V.F. Corporation (NYSE:VFC) Q2 2024 Earnings Call Transcript

V.F. Corporation (NYSE:VFC) Q2 2024 Earnings Call Transcript October 30, 2023

V.F. Corporation misses on earnings expectations. Reported EPS is $0.63 EPS, expectations were $0.65.

Operator: Greetings, and welcome to the Second Quarter Fiscal 2024 VF Corporation Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Allegra Perry, Vice President of Investor Relations. Thank you, Allegra. You may begin.

Allegra Perry: Good afternoon, and welcome to VF Corporation’s second quarter fiscal 2024 conference call. Participants on today’s call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. Unless otherwise noted, amounts referred to on today’s call will be on an adjusted constant dollar basis which we’ve defined in the press release that was issued this afternoon, and which we use as lead numbers in our discussion, because we believe they more accurately represent the true operational performance and underlying results of our business.

A busy fashion store showcasing a wide range of apparel and accessories.

You may also hear us refer to reported amounts, which are in accordance with U.S. GAAP. Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide management’s view of why this information is useful to investors. Joining me on the call will be VF’s President and Chief Executive Officer, Bracken Darrell; and EVP and Chief Financial Officer, Matt Puckett. Following our prepared remarks, we’ll open the call for questions. I’ll now hand over to Bracken.

Bracken Darrell: Good afternoon, everyone. I’m excited to be here for my first quarterly call. I’ll start us off, and then Matt will cover Q2 and other financial aspects of the comments I’m about to make. Having now been here for over 100 days, I’ve had a chance to go far and wide within the company and outside of it. I’ve talked to employees, customers, wholesalers, investors, analysts, and more. There is a universal desire for VF to be successful again. It’s been exciting to hear the power of our brands and appreciate the consistent performances of our international business as well as the North Face. And it was also important for me to hear firsthand where the biggest issues are including in the U.S. and Vans. I’ve come too many conclusions about the organization, business and opportunities we have.

Most importantly, I’ve gained conviction about what we need to do next and have begun to see how we could evolve the Company longer-term into a new kind of brand builder and innovator. I’ll save that last part for another day. Before I go into our plans, I want to mention that I’m struck by the parallels between VF and my former company when I first started there 11 years ago. It too required to turnaround. Turnarounds have many consistent features and similar themes that are always key focus areas in the beginning that evolve over time. The seriousness of the situation gives you a sense of urgency and a desire to move quickly on key steps. Our biggest business is declining. The U.S. isn’t working well. The innovation engine has historically been strong but has drifted downward over the past few years.

Employees still love the brands and business. But the morale has been hurt by the poor performance and costs are too high. All of those were features of my last turnaround. My first turnaround long ago was the Old Spice brand, P&G. Similarly, sales were falling, profit was down, costs were too high for the business, and the innovation engine and marketing just weren’t working. By the time I left Old Spice with more than tripled market share and today it’s a market-share leader in the category. My last turnaround Logitech is now worth more than 10 times what it was when I started at 11 years ago. Well, no two turnarounds at the same. I’ve been here before and I feel quite at home. I’ve not encountered any big surprises. I will start with a replay of the past and a diagnosis of how we got here.

I recognize many of you already have opinions on that, but it’s clear we got here through our own doing. It’s also clear that getting out of it is in our control and we’re focused on doing just that. We have amazing brands that are recognized around the world. I’m energized and excited by the potential all of which is in our power to unlock. Our talent is World-class. I continue to be amazed by the depth and breadth of experienced people in this company, and their passion and commitment to VF. Some people surely left along the way, but so many stayed. We brought in great people along the way too. I will spend most of my time looking forwards towards the future and what we need to do to return to consistent growth and value creation. Long term, we’ll turn VF into a company that relentlessly focuses on delighting consumers throughout the world, through superior product design and engaging consumer experiences backed by a well-oiled execution machine simple, effective, structured, supporting highly energized employees.

These are the four key areas we’re prioritizing aggressively. I will go into some of the specific actions we’re taking to address them next. The four key areas are fix the U.S., deliver the Vans’ turnaround, lower our cost base, and strengthen our balance sheet. Now let me highlight some of the immediate actions that we’ll begin to deliver those. First, we’re establishing a global commercial organization, inclusive of an Americas region. Throughout my career, I’ve been in a lot of different corporate structures. From an execution standpoint, having an engine was fast transfer of best practices and ensuring as things work they get transferred throughout the Company and throughout the different parts of the world, in my view, is absolutely critical.

We don’t have that in North America and our results show it. However, we do have an aim here and we recently successfully transferred that model to APAC, which is also operating well. To ensure we’re executing consistently across the globe in terms of supply-chain management, relationships with wholesale customers, customer service and more. We are changing our operating model and creating a global commercial organization led by our Chief Commercial Officer, who will lead the day-to-day execution of the business around the world and bring execution excellence back to North America. The leader of this combined platform across North America, EMEA and APAC will be Martino Scabbia Guerrini, who many of you know well and who we have promoted to this newly-created role reporting directly to me.

Some of you already know that Martino has been highly effective in building a platform for EMEA that has delivered sustained growth in revenue and operating income for many years. A platform that has delivered superior growth in all our brands and a winning spirit that’s palpable when you meet our people in EMEA. Second, a second step we’re taking is to sharpen brand presence focused on sustainable long-term growth and brand health. A direct consequence and intent of the operating model change which is particularly critical at this stage for all the brands, but especially Vans is the new structure enables brand presence to focus on what matters most. Getting closer to the customer and creating consistent pipeline – a consistent pipeline of amazing products and creating excitement around our brands.

If you think about it, we really do two things for the world. We create products that people choose to wear and we build brands which operate like clubs that consumers want to be part of. Those two things are so critical to the success of any brand in our business. And that’s where our brand presence will focus. Three, we’ll be making a change in Brand President at Vans. Trends today for Vans aren’t getting any better. And in fact, could even be viewed as getting worse. We will not see a turnaround this year. The good news is that the brand continues to be loved by so many consumers. There are many good steps that we’ve made, but we now have to make some changes and move faster. To that end, today, we’re announcing that Kevin Bailey will be stepping down as – from the position of Global Brand President at Vans.

Kevin will remain on the executive leadership team reporting to me and the leadership role in Reinvent. His long history at VF is Brand President and Regional President helping build the APAC platform will be valuable as we build a more effective and efficient organization in the months ahead. I’d like to thank Kevin for stepping back into this role about 18 months ago, he’s been a loyal and wise leader for this Company for many years. And external search is underway for a new President of Vans and in the interim, I will personally take a very active role in delivering the turnaround strategies at the brand. Four, we will optimize cost structure to improve operating efficiency and profitability and I predict also effectiveness. I’ve never seen a turnaround situation that didn’t have a need for addressing cost structure.

We’re committing to $300 million of cost reductions across the business. This program is comprehensive and will touch almost everything. But importantly, we will invest back a portion of our savings in the brand-building and product innovation as we are organized to return to growth and at the same time improve profitability. Of course, addressing our cost base is an important factor in making progress on our critical financial priority to deleveraging the balance sheet, which is our next topic. So the last section, I’ll be talking about today will be to bring down our debt and reduce leverage. This is our top financial priority, to strengthen the balance sheet. Bringing down debt levels and deleveraging are important for shareholders. And today as a consequence, the dividend reduction we have announced is one-step towards achieving this objective but there will be more.

We also will not be doing any acquisitions until we bring the debt level down. I want to underscore our full commitment to creating and maximizing value for all our shareholders. In order to bring down our debt levels and improve our operations, the board and I are fully aligned, and everything is on the table and there are no sacred cows. Now moving on to our outlook for fiscal year ’24. The headline here is that we’re not guiding revenue and profit for the remainder of the year. We are providing an update on free cash flow and projected liquidity levels at year-end, which remained more than ample under a wide range of scenarios. So why are we removing guidance? As a new CEO, I want to hit our numbers. At the end of the day, the first numbers I’m going to give you, we will hit.

There are a lot of moving pieces in our business and in the market and we’re moving even more as a function of our Reinvent program. I withdrew guidance in my early days 11 years ago Logitech had quickly reinstated at the appropriate time. There’s no reason why we can’t do the same here. To conclude, this is a turnaround. I’ve been here before, so I know what it takes. We have a strong foundation, world-class brands and great people, and we’re taking aggressive action as we started to announce today. This will lead the way to a new future for VF and which the Company will be leaner, faster and stronger. Well, let’s say, while it will take time for the initiatives we’re implementing to take full effect, we do expect to make progress being quickly.

And we will build on that in the quarters to come. With that, I will now hand it over to Matt to talk you through the financials. Matt?

Matt Puckett: Thank you, Bracken. It’s great that you’re here with us as together we face this challenging and critical time in our company’s history. Despite these difficult circumstances, I’m energized and positive about the future and the plans that we’re laying out today to strengthen our financial position, to improve our operating performance, and to position VF to achieve its full potential. Now let me turn to the results of the quarter. Q2 remained weak overall as bright spots in the North Face and international markets continued to be outweighed by declines in Vans and in our Americas business. That said, we delivered on our commitment to reduce inventory versus last year and paid down €850 million term debt in September ending the quarter with liquidity of $1.7 billion and net leverage of 4.5 times, slightly ahead of our plans mid-year.

Revenue for the quarter was down 4% overall, in line with our near-term expectations, but disappointingly reflecting continued weakness in the U.S. business and in Vans globally, two areas we were not making the anticipated progress. As indicated last quarter, Q2 revenue benefited from a change in shipment timing, particularly at the North Face and importantly, we have delivered more consistently on time this year and are lapping late deliveries from last year that fell into Q3. Normalizing for this change in shipment timing which benefited the quarter by a couple of points, overall, Q2 momentum had a relatively similar trajectory to Q1. By region, the Americas was down 11% in the quarter as results continued to be pressured by wholesale as expected.

D2C saw an outsized impact from Vans’ underperformance. Excluding Vans, America’s DTC was up 5% in the quarter, with all brands except Vans and Timberland recording positive performances. EMEA returned to growth up 6% achieving its first $1 billion quarter in the company’s history. Wholesale was up 7%, also reflecting some of the delivery timing benefits highlighted earlier, while DTC was up 3% led by the North Face up low-teens. Lastly, revenue in the APAC region was also up 6%, led by Greater China up 14%. Brick-and-mortar stores rose double-digits, driven by increasing traffic and average unit retail. While the consumer continues to be impacted by the economic environment in China, the North Face had another outstanding quarter of nearly 50% in Greater China growing across channels.

Now let me turn to the performance by brand and staying with the North Face. The brand had another strong quarter with revenue up 17% , we’re up high-single-digits on a normalized basis excluding the change in shipment timing which benefited wholesale with up 19%. Importantly, and continuing the good results for the last several quarters, D2C was also strong up 12% in this quarter. This compares to a run rate of a little over 20% for the first five months of the fiscal year. However, a later than typical started the fall season, particularly in insulated outerwear, weight on September results which were plus 2%. Globally and across channels, we saw strong performances in bags and packs supporting a robust back-to-school season. Vans had another disappointing quarter with revenue down 23%.

Slow sell-through rates continued to put pressure on wholesale across all regions, while traffic remained challenged and weighted on DTC. As Bracken mentioned earlier, the brand remains loved by consumers that we must and will do more to generate demand. Newness and innovation continued to outperform in silhouettes, like the Knu Skool, Lowland, UltraRange and MTE, which all saw strong growth during the quarter though the volumes in these stalls continued to have limited impact in offsetting the declines in classic products. At Timberland, Q2 revenue declined 10% as growth in both EMEA and APAC was more than offset by softness in America’s wholesale. Results were affected by demand softness for six-inch boots, which negatively impacted both the wholesale order book conversion and DTC.

Outdoor and women’s continued to perform well as the Motion 6 trail and hiking collection became the brand’s number two collection globally, and success in women’s sandals from spring paved the way for new fall boots. Dickies continued to feel pressure from the value and consumer in the core work business. And although sequentially improving versus Q1, revenue declined 9% in Q2. Increased caution from key partners has continued to weigh on results. Last but not least, Supreme had its strongest start to a season in a couple of years with double-digit revenue growth in the quarter. The August opening of Supreme’s new store in Seoul is off to a terrific start and has delivered impressive results across a number of metrics, a strong proof point on the road map of our grow wide strategy, which is aimed at expanding access to the brand to more consumers globally.

Now moving down the P&L. Gross margin of 51.3% was down 20 basis points year-over-year. Although excluding the impact of additional inventory reserves in Dickies, it would have been up 30 basis points. Tailwinds from mix, price and lower promotions were more than offset by product cost and FX headwinds. Positive mix of up 20 basis points in the quarter was driven primarily by international growth but was a lower-than-anticipated benefit as DTC slowed due to the challenges at Vans. Rate was down 50 basis points more than offsetting these benefits as margin expansion from price and lower promotions, which has improved versus last year, but remains higher than fiscal ’22 was more than offset by increased product cost and negative transactional currency impacts.

During the quarter, we booked an unplanned $15 million distressed inventory reserve associated with Dickies, which flows through the cost line and negatively impacted gross margin by about 0.5 point. We generated a healthier operating margin of 12% in the quarter, down 30 basis points year-over-year, mainly reflecting the small gross margin decline and slight SG&A deleverage of 10 basis points. SG&A spend in the quarter was down 1% year-over-year as we continued to maintain tight cost discipline and began to generate modest benefits associated with Reinvent but saw some deleverage in digital and technology and distribution expenses. Q2 adjusted earnings per share was $0.63, down $0.10 versus fiscal ’23, largely due to elevated interest and tax, with higher tax driven by jurisdictional mix and the reversal of tax interest income that had been accrued associated with the Timberland tax payment.

A quick comment on the reported tax expense in Q2. On September 8, the Appeals Court ruled in favor of the IRS in the Timberland tax case with regards to the timing of income inclusion from the Timberland acquisition in 2011. We’re disappointed with the outcome and still believe in the technical merits of our case. This decision has no impact to our cash debt outlook for fiscal ’24 as the payment was made last year. But we recognized a noncash $690 million net increase to our reported tax expense in Q2 which includes anticipated refunds of some tax payments from prior years. The process of filing amended returns for each tax year across both federal and multiple state jurisdictions will take time and we’re not assuming any benefits to cash over the next 18 months from these refunds.

Turning to the balance sheet and cash flow. I’m pleased to report that our inventory is down 10% at the end of Q2 versus last year, in line with our expectation to inflect at this point in the year. This result, despite ongoing revenue challenges speaks to the improved performance of our supply chain and the important results our teams are accomplishing to improve operational metrics and benefit cash flow. Our inventory composition remains healthy overall and is concentrated in core and carryover product. Our use of cash during the first half was slightly better than planned, driven by lower working capital with $19 million used by operations and negative free cash flow of $158 million. As a result, liquidity sits at $1.7 billion, which is again better than our plans at this point in the year.

As it relates to debt, we paid down €850 million term debt in September and ended the quarter with a commercial paper balance of 1 billion. Midway through the fiscal year and at our seasonal peak levels of working capital, total debt is up modestly versus the beginning of the year. Now let me talk about Reinvent, our newly announced transformation program. Through Reinvent, we are addressing fundamental structural challenges that have impacted our performance as well as tackling our cost structure head-on as we expect to generate $300 million in fixed cost reductions. We’ll streamline operations in line with the changes to the operating model that Bracken discussed to generate efficiencies and create a faster and leaner organization company-wide.

We’ll additionally further drive down costs in nonstrategic areas, ensure the overall cost structure across the company is balanced to the business and pointed towards our biggest opportunities. This will include reinvesting a portion of the savings directly toward brand building and product innovation, first and foremost, against our largest brand assets. We expect to achieve the vast majority of the $300 million target on a forward run rate basis by the middle of the next fiscal year. We’d anticipate about half on a run rate perspective will be in place by the beginning of fiscal ’25 as a portion will, in fact, be achieved in fiscal ’24. We’ll provide more specifics on our plans and details around timing over the next couple of quarters. Speaking of fiscal ’24, as Bracken explained earlier, we were resetting our expectations for this year to more appropriately reflect the uncertainty and continued underperformance that has impacted our results to date and retracting revenue and profit guidance for the fiscal year, while updating our cash flow guidance.

Together, myself and Bracken are committed to coming back and reestablishing guidance, and we’re fully confident in our ability to consistently meet commitments. Our decision to retract revenue and profit guidance today centers mainly on four key changes to our assumptions. First, the timing of the Vans turnaround is taking longer than we thought. And specifically, we are now no longer expecting any discernible improvement in half two results relative to half one. Through today’s announced actions, we are addressing with urgency, the work needed to stabilize the business. Bracken and I plan to share our expectations with the market on the timing of the turnaround when we see a tangible impact from the initiatives underway. Second, the North America business, primarily U.S. wholesale is now anticipated to be modestly weaker versus our prior expectations as we look to the back half of the year.

And although much less impactful, we now see a choppier macro environment in Europe. Last, there will be cross currents from Reinvent as we remove costs, change the organization structure and reengineer the Americas for growth. This will create noise in the P&L in the short term. In addition to the changes just highlighted, most notably Vans, which will directly impact Q3, it’s worth reminding the importance of looking at the two quarters, Q2 and Q3 combined to get a more comparable reading of the seasons. This is particularly true for The North Face, which is comping bigger distortion from last year’s late shipment timing and subsequent benefit in Q3 last year and will, therefore, be negatively impacted in Q3 this year. And to remind you, the third quarter’s result – the third quarter’s wholesale result in the brand will also be impacted by the lower overall order book for the season as planned, reflecting greater retailer caution, their focused efforts to reduce inventories and our poor service to customers last year, which we have been working hard to correct.

While we expect the DTC business to continue to deliver healthy growth in Q3, taking it all together, we anticipate global North Face revenue to decline in the third quarter. Stepping back from the near-term impacts and optics I’ve just explained, we continue to feel very good about the underlying consumer demand for the brand to broad-based performance across product categories and geographies and the significant growth opportunity that lies ahead for the brand. Now turning to our balance sheet and cash flow expectations. We continue to focus on reducing inventory and now expect to end the year down mid to high single digits compared to previous guidance of at least down 10%, reflecting the more challenged Vans and U.S. wholesale outlook. Fiscal ’24 free cash flow is now expected to be approximately $600 million, a decrease from previous guidance of approximately $900 million, flowing through the more muted operating results.

We now anticipate liquidity of about $2.2 billion by the end of the fiscal year. Deleveraging the balance sheet remains our top financial priority. We plan to end the year with leverage slightly higher than last year, given the anticipated impacts to half two revenue and profit. We continue to be laser-focused on addressing both the numerator and the denominator moving forward and are taking the necessary steps to impact both, including the $300 million in annualized cost reduction through Reinvent and the reduction to the dividend, which on an annualized basis is approximately $325 million in cash savings. Lastly, as an update on our packs business, all three brands continue to perform strongly, and this positions us well as we progress the sales process.

We are confident we will achieve our objective. In summary, we’re taking the necessary actions to reset the business and strengthen the balance sheet. Our transformation plan Reinvent directly addresses our biggest performance issues, Vans in the U.S. and importantly, commits to lowering our cost structure by $300 million. We will make progress toward our number one financial priority of lowering our debt and leverage from these actions, along with the reduction in the dividend as we set the stage for a return to growth and increased ROIC. We look forward to updating you in coming quarters on our ongoing progress. Finally, under Bracken’s leadership, through our great brands, the continued commitment of our outstanding teams and the Reinvent program announced today, I’m confident we have the foundation to once again deliver strong shareholder returns.

We now open the line and take your questions.

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Q&A Session

Operator: [Operator Instructions] Thank you. Our first question is from Laurent Vasilescu with BNP Paribas. Please proceed with your question.

Laurent Vasilescu: Good afternoon.

Bracken Darrell: Hello, Laurent.

Laurent Vasilescu: Hi, Bracken. Good afternoon, thank you very much for taking the question. And also thank you for the – for your initial thoughts, 100 days in. Bracken, on that, as you get a chance to get closer to the North Face brand, is that you saw in the softer September that changes your view, the direction where the brand is headed as long-term potential?

Bracken Darrell: No, not at all. Actually, I’m really excited about the North Face brand. I think the brand business team kind of across the board, you know, I have – you know, let’s say that we all live through the warmest September on record, I think, in the first half of October look like that now. But my way into work to that was absolutely freezing but only because my hands were exposed because I was wearing a North Face jacket. So I have a feeling, sales are going to pick up. And I just did a big review of all our products with Nicole, who runs – Nicole Otto who runs that business and her team, and I couldn’t be any more excited about it.

Laurent Vasilescu: That’s good to hear. And then maybe a question for Matt, you know, in the sense that you’re pulling the guide but you’re talking about hitting numbers that you are guiding to, that $600 million of free cash flow. Can you maybe just – I know you don’t guide, Matt, by quarter, but how do we think about the shape of the free cash flow between the third and fourth quarter? And then maybe, Bracken, if you can just talk about the $300 million of cost savings, where is that going to go in terms of – is that coming from marketing? I think marketing was 7.4% of sales. Is that the right number for this year and beyond? Any shape on the cost savings and where it’s coming from would be very helpful.

Matt Puckett: Yes. So hi, Laurent, on the $300 million or the reduction in the cash flow, but really, your question is what’s cash is going to look like over the next couple of quarters. I think Q3 will be a pretty strong cash-generating quarter because it’s a heavy direct-to-consumer business with a really short cash conversion cycle, right? So that’s one thing. Inventories will continue to come down. Good progress in Q2. That will continue as we move through the back half of the year. kind of equally probably between Q3 and Q4 from an inventory and working capital perspective. But I would say our cash generation overall will be a little more distorted towards Q3 versus Q4, as it typically is.

Bracken Darrell: And on the cost reduction, first of all, where is it coming from? You know, this is the – this is going to be a very comprehensive cost reduction program. So it’s really going to touch virtually every area of fixed cost. But I just want to make sure I said this in the opening remarks, and I want to reiterate, but we will be reinvesting back part of that back into brand building to marketing and into innovation. Your question – your specific question was, what’s the – what ratio or percentage should we expect? I’m not ready to declare that yet. But I know one thing is for sure, this is a business built on amazing products and amazing brands. And so we’re going to make sure we’re investing at the right level on that. We’ll come back later in the year as we head into next year with real clear principles on how much we’re investing in those different areas.

Laurent Vasilescu: Very helpful. Thank you very much.

Bracken Darrell: Thanks, Laurent.

Operator: Thank you. Our next question is from Ike Boruchow with Wells Fargo. Please proceed with your question.

Bracken Darrell: Hi, Ike.

Ike Boruchow: Hi, guys, how are you? I guess I wanted to – similar to, Laurent, kind of want to focus on North Face. Just maybe, Matt, this is for you. Just to understand a little bit more about the comment about 3Q being down. So direct-to-consumer slowed in September, I think you said it was up two, but it sounds like you know, things are getting cooler, not warmer. Should direct-to-consumer continue to slow, like should we expect direct-to-consumer to also be negative? Or is this more of a dynamic that has to do with the wholesale channel? I don’t mean to get so granular. I’m just kind of curious because I was surprised to hear that the brand could be negative.

Matt Puckett: Yes. I’ll keep this simple, Ike. It’s really a wholesale issue in the quarter and it’s timing, but it’s also the order book itself, which is nothing new. We’ve talked about that for a couple of quarters. DTC, we expect to grow in the quarter.

Ike Boruchow: Got it. And then a quick follow-up. You had talked about choppier U.S. wholesale, makes sense, and you also talked a little bit about seeing some of that pressure overseas in Europe. Could you just elaborate a little bit more, Matt, maybe is that broad-based? Is it more specific to one of the brands? I was kind of curious to learn a little bit more.

Matt Puckett: Yes. I mean I would say, yes, first of all, our Europe business continues to perform well and we expect it to continue to perform well. And it’s far and away kind of the smallest, I would say, impact of how we’re seeing the second half of the business evolve as what’s going on in Europe. But I think it’s fair to say the macro is a little bit tougher. I mean there’s a lot going on there from a geopolitical standpoint, consumer sentiment remains pretty difficult, pretty – a lot of caution being deployed there. Maybe a little more so in the U.K. is what we’re seeing. So I would say it’s kind of across the business, but it’s not significantly impactful. And what I would also have a lot of confidence in saying is that our business there and our platform and the go-to-market strategy. we’re going to win whatever the environment is. We just think the environment is going to be a little bit tougher in the short term.

Ike Boruchow: Thank you.

Bracken Darrell: Thank you.

Operator: Thank you. Our next question is from Lorraine Hutchinson with Bank of America. Please proceed with your question.

Bracken Darrell: Hi, Lorraine.

Lorraine Hutchinson: Good afternoon. Hi. Bracken, I’m interested in hearing the initial steps that you’re taking to first stabilize and then grow the Vans business.

Bracken Darrell: Well, first of all, yes, there’s a turnaround plan in place, which I think you’ve been exposed to before and those steps continue. So my game plan is really to step in until we bring in a new brands – new brand President and really accelerate and then make some select changes. I don’t plan to undo a whole bunch of things. I think the steps we put in place are the right ones. I’d just like to see it happen faster. There are a few things we are changing. You know, this change in North America is a change in our approach to the Vans business. And the biggest problem we’ve had because the biggest part of the business for Vans is in the U.S., is – it’s to address that very directly and quickly. And beyond that, I’ll come back to you and tell you when I think I’ve got something to say. But right now, I’d say just stay tuned.