V.F. Corporation (NYSE:VFC) Q1 2024 Earnings Call Transcript

Matt Puckett: Yes, we, in May, we did not at least certainly not our intention. We did not indicate that we were projecting growth in the back half of the year. What we’ve said consistently, and I think we’re still saying today, is that we expect to see the business return to growth at some point later this year inflect to growth. And we haven’t been specific on exactly when that is or kind of what the order of magnitude of that is. But that’s what we said.

Ike Boruchow: Got it. Thank you.

Operator: Thank you. Our next questions come from the line of John Kernan with TD Cowen. Please proceed with your questions.

John Kernan: Excellent. Thanks for taking my question, Matt. Just on the capital structure, how are you approaching capital allocation, the dividend commitment the debt refinancing, and you obviously have the potential sale of the backpacks business, the valuations get better there. How should we think about debt pay down dividends and overall capital allocations going forward?

Matt Puckett: Yes, I think I would say nothing’s really changed from our stance on this, over the last couple of quarters. And certainly on the back, of the cut in the dividend that we made a couple months ago, our capital, we’re focused on ensuring we’ve got investments in the capital allocated to our organic portfolio that’s necessary to kind of drive the growth that we’re planning in that business over time. So big focus there for sure, that we’re not choking the business and we’re not as it relates to free cash flow. Certainly dividend is something that we remain committed to at our target, right? And our target is about a 50% payout. And that’s kind of what we’re targeting and we’re in line with that. We think this year and kind of, even if you look at it in terms of the percent of whether it’s net income or free cash flow kind of both.

And then after that, I would tell you that, all excess free cash flow we are using to pay down debt and reducing debt is our number one financial priority. I think I made that clear in the prepared comments and that remains consistent. So as we think about the choices that we’re making from a capital allocation everything is really through the lens of [indiscernible], our balance sheet, which really goes to reducing debt and reducing leverage, and that that’s our primary focus.

John Kernan: Understood. That’s helpful. Let me just one quick follow up for Kevin and specifically on Vans. I mean, we see the pressure in the U.S. wholesale channel across a lot of brands at this point. And just curious, when do you think open to buy dollars and maybe more risk appetite within that U.S. wholesale channel might start? Is it spring, summer next year? Like what on the calendar when you start to look at the business, how do we think about the recovery in that U.S. wholesale channel?

Kevin Bailey: Yes, John, that’s a good question, and I think that’s the way we’re thinking about it, is that the opportunity, as we get into the back half of this year, what we’re hearing from retailers as you see all their reports as well, inventory, traffic, promotions, all affecting business in general. We’ve been focused on marketplace cleanup, marketplace execution, getting the newer product in their hands because that’s what consumers are asking for. So I think we still believe that’s going to happen as we get into the back half of this fiscal year for us. And I got to believe that things should start to stabilize in the marketplace as we turn the corner into spring summer next year. But as Matt said, the order of magnitude is always is a little hard right now given where wholesale is.

John Kernan: All right, thanks everybody, and Bracken, welcome.

Bracken Darrell: Thank you.

Operator: Thank you. Our final questions will come from the line of Adrienne Yih with Barclays. Please proceed with your questions.

Adrienne Yih: Great. Thank you very much and nice to meet you Bracken as well.