V F CORP 10-Q

ITEM 2 — MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. VF Corporation (together with its subsidiaries, collectively known as “VF” or the “Company”) uses a 52/53 week fiscal year ending on the Saturday closest to March 31 of each year. The Company's current fiscal year runs from March 31, 2024 through March 29, 2025 ("Fiscal 2025"). Accordingly, this Form 10-Q presents our third quarter of Fiscal 2025. For presentation purposes herein, all references to periods ended December 2024 and December 2023 relate to the fiscal periods ended on December 28, 2024 and December 30, 2023, respectively. References to March 2024 relate to information as of March 30, 2024. All per share amounts are presented on a diluted basis and all percentages shown in the tables below and the following discussion have been calculated using unrounded numbers. References to the three and nine months ended December 2024 foreign currency amounts and impacts below reflect the changes in foreign exchange rates from the three and nine months ended December 2023 when translating foreign currencies into U.S. dollars. VF’s most significant foreign currency exposure relates to business conducted in euro-based countries. Additionally, VF conducts business in other developed and emerging markets around the world with exposure to foreign currencies other than the euro. On July 16, 2024, VF entered into a definitive Stock and Asset Purchase Agreement (the "Purchase Agreement") with EssilorLuxottica S.A. to sell the Supreme ® brand business ("Supreme"). On October 1, 2024, VF completed the sale of Supreme. During the second quarter of Fiscal 2025, the Company determined that Supreme met the held-for-sale and discontinued operations accounting criteria. Accordingly, VF has reported the results of Supreme and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively, through the date of sale. In addition, interest expense and the related interest rate swap impact for the delayed draw Term Loan ("DDTL") were reallocated to discontinued operations due to the requirement within the DDTL Agreement, as amended, that the DDTL be prepaid upon the receipt of the net cash proceeds from the sale of Supreme. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets, through the date of sale. These changes have been applied to all periods presented. Refer to Note 4 to VF’s consolidated financial statements for additional information on discontinued operations. Unless otherwise noted, amounts, percentages and discussion for all periods included below reflect the results of operations and financial condition from VF’s continuing operations. RECENT DEVELOPMENTS Supreme Divestiture As noted above, VF completed the sale of Supreme on October 1, 2024. VF received proceeds of $1.486 billion , net of cash sold and subject to post closing adjustments, and recognized an estimated after-tax loss on sale of Supreme of $127.5 million, whic h is included in the income (loss) from discontinued operations, net of tax line item in the Consolidated Statement of Operations for the nine months ended December 2024 . VF used a portion of the net cash proceeds to prepay $1.0 billion of the DDTL on October 4, 2024, pursuant to the terms of the DDTL Agreement, as amended, which required repayment within ten business days of VF’s receipt of the net cash proceeds from the sale of Supreme, and to repay $450.0 million of commercial paper borrowings upon maturity during the three months ended December 2024. Reinvent On October 30, 2023, VF introduced Reinvent, a transformation program to enhance focus on brand-building and to improve operating performance and allow VF to achieve its full potential. The first announced steps in this transformation, which cover the following priorities: improve North America results, deliver the Vans ® turnaround, reduce costs and strengthen the balance sheet, are as follows: • Establish global commercial organization, inclusive of an Americas region: VF changed the operating model with the establishment of a global commercial structure. This included the creation of an Americas regional platform, modeled on the Company's successful operations in the Europe and Asia-Pacific regions. With this change, VF created the role of Chief Commercial Officer, with responsibility for go-to-market execution globally. • Sharpen brand presidents' focus on sustainable growth: A direct consequence and intent of the operating model change, which is particularly critical at this stage for the Vans ® brand, enables brand presidents to direct greater focus and attention to long-term brand-building, product innovation and growth strategies. • Appoint new Vans ® President : Sun Choe was appointed the new Global Brand President of Vans ® effective late July 2024. • Optimize cost structure to improve operating efficiency and profitability: Actions have been implemented in a large-scale cost reduction program, which is expected to deliver $300 million in annual fixed cost savings, by removing spend in non-strategic areas of the business, and simplifying and right-sizing VF's structure. • Reduce debt and leverage: In addition to improving operating performance, VF is committed to deleveraging the balance sheet. VF used the proceeds from the sale of Supreme to prepay the DDTL and to repay $450.0 million of commercial paper borrowings. During the second quarter of Fiscal 2025, the Company initiated the next phase of Reinvent, which is focused on a return to growth and improvements to profitability. In doing so, the Company initiated a set of transformational workstreams focused on revenue growth, margin expansion and selling, general and administrative expense contraction. Reinvent restructuring charges in the three and nine months ended December 2024 were $16.4 million and $41.8 million, respectively, and cumulative charges were $150.5 million since the inception of the program, which primarily included c osts associate d with severance and employee-related benefits and the impact of asset impairments and write-downs. 29 VF Corporation Q3 FY25 Form 10-Q Table of Contents SUMMARY OF THE THIRD QUARTER OF FISCAL 2025 • Revenue increased 2% to $2.8 billion compared to the three months ended December 2023. • Outdoor segment revenues increased 6% to $1.9 billion compared to the three months ended December 2023, including a 1% unfavorable impact from foreign currency. • Active segment revenues decreased 6% to $766.3 million compared to the three months ended December 2023. • Work segment revenues decreased 3% to $216.5 million compared to the three months ended December 2023, including a 1% unfavorable i mpact from foreign currency. • Wholesale revenues increased 8% compared to the three months ended December 2023. • Direct-to-consumer revenues decreased 3% compared to the three months ended December 2023, including a 1% unfavorable impact from foreign currency. • International revenues increased 1% compared to the three months ended December 2023, including a 1% unfavorable impact from foreign currency. • Revenues in the Americas region increased 1% compared to the three months ended December 2023, including a 1% unfavorable impact from foreign currency. • G ross margin increased 170 basis points to 56.3% compared to the three months ended December 2023 , primarily driven by lower product costs and less promotional activity. • Earnings (loss) per share w as $0.43 compared to $(0.24) i n the 2023 period . The increase was primarily driven by increased profitability in the Outdoor segment during the three months ended December 2024 and lower impairment charges in the current period compared to the three months ended December 2023 . ANALYSIS OF RESULTS OF OPERATIONS Consolidated Statements of Operations The following table presents a summary of the changes in net revenues for the three and nine months ended December 2024 from the comparable periods in 2023: (In millions) Three Months Ended December Nine Months Ended December Net revenues — 2023 $ 2,780.2 $ 7,668.4 Organic 60.5 (301.2) Impact of foreign currency (6.8) (6.3) Net revenues — 2024 $ 2,833.9 $ 7,360.9 VF reported a 2% increase and a 4% decrease in revenues for the three and nine months ended December 2024, respectively, compared to the 2023 periods. The revenue increase in the three months ended December 2024 was driven by an increase in the Outdoor segment, partially offset by a decrease in the Active segment. The revenue increase in the three months ended December 2024 was also due to increases across all regions. The revenue decrease in the nine months ended December 2024 was driven by declines across the Active and Work segments, partially offset by an increase in the Outdoor segment. The revenue decrease in the nine months ended December 2024 was also due to declines across the Americas and Europe regions, with the most significant declines in the Americas region. Additional details on revenues are provided in the section titled “Information by Reportable Segment.” The following table presents the percentage relationship to net revenues for components of the Consolidated Statements of Operations: Three Months Ended December Nine Months Ended December 2024 2023 2024 2023 Gross margin (net revenues less cost of goods sold) 56.3 % 54.6 % 53.5 % 52.6 % Selling, general and administrative expenses 46.5 48.7 47.7 46.3 Impairment of goodwill and intangible assets 1.8 9.2 0.7 3.4 Operating margin 8.0 % (3.3) % 5.1 % 3.0 % Note: Amounts may not sum due to rounding. Gross margin increased 170 and 90 basis points in the three and nine months ended December 2024, respectively, compared to the 2023 periods. The increase in both periods was primarily driven by lower product costs. The increase in the three months ended December 2024 was also due to less promotional activity. Selling, general and administrative expe nses as a percentage of total revenues decreased 220 basis points and increased 140 basis points during the three and nine months ended December 2024, respectively, compared to the 2023 periods. Selling, general and administrative expenses decreased $34.8 million and $37.1 million in the three and nine months ended December 2024, resp ectively, compared to the 2023 periods. The decrease VF Corporation Q3 FY25 Form 10-Q 30 Table of Contents in the three months ended December 2024 was primarily due to cost savings from Reinvent, partially offset by higher compensation costs, including performance-based compensation. The decrease in the nine months ended December 2024 was primarily due to cost savings from Reinvent, lower information technology costs and distribution expenses and a gain recognized from a sale leaseback transaction, partially offset by Reinvent restructuring charges and project-related costs and higher compensation costs, including performance-based compensation. VF recorded an i ntangible asset impairment charg e of $51.0 million relat ed to the Dickies indefinite-lived trademark intangible asset in the three and nine months ended December 2024. During the third quarter of Fiscal 2025, due to the continued downturn in the Dickies financial results and projections, combined with expectations of a slower recovery than previously anticipated , the Company determined that a triggering event had occurred requiring impairment testing of the Dickies indefinite-lived trademark inta ngible asset. The indefinite-lived trademark intangible asset impairment primarily related to the reduction in financial projections fo r Dickies. VF recorded goodwill impairment charges of $195.3 million and $61.8 million related to the Timberland and Dickies reporting units, respectively, in the three and nine months ended December 2023. During the third quarter of Fiscal 2024, due to continued weakness and downturn in the financial results, combined with expectations of a slower recovery, the Company determined that a triggering event had occurred requiring impairment testing of the Timberland and Dickies reporting unit goodwill and indefinite-lived trademark intangible assets. The goodwill impairment related to the reduction in financial projections for both reporting units. Net inter est expense decreased $12.6 million and $5.6 million during the three and nine months ended December 2024, respectively, compared to the 2023 periods. The decrease in net interest expense in both the three and nine months ended December 2024 was primarily due to decreased levels of short-term commercial paper borrowings and an increase in interest income due to higher cash and cash equivalents and rates. Total outstanding debt averaged $5.0 billion in t he nine months ended December 2024 and $6.8 billion in the same period in 2023, with weighted average interest rates of 3.3% and 2.6% in the nine months ended December 2024 and 2023, respectively. Other income (expense), ne t decreased $21.6 million and $17.9 million during the three and nine months ended December 2024, respectively, compared to the 2023 periods. Th e decrease in both periods was primarily due to legal settlement gains of $29.1 million recorded in the 2023 periods, partially offset by cyber insurance recoveries of $9.2 million received in the three and nine months ended December 2024 . The effective income tax rate for the nine months ended December 2024 wa s 16.1% compared to 578.0% in the 2023 period. Th e nine months ended December 2024 included a net discrete tax benefit of $1.9 million, which was comprised primarily of a $5.8 million net tax benefit related to unrecognized tax benefits and interest, and a $5.9 million tax expense related to stock compensation. Excluding the $1.9 million net discrete tax benefit in the 2024 period, the effective income tax rate would have been 16.8%. The nine months ended December 2023 included a net discrete tax expense of $693.8 million, primarily related to the tax effects of decisions in the Timberland tax case and Belgium excess profits ruling. Excluding the $693.8 million net discrete tax exp ense in the 2023 period, the effective income tax rate would have been 31.0%. Without discrete items, the effective income tax rate for the nine months ended December 2024 decreased by 14.2% co mpared with the 2023 period primarily due to disproportionate year-to-date losses in jurisdictions with no tax benefit and jurisdictional mix of earnings as well as the impairment of nondeductible goodwill in the prior year. As a result of the above, income (loss) from continuing operations in the three months ended December 2024 was $169.1 million ($0.43 per diluted share) compared to $(91.7) million ($(0.24) per diluted share) in the 2023 period, and income (loss) from continuing operations in the nine months ended December 2024 was $219.6 million ($0.56 per diluted share) compared to $(606.4) million ($(1.56) per diluted share) in the 2023 period. Refer to additional discussion in the “Information by Reportable Segment” section below. Information by Reportable Segment VF's reportable segments are: Outdoor, Active and Work. The primary financial measures used by management to evaluate the financial results of VF's reportable segments are segment revenues and segment profit. Segment profit comprises the operating income and other income (expense), net line items of each segment. Refer to Note 14 to the consolidated financial statements for a summary of results of operations by segment, along with a reconciliation of segmen t profit to income (loss) from continuing operations before income taxes. 31 VF Corporation Q3 FY25 Form 10-Q Table of Contents The following tables present a summary of the changes in segment revenues and profit in the three and nine months ended December 2024 from the comparable periods in 2023 and revenues by region for our Top 4 brands for the three and nine months ended December 2024 and 2023: Segment Revenues: Three Months Ended December (In millions) Outdoor Active Work Total Segment revenues — 2023 $ 1,738.6 $ 819.3 $ 222.3 $ 2,780.2 Organic 113.6 (47.8) (5.4) 60.5 Impact of foreign currency (1.1) (5.2) (0.4) (6.8) Segment revenues — 2024 $ 1,851.1 $ 766.3 $ 216.5 $ 2,833.9 Nine Months Ended December (In millions) Outdoor Active Work Total Segment revenues — 2023 $ 4,282.0 $ 2,735.2 $ 651.2 $ 7,668.4 Organic 14.9 (277.0) (39.0) (301.2) Impact of foreign currency 3.1 (8.2) (1.3) (6.3) Segment revenues — 2024 $ 4,300.0 $ 2,450.0 $ 610.9 $ 7,360.9 Segment Profit: Three Months Ended December (In millions) Outdoor Active Work Total Segment profit (loss)— 2023 $ 304.7 $ 32.3 $ (1.9) $ 335.2 Organic 94.6 (19.7) 15.3 90.1 Impact of foreign currency 1.3 (0.3) 0.1 1.1 Segment profit — 2024 $ 400.6 $ 12.3 $ 13.5 $ 426.4 Nine Months Ended December (In millions) Outdoor Active Work Total Segment profit — 2023 $ 557.8 $ 254.6 $ 13.5 $ 825.9 Organic 42.0 (69.8) 25.6 (2.2) Impact of foreign currency 4.8 0.2 0.2 5.2 Segment profit — 2024 $ 604.6 $ 185.0 $ 39.3 $ 828.9 Note: Amounts may not sum due to rounding. Top Brand Revenues: Three Months Ended December 2024 (In millions) The North Face ® Vans ® Timberland ® (a) Dickies ® Total Americas $ 574.0 $ 412.4 $ 262.6 $ 101.6 $ 1,350.6 Europe 427.6 136.9 185.7 17.1 767.3 Asia-Pacific 251.7 58.3 78.7 14.9 403.6 Global $ 1,253.3 $ 607.6 $ 527.0 $ 133.6 $ 2,521.5 Three Months Ended December 2023 (In millions) The North Face ® Vans ® Timberland ® (a) Dickies ® Total Americas $ 557.7 $ 434.1 $ 231.4 $ 111.5 $ 1,334.7 Europe 418.1 149.4 172.6 22.8 762.9 Asia-Pacific 216.3 84.7 69.1 13.6 383.7 Global $ 1,192.1 $ 668.2 $ 473.0 $ 147.9 $ 2,481.2 VF Corporation Q3 FY25 Form 10-Q 32 Table of Contents Nine Months Ended December 2024 (In millions) The North Face ® Vans ® Timberland ® (a) Dickies ® Total Americas $ 1,289.9 $ 1,165.9 $ 574.7 $ 291.1 $ 3,321.6 Europe 988.3 493.9 479.5 70.3 2,032.0 Asia-Pacific 590.6 197.1 177.6 41.4 1,006.7 Global $ 2,868.9 $ 1,856.8 $ 1,231.7 $ 402.8 $ 6,360.2 Nine Months Ended December 2023 (In millions) The North Face ® Vans ® Timberland ® (a) Dickies ® Total Americas $ 1,377.0 $ 1,350.3 $ 549.6 $ 331.1 $ 3,608.0 Europe 990.9 526.4 489.5 75.8 2,082.6 Asia-Pacific 491.1 277.9 176.3 49.1 994.4 Global $ 2,859.0 $ 2,154.5 $ 1,215.5 $ 456.0 $ 6,685.0 (a) The global Timberland brand includes Timberland ® , reported within the Outdoor segment and Timberland PRO ® , reported within the Work segment. Note: Amounts may not sum due to rounding. The following sections discuss the changes in revenues and profitability by segment. For purposes of this analysis, royalty revenues have been included in the wholesale channel for all periods. Outdoor Three Months Ended December Nine Months Ended December (Dollars in millions) 2024 2023 Percent Change 2024 2023 Percent Change Segment revenues $ 1,851.1 $ 1,738.6 6.5 % $ 4,300.0 $ 4,282.0 0.4 % Segment profit 400.6 304.7 31.5 % 604.6 557.8 8.4 % Operating margin 21.6 % 17.5 % 14.1 % 13.0 % The Outdoor segment includes the following brands: The North Face ® , Timberland ® , Smartwool ® , Altra ® and Icebreaker ® . Global revenues for Outdoor increased 6% in the three months ended December 2024 compared to the 2023 period, including a 1% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region increased 16%, including a 14% increase in Greater China (which includes Mainland China, Hong Kong and Taiwan) with a 1% favorable impact from foreign currency. Revenues in the Americas region increased 5%, including a 1% unfavorable impact from foreign currency. Revenues in the Europe region increased 3%. Global revenues for Outdoor remained flat in the nine months ended December 2024 compared to the 2023 period. Revenues in the Asia-Pacific region increased 15%, including a 1% unfavorable impact from foreign currency and a 19% increase in Greater China. Revenues in the Europe region decreased 1%. Revenues in the Americas region decreased 4% compared to the 2023 period. Global revenues for The North Face ® brand increased 5% in the three months ended December 2024 compared to the 2023 period, primarily driven by growth in the Asia-Pacific region, which increased 16%. Revenues in the Americas region increased 3% in the three months ended December 2024. Revenues in the Europe region increased 2% in the three months ended December 2024, including a 1% favorable impact from foreign currency. Global revenues for The North Face ® brand remained flat in the nine months ended December 2024, compared to the 2023 period. Revenue growth in the Asia-Pacific region of 20% in the nine months ended December 2024, was offset by declines in the Americas region of 6%. Revenues in the Europe region remained flat in the nine months ended December 2024, including a 1% favorable impact from foreign currency. Global revenues for the Timberland ® brand increased 11% in the three months ended December 2024, compared to the 2023 period, including a 1% unfavorable impact from foreign currency. Revenue in the Americas region increased 15% in the three months ended December 2024, including a 1% unfavorable impact from foreign currency. Revenues in the Europe region increased 8% in the three months ended December 2024. Revenues in the Asia-Pacific region increased 14% in the three months ended December 2024, including a 1% unfavorable impact from foreign currency. Global revenues for the Timberland ® brand remained flat in the nine months ended December 2024, compared to the 2023 period, including a 1% unfavorable impact from foreign currency. Revenue in the Americas region increased 3% in the nine months ended December 2024, including a 1% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region increased 1% in the nine months ended December 2024, including a 1% unfavorable impact from foreign currency. These increases were offset by decreased revenues in the Europe region of 2% in the nine months ended December 2024, including a 1% favorable impact from foreign currency. 33 VF Corporation Q3 FY25 Form 10-Q Table of Contents Global direct-to-consumer revenues for Outdoor increased 6% and 5% in the three and nine months ended December 2024, respectively, compared to the 2023 periods. The increases were primarily due to the The North Face ® brand across all regions. Global wholesale revenues increased 7% in the three months ended December 2024, compared to the 2023 period. The increase was primarily driven by the Timberland ® brand across all regions. Global wholesale revenues decreased 3% in the nine months ended December 2024, compared to the 2023 period. The decrease was primarily driven by declines in The North Face ® brand in the Americas and Europe regions. Operating margin increased in both th e three and nine months ended December 2024 compared to the 2023 periods, reflecting higher gross margin, primarily driven by lower product costs. The increase in gross margin in the three months ended December 2024 was also due to less promotional activity. Active Three Months Ended December Nine Months Ended December (Dollars in millions) 2024 2023 Percent Change 2024 2023 Percent Change Segment revenues $ 766.3 $ 819.3 (6.5) % $ 2,450.0 $ 2,735.2 (10.4) % Segment profit 12.3 32.3 (62.0) % 185.0 254.6 (27.3) % Operating margin 1.6 % 3.9 % 7.6 % 9.3 % The Active segment includes the following brands: Vans ® , Kipling ® , Napapijri ® , Eastpak ® and JanSport ® . Global revenues for Active decreased 6% in the three months ended December 2024 compared to the 2023 period. Revenues in the Asia-Pacific region decreased 27%, including a 38% decrease in Greater China with a 1% favorable impact from foreign currency. Revenues in the Americas region decreased 4%, including a 1% unfavorable impact from foreign currency. Revenues in the Europe region decreased 2%. Global revenues for Active decreased 10% in the nine months ended December 2024 compared to the 2023 period. Revenues in the Americas region decreased 11%, including a 1% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region decreased 24%, including a 34% decrease in Greater China with a 1% unfavorable impact from foreign currency. Revenues in the Europe region decreased 5%. Vans ® brand global revenues decreased 9% in the three months ended December 2024 compared to the 2023 period, including a 1% unfavorable impact from foreign currency. The overall decline was most significantly impacted by a 31% decrease in the Asia-Pacific region and 5% decrease in the Americas region for the three months ended December 2024. The decrease in the Americas region included a 1% unfavorable impact from foreign currency. Revenues in the Europe region decreased 8% in the three months ended December 2024 including a 1% favorable impact from foreign currency. Vans ® brand global revenues decreased 14% in the nine months ended December 2024 compared to the 2023 period, including a 1% unfavorable impact from foreign currency. The overall decline was most significantly impacted by a 14% decrease in the Americas region for the nine months ended December 2024, including a 1% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region decreased 29% in the nine months ended December 2024, including a 1% unfavorable impact from foreign currency. Revenues in the Europe region decreased 6% in the nine months ended December 2024, including a 1% favorable impact from foreign currency. Global direct-to-consumer revenues for Active decreased 17% and 20% in the three and nine months ended December 2024, respectively, compared to the 2023 periods, including a 1% unfavorable impact from foreign currency in the nine months ended December 2024. The decreases were primarily driven by declines in the Americas region, which decreased 16% and 20% in the three and nine months ended December 2024, respectively. Global wholesale revenues increased 15% and 2% in the three and nine months ended December 2024, respectively, including a 1% unfavorable impact from foreign currency in the three months ended December 2024. The increases were primarily due to a 35% and 9% increase in the Americas region in the three and nine months ended December 2024, respectively, including a 2% and 1% unfavorable impact from foreign currency in the respective periods. The current year increase is in part the result of the deliberate actions taken to right-size inventories in the Americas wholesale channel in the second half of Fiscal 2024. Wholesale revenues in the Europe region increased 9% and decreased 1% in the three and nine months ended December 2024, respectively, including a 1% favorable impact from foreign currency in both periods. Wholesale revenues in the Asia-Pacific region decreased 20% and 15% in the three and nine months ended December 2024, respectively, including a 1% unfavorable impact from foreign currency in the nine months ended December 2024. O perating marg in decreased in bot h the three and nine months ended December 2024 compared to the 2023 periods, primarily due to legal settlement gains of $29.1 million recorded in the prior year periods. The decrease in the nine months ended December 2024 also reflected lower leverage of operating expenses due to decreased revenues. VF Corporation Q3 FY25 Form 10-Q 34 Table of Contents Work Three Months Ended December Nine Months Ended December (Dollars in millions) 2024 2023 Percent Change 2024 2023 Percent Change Segment revenues $ 216.5 $ 222.3 (2.6) % $ 610.9 $ 651.2 (6.2) % Segment profit (loss) 13.5 (1.9) * 39.3 13.5 191.2 % Operating margin 6.2 % (0.8) % 6.4 % 2.1 % *Calculation not meaningful The Work segment includes the following brands: Dickies ® and Timberland PRO ® . Global Work revenues decreased 3% in the three months ended December 2024 compared to the 2023 period, including a 1% unfavorable impact from foreign currency. Revenues in the Europe region decreased 25%, including a 1% favorable impact from foreign currency. Revenues in the Americas region decreased 1%. Revenues in the Asia-Pacific region increased 10%. Global Work revenues decreased 6% in the nine months ended December 2024 compared to the 2023 period. Revenues in the Americas region decreased 5%. Revenues in the Asia-Pacific region decreased 16%, including a 2% unfavorable impact from foreign currency. Revenues in the Europe region decreased 7%, including a 1% favorable impact from foreign currency. Dickies ® brand global revenues decreased 10% and 12% in the three and nine months ended December 2024, respectively, compared to the 2023 periods. The declines in both the three and nine months ended December 2024 were primarily driven by decreases in the Americas region of 9% and 12%, respectively, reflecting lower inventory replenishment and weakness with certain key U.S. wholesale customer accounts. Revenues in the Europe region decreased 25% and 7% in the three and nine months ended December 2024, respectively, including a 1% favorable impact from foreign currency in both periods. Revenues in the Asia-Pacific region increased 10% and decreased 16% in the three and nine months ended December 2024, respectively, including a 2% unfavorable impact from foreign currency in the nine months ended December 2024 , primarily due to broad-based weakness in Greater China in the nine months ended December 2024 . O perating marg in increased in both the three and nine months ended December 2024 compared to the 2023 periods, reflecting higher gross mar gin, primarily driven by lower inventory reserves, and decreased distribution expenses. Reconciliation of Segment Profit to Income (Loss) F rom Continuing Operations Before Income Taxes There are three types of costs necessary to reconcile total segment profit to con solidated income (loss) from continuing operations before income taxes. These costs are (i) impairment of goodwill and intangible assets, which is exclu ded from segment profit because these costs are not part of the ongoing operations of the businesses, (ii) corporate and other expenses, discussed below, and (iii) interest expense, net, which was discussed in the “Consolidated Statements of Operations” section. Three Months Ended December Nine Months Ended December (Dollars in millions) 2024 2023 Percent Change 2024 2023 Percent Change Impairment of goodwill and intangible assets $ 51.0 $ 257.1 (80.2) % $ 51.0 $ 257.1 (80.2) % Corporate and other expenses 142.2 140.3 1.3 % 396.0 316.2 25.2 % Interest expense, net 36.5 49.1 (25.6) % 120.2 125.8 (4.5) % Corporate and other expenses are those that have not been allocated to the segments for internal management reporting, including (i) information systems and shared service costs, (ii) corporate headquarters costs, and (iii) certain other income and expenses. The increase in corporate and other expenses for both the three and nine months ended December 2024 was due to higher compensation costs, including performance-based compensation, partially offset by cost savings from Reinvent. The increase in the nine months ended December 2024 was also due to higher Reinvent restructuring charges and project-related costs compared to the 2023 period. International International revenues increased 1% in the three months ended December 2024 compared to the 2023 period, including a 1% unfavorable impact from foreign currency. In the Asia-Pacific region, revenues increased 5% in the three months ended December 2024. Revenues in Greater China increased 4% in the three months ended December 2024. Revenues in the Europe region increased 1%. Revenues in the Americas (non-U.S.) region decreased 7% in the three months ended December 2024, including a 6% unfavorable impact from foreign currency. International revenues decreased 2% in the nine months ended December 2024 compared to the 2023 period. Revenues in the 35 VF Corporation Q3 FY25 Form 10-Q Table of Contents Europe region decreased 2% in the nine months ended December 2024, including a 1% favorable impact from foreign currency . Revenues in the Americas (non-U.S.) region decreased 8% in the nine months months ended December 2024, including a 4% unfavorable impact from foreign currency. In the Asia-Pacific region, revenues increased 2% and revenues in Greater China increased 5%. Inte rnational revenues were 52% and 53% of total revenues in the three-month periods ended December 2024 and 2023, respectively, and 54% and 53% of total revenues in the nine-month periods ended December 2024 and 2023, respectively. Direct-to-Consumer Direct-to-consumer revenues decreased 3% and 7% in the three and nine months ended December 2024, respectively, compared to the 2023 periods, including a 1% unfavorable impact from foreign currency in the three months ended December 2024. VF's e-commerce business decreased 3% and 5% during the three and nine months ended December 2024, respectively. The decreases were primarily driven by declines in the e-commerce business in the Americas region. Revenues from VF-operated retail stores decreased 4% and 10% during the three and nine months ended December 2024, respectively, including a 1% unfavorable impact from foreign currency in the three months ended December 2024. There were 1,160 VF-operated retail stores at December 2024 compared to 1,255 at December 2023. Direct-to-consumer revenues were 55% and 58% of total revenues in the three-month periods ended December 2024 and 2023, respectively, and 44% and 45% of total revenues in the nine-month periods ended December 2024 and 2023, respectively. Wholesale Wholesale revenues increased 8% and decreased 2% in the three and nine months ended December 2024, respectively, compared to the 2023 periods. The increase in the three months ended December 2024 was primarily driven by growth across all regions. The current year increase is in part the result of the deliberate actions taken to right-size inventories in the Americas wholesale channel in the second half of Fiscal 2024 for the Vans ® brand. The decrease in the nine months ended December 2024 was primarily driven by declines in the wholesale business in the Americas and Europe regions. Wholesale revenues were 45% and 42% of total revenues in the three-month periods ended December 2024 and 2023, respectively, and 56% and 55% of total revenues in the nine-month periods ended December 2024 and 2023, respectively. ANALYSIS OF FINANCIAL CONDITION Consolidated Balance Sheets The following discussion refers to significant changes in balances at December 2024 compared to March 2024: • Decrease in short-term borrowings — primarily due to a decrease in commercial paper borrowings resulting from a $450.0 million repayment using the proceeds from the sale of Supreme. • Decrease in the current portion of long-term debt — due to the prepayment of $1.0 billion of long-term debt due in December 2024 related to the DDTL, partially offset by the reclassification of $750.0 million of long-term notes due in April 2025 to current liabilities. • Increase in accounts payable — primarily due to the timing of inventory shipments from and payments to vendors. • Increase in accrued liabilities — primarily due to the timing of services received and payments made for other accruals. • Decrease in long-term debt — due to the reclassification of $750.0 million of long-term notes due in April 2025 to current liabilities. The following discussion refers to significant changes in balances at December 2024 compared to December 2023: • Decrease in inventories — driven by VF reducing elevated inventory levels. • Decrease in property, plant and equipment, net — primarily due to asset disposals and write-downs. • Decrease in goodwill — primarily due to $250.5 million in impairment charges related to the Timberland and Icebreaker reporting units recorded in the fourth quarter of Fiscal 2024. • Decrease in short-term borrowings — primarily due to a decrease in commercial paper borrowings resulting from a $450.0 million repayment using the proceeds from the sale of Supreme. • Decrease in the current portion of long-term debt — due to the prepayment of $1.0 billion of long-term debt due in December 2024 related to the DDTL, partially offset by the reclassification of $750.0 million of long-term notes due in April 2025 to current liabilities. • Decrease in long-term debt — due to the reclassification of $750.0 million of long-term notes due in April 2025 to current liabilities. VF Corporation Q3 FY25 Form 10-Q 36 Table of Contents Liquidity and Capital Resources We consider the following to be measures of our liquidity and capital resources: December March December (Dollars in millions) 2024 2024 2023 Working capital $1,794.6 $733.6 $920.9 Current ratio 1.6 to 1 1.2 to 1 1.2 to 1 Net debt to total capital 73.6% 80.1% 75.8% The increase in working capital and the current ratio at December 2024 compared to March 2024 was primarily due to a net increase in current assets driven by higher cash and cash equivalents. The increase in working capital and the current ratio at December 2024 compared to December 2023 was primarily due to a net decrease in current liabilities driven by decreased short-term borrowings and current portion of long-term debt, as discussed in the "Consolidated Balance Sheets" section above. The increase at December 2024 compared to December 2023 was also due to a net increase in current assets driven by higher cash and cash equivalents, partially offset by lower inventory balances, as discussed in the "Consolidated Balance Sheets" section above. For the ratio of net debt to total capital, net debt is defined as short-term borrowings, current portion of long-term debt and long-term debt, in addition to operating lease liabilities, net of unrestricted cash and cash equivalents. Total capital is defined as net debt plus stockholders’ equity. The decrease in the net debt to total capital ratio at December 2024 compared to both March 2024 and December 2023 was primarily driven by a decrease in net debt. The decrease in net debt was primarily due to the prepayment of $1.0 billion of long-term debt in October 2024 related to the DDTL and a decrease in short-term borowings as discussed in the "Consolidated Balance Sheets" section above, and higher cash and cash equivalents at December 2024. The decrease in the net debt to total capital ratio at December 2024 compared to December 2023 was partially offset by a decrease in stockholders' equity. The decrease in stockholders' equity was primarily driven by the net loss for the period and payments of dividends. VF’s primary source of liquidity is its expected annual cash flow from operating activities. Cash from operations is typically lower in the first half of the calendar year as inventory builds to support peak sales periods in the second half of the calendar year. Cash provided by operating activities in the second half of the calendar year is substantially higher as inventories are sold and accounts receivable are collected. Additionally, direct-to-consumer sales are highest in the fourth quarter of the calendar year. VF's additional sources of liquidity include available borrowing capacity against its $2.25 billion senior unsecured revolving line of credit (the “Global Credit Facility”), available cash balances and international lines of credit. In summary, our cash flows from continuing operations were as follows: Nine Months Ended December (In thousands) 2024 2023 Cash provided by operating activities $ 609,545 $ 975,171 Cash provided (used) by investing activities 1,450,486 (184,498) Cash used by financing activities (1,359,682) (735,766) Cash Provided by Operating Activities Cash flows related to operating activities are dependent on income (loss) from continuing operations, adjustments to income (loss) from continuing operations and changes in working capital. The decrease in cash provided by operating activities in the nine months ended December 2024 compared to December 2023 was primarily due to a decrease in net cash provided by working capital and a decrease in income from continuing operations, excluding the write-off of income tax receivables and interest related to the Timberland tax case in the prior year. Cash Provided (Used) by Investing Activities The increase in cash provided by investing activities in the nine months ended December 2024 was primarily due to proceeds from the sale of Supreme, net of cash sold, of $1.486 billion in the period. The nine months ended December 2024 also included proceeds from the sale of assets of $88.1 million, primarily related to a sale leaseback transaction of a distribution center, sale of an aircraft hangar, sale of a corporate-owned aircraft and sale of an office building. The increase was also due to a decrease in capital expenditures of $50.2 million and a decrease in software purchases of $21.3 million in the nine months ended December 2024 compared to the 2023 period. Cash Used by Financing Activities The increase in cash used by financing activities during the nine months ended December 2024 was primarily due to a $694.6 million net decrease in short-term borrowings for the periods compared. The nine months ended December 2024 also included a $1.0 billion prepayment of the DDTL compared to a $907.1 million payment of long-term debt in the nine months ended December 2023. The increase was partially offset by a $163.1 million decrease in dividends paid for the periods compared. Share Repurchases VF did not purchase shares of its Common Stock in the open market during the nine months ended December 2024 or the 37 VF Corporation Q3 FY25 Form 10-Q Table of Contents nine months ended December 2023 under the share repurchase program authorized by VF's Board of Directors. As of the end of December 2024, VF had $2.5 billion remaining for future repurchases under its share repurchase authorization. VF's capital deployment priorities in the near-to-medium term will be focused on reducing leverage and reinvesting a portion of cost savings to drive profitable and sustainable growth. Revolving Credit Facility, DDTL Agreement and Short-term Borrowings VF relies on its ability to generate cash flows to finance its ongoing operations. In addition, VF has significant liquidity from its available cash balances and credit facilities. VF maintains a Global Credit Facility that expires in November 2026. VF may request an unlimited number of one-year extensions so long as each extension does not cause the remaining life of the Global Credit Facility to exceed five years, subject to stated terms and conditions; however, granting of any extension is at the discretion of the lenders. The Global Credit Facility may be used to borrow funds in U.S. dollars or any alternative currency (including euros and any other currency that is freely convertible into U.S. dollars, approved at the request of the Company by the lenders) and has a $75.0 million letter of credit sublimit. The Global Credit Facility supports VF’s global commercial paper program for short-term, seasonal working capital requirements and general corporate purposes. Outstanding short-term balances may vary from period to period depending on the level of corporate requirements. VF has restrictive covenants on its Global Credit Facility and had restrictive covenants on the DDTL Agreement, including a consolidated net indebtedness to consolidated net capitalization financial ratio covenant, as defined in the agreements as amended in August 2024 (effective for the first quarter of Fiscal 2025), starting at 70% with future step downs. The calculation of consolidated net indebtedness is net of unrestricted cash and cash equivalents and the calculation of consolidated net capitalization permits certain addbacks, including non-cash impairment charges and material impacts resulting from adverse legal rulings, as defined in the amended agreements. The covenant calculation also excludes consolidated operating lease liabilities. Additionally, the amended agreements restrict the total amount of cash dividends and share repurchases to $500.0 million annually, on a calendar-year basis and required the repayment of the DDTL upon the completion of the Supreme sale. O n October 4, 2024, VF made an aggregate $1.0 billion prepayment of the DDTL using the net cash proceeds from the sale of Supreme, pursuant to the terms of the DDTL Agreement, as amended. As of December 2024, VF was in compliance with all covenants. VF has a global commercial paper program that allows for borrowings of up to $2.25 billion to the extent that it has borrowing capacity under the Global Credit Facility. Based on VF's current ratings, there is no active market for commercial paper. As of December 2024 there were no U.S. or euro commercial paper borrowings. The euro commercial paper borrowing program has been terminated as of January 2025. Standby letters of credit issued under the Global Credit Facility as of December 2024 were $0.6 million, leaving approximately $2.2 billion available for borrowing against the Global Credit Facility at December 2024, subject to applicable financial covenants. VF has $92.1 million of international lines of credit with various banks, which are uncommitted and may be terminated at any time by either VF or the banks. Total outstanding balances under these arrangements were $12.8 million at December 2024. Additionally, VF had $1.4 billion of unrestricted cash and cash equivalents at December 2024. Supply Chain Financing Program VF facilitates a voluntary supply chain finance ("SCF") program that enables a significant portion of our inventory suppliers to leverage VF's credit rating to receive payment from participating financial institutions prior to the payment date specified in the terms between VF and the supplier. The SCF program is administered through third-party platforms that allow participating suppliers to track payments from VF and elect which receivables, if any, to sell to the financial institutions. The transactions are at the sole discretion of both the suppliers and financial institutions, and VF is not a party to the agreements and has no economic interest in the supplier's decision to sell a receivable. The terms between VF and the supplier, including the amount due and scheduled payment terms (which are generally within 90 days of the invoice date) are not impacted by a supplier's participation in the SCF program. All amounts due to suppliers that are eligible to participate in the SCF program are included in the accounts payable line item in VF's Consolidated Balance Sheets and VF payments made under the SCF program are reflected in cash flows from operating activities in VF's Consolidated Statements of Cash Flows. At December 2024, March 2024 and December 2023, the accounts payable line item in VF’s Consolidated Balance Sheets included total outstanding obligations of $661.4 million, $485.0 million and $599.0 million, respectively, due to suppliers that are eligible to participate in the SCF program. Rating Agencies At the end of December 2024, VF’s long-term debt ratings were ‘BB’ by Standard & Poor’s ("S&P") Global Ratings and ‘Ba1' by Moody’s Investors Service ("Moody's"), and U.S. commercial paper ratings by those rating agencies were 'B’ and ‘NP’, respectively. The Moody's rating for VF's euro commercial paper was also 'NP'. Based on VF's current ratings, there is no active market for commercial paper. VF's credit rating outlook by S&P and Moody's was 'stable' at the end of December 2024. Further downgrades to VF's ratings would negatively impact borrowing costs. None of VF’s long-term debt agreements contain acceleration of maturity clauses based solely on changes in credit ratings. However, if there were a change in control of VF, and as a result of the change in control the notes were rated below investment grade by recognized rating agencies, then VF would be obligated to repurchase the notes at 101% of the aggregate principal amount, plus any accrued and unpaid interest, if required by the respective holders of the notes. The change of control provision applies to all notes, except for the notes due in 2033. Dividends The Company paid cash dividends of $0.09 and $0.27 per share during the three and nine months ended December 2024, respectively, and the Company declared a cash dividend of $0.09 per share that is payable in the fourth quarter of Fiscal 2025. Subject to approval by its Board of Directors, VF intends to continue to pay quarterly dividends. VF Corporation Q3 FY25 Form 10-Q 38 Table of Contents Contractual Obligations Management’s Discussion and Analysis in the Fiscal 2024 Form 10-K provided a table summarizing VF’s material contractual obligations and commercial commitments at the end of Fiscal 2024 that would require the use of funds. As of December 2024, there have been no material changes in the amounts of unrecorded commitments disclosed in the Fiscal 2024 Form 10-K, except as noted below: • Contractual obligations and commercial commitments at the end of Fiscal 2024 included approximately $93.7 million of inventory obligations related to Supreme, which is now classified as discontinued operations. • Inventory purchase obligations decreased by approximately $852.0 million at the end of December 2024 primarily due to timing of inventory shipments. • VF entered into a contract with a consulting firm during the second quarter of Fiscal 2025. Fees related to this contract could be up to $141.0 million, which includes $66.0 million of fixed fees and $75.0 million of contingent fees tied to increases in VF's stock price through June 2027. The total fair value of the contingent fees was $36.2 million as of December 2024 . Management believes that VF has sufficient liquidity and flexibility to operate its business and meet its current and long-term obligations as they become due. Recent Accounting Pronouncements Refer to Note 2 to VF’s consolidated financial statements for information on recently issued and adopted accounting standards. Critical Accounting Policies and Estimates Management has chosen accounting policies it considers to be appropriate to accurately and fairly report VF’s operating results and financial position in conformity with generally accepted accounting principles in the United States of America. Our critical accounting policies are applied in a consistent manner. Significant accounting policies are summarized in Note 1 to the consolidated financial statements included in the Fiscal 2024 Form 10-K. There have been no material changes in VF's accounting policies from those disclosed in our Fiscal 2024 Form 10-K. The application of these accounting policies requires management to make estimates and assumptions about future events and apply judgments that affect the reported amounts of assets, liabilities, revenues, expenses, contingent assets and liabilities, and related disclosures. These estimates, assumptions and judgments are based on historical experience, current trends and other factors believed to be reasonable under the circumstances. Management evaluates these estimates and assumptions, and may retain outside consultants to assist in the evaluation. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known. The accounting policies that involve the most significant estimates, assumptions and management judgments used in preparation of the consolidated financial statements, or are the most sensitive to change from outside factors, are discussed in Management’s Discussion and Analysis in the Fiscal 2024 Form 10-K. Refer to Note 16 to VF's consolidated financial statements for additional information regarding VF's critical accounting policies and estimates during Fiscal 2025. Cautionary Statement on Forward-looking Statements From time to time, VF may make oral or written statements, including statements in this quarterly report, that constitute “forward-looking statements” within the meaning of the federal securities laws. You can identify these statements by the fact that they use words such as "will," "anticipate," "believe," "estimate," "expect," "should," and "may," and other words and terms of similar meaning or use of future dates. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. Forward-looking statements include statements concerning plans, objectives, projections and expectations relating to VF’s operations or economic performance and assumptions related thereto. Forward-looking statements are made based on management’s expectations and beliefs concerning future events impacting VF and therefore involve a number of risks and uncertainties. Forward-looking statements are not guarantees, and actual results could differ materially from those expressed or implied in the forward-looking statements. VF undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Potential risks and uncertainties that could cause the actual results of operations or financial condition of VF to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: the level of consumer demand for apparel and footwear; disruption to VF’s distribution system; changes in global economic conditions and the financial strength of VF’s consumers and customers, including as a result of current inflationary pressures; fluctuations in the price, availability and quality of raw materials and finished products; disruption and volatility in the global capital and credit markets; VF’s response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; VF's ability to maintain the image, health and equity of its brands, including through investment in brand building and product innovation; intense competition from online retailers and other direct-to-consumer business risks; increasing pressure on margins; retail industry changes and challenges; VF's ability to execute its Reinvent transformation program and other business priorities, including measures to streamline and right-size its cost base and strengthen the balance sheet while reducing leverage; VF’s ability to successfully establish a global commercial organization, and identify and capture efficiencies in 39 VF Corporation Q3 FY25 Form 10-Q Table of Contents its business model; any inability of VF or third parties on which it relies, to maintain the strength and security of information technology systems; the fact that VF’s facilities and systems, and those of third parties on which it relies, are frequent targets of cyber-attacks of varying levels of severity, and may in the future be vulnerable to such attacks, and any inability or failure by VF or such third parties to anticipate or detect data or information security breaches or other cyber-attacks, including the cyber incident that was reported by VF in December 2023, could result in data or financial loss, reputational harm, business disruption, damage to its relationships with customers, consumers, employees and third parties on which it relies, litigation, regulatory investigations, enforcement actions or other negative impacts; any inability by VF or third parties on which it relies to properly collect, use, manage and secure business, consumer and employee data and comply with privacy and security regulations; VF’s ability to adopt new technologies, including artificial intelligence, in a competitive and responsible manner; foreign currency fluctuations; stability of VF's vendors' manufacturing facilities and VF's ability to establish and maintain effective supply chain capabilities; continued use by VF’s suppliers of ethical business practices; VF’s ability to accurately forecast demand for products; actions of activist and other shareholders; VF's ability to recruit, develop or retain key executive or employee talent or successfully transition executives; continuity of members of VF’s management; changes in the availability and cost of labor; VF’s ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; maintenance by VF’s licensees and distributors of the value of VF’s brands; VF’s ability to execute acquisitions and dispositions, integrate acquisitions and manage its brand portfolio; VF's ability to realize benefits from the completed sale of the Supreme ® brand business; business resiliency in response to natural or man-made economic, public health, cyber, political or environmental disruptions; changes in tax laws and additional tax liabilities; legal, regulatory, political, economic, and geopolitical risks, including those related to the current conflicts in Ukraine and the Middle East and tensions between the U.S. and China; changes to laws and regulations; adverse or unexpected weather conditions, including any potential effects from climate change; VF's indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent VF from fulfilling its financial obligations; VF's ability to pay and declare dividends or repurchase its stock in the future; climate change and increased focus on environmental, social and governance issues; VF's ability to execute on its sustainability strategy and achieve its sustainability-related goals and targets; risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis; and tax risks associated with the spin-off of the Jeanswear business completed in 2019. More information on potential factors that could affect VF’s financial results is included from time to time in VF’s public reports filed with the Securities and Exchange Commission, including VF’s Annual Report on Form 10-K. ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. There have been no significant changes in VF’s market risk exposures from what was disclosed in Item 7A in the Fiscal 2024 Form 10-K.