V.F. Corporation ($VFC)

[indiscernible] VF Corp. Thank you for being here. Bracken Darrell, CEO; Paul Vogel, CFO. Before we kick off, I'm just going to give the mic quick to Allegra Perry in IR to say a few opening comments.

Good morning, everyone. Okay. So throughout today's discussion, VF management may 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 by VF. Unless otherwise noted, amounts referred to on today's call are all on an adjusted constant dollar continuing operations and excluding Dickies basis. The company uses those as lead numbers in its discussion as it believes they more accurately represent the true operational performance and underlying results of the business. VF management may also refer to reported amounts which are in accordance with U.S. GAAP.

Thank you, Allegra, and thank you, Bracken and Paul for being here. Appreciate it. We'll kick off with just kind of a high level. I'm curious to hear from both of you guys, both of you fairly new in the overall scheme of things to the retail world, the brand world. I'm curious just at a very high level, how it's been for you guys generally, how it's compared to your previous experiences? What's been positive surprise, negative surprise? Anything along those lines, I think, would be really interesting here.

I'll let Paul go first.

So I'd say a couple of things. I think one is, from a brand perspective, it's actually somewhat similar, right? When you -- my prior world, I've worked for very strong brands. And so when you have really strong brands, the cultivation of those brands, the ownership of those brands, the protection of those brands, that's all very similar, right? Everything you want to do is in service of making sure that, that brand is growing and you're thoughtful about how you're managing and protecting that brand, right? So that's very similar to me. I think obviously, in the tech world, the ability to make change sometimes can be pretty fast in terms of just writing new code. So it actually -- in my view, it actually makes the decision-making process have to be even faster in this world because you know when that decision happens, it's going to take a little bit of time to see it roll through the system. And so I had a lot of speed in my old job. One of the things that Bracken and I have both really stressed is bringing speed to this world. Because of lead time to get products on the shelves, you can't really take your time and making other decisions. And so that's where I think -- I don't know if it's different to the same. We did things pretty quick in the other world, but we do things quick here for a different reason because there's quick and then there's not so quick. And so I think the better you can be and the more thoughtful stuff you can be quick on, it helps you get that stuff done in a timely manner.

I think for me, it felt -- in the beginning, it felt so similar, it was almost uncomfortable. I was checking myself on every decision because it just felt like literally almost a rinse and repeat of Logitech. And -- because when I went into Logitech, it was a deep turnaround, came in here, it's a deep turnaround. Turnarounds are characterized by your costs are too high, your growth is too low. You've got to change a lot of things. So it felt so comfortable and there was so much change to do that I was almost nervous that I was missing something. As I stayed here longer, the differences have started to appear. And I would say through the first year, it felt like, "Boy, this feels like a play. I know how to run really well." Now it's getting even more interesting. Like, for example, I mean, one of the biggest differences is just the number of leadership changes I've had to make here, including Paul. So I think we've changed the entire leadership team. In fact, just in the last 3 months -- now the good news is they've been really, really systematic and planned. Like in the last 3 months, we announced the transition of Martino, who is running our global commercial organization, is going to step down sometime in the next quarter or so and -- or step away in the next quarter or soand we've already promoted Brent Hyder, who I brought in literally in, I think, the second month I was here, and he ran the Americas for a while. And then our plan was to promote him and put him in place, and we did that. So a very, very long planned transition. Same thing we're doing actually today. We're announcing that Caroline Brown, who is on our board, I asked her to step in to really help us really get the North Face going again. We had a lot of political challenges inside the company. There was a lot of strife and the morale was terribly low. Caroline came in. I thought you'll be lucky if we keep her for a couple of years. She's come and done a super job. In the meantime, we hired in Chris Goble, who was at the Gap. He had led the turnaround of the Gap brand. He's been with the Gap for a long time. He'd run the North America business for the Gap, a little like Brent had. So we had somebody in the -- and we put him on Dickies. And then we held him back from Dickies because we knew we were going to make this move. So we've now -- now we're systematically making the next step. So Caroline will go find a new transformation she really wants to do, and Chris will be promoted and put in charge of the North Face brand. So the cool thing about this situation is that we've been able to systematically do a lot of the things that, honestly, you would want to do in a long time frame, but we've been able to do them relatively short. And that's probably just because of my experience. And the last thing that I'd say is quite different is AI. Paul talked about speed, and I really am very excited about speed. I always say when I hire people, people usually ask you, what do you hire for? It's definitely too of Chris and Brent and others, Paul. I really end up hiring for 2 things. By the time you're a CEO and you're hiring people, they have the capability. I mean, everybody I interviewed. But the 2 things that really stand out are the personal drive to have an impact. It really stands out -- usually stands out in an interview. And the other one is speed, which is harder to see in an interview, but they just drive to make things happen right away because the faster you make things happen, the faster you find out if they work, then the faster you can change. So I think this has been a super exciting -- it will be 3 years this summer for me. Super exciting 3 years. And we're definitely on track to what I thought we could do here.

One of the things that you inherited when you came -- both of you was kind of a struggling Vans business. I think that's been a hot topic for certainly the investment community, I'm sure within the company. How do you feel about the progress? Maybe give us an update on how you feel about that brand by geography where you're furthest along where you still have more work to do?

I love the Vans brand. I loved it before I got here. I liked it before I got here. I loved it once I got into it. And it is a phenomenal brand. You can't see because we're not doing video, but I have the coolest shoes. I mean these are -- the exciting thing for me to be able to say today is we have so many cool things out there and so many more coming. So it's -- I'm really, really excited about the brand. I'm also very patient, as you know, probably more patient than some investors would like. I think it's more important to really get the brand sturdy and healthy and then grow it through elevation, through innovation and through great marketing in a really systematic long-term way than it is to try to get it quickly turned around. I think some people would have loved for me to just wave a magic wand and get it turned around. I've seen people do that. It does turn around. It's easy to do that. And then it goes the other way pretty quickly in the next year or 2. I'm not here for that. We want this thing to be a long-term sustainable growth engine again, and it can be a really strong one. We've got fantastic products that are out there. We've got even better ones coming. And I'm super excited about the team on the brand, too. I mean from the Head of Marketing, to the Head of Design, to the Head of Merchandising, [indiscernible], we just got a great team. So I'm very excited about the business, but I'm patient.

And about in terms of where you stand in that journey by geography, where do you feel like you're furthest along? Where is the brand starting to really resonate? Any green shoots you can share?

Yes. I'm sorry, I didn't answer that right away. I would say -- I think I've said this in the last couple of calls, I'm really fixated on the U.S. on our own DTC, not because it's the only thing that matters, it is more than half the business is our U.S. business, which is because I think you're going to see stuff there first. We already started to see it last quarter, as you know. The excitement around the brand is going to show up first where you have the greatest number of new products. And I originally thought, well, maybe we'll see it in wholesale first because they can curate faster because we've got -- we'll have a few new products coming and they'll be able to curate their assortment and get a bigger proportion of that. That's not exactly the way I think it really has worked. I think it's the opposite. I mean I think where we can bring -- it's taken longer, but I think where we could bring a broader assortment of new products where you can really see what's coming and see it in the context of apparel has -- that's where we're starting to see it. And so e-com, I think, went positive for the first time last quarter in the U.S.. I think you're going to continue to see great progress in the U.S. market, both e-com and brick-and-mortar. The rest of the world will be slow. I mean I think APAC will be very slow because the brand was never well established there. So I think our sales there are really built on kind of retail momentum and e-com momentum more than fundamentals. And so I don't expect magic in APAC. And I think EMEA will be somewhere in between. EMEA, we do have a strong brand there, but not as strong as the U.S. So keep your eyes on the U.S.. That's where the action is.

Got it. You referenced some management changes within the North Face. Maybe talk about what prompted those changes, what you're looking for to drive momentum in that brand? Anything that needs fixing? What are you looking for new leadership to do?

First of all, this was a plan. So we've had this for a while, and the North Face business is in good shape. So you've seen the growth quarter-by-quarter, and we expect it to look something like that all the way through next year. So we feel good about where we are in the North Face. What I do think we'll get from Chris, which is exciting, is he's somebody who comes in with a direct commercial background and a direct merchandising background, which is a little different from a lot of the presidents that go into these jobs. Many of them in this industry don't have both, that combination of practical and commercial experience, delivering the numbers, making sure you know what the assortment ought to be by channel, even by retailer and at the same time, have a really strong merchandising background. I mean this business is a product business. If you don't have great product, you're not going to win. So he's got that rare combination of both, and I think he's going to bring a really good touch to that, probably a simplifying touch to that. And the North Face is a big, healthy brand, but it's also complex, and I want to keep simplifying it. Even as we expand into 365 days a year, expand into more and more women's product, elevate more of our product, it's working. We're doing that now, but we can do that and make it more transparent to consumers.

And we touched on 2. Let's go for the third, Timberland. What are you seeing? What are you looking for? This brand certainly has some momentum. How do you think about the longer-term growth opportunities at Timberland? What is it that drives that momentum?

It's really cool to -- being a part of this business is so cool because each brand has a really defined challenge. The challenge in the North Face is how do we double that thing when it's already so big. And the answer is, boy, do we have a lot of opportunities and the momentum is with us. The challenge of Vans, of course, is how do we get the momentum back. It's starting to come back now. You're seeing -- you mentioned green shoots. We're seeing -- we're selling out of more and more of the new products. I mean all the new products are working, almost all. I think there's probably almost -- there are very few exceptions. When we launch something, it really sells out. We've got to be a little bolder on our buys. And Timberland, the story is how do we get this incredibly strong momentum we have on the brand and how do we make sure it transfers into other products beyond that yellow boot everybody is so familiar with. And we're going to do that. We've got a great plan to do. We've got a great team to do it. We're starting to do it. If you keep an eye on our Instagram, you see how we're doing it. We're not going to let up on making sure that we're selling that yellow boot and the black boot, but we're going to keep bringing it into new things in both footwear and apparel. So that's a challenge. I feel good about it. That's another place where we have a fantastic team, great marketing, great products. Just stay tuned. It's going to be fun to watch.

Maybe we'll give one to Paul, just to give you a break, Bracken. You guys have committed to a 10% EBIT margin by '28. At the time you gave that guidance. Since then, we've had Liberation Day, we've had this [indiscernible] decision, had a few curve balls. So maybe talk about where you feel you're on track towards hitting that goal, maybe where you're running above, if there's any places that you're running behind just as we look out to hitting that 10% target?

Yes. So we definitely still feel very good about the targets we put out. if you kind of break it down, the fiscal '28 number, the exit run rate number was you kind of premised on flat growth on fiscal '24, right? So we do need a little bit of revenue growth in there, not a ton, but a little bit to get back to sort of what we said flat from that point. And we expect to get that. Second, on the gross margin side, we said 55%. We're pretty close to it now if you kind of look at where we're going to end the year based on how we've done for the first 3 quarters and then for Q4. So we're pretty close to there. So I think we're definitely on track if not ahead of track on the gross margin side. On the SG&A side, we're right on track there as well, right? You continue to see -- you'll see leverage each year. You started to see some leverage. I think you'll see incrementally more leverage as we go on. And so we feel good about it. And not only that, we're generating free cash flow and positive free cash flow. We said it would be up this year. It will be up this year, which is great. We've been able to pay down the debt. We said our debt would be below 3.5x or below at the end of the year. So we're on track to hit that 2.5x at the end of fiscal '28 that we talked about. So we feel like we're just kind of systematically checking off all the things we said we're going to do. We feel really good about it, and we'll continue to execute.

Can you maybe talk about some of the puts and takes on gross margins as we look out to next year? Just it's a complex business, a lot of moving pieces. Maybe talk about what's working for you, what's working against you. And I'd love to also know is there any low-hanging fruit on the SG&A side that you can still kind of extract?

Yes. So on the gross margin side, obviously, the tariffs are obviously running through. We've talked about we'll be able to mitigate it within fiscal '27. So maybe not for all of fiscal '27, but within fiscal '27, we'll be on that rate. We feel like we're projecting where we want to be, right? We said that pricing really wasn't a factor in Q3, will have some impact on Q4 in terms of helping mitigate it and moving forward. With all that, we've been able to deliver kind of at or better-than-expected gross margin. So that's been really great. On the margin side, obviously, we're always working on sourcing and supply chain, all those things. And so just trying to continue to get incrementally better there. And then so much just being selling more full-price items, right? And the more we can sell full-price items, be a little less promotional has also helped. So that's kind of been the mix that's gone into the gross margin. So I would say really good job on the supply chain sourcing side. We're going to have the ability to mitigate the tariffs the way we thought, and we're starting to do a better job on sort of selling full price on the gross margin side. On the SG&A side, I don't know if there's any more low-hanging fruit. I think it's just -- I mean, SG&A is just a day in, day out, year in, year out line items that you just have to pay attention to, right? And I think in our case, obviously, we're trying to return to growth, so you need to be very thoughtful and strategic about your SG&A. And then when you return to growth, it's like how do you not get ahead of your skis? All of a sudden, you start seeing real growth. It's easy to kind of take the foot off the gas in terms of the discipline you want on the SG&A side. So I think we're in that position now where, hopefully, we're going to return to growth. Obviously, we'll be up this year, just a little bit, but we'll be up. And then -- so it's -- continue to just show that discipline. And I think that's where we're headed on the SG&A side.

Helpful. In the U.S. specifically, if we were sitting here 2 weeks ago, I might have asked you how are you thinking about refunds coming back to the U.S. consumer and how much of a driver can that be to the business if you were even really thinking about it as a driver in yours. Now we're sitting here with some pretty crazy fluctuations on oil. Talk to us about the U.S. consumer, the macro, how that sort of pervades your view of growth across brands.

I think generally speaking, I think I said this 6 months ago or something that the U.S. consumer has been stubbornly positive. And I don't know, the best predictor of the future is usually the past, and I think that's probably going to continue. We don't expect robust consumer growth ahead, but we don't need much. I mean we have so much in our control. We're -- as you -- we started by talking about Vans. We've so much in our control to make sure we're really executing well. And we have a lot of things we're improving right now in all 3 brands. So I don't think we're very dependent on how good or bad within a range. How good or bad the macro is in the U.S. to have a good business. We should have a good business regardless. And I'm not saying no matter what. I mean if things got really bad for some reason, it would be different, but they haven't. And it feels like we're probably going to keep going about the same way, we'll see. Nobody can really predict with this war right now in Iran. It's really unpredictable. But I'm quite optimistic. I think we have a lot of things in our control.

How about some of the other geographies? Obviously, your global business. Talk to us about Europe, talk to us about Asia, how you're looking at the macro, the backdrop that you're playing under?

Yes. I think EMEA is tougher. I think they always -- now I'll generalize, and I apologize to all the Europeans out there for having another American talk about Europe. I think Europe is always a little more -- takes things a little harder and takes good news a little softer. So I think that probably the challenge over there is the Middle East is closer there, and I think they probably feel it more every day than we do a little bit. And they've got 2 wars happening in the Middle East right now or 2 battlegrounds happening in the Middle East, 3 in Europe and the Middle East put together, if you add Ukraine, which, of course, you have to. And so there's just a lot going on over there. So I think it's a little rougher over there. But again, our business is okay over there. There's nothing too alarming, and I think it's been okay. And I think we're almost -- and maybe Europeans too are almost desensitized to all the challenging news, which in a way, from our business standpoint, is kind of a good thing. APAC is different. APAC, it feels like it operates more in isolation, and it's a much smaller part of our business. The one thing you do know is there is nothing happening in the Middle East right now from a business standpoint. Now the good news right now for us is that's a really small part of our business, but it's a lot of potential out there. So one day, we'll get that back. But yes, I think, generally speaking, I think outside of especially Europe, probably we'll feel it more.

Maybe talk to us about tariffs. We've obviously had some fluctuations, right, with in recent weeks. Maybe talk to us about how you kind of changed and adjusted to the higher tariff world and what sort of changes you might be making now, if any? And I'd love to hear also what your plan is if we are operating in a lower tariff environment, does it mean anything for you in terms of pricing and how you think about what you put in front of the customer from a price point perspective? How did that change?

I'll go first and then Paul, why don't you pick it up from here. I think, first of all, we adjusted very fast to the tariffs. I mean we -- as I think you all know, we've been very practical and said, the tariffs just aren't going to affect our business as imposed before the Supreme Court decision. They're not going to impact our business by the middle of next fiscal year because we're going to offset them between cost reductions and pricing, and we're well on track to do that. Now that they've been -- after the Supreme Court decision, we're operating as if that Supreme Court decision didn't happen because we're not going to count on anything. We don't believe in luck. So we're going to -- we'll see. If that happens, it will be great. If it doesn't, we'll be fine.

Yes. I mean I don't know if there's much more to add on that. I think to Bracken's word, we're operating as if nothing has changed, right, in terms of -- anything change down the line, we'll adjust. But we've acted very quickly. We work closely with our suppliers. We've been very thoughtful about how we're going to raise prices, and it's very different by brand. It's very different by product by brand. And so for us, it's just sort of status quo. And then I think when there's this level of uncertainty, just kind of stay the course unless something is definitively changing.

And if we were in a refund situation where you would actually get something back, what is that number? What did you pay under IEEPA tariffs? And if you do have some money coming back to you, what is...

Yes. We haven't disclosed that number. I don't think we have, right, Allegra. We probably can. We haven't done yet. So I don't know the exact number. But it's -- I mean, look, it's not immaterial. I mean it's real money. But again, at this point, we're not counting on it. So if everything goes through and it turns out that we get the money back, great. But at this point, we're assuming, again, no change to anything.

We're also not assuming, going back to your first question, that this decision is going to have any material effect on pricing in absolute terms or relative to other companies.

Got it. You made some changes from an organizational structure. Maybe can you talk to us about those, how it's allowed you maybe to be a little bit faster speed to market, the positives and the benefits from those changes?

Yes. I kind of opened with that. We've made a series of changes, and we're going to continue to make changes. I personally love being close to the brands and close to the commercial teams. And those are the 2 areas where I probably feel like I can add the most value. So everything I do, I always think about how can I make sure that I get to be close to those leaders who are leading those parts of the business. And some of these changes are directly on that. I also think you're never done. We have a very, very deep and rigorous succession planning process. So you've got to always have a plan for where you're going next, who you're developing, who are those people. We've got such an ambitious program for developing people inside the company. That's a key part of every change we make. I'm really, really excited about the path that our Chief People Officer, Brent, had and Tyler has. We've got a new Chief People Officer in place now. He was promoted internally, just like Chris was into the North Face. So I'm really excited about really the people development part of our model. It's going to get stronger and stronger. And we're already able to attract really great talent. And I think we're going to keep that talent and grow talent internally a lot more now. So yes, overall, the changes are -- they're beginning to be kind of table stakes every quarter, every year for us. It's just part of it, but it's a lot of internal promotion.

AI is a hot topic. We're hosting a lunch today on that topic, exactly. Curious how you're using AI in your business to find efficiencies. How are you using it today versus what you see in the future? How is it helping you, if at all, right now? What kind of changes do you expect on the AI front?

I'll start and again, hand it off to you, Paul. We've got a very ambitious agenda for AI like most companies do or should. I mean the obvious places you see it are in places like customer service where it's a direct cost reduction and efficiency play. But we probably have, I don't know, 14, 15, 16 different AI projects across virtually every part of our business. All of them are relatively small today. We're investing aggressively in AI across the board. We think it's the game changer, people are thinking it is. We're also aware that -- we don't see anybody who's really done anything remarkably transformative yet in this industry. And so we're hesitant to talk too much about what we're doing until we have real proof. And it's not skepticism on our side at all. It's practical reality. We like to do things and then talk about. So we probably won't talk too much about what we're up to, but we're excited about what's possible.

Yes. I would just add, Bracken talked about the sort of the brand and the product side and the marketing side. And for us on the corporate overhead side, there's obvious things there as well, right, when you think about finance or HR or the technology side. I mean in finance, in particular, there's just a ton of opportunity there, right? I mean there is a curve to get there, particularly when you've got as many brands as we do, making sure you've got sort of the data in a place that you can really analyze it the way you want. But I mean, there's going to be semantic models where literally, if you ask me a question, I'll just be able to type it right into the chatbot and get the exact answer you want, every number, every trend line, everything with a chart and a picture, and it will happen automatically. So we're not there yet, but we're not years and years away from that either.

I'll give you one little example of something we just -- so we have so much going on, just one tiny example. We just introduced last week a portal where you can just go in and depending on what kind of thing you're trying to solve, you didn't have to go into the AI engine itself, you go into our portal, you decide what kind of question am I asking? Is it about creativity? Is it about analysis? You just go into that, you hit that portal, you ask the question, you get the answer, it goes to the appropriate engine. So -- and that's so that we can make sure we shield our data from the broad AI models data, but also that we give people super frictionless access to AI across our company. That's just one tiny example of what we're up to. We're doing a whole bunch of things like that.

On the AI topic, it kind of moves into just the discussion overall of cash, right? So -- and CapEx, like how much investment are you having to make on AI? Is that more of a CapEx investment? Does it run through the P&L? Maybe talk about cash flow and priorities for cash in that context.

Yes. I mean it's not that big right now. I think it will probably be a combination of both, if I'm being honest. There'll be some long-term projects that will capitalize and there will be some short-term things will be just expenses we're trying to figure out how they are. The numbers right now are not that big, but they will obviously get bigger. And that just goes into the broader CapEx strategy we have in general, which is balancing our free cash flow with our CapEx, which -- within CapEx, the 2 biggest ones for us are really on the technology side, on the store opening side. So just making sure that as we open stores, we're doing them effectively with a good ROI. As we're building out technology, we're doing it smartly and efficiently and then having room to add in the next-gen stuff like AI or other investments we want to make in other areas where we think there's long-term growth.

But I also suspect that the bigger expense long term is not going to be CapEx. It's going to be expense. And the great thing about that is there's so much efficiency in the application of AI to offset that expense and deliver significant savings on top of it that. I think we're going to be really successful in lowering our costs as we invest more in AI. And it's a little early to say that with 100% confidence, but say 99%. I feel really strongly about that. I think we're in a really -- there's a sweet spot ahead on this.

And also I'm curious, again, it's capital allocation to a certain extent. You've got a history of buying brands. You've got a history of disposing of brands. Where are you now just in that thought process? What's next, if anything, at all?

Yes, it's all good. Look, I think a couple of things. I think one is we're very committed to getting our leverage down, right, which we've talked about. And so you can think of our -- from a capital allocation standpoint, any excess cash is going to go towards bringing that leverage ratio down. And that's -- we're on that track. We've given you kind of where we are at. So until we're 2.5x or below, I think that probably kind of limits some of where we may go. But I'll steal the line Bracken always uses, we're all here for growth, right? And so we all want to grow, and we want to get this business back to growing. Growth obviously comes from organic growth, but eventually, it also can come from M&A growth. And so we're not there yet. We've said all along, our #1 priority is to get our leverage in the spot we want to get in. And then from there, we'll see. But I think about it really from optionality, right? And what we're trying to do is get this business back to a place where we have maximum optionality to do what we want to do to grow the business.

I also think we're in this luxurious spot that may be hard for some investors to see today where we have so much internal growth potential that we don't even need to worry at all about acquisitions. I mean If I look just at those 3 large brands we talked about, all of them can grow strongly. And then if you add Ultra, which we haven't talked about it all today, Ultra is a running brand that's last quarter grew, I think, over 20%. It's between 20% and 35% the last few quarters, and I don't see any reason why that's going to let up. And that's before we even expand its "footprint" of what kind of business it can be. So I think there's a lot of growth there. And then there are other small brands we never talk about that have lot of growth potential. So we have a lot of potential here internally before we worry about acquisitions. And my general view of companies is that if you do nothing but just grow with the market, you're going to grow low single digits. That's your business. If you outperform the other people in your business by having a better innovation engine and a better marketing engine, that's always the goal. That's certainly our goal, and we're going to do that, then you grow mid-single digits. And if you do that and you're entering new categories, either by acquisition or through organic decisions to go into new categories within those brands you have, then you can grow upper single digits or even touch double digits on a consistent basis. And so that's the model that we're running. And we're not at that mid-single digits yet. We're on our way to lower single digits. But one day, I think we'll get higher than that.

Can you maybe talk -- on that growth topic, can you maybe talk about the drivers when you think about DTC and retail versus wholesale, maybe by brand, where you see the outsized growth opportunities? We've heard from a couple of folks at this conference that are saying things like, "Hey, stores are back, right?" And maybe e-com is losing a little bit of share. Some of the younger consumers like to go into stores, which can impact both your retail business and your wholesale business. But I'd love to hear your thought on the drivers for each of those brands.

Well, I'll talk for just a second. I'll do -- I'll break it down by brands maybe one time and then I'll ladder up. On Timberland, we really need to expand our retail footprint because people want to buy Timberland, they don't know where to go buy it. And if you're going to buy a footwear, especially a boot, you kind of feel like you need to try it on. So we've been -- we've expressed this, we need to have more stores for Timberland, especially in the U.S. market where there's not enough obvious places to go buy. Now that said, if I step back up again, all 3 of those channels are super important. And I think they're all going to play a really important role for us. The cool thing about DTC, as I said earlier, is that you can bring your products to market in an unfiltered way, and you don't have to convince somebody else that they're going to sell. You just have to convince yourself. So -- and we haven't always taken advantage of that, by the way. We got -- our own process has got in the way of us doing that. So we're changing that right now. And then the cool thing about wholesale, which I just love, is it's the most competitive environment there is to sell in. I mean you go in there, the average person who walks into a wholesaler is not necessarily and maybe not at all committed to your brand, but they're committed to buying something. They're in there to do something. So it's a real torture test, and you must be in there or we must be in there to make sure that we have compelling products and compelling marketing. If we're not winning in there, then we have to ask ourselves what's wrong with us. So I love being kind of equally distributed among the 3. The little larger on wholesale, I like having half the business be wholesale because man oh man, if you're not winning there, you got to soul search. And then I love the e-commerce business because it's so fast and you can do things so lightning fast there. And then bricks-and-mortar is where you really get to experience your customer and you get to find out, are we doing everything we can to get them everything they might need in that shopping trip. So I like all 3, and I think we're going to do well in all 3 over time.

Maybe talk a little bit more about the wholesale channel and where you're seeing the greatest receptivity to the product? Which brands are you just having great conversations and seeing great traction with those wholesale accounts? Because it is a challenging environment, right, to get that shelf space and continue to have those partners order up every year.

Timberland is like running through open doors right now because there's very strong demand. And so we're -- I'd say there is the easiest discussions. The opportunity in North Face is big because we had a period of several years ago where we didn't do as good a job with our wholesalers as partners. We just didn't treat them well. We didn't serve them well, and we paid the ultimate prices as our business shrunk in there. And so we have the opportunity now to get that back, and we're really working on that. We're trying to be a really first class. First of all, good and then great wholesale partner for all those players that are so important to us. And then Vans is, as I said, focus on the U.S., focus on DTC, wholesale will follow that. We have a few key wholesalers who are really critical to that business long term. But honestly, we can do so much in DTC before we really are winning big with them. And I think you'll see those come back. It will be sequential. We'll first win in DTC and Vans and then we'll win in wholesale. And again, for all those comments, I'm really focused on the Americas business, which is about half of our business.

Got it. How about when you think about from a traffic and units perspective versus price? What do you see as being the primary driver of growth? And how does that differ by brand?

Well, I'm not -- maybe I'll step back and just say traffic in general is like the -- that's like the holy grail of retail, right? So getting people into stores is really key. And the traffic in general has been more difficult, I would say, since I got here than it was before I got here. And I suspect that's starting to change a little bit by brand, and we'll see. But I'm, again, focused on the U.S. market. I think we're starting to see that change by brand, and I think that's a good thing. But there's so much beyond traffic that -- and this is one of the things I really learned in this business. The execution in store is so critical to really the performance of the business. And we were not executing at the level we could have been. And as of about 3 or 4 quarters ago, we're starting to see a change in that. We're getting more out of everybody who's walking in that store. And that's great because when the traffic comes on top of that from brand heat, brands like Timberland and North Face and then ultimately Vans, we're going to be in a much better spot. So overall, I think traffic is the ultimate measure of brand heat, and we've got a ways to go before I'll feel like, okay, we're really there.

Got it. And with all this talk of growth, I guess, just going back to that 10% EBIT margin target that was kind of put out there under a no-growth scenario initially. But maybe can we talk about that? And what does that potentially look like if you are, in fact, successful at achieving some of these growth levels that we're talking about?

Yes. I think we always -- I think we had said at the initial Investor Day that the targets we have was sort of a base like this is what we were going to get to. It didn't mean that's where we're going to stop, right? And so I think we've always believed that 10% was a good starting point for saying, "Hey, here's what we can get back to. Here's what we think a well-run, well-executing business should perform at and we can get there by this period of time." That was the 10%. I think we also said that we believe we can get above that. And then the question is how far above that is really just dependent on where we want to invest, how much we want to spend to continue to grow the business, where the opportunities are. And so as I said before, I think we're really confident in the numbers we put out, the targets. We think we'll hit them. If growth starts to really accelerate, yes, I think there's probably upside from there, again, if that happens. And then the question is how much of that upside do we use to reinvest either into the current businesses or something else or how much we would flow to the bottom line. It would be a great problem to have and we have it.

We're almost at time, but maybe Bracken, maybe just to close up, what's got you most excited within the business right now?

I don't think I've ever been as excited as I am right now. Last week, we had 800 of our leaders in a big meeting we do every year to plan out next year. We really celebrate this year and then plan next year. And I think I can safely say, man, there are people who are walking out of there super pumped, and I was. And I just feel really good about our plans. I feel really good about our teams. I think we're just committed. And I think there's nobody working in our business now who doesn't see that we can be a really strong, really strong long-term growth business. That's what I came for. That's what everybody came for.

Appreciate it, Bracken and Paul, thank you for doing this, and thanks, everybody, for joining.

Thanks so much.

Thank you.