VF Corp: 2Q27 Immediate Call Postmortem

As usual, the entire focus from analysts was on Vans. The big reason for confidence in the expected jump in Vans 2H sales is because “we are looking at orders”. Wholesale partners are seeing the strength in DTC. Bracken wanted to “double down” on point that Vans is in a very unique price position and appeals to both sides of the K shaped economy.

Have better visibility overall on things than in the past. Filed the Q today – “have never done that before”. At point now where Bracken thinks they could guide for next year (but hes not going to). “2029 is the year after that and we will deliver on the 10% operating margin we promised”

Bracken started call by saying an unrecognized aspect of story is triple leverage. They have three forms all working at once. First one is operating leverage (not stopping at 10%). Second is declining tax rate (mid 30’s to low 20’s over next few years). Third is debt with interest going down so EPS up, plus paying down debt increases equity value in enterprise value.

75% of the business is growing, which is up from 43% in FY24. Bracken thinks a healthy consumer brand should be 80%+.

Vans might have been a little below what they expected (“wholesale softness”) but there is a “swagger” in Costa Mesa that’s been missing for some time. Come on dude, don’t use the word swagger when you miss. Vans inflection started with Americas ecom a few quarters ago, then that became Americas DTC total, and now global DTC is up (first time in five years). Pearlized and Souvenir drove excitement and demand – we talked about how this is largely the product story in our report: The “Gold” Standard – 9/8/26

Vans should be down 2% or better in the second half – I dunno, it’s just hard to have them miss on wholesale this quarter and still expect them to massively improve in the second half because of wholesale. They say they have better visibility for fall/winter 26 and spring/summer 27. They think Vans should be only down 4% or better in 3Q, so that’s meaningful sequential improvement.

TNF growth was broad based, including apparel growth that was driven by bottoms, transitional jackets, and double digit global footwear growth. The reversible Nuptse is new innovation.

Timberland six inch boot continues to grow but shoes and other boots growing at faster rate. Sneakers and apparel are significant white space – we shouldn’t expect material contribution in short term but “a lot happening behind scenes”.

Altra up over 40% as road and trail both grew. “We already lead in trail”. In FY27 the growth in Altra should fully offset the decline in Vans footwear.

About 180 basis points of the 290 basis points of gross margin expansion was from structural, lower product cost, integrated business planning, and price increases. Remainder was FX. Gross margin will be up for 3Q but not as high as 180 basis points. FX tracking to flat.

Andreeva and Binetti got a bit more color on Vans in Q&A. In 2Q there continues to be a little destocking and might continue a little bit longer – still they “very confident” on order book for 3Q and 4Q. Will definitely see more new products in wholesale in 2H. Level of innovation and renovation is going to keep going and might even accelerate. Lot of new categories have not touched yet, especially in apparel and women’s footwear. Have visibility into the confirmed and cancellation orders for both fall/winter and spring/summer. Sell in process on 6-9 month lag, started launching new styles in DTC during Q3 last year and only expanded that to wholesale later.

Sounds like Laurent is pitching the idea of Vans replacing Air Jordans now that Nike wants scarcity again. They just reiterated their confidence and what they are seeing in the order books.

Must admit that was a super cool Altra video at the end of the call.

*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends (not edited). Management has given some topics to dig deeper into and will circle back afterwards with much more in depth work on what was mentioned. You can find that work (and more on VF Corp and other retail/consumer research) at our website here: M Squared Capital

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Originally posted on X and Substack.