V.F. Corporation's Q2 2026 Earnings Call: Contradictions in Tariff Strategies, North Face Turnaround, Vans Growth, and Store Expansion

Date of Call: October 28, 2025

Financials Results

• Revenue: $2.8B, up 2% reported, down 1% on a constant dollar basis versus prior year
• EPS: $0.52 adjusted EPS, versus $0.60 in Q2 prior year
• Gross Margin: Adjusted gross margin flat year-over-year; benefit from fewer discounts offset by FX headwinds; minimal tariff P&L impact in Q2
• Operating Margin: Adjusted operating margin 11.8%, up 40 basis points year-over-year; operating income $330M, above guidance range of $260M–$290M

Guidance:

• Q3 revenue expected down 1% to down 3% on a constant dollar basis.
• Q3 operating income expected in the range of $275M to $305M.
• Q3 gross margin expected to be down versus last year due to initial tariff impacts partially offset by lower discounts; most pricing mitigations will show in Q4.
• Q3 interest expected ~ $40M; effective tax expense approximately double prior year (minimal cash tax impact).
• Fiscal '26: operating income expected up versus last year; operating and free cash flow expected up year-over-year excluding sale of noncore assets; Dickies sale estimated to reduce cash flow by ~$35M.
• Expect to offset tariffs in fiscal '27 and remain on track for fiscal '28 targets of $500M–$600M operating income expansion and ≤2.5x leverage.

Business Commentary:

* Revenue and Financial Performance: - V.F. Corporation reported total revenue of $2.8 billion in Q2, up 2% in reported dollars but down 1% in constant dollars. - Operating income was $330 million, surpassing the guidance range of $260 million to $290 million. - The decline in constant dollars was mainly due to a challenging and unpredictable environment.

• Brand Performance:
• The North Face brand experienced 4% revenue growth with strong performance in both wholesale and DTC channels.
• Growth was driven by product innovation, newness, and elevation in categories like Performance Apparel and footwear.

• The brand's strategic marketing efforts and athlete-led campaigns also contributed to growth.

• Divestiture of Dickies Brand:

• V.F. Corporation announced plans to sell the Dickies brand for $600 million, reflecting a EBITDA multiple of over 20x.
• The divestiture is expected to accelerate the company's transformation and debt paydown.

• Proceeds will be used to reduce debt, supporting the company's medium-term leverage target of 2.5x or below.

• Product and Marketing Strategies:

• Vans reported a decline of 11% in revenue, but the company is focused on improving commercial moments and product newness.
• New product launches like the Super Lowpro and skate loafers have shown strong performance, attracting new consumers.
• The company is shifting to a more socially centered marketing strategy, including upcoming collaborations like the one with SZA.

Sentiment Analysis:

Overall Tone: Positive

• Management: "It was a good quarter... we delivered on our commitments, and we made further progress on our turnaround." CFO: "Revenue finished slightly ahead of our guidance... operating profit outperformed nicely." Net debt down $1.5B (down 27% vs prior year) and Dickies inbound offer of $600M noted as value-creating.

Q&A:

• Question from Jay Sole (UBS): Can you talk about the path back to growth for Vans and where you think Vans will be for revenue growth?
  Response: Recovery driven by increased product newness and upgraded marketing; underlying Vans was down high-single-digits ex value-channel actions in Q2, similar in Q3, with most value-channel impact rolling off by Q4.

• Question from Jonathan Komp (Robert W. Baird): Can you give more color on Q2 gross margin drivers (tariffs vs less discounting) and progress on Phase 2 cost savings?
  Response: Q2 gross margin was driven by modest FX headwinds offsetting benefits from lower promotions; markdown management and integrated planning helped; medium-term cost and margin initiatives are on plan and will be quantified at year-end.

• Question from Brooke Roach (Goldman Sachs): Where are you in promotional recapture in the Americas and plans for pricing/promos this holiday and medium term?
  Response: Promotion levels have improved versus last year and will continue to benefit the remainder of the year; pricing to offset tariffs is primarily targeted and will show mostly in Q4.

• Question from Michael Binetti (Evercore): Can you dissect the APAC decline and clarify Vans comments (ex-currency, impact timing)?
  Response: APAC (notably China) is stabilizing after a long run of strong growth and may pause before re-accelerating; all comps quoted are in constant dollars; Vans underlying run-rate down high-single-digits ex value-channel/store-closure impacts, which moderate into Q4.

• Question from Irwin Boruchow (Wells Fargo): Any early signs from retailer orders for the holiday season—differences by channel or region?
  Response: Too early to draw firm conclusions on holiday orders; management is optimistic with product cadence and plans but has no definitive signals yet.

• Question from Adrienne Yih-Tennant (Barclays): With tariffs reversing op margin expansion, what are you seeing on exit trends, planned price increases (mid/low single-digit), and elasticity/volume impacts?
  Response: Pricing will be surgical and targeted by brand (primarily U.S.), assuming normal elasticity; tariffs will pressure near-term margins with pricing mitigations largely implemented in Q4.

• Question from Anna Andreeva (Piper Sandler): Where are you with number of doors (own/store closures/additions) and can you quantify earlier wholesale demand in Q2?
  Response: Store footprint largely stabilized with targeted expansion planned (Timberland, North Face); overall stores down ~5% year-over-year (majority at Vans); ~50–60 basis points of the revenue outperformance was from shipping timing (orders shipped in Sept vs Oct) and stronger DTC (back-to-school).

• Question from Matthew Boss (JPMorgan): How healthy is The North Face and what still constrains Vans despite product improvements?
  Response: North Face is healthy with multi-category upside (footwear, women's, year-round); Vans' constraint remains execution of the right product assortment and marketing—newness is improving sell-through but sustained recovery requires continued product and marketing execution.

• Question from Janine Hoffman Stichter (BTIG): Update on tariff mitigation—are you still targeting ~50% mitigation this year and full offset in fiscal '27 timing?
  Response: Little pricing impact in Q2/Q3; pricing largely kicks in Q4; company still expects to offset tariffs within fiscal '27 but will provide more clarity at year-end.

• Question from Tom Nikic (Needham): Is deleveraging primarily a function of EBITDA growth or are other levers available to reduce leverage faster?
  Response: Primary path is EBITDA improvement and working-capital/inventory reductions; Dickies sale accelerates deleveraging but is not required to reach the 2.5x target—additional cash generation and inventory-day improvements will contribute.

Contradiction Point 1

Tariff Mitigation Strategies and Timing

It involves differences in the approach and timing of mitigating tariff impacts, which are crucial for financial planning and investor expectations.

How will demand elasticity and pricing be affected as tariffs reverse op margin expansion? - Adrienne Yih-Tennant (Barclays Bank PLC)

2026Q2: We expect a 5% price increase, but the exact amount is not disclosed. Pricing will be surgical and targeted by brand. - Paul Vogel(CFO)

Can you quantify the $60M–$70M gross profit impact from tariffs? Can you offset this through SG&A or other P&L line items? - Adrienne Eugenia Yih-Tennant (Barclays Bank PLC, Research Division)

2026Q1: We're working to mitigate this through sourcing savings and pricing actions. We're continuing to improve gross margins and are diligent about other cost initiatives. - Paul Aaron Vogel(CFO)

Contradiction Point 2

North Face Performance and Turnaround Strategy

It highlights differing expectations and strategies for the North Face brand, which is essential for understanding the company's growth trajectory.

Can you comment on the North Face brand's health and outdoor channel opportunities? - Matthew Boss (JPMorgan Chase & Co.)

2026Q2: North Face is healthy with opportunities in women's and seasonal categories. We need to execute consistently year-round, especially in footwear and women's, to drive growth. - Bracken Darrell(CEO)

Why did North Face Americas revenue decline 3% during summer? What lifestyle products are launching, and what performance is expected? - Michael Michael Binetti (Evercore Inc.)

2026Q1: We're focusing on bringing more product innovation for spring and summer. While it's early, we believe increased product offerings will drive future growth. - Bracken P. Darrell(CEO)

Contradiction Point 3

Vans Growth Strategy and Marketing Focus

It involves a shift in strategy and marketing approach for the Vans brand, which could impact consumer perception and brand performance.

What is the path to growth for Vans, and what revenue growth is expected in the second quarter guidance? - Jay Sole (UBS Investment Bank)

2026Q2: Vans' growth plan involves increasing new product offerings. This quarter saw success with Super Lowpro and Old Skool sales, particularly strong double-digit growth in women's styles. Marketing is shifting to be more inclusive, including product introductions and partnerships like the upcoming collaboration with SZA. - Bracken Darrell(CEO)

What are your CapEx plans, and how does this year's Vans back-to-school strategy differ from last year's? - Michael Binetti (Evercore ISI)

2025Q4: The strategy for Vans back-to-school involves focusing on new product launches, particularly in footwear, with an emphasis on youth and women. This will be supported by brand elevation and marketing efforts. - Bracken Darrell(CEO)

Contradiction Point 4

Tariff Impact and Pricing Strategy

It involves the company's approach to managing tariff impacts and pricing strategy, which directly affects financial performance and competitive positioning.

With tariffs reversing op margin expansion, how do you expect demand elasticity and pricing to play out? - Adrienne Yih-Tennant (Barclays Bank PLC)

2026Q2: We expect a 5% price increase, but the exact amount is not disclosed. Pricing will be surgical and targeted by brand. We still anticipate reaching our medium-term leverage targets despite tariff impacts. - Paul Vogel(CFO)

How do gross margin improvements vary by channel and brand? - Dana Telsey (Telsey Group)

2025Q4: Mitigating tariffs starts in Q4 with offsetting actions. Despite tariffs, we expect to meet our medium-term goals by fiscal '27. - Paul Vogel(CFO)

Contradiction Point 5

Store Count and Distribution Strategy

It involves the company's approach to managing store count and distribution, which impacts customer experience and operational efficiency.

How many doors do we have currently, and is there potential for further reduction, especially at Vans? - Anna Andreeva (Piper Sandler & Co.)

2026Q2: We are stable in terms of door numbers but will expand in North Face and Timberland. We continue to churn in Vans, but the major reductions are concentrated in the past. Vans has about 580 doors globally, with a focus on enhancing distribution in key regions. - Bracken Darrell(CEO)

What is your strategy for the Vans store base and dividend amid macroeconomic challenges? - Ike Boruchow (Wells Fargo)

2025Q4: The store count has been optimized, and we're continuing to evaluate store performance. There are no plans to reduce the dividend further; our priority is to manage leverage under 2.5x. - Bracken Darrell(CEO)