarterly benefit throughout the year of that magnitude?

Eric Wiseman

Let me start with the first question, Oliver. The -- relative to cost side, you're absolutely right, we're locked in at this point in time for the full year. Now what that means is, is we've bought -- we have all of our buys through the third quarter because what we buy in the fourth quarter, of course, will flow into 2012. So that's how that works. Relative to cotton, where all the activity is, relative to cotton, we're actually not going to see a lot of change until the new crops come in, which is in the fall. So what that might mean is that as we look into 2012, the costs that we've been seeing in the latter part of 2011 will likely continue, at least into the first quarter, once again, until the new crop comes in and until the cost surrounding that crop are in fact -- in fact known. I'm sure that you're aware that the cost of cotton has seen some reduction here of late. I think there a number of factors that are impacting that, but obviously that's a good sign for all of us. The second point was on the 40 basis points. No, that really is mostly a first quarter issue. And no, we won't see -- we won't really see any benefit from that in the latter quarters.

Oliver Chen

And our last question is on inventory. Is there a timeframe for which we should see this to grow more in line with sales? Do you expect this trend to continue as it did in the first quarter over the next -- in the near-term?

Eric Wiseman

No. As I said in my comments, the days were up a couple days. Actually, by the end of year, we expect our days to be below the prior year. So as we go throughout the upcoming quarters, we'll see a little better relationship in the growth of inventories versus revenues.

Operator

Our next question will come from Michael Binetti of UBS.

Michael Binetti - UBS Investment Bank

Could you help me clarify how much FX impact was in the previous guidance of $7 to $7.10?

Eric Wiseman

Yes, almost none. It really was -- it was neutral.

Michael Binetti - UBS Investment Bank

So the incremental $0.10 is to 2Q through 4Q?

Eric Wiseman

That's correct.

Michael Binetti - UBS Investment Bank

Okay. And just to be clear, you're guiding at EUR 1.35 even though it's a EUR 1.49 this morning, I think? So it seems a little light, I just want to make sure we're all on the same page there.

Eric Wiseman

Yes, that's right. We may be a little cautious. I mean, we are, based on today's rate for sure. And you're absolutely right. The numbers that we have in -- the numbers in our guidance are at EUR 1.35, not contemplating the $1.48 kind of number.

Michael Binetti - UBS Investment Bank

I guess my last question, if I just looked down the divisional P&Ls here, one thing that strikes me as the comparisons on the Outdoor & Action Sports division through the year, and I'm just kind of wondering how you're thinking about where the divisional margin, any updated thoughts you have on where the divisional margin looks for the Outdoor & Action Sports this year versus what we talked about last time we talked to you?

Eric Wiseman

Considering the strength of the first quarter?

Michael Binetti - UBS Investment Bank

Yes.

Eric Wiseman

Yes. Right, we are off to a really strong year, Michael, you're right in that area. And yes, we'll be a little bit stronger than we previously planned, and part of that is from volume, and part of that's also from mix. One of the business in our protective area, which provides us with very strong margins has been especially strong. So as that business continues to grow and strengthen, it is going to help our margins somewhat.

Michael Binetti - UBS Investment Bank

Was that comment -- was that specific -- I was actually asking specifically to the Outdoor & Action Sports division only?

Eric Wiseman

The Outdoor & Action Sports, I'm sorry.

Michael Binetti - UBS Investment Bank

Yes.

Eric Wiseman

On Outdoor & Action Sports, what we're saying is that we still expect it to be at about the 20% number on a full year basis. Okay? So the first quarter was off just a little bit. The first quarter resulted from the higher marketing spend coming into the quarter. On a full year basis, even in our five-year plans, we laid out a 20% operating margin. We expect it to be right at about 20% on a full year, and that's what we committed to earlier in the year. And Michael, one other point I did want to make, and I want to make sure this is clear. You asked about the $0.10, is that looking forward? Actually, because of the rate in the first quarter, we did pickup about $0.04 versus our plan. So I want to make that clear. So really, as we look out over the next 3 quarters, it's another $0.06. Okay? That's how this expense lays out.

Operator

Our next question comes from Jim Duffy of Stifel, Nicolaus.

Jim Duffy - Stifel, Nicolaus & Co., Inc.

I have a question for Scott. Scott, could you comment on what you're seeing from competitor pricing in the U.S. Jeanswear landscape?

Scott Baxter

Well, certainly. You saw the pricing that came out the beginning of the year, and then you saw that we took our increase of small one at the beginning of the year, and we have some plans for the summer. We haven't seen much of a change from what the competitors did in the first quarter. We haven't seen anything since then, and that's really where it stands right now.

Jim Duffy - Stifel, Nicolaus & Co., Inc.

Okay. Can you be a little more specific, maybe on what the competitors did in the first quarter and what your response was? Well, not response, but your pricing change was?

Scott Baxter

Well, Levi's was higher. And certainly, we saw that in the first quarter and we've had some market share gains in the mid-tier segment because of that.

Jim Duffy - Stifel, Nicolaus & Co., Inc.

Okay. That's helpful. And then Eric or Steve, if you mentioned this, if I missed it. Can you comment on the fall order book for The North Face, how that shaped up for the year?

Eric Wiseman

Yes, Steve, can you handle that?

Steve Rendle

Sure. Yes, Jim, we saw solid gains in our Americas business. Our order book in the Americas for The North Face was up 16%.

Jim Duffy - Stifel, Nicolaus & Co., Inc.

Okay. And on a global basis?

Steve Rendle

Mostly better than that.

Jim Duffy - Stifel, Nicolaus & Co., Inc.

Okay. Great. And then, Bob, nice growth in the royalty income. What's behind that?

Robert Shearer

Royalty is not an area that we normally get a lot of questions on, Jim. You know that most of the royalty income comes from our Nautica business, some from Jeanswear as well. So it's kind of -- it's really spread across-the-board. No one fee stands out.

Jim Duffy - Stifel, Nicolaus & Co., Inc.

Okay, that's great. I'll leave it with that, and circle back with you guys after the fact.

Operator

Our next question comes from Jeff Klinefelter of Piper Jaffray.

Jeffrey Klinefelter - Piper Jaffray Companies

One general question, maybe for Eric and Bob, in terms of the International business. Strong growth, both Europe and Asia. I think on top of a strong year last year that seemed to exceed the kind of initial expectations. Given the first quarter performance, how have your thoughts changed for the International business for the year? Are you anticipating even better growth for the balance of the year than you had modeled at the beginning of the year? And then, more specifically, maybe for Karl Heinz, he's on the call, would be -- with respect to India and Asia, I'm just curious on the pricing between the 2 markets. Would you expect -- I know India is small now, but growing quickly, would you expect it to have the same op margin contribution of Asia going forward?

Eric Wiseman

Jeff, I'll take the first part of that and Karl Heinz, you can deal with the second part. So yes, we had 20% rise on our international revenues for the quarter. Our target for the year is 15%. I said in my comments, there may be some upside to that, and the way we're thinking about that, obviously, is like it's very early in this year. We have most of the year ahead of us for all the obvious reasons. We're really pleased with the momentum we have going into the first quarter, but it is not our biggest quarter. So there could be a little bit of upside there, that is for sure. We have some of that reflected in the increase in revenue that we made around for the company, taking our revenue growth from 8% to 9%, up to 10%. And we're hopeful that it all comes together as the year moves toward. So that's the first part of that. Karl Heinz, could you answer the second part of that question?

Karl Salzburger

Yes. The question was on the profitability in India. Jeff, in India, we just started a few years ago. It's a relatively small business today. It's about $100 million and it’s fast growing. The profitability, the margins are not yet there at this moment, where the other margins are in Asia because we just started a couple of years ago. Over time, we expect them to grow. Clearly, whether they reach the margins we have in the other big markets like in China and Asia, at this moment, it's early to say. But we expect them to grow over time.

Jeffrey Klinefelter - Piper Jaffray Companies

Okay. And Karl Heinz , just to clarify. I meant in India, what we hear is that a lot of the brands out of necessity need to be priced a little more modestly. So I was just curious on pricing relative -- between Asia and India and how that would eventually play into profitability?

Karl Salzburger

Well, that is true, Jeff. The gross margins we have in India are little bit lower than in the rest of Asia, which they mirror the competitive situation there. It's a little bit more price aggressive market, and we are in line with market. So at the same time, our SG&A structure is also lower than in the rest. So as I said before, profitably at the moment is lower than in the rest of Asia, but over time, we expect that to raise.

Eric Wiseman

And Jeff, I would add to Karl Heinz's comment that we're 5 years in, not quite 5 years in to our business in India. And 5 years into our business in China, we were still losing money. Our Indian business, based on the success the team there is having has turned that corner last year. It means that we're in the green there, and we have great momentum. We expect India pretty quickly to get to our operating margin targets that we have for our total business, which are 15% of our target. But I will tell you we will make the right investments there to make sure we lay the groundwork to get that done right. Our focus there is getting the platform laid out right now.

Robert Shearer

Yes, the comparison to the rest of Asia, as you know, being so profitable for us, our India operating margins, actually, are very respectable today. So when we compare them to the rest of Asia, specifically in China, where they're so much stronger. Again, it's a tough comparison, but we're very pleased with the returns that we get on our Indian business today.

Jeffrey Klinefelter - Piper Jaffray Companies

And Bob, just to clarify in that guidance, I know there are questions about it this morning. But if you back off your incremental special items, $0.11, your FX $0.10 from $7.25, looking at about a $7.04 is that apples-to-apples comparison with your $7 to $7.10 guidance last quarter?

Robert Shearer

Yes, it is. That's what that is, yes.

Jeffrey Klinefelter - Piper Jaffray Companies

Okay. So you took up your revenue growth slightly. You're essentially in the same range for bottom line kind of...

Robert Shearer

That's right. That's exactly right. And I mean you can tell by the comments that we've all been making, it's just -- it's early in the year. We were trying to take relatively cautious view at this point in time. As I said earlier, relative to the pricing and consumer response to pricing in the latter half of year, we just think that it's a good idea right now, prudent idea right now just to be a little more cautious.

Operator

Our next question comes from Bob Drbul of Barclays Capital.

Robert Drbul - Barclays Capital

I've got a couple of questions, I don't think I'm going to stump Bob Shearer this morning. The question that I have around the NFL business. Can you talk about what you're assuming in the business in your guidance and how you guys are planning and executing it? And if one were looking for a Cameron Heyward jersey, when would that be showing up at retail and some of your distribution channel?

Scott Baxter

Bob, this is Scott, and all good questions. Right now, you know as much as we do, because you know the meetings have been confidential. And we were very, very pleased to see over the last 24 hours that the NFL and the PA are now all back to work today. As everyone has seen, they have resumed regular football operations throughout the NFL today. And they held the draft last night, we were encouraged by that. So right now, as of today, we are planning on a normal year. And we will adjust accordingly relative to any news that comes out as the year progresses. But as of today, we're pleased with what we've seen. Hopefully the negotiations continue and thrilled that football operations are back around the United States today.

Robert Drbul - Barclays Capital

And the jersey?

Karl Salzburger

And the jerseys, well, that's an interesting question. We do not do the jersey. We are the authentic on-field provider for Major League Baseball for the jerseys. We are the Fanwear provider for the NFL. So you can buy the team logos and what have you, but the name and number jersey rights do not lie with us in the NFL, they do in MLB.

Operator

We'll go next to Michelle Tan of Goldman Sachs.

Michelle Tan - Goldman Sachs Group Inc.

I was wondering if you could talk a little bit more about the international Jeanswear business. It seems like it's on a pretty positive trajectory. And I was wondering how much of that is coming from incremental distribution in some of the growth in markets like India versus just better sell-through and product turnaround?

Eric Wiseman

Karl Heinz, I think that's a question for you.

Karl Salzburger

Yes, thanks. Michelle it has two legs. One is Europe and one is Asia. We see positive feedback on both markets. Clearly Asia is much stronger. We mentioned before India was up 80%. That is predominantly 2 jeans brands, Lee and Wrangler. At the same time, we see very strong increase in China. It is going with better comp store numbers, but at the same time, we benefit from an expanded distribution in Asia and in India -- I mean, in China and in India. In Europe, we saw a flat quarter, but at the same time, we just got our forward bookings both for our Lee and Wrangler, and we believe we have finally turned to stone, as to say, also in Europe.

Michelle Tan - Goldman Sachs Group Inc.

Okay. Great. And then on the Outdoor business. It seems like most of the big brands did significantly or did better than the total, I should say. Can you talk about what's dragging that down? It looks like it might be the JanSport, Eastpak, anything going on there that we should be aware of?

Eric Wiseman

Steve, can you comment to that?

Steve Rendle

From an Americas point of view, all of our businesses performed very nicely in the quarter. Absolutely in the North Face and Vans are the primary drivers due to their scale, but all businesses saw nice growth through the full quarter.

Eric Wiseman

Maybe in an international add up, and I'm not sure that we're prepared for that.

Michelle Tan - Goldman Sachs Group Inc.

Okay. Fair enough. And then my last one is just on the Jeanswear business. Anything you can give us more specifically on pricing and unit reaction? So to clarify the point on seeing a positive response to the initial price increases, any magnitudes that you can share?

Scott Baxter

This is Scott. Currently, we're going to remain where we said in our prior guidance, where we said mid-single digit percentage decline in units, and we're comfortable with that going forward.

Eric Wiseman

And Michelle, maybe a couple of other points. So clearly in the first half, the pricing increases, and we're mostly talking about our U.S. jeans, the pricing increases are significantly lower than the second half. On a full year basis, as we said in our last call, the full year and our U.S. Jeans business, on like-for-like items, in other words, continuing programs that we have in units, down mid-single digit kind of percentage reduction. Now we do have some new programs that are coming to help that. Now in the second half, there will be an additional pricing adjustment for those businesses. So once again, much less in the first half than the second half. Our comments were around, so far, I mean, we've talked a lot over the last several calls about how we approach that in terms of consumer response and ultimate takeout at retail and all those kinds of things. And what we're saying is based on all the work that we did and how we developed our plan, that at this point in time, we're right on track and even a little better in terms of the takeout at retail within our Jeans business. So we're really pleased by that, it makes us believe that we're on the right track relative to the same kind of work that we did around the second half and pricing adjustments, and also how the consumer responds to that.

Operator

We'll go next to Evren Kopelman of Wells Fargo Securities.

Evren Kopelman - Wells Fargo Securities, LLC

Question on Wal-Mart's decision to expand the square footage they allocate to apparel. Do you think that -- how does that impact you? Are they increasing denim in your brands? And then the second question is, can you tell us in the Jeanswear coalition, what percentage is domestic of sales? And what kind of growth do you expect there this year?

Eric Wiseman

Yes, I can't comment specifically on Wal-Mart's strategy. I mean, that is theirs to talk about. Obviously, they allocate space in their stores as they deem appropriate for their future. We are a big and important part of their apparel business, and we are -- we fight for space one rack at a time with them like everybody else. Our team has consistently done a good job with that, and we're expecting a really strong year at Wal-Mart this year. That's really all I can say. I can't comment on that. Scott, do want to add...

Scott Baxter

Evren, we're you asking for our total global Jeanswear business, the percent that's been in the U.S.? Is that what you're asking?

Evren Kopelman - Wells Fargo Securities, LLC

Yes. But I was just curious what kind of -- how large is the U.S. business?

Eric Wiseman

It's about 2/3 of the total. The other 1/3 is made up of our business in Europe as well as in Asia.

Evren Kopelman - Wells Fargo Securities, LLC

And what kind of growth do you expect in the U.S. for Jeanswear this year?

Robert Shearer

The beginning of the year, we talked about mid- to a little better than mid, mid-single digit kind of growth on a full year basis.

Evren Kopelman - Wells Fargo Securities, LLC

For the whole coalition, right?

Robert Shearer

No. That's for jeans, for U.S.

Evren Kopelman - Wells Fargo Securities, LLC

For U.S. Okay. And the 2/3 is U.S. not all of Americas?

Robert Shearer

2/3 is U.S., that's right. I need to tell you, maybe Karl Heinz would want to mention this as well, but in our business outside of the U.S., the growth there has been stronger. For example, in our first quarter, in Asia, our Jeans business growth in Asia alone, actually, in China alone, was about 50%. So again, we're seeing really, really strong growth on a global basis and particularly in Asia and as well as in India. So that growth is -- it has a lot to do with when we talk about our overall Jeans business, then Eric mentioned on a full year basis that despite the challenges from that cotton presents for us, and particularly in our -- U.S. business, that we expect our operating dollars, our operating income on a full year basis to be about flat year-over-year.

Eric Wiseman

This really gets to the point of VF's business model and why we think we were advantaged. And we do have brands that can go globally and successful operating platforms, globally. And it gives us a lot of flexibility as we weather challenges in one region or in one product category to continue to deliver successful results for our shareholders, is we've just got a lot of options for where to invest and deliver great results.

Operator

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

Robert Ohmes - BofA Merrill Lynch

A couple of quick questions. I apologize if I missed this. Did you guys give out or can you give out the Vans North America growth and what the expectation is for Vans North America for this year and what the driver is? And then second question, totally different question, I was hoping, Eric, you could maybe talk more about the Rock & Republic deal and maybe -- is there any impact on your Lee business or is it going to be very differentiated? And also, is this the first time that you've done a deal like this where you would actually be, I guess, manufacturing the product, but not actually designing it? And maybe you could maybe flush out what's going on there and where -- what this could lead you into going forward? And then the final question, for Bob, there's been a lot of comments on the second quarter. Can you give us any more sort of range there? Could the second quarter earnings be down year-over-year? Just something to help us all be in the right range or where we should be.

Eric Wiseman

Sure, Robbie. Let me start with the Rock & Republic question. And this is obviously brand new news, something we're really excited about. We are obviously, as a business, most of our business is around our wholesale model of national brands. But as a partner to our retailers, our job is to add value. And in this instance, we have a partner, Kohl's, who's very interested in building private and exclusive brand, and they're interested in doing that with us. We could help them accomplish something where we had a core competency. And there was also a white space for them. And in the contemporary space around the Rock & Republic brand that we've identified -- they've identified a white space that we're going to partner with them on. It's going to be a slightly different model than some other exclusive brand models in that, since we have a core competency around denim, we're going to be a designing and sourcing the manufacturing, all the bottoms, the men's and women's bottom. So because we're good at that, and they obviously realized that. So that's going to be a Wholesale business for us. In addition to that, we'll be partnering with them on the marketing and total look of the brand, but they'll be executing the other product categories. So that's a little bit of twist on this model from what others have done. We think one that's good for us, and hopefully good for making this brand successful. We will not have any products at retail until 2012. That's why I said in my comment that it should be a positive impact on Jeanswear top and bottom lines next year. I'm trying to remember what else you asked about it...

Robert Ohmes - BofA Merrill Lynch

No. I just, I was -- I think you were clarifying, I was confused. I thought that they were designing the jeans wherein you were just manufacturing it. But it sounds like you'll be the creative end on the jeanswear piece of Rock & Republic still as well.

Eric Wiseman

That's correct. It's going to be -- everything we do on this brand is going to be a collaboration with our retail partner Kohl's. But we are going to -- through our Lee business, actually, we'll all be doing the product work around the Rock & Republic Jeans business. If you also ask how will this affect Lee, I think, was one of your questions. And we don't think this customer is the same consumer who shops for Lee. So we think it complements Lee in Kohl's and will help VF Corporation have a greater share of Kohl's denim business and be a better partner. With that, I'll go over to Bob on the Vans question.

Robert Shearer

On the Vans question, Robbie, on a global basis in the quarter, the Vans business just continued to show its strength that it showed throughout the last several years, actually. It was up 20% on a global basis. Quite strong.

Robert Ohmes - BofA Merrill Lynch

Yes. And my second question was the -- what's the North American piece of that? Because my assumption is that Asia for Vans might be up?

Robert Shearer

Yes, you're right. Yes, you're absolutely right. Asia, as well as the European business for Vans has been very, very strong. I believe on the U.S. side, it was somewhere in the low- to mid-teen kind of range. So again, it remains very strong. It really is, it's sitting on all cylinders and across-the-board. Your other question was maybe a little more color, I guess, on the second quarter. No, we don't expect earnings to decline. Now, having said that, I will say that we're still sorting through the impact of the loss distribution center that Eric mentioned earlier, but no, our expectation is not to see an earnings decline. However, our operating margin could be down a little bit. Again, a little more color on that. Part of our plan, on the annual basis, as you well know is to reduce the relationship of SG&A to revenues by about 100 basis points. So in other words, what we said was that we expected our gross margins to be down by about that amount. We would make that up based on strong growth and leverage in our SG&A area. Meaning, that our SG&A expenses won't increase as fast as revenues over the year, thus reducing the relationship of SG&A to revenues. In the second quarter. we won't see that level of leverage. That's really what it comes down to. And the reason we won't is because of the additional expenses. This happened to fall in to this -- this just happened to fall in to the second quarter. And we knew about that early in the year. We knew that this would be a period when expenses would be the biggest increase of the year as we said quarter-to-quarter, which is our smallest quarter, overall. So it points out that it really is unusual from that standpoint. We just didn't have a lot of choice in terms of when some of these expenses fall like the activity in the technology area. These are things that we just need to do to put us in the right position going forward. And based on timing of the way the euro falls and the way the strength of our third and fourth quarters, we needed to get these things done in the second quarter. And that's why you're seeing the expense increase, we're seeing the expense increase in the second quarter. So that's what's taking place. We won't see the leverage that we'll see throughout the rest of the year on the SG&A line. The relationship might be down a little bit. The relationships of revenues, of SG&A could be down just a little -- or improved just a little bit, but clearly not to that 100 basis point improvement that we expect to see on a [indiscernible] basis.

Operator

Our next question will come from Ken Stumphauzer with Sterne Agee.

Kenneth Stumphauzer - Sterne Agee & Leach Inc.

Bob, just real quick, can you give us an idea of the puts and takes on gross margin in the quarter on an adjusted basis with it being down 50 basis points?

Robert Shearer

Yes, I can. The cost net of price is the way I'll give that to you. It was about 120 basis points. And that was offset by a mix benefit of about 70 basis points. The mix meaning higher revenues in our highest margin businesses.

Kenneth Stumphauzer - Sterne Agee & Leach Inc.

And that -- the mix component of it should be constant, correct? For the duration of the year?

Robert Shearer

Yes. Actually, it will be. And even maybe a little better than that because when you look at retail, retail is part of that mix, it's partly a driver of that mix benefit with its much higher gross margins. When we get to the fourth quarter, which is such a big quarter for us in terms of our overall retail business, it even -- it improves in the fourth quarter. It strengthens in the fourth quarter. But yes, you're right, Ken. That's not something that deviates a lot quarter-to-quarter.

Kenneth Stumphauzer - Sterne Agee & Leach Inc.

Okay. And then secondly, you guys spent a lot of time discussing elasticity in the Jeanswear division. I'm curious to know whether you guys have any reads into the other divisions, whether you've seen that, whether it be via backlog or initial pricing increases for spring '12 -- or excuse me, '11.

Eric Wiseman

Yes, we have talked, Ken, this is Eric, about the Jeanswear business. The only other example we have, and again, it's very early days on this pricing situation, is in our Sportswear business where we did take some modest price increases earlier in the year. And we've had good unit and dollar growth. So I will caution, and it's not because we don't want to talk about it, it's that we're looking at magnitude. The magnitude is very much back-half weighted. And we have a lot to see about how consumers respond to higher prices. And I know you know this, but it's not just cotton prices, it's how consumers responds to inflation in their life.

Kenneth Stumphauzer - Sterne Agee & Leach Inc.

Sure. And then just one last question, kind of a follow-up on the Rock & Republic acquisition and the subsequent positioning. It's obviously a considerable focus on exclusive brands in the department store channel. So I'm curious to know, is that an increasingly relevant area for acquisitions for you guys right now, looking at potentially doing exclusive deals.

Eric Wiseman

Well, what we have acknowledged is what you've observed is that this is becoming a part of the retailers’ playbook. And as we are a partner to the retailers, we want to, to define what role this kind of exclusive branding has into VF model. And we're going to learn that by starting with Rock & Republic, and we'll see what happens from there. If this is a great thing for VF shareholders, we would do more of it. And if it's not, we wouldn't. We are moving forward now with our first test, and thrilled to be doing so.

Operator

Our next question will come from John Kernan of Cowen.

John Kernan - Cowen and Company, LLC

So I guess, Bob, you gave us some interesting commentary back when we had the Analyst Day in March that some of the cotton mills were trying to lock in prices. And since then, comps come down in pretty significant amount. Has there been any change in their behavior towards you guys when you've been buying for them? Do you have any incremental data from them that we could maybe hang around on?

Eric Wiseman

There's not a lot of change. I'd tell you right now, John, it's somewhat of a waiting period here until the next crop comes in. We're hearing a couple things. We're hearing that actually, some cotton that was purchased in China is actually starting to come back. But we're seeing some signs like that. The reduction in price right now doesn't surprise us so much, I guess, a result of some of the things that we're hearing just relative to overall demand and particularly the buys in China and those kinds of things. But we saw a decline before, and the price went back up. Again, until the crops come in, until the volume is known, the yields and all that kind of thing, I just think we're going to see a little volatility here, but not a lot of really solid evidence until we're closer to the fall.

John Kernan - Cowen and Company, LLC

And then in terms of, I guess, share repurchase. You still have a pretty significant share authorization. I know you're favoring acquisitions. But do you think if nothing gets done on the acquisition side that you could potentially ramp that as the course of the year goes on? Or are you just going to try to build, I guess, cash in the balance sheet for potential acquisition?

Eric Wiseman

We could adjust, we could adjust that. I said that right now, there's nothing included in the numbers relative to the buyback. I'd ask you to keep in mind that last year, we were -- we heavied up on the buyback, we bought back 5 million shares last year, so we carried that into the year. But no, as the year goes on, just as you said, priority remains on the acquisition front. We can -- we'll adjust and it's very possible, yes, that we could be back in the market buying back some shares a little later in the year.

John Kernan - Cowen and Company, LLC

You may have given this, I may have missed this, did Vans bookings for fall. Did you put it -- is there a number there global or North America?

Eric Wiseman

Steve, did you talk about the North American Vans booking number for fall? I don't recall.

Steve Rendle

No, we did not, Eric.

Eric Wiseman

Okay. I'm not sure we have that, John.

Operator

And that question will come from Andrew Burns of D.A. Davidson.

Andrew Burns - D.A. Davidson & Co.

Two quick questions for you. First, just in terms of Vans, just from recent store visits. In my opinion, the Vans apparel has never looked better, can you comment on the momentum of Vans on the apparel side?

Eric Wiseman

Steve, do you want to comment on that?

Steve Rendle

Sure. I'm not sure what stores you were visiting. If they were some of the core specialty retailers the business works with. And we're really happy with how that team is really looking at it and interpreting the trends in that surf and skate channel. Our core skate and surf business continues to grow nicely as does our larger format retailer business. So it's really the focus of that product team in the offices near California. They're looking at those different channels.

Eric Wiseman

When we acquired Vans, gosh, 7 years ago now, almost 7 years ago now. One of the core opportunities we identified was to enable the apparel potential of the brand, and that team there is just getting -- you're right, your observation is right. They are consistently getting better at it, and that apparel business continues to perform better and better and better every year and becoming a bigger part of their business, and they have way surpassed the expectations that we had at them 7 years ago when we first acquired the business.

Andrew Burns - D.A. Davidson & Co.

And then a point of clarification, just in terms of SG&A for the second quarter. Are you saying that SG&A will grow in absolute dollars from the first quarter? Or that the growth rate is going to be higher than the first quarter growth rate?

Eric Wiseman

What I'm saying is that the dollars, the dollars of growth will be the highest for the entire year, for any quarter in the year, the dollars of growth. And yes, that obviously implies that the dollars of growth versus what we saw in the first quarter, quarter-over-quarter, will be higher.

Eric Wiseman

That concludes the Q&A session. I want to thank all of you for your interest in our company. We're thrilled with this strong start to the year and with our ability to increase our outlook for the year. We're confident in what we can get done this year. It's right line with the 5-year target that we established. And we'll report back in the second quarter of how much more progress we've made. Thank you so much.

Operator

That does conclude today's conference. Thank you all for your participation.

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