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 30, 2025 through March 28, 2026 ("Fiscal 2026"). Accordingly, this Form 10-Q presents our first quarter of Fiscal 2026. For presentation purposes herein, all references to periods ended June 2025 and June 2024 relate to the fiscal periods ended on June 28, 2025 and June 29, 2024, respectively. References to March 2025 relate to information as of March 29, 2025. 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 months ended June 2025 foreign currency amounts and impacts below reflect the changes in foreign exchange rates from the three months ended June 2024 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. In the first quarter of Fiscal 2026, VF realigned its reportable segments to reflect a change in how the Timberland ® brand is managed and the chief operating decision maker's key areas of focus. VF began managing its Timberland ® and Timberland PRO ® brands as one operating segment during the first quarter of Fiscal 2026. This operating segment has been aggregated with The North Face ® brand in the Outdoor reportable segment and the Vans ® , Kipling ® , Eastpak ® and Jansport ® brands have been aggregated in the Active reportable segment. All other brands that have not been aggregated within the reportable segments described above, which do not meet the quantitative threshold to be disclosed as a separate reportable segment, have been grouped within an "All Other" category. This group includes the Dickies ® , Altra ® , Smartwool ® , Napapijri ® and Icebreaker ® brands. In the tables below, the Company has recast historical financial information to reflect the new reportable segments. These changes had no impact on previously reported consolidated results of operations. Refer to additional discussion in the "Information by Reportable Segment" section below and Note 14 to VF's consolidated financial statements. 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 t he 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"), which totaled $14.9 million for the three months ended June 2024, were allocated 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 Impact of Tariffs In April 2025, the U.S. government announced broad-based, reciprocal tariffs on foreign imports. The implementation of some of the announced tariffs has been delayed, while some have taken effect. Additionally, in response, certain governments have announced retaliatory tariffs on goods imported from the U.S. VF has a diversified sourcing country mix. Approximately 85% of products purchased for sale in the U.S. are sourced through Southeast Asia and Central and South America, with Vietnam, Bangladesh, Cambodia and Indonesia comprising the top four sourcing markets. Less than 2% of total U.S. products are sourced through China. While the situation is dynamic and evolving, VF continues to analyze the impact of these tariffs on our business and is taking steps to mitigate our tariff exposure. Mitigation strategies include sourcing optimization, accelerating production and shipments into the U.S. during the period of delayed application of the reciprocal tariffs, negotiations with our vendors, and potential price increases. However, the duration and scope of the tariffs are difficult to predict, along with the extent to which VF will be able to offset the impact through our mitigation efforts. 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 covered the following priorities: improve North America results, deliver the Vans ® turnaround, reduce costs and strengthen the balance sheet. In Fiscal 2025, the Company initiated the second 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. VF aims to generate between $500.0 and $600.0 million in net operating income expansion in Fiscal 2028 compared to the end of Fiscal 2024. Reinvent restructuring charges in the three months ended June 2025 were $17.5 million and cumulative charges were $207.6 million since the inception of the program, which primarily included costs associated with severance and VF Corporation Q1 FY26 Form 10-Q 26 Table of Contents employee-related benefits and the impact of asset impairments and write-downs. All restructuring actions related to Reinvent were substantially complete at the end of the first quarter of Fiscal 2026. In addition, as further discussed in Note 16 to VF's consolidated financial statements, VF has entered into a contract with a consulting firm to support Reinvent. Fees related to the contract consist of fixed fees for services performed and contingent fees tied to increases in VF’s stock price. Services provided under the contract are expected to be substantially complete by the third quarter of Fiscal 2026 and contingent fees tied to increases in VF’s stock price will be measured through June 2027. SUMMARY OF THE FIRST QUARTER OF FISCAL 2026 • Revenues remained flat at $1.8 billion compared to the three months ended June 2024, including a 2% favorable impact from foreign currency. • Outdoor segment revenues increased 8% to $812.5 million compared to the three months ended June 2024, including a 2% favorable impact from foreign currency. • Active segment revenues decreased 10% to $699.7 million compared to the three months ended June 2024, including a 1% favorable impact from foreign currency. • Wholesale revenues increased 1% compared to the three months ended June 2024, including a 1% favorable impact from foreign currency. • Direct-to-consumer revenues decreased 3% compared to the three months ended June 2024, including a 1% favorable impact from foreign currency. • International revenues increased 2% compared to the three months ended June 2024, including a 3% favorable impact from foreign currency. • Revenues in the Americas region decreased 4% compared to the three months ended June 2024, including a 1% unfavorable impact from foreign currency. • G ross margin increased 270 basis points to 53.9% compared to the three months ended June 2024, primarily driven by favorable foreign currency impacts, higher quality inventory and lower discounts. • Net loss per share was ($0.30) compared to ($0.39) i n the 2024 period . Th e decrease in ne t loss per share was primarily driven by increased profitability in the Outdoor segment during the three months ended June 2025 compared to the three months ended June 2024. The decrease in net loss per share was partially offset by higher Reinvent charges and lower profitability in the Active segment . ANALYSIS OF RESULTS OF OPERATIONS Consolidated Statements of Operations The following table presents a summary of the changes in revenues for the three months ended June 2025 from the comparable period in 2024: (In millions) Three Months Ended June Revenues — 2024 $ 1,769.1 Organic (31.3) Impact of foreign currency 22.9 Revenues — 2025 $ 1,760.7 VF revenues remained flat for the three months ended June 2025 compared to the 2024 period, including a 2% favorable impact from foreign currency. The operational decline was driven by a decrease in the Active segment, partially offset by an increase in the Outdoor segment. Revenue declines in the Americas region were offset by increases in the Europe and Asia-Pacific regions, including favorable impacts from foreign currency. Additional details on revenues are provided in the section titled “Information by Reportable Segment.” The following table presents the percentage relationship to revenues for components of the Consolidated Statements of Operations: Three Months Ended June 2025 2024 Gross margin (revenues less cost of goods sold) 53.9 % 51.2 % Selling, general and administrative expenses 58.8 58.1 Operating margin (4.9 %) (7.0 %) Note: Amounts may not sum due to rounding. 27 VF Corporation Q1 FY26 Form 10-Q Table of Contents Gross margin increased 270 b asis points in the three months ended June 2025 compared to the 2024 period. Th e increase in the three months ended June 2025 was primarily driven by f avorable foreign currency impacts, higher quality inventory and lower discounts. Selling, general and administrative expe nses as a percentage of total revenue s increased 70 b asis points during the three months ended June 2025 compared to the 2024 period. Selling , general and administrative expenses increased $6.9 million in the three months ended June 2025 compared to the 2024 period. The increase in the three months ended June 2025 was primarily due to higher Reinvent restructuring charges and project-related costs, and a gain recognized from a sale leaseback transaction in June 2024 , partially offset by cost savings from Reinvent, lower information technology costs and distribution expenses. Net interest expense increased $0.2 million durin g the three months ended June 2025 compared to the 2024 period. The increase i n net interest expense in the three months ended June 2025 was primarily due to unfavorable foreign currency impacts, partially offset by the March 2025 early redemption of $750.0 million in aggregate principal amount of its outstanding 2.400% Senior Notes due in April 2025. Total outstanding debt averaged $5.1 billion in the three months ended June 2025 and $6.1 billion in the same period in 2024, with weighted average interest rates of 2.9% and 3.1% in the three months ended June 2025 and 2024, respectively. The effective income tax rate for the three months ended June 2025 was 8.0% compared to 8.1% in the 2024 perio d. Th e three months ended June 2025 included a net discrete tax expense of $11.5 million, which was comprised primarily of a $7.4 million net tax expense related to unrecognized tax benefits and interest, and a $4.1 million tax expense related to stock compensation. Excluding the $11.5 million net discrete tax expense in the 2025 period, the effective income tax rate would have be en 17.2%. T he three months ended June 2024 included a net discrete tax expense of $7.1 million, w hich was comprised primarily of a $3.6 million net tax expense related to unrecognized tax benefits and interest, and a $4.3 million tax expense related to stock compensation. Excludin g the $7.1 million net discrete tax expense in the 2024 period, the effective income tax rate would have been 12.4%. Without discrete items, the effective income tax rate for the three months ended June 2025 increased by 4.8% co mpared with the 2024 period primarily due to an increase in tax rates on foreign earnings. As a result of the above , loss from continuing operations in the three months ended June 2025 was ($116.4) million (($0.30) per diluted share) compared to ($152.0) million (($0.39) pe r diluted share) in the 2024 period. Refer to additional discussion in the “Information by Reportable Segment” section below. Information by Reportable Segment As discussed above, VF realigned its reportable segments during the first quarter of Fiscal 2026. VF's new reportable segments are Outdoor and Active. We have included an "All Other" category in the revenues table below for purposes of reconciliation of total revenues. "All Other" includes the Dickies ® , Altra ® , Smartwool ® , Napapijri ® and Icebreaker ® brands, which do not meet the quantitative threshold to be disclosed as a separate reportable segment. The Company has recast historical financial information to reflect the new reportable segments. These changes had no impact on previously reported consolidated results of operations. 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 (loss) comprises the operating income (loss) 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 segment profit to loss from continuing operations before income taxes. The following tables present a summary of the changes in revenues a nd segment profit (loss) in the three months ended June 2025 from the comparable period in 2024 and revenues by region for our Top 3 brands for the three months ended June 2025 and 2024: Revenues: Three Months Ended June (In millions) Outdoor Segment Active Segment All Other Total Revenues — 2024 $ 753.6 $ 776.7 $ 238.7 $ 1,769.1 Organic 46.9 (84.3) 6.2 (31.3) Impact of foreign currency 12.0 7.3 3.6 22.9 Revenues — 2025 $ 812.5 $ 699.7 $ 248.5 $ 1,760.7 Note: Amounts may not sum due to rounding. VF Corporation Q1 FY26 Form 10-Q 28 Table of Contents Segment Profit (Loss): Three Months Ended June (In millions) Outdoor Segment Active Segment Total Segment profit (loss)— 2024 $ (72.9) $ 71.5 $ (1.4) Organic 31.3 (16.3) 15.2 Impact of foreign currency (0.7) 1.6 0.8 Segment profit (loss)— 2025 $ (42.3) $ 56.8 $ 14.6 Note: Amounts may not sum due to rounding. Top Brand Revenues: Three Months Ended June 2025 (In millions) The North Face ® Vans ® Timberland ® Total Americas $ 242.2 $ 295.7 $ 130.6 $ 668.5 Europe 183.9 136.3 89.0 409.2 Asia-Pacific 131.3 66.0 35.5 232.8 Global $ 557.4 $ 498.0 $ 255.1 $ 1,310.5 Three Months Ended June 2024 (In millions) The North Face ® Vans ® Timberland ® Total Americas $ 250.5 $ 348.3 $ 113.1 $ 711.9 Europe 160.1 154.3 84.9 399.3 Asia-Pacific 113.6 79.3 31.4 224.3 Global $ 524.2 $ 581.8 $ 229.4 $ 1,335.4 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 Segment Three Months Ended June (Dollars in millions) 2025 2024 Percent Change Segment revenues $ 812.5 $ 753.6 7.8 % Segment loss (42.3) (72.9) 42.0 % Segment profit margin (5.2 %) (9.7 %) The Outdoor segment includes the following brands: The North Face ® and Timberland ® . Global revenues for Outdoor increased 8% in the three months ended June 2025 compared to the 2024 period, including a 2% favorable impact from foreign currency. Revenues in the Europe region increased 11%, including a 5% favorable impact from fore ign currency. Revenues in the Asia-Pacific region increased 15%. Reve nues in the Americas region increased 3%. Global revenues for The North Face ® brand increased 6% in the three months ended June 2025 compared to the 2024 period, including a 1% favorable impact from foreign currency, driven by growth in the Europe and Asia-Pacific regions. Revenues in the Europe region increased 15%, including a 6% favorable impact from foreign currency. Revenues in the Asia-Pacific region increased 16% in the three months ended June 2025. Revenues in the Americas region decreased 3% in the three months ended June 2025. Global revenues for the Timberland ® brand increased 11% in the three months ended June 2025 compared to the 2024 period, including a 2% favorable impact from foreign currency, with revenue growth across all regions. Revenues in the Americas region increased 15% in the three months ended June 2025, including a 1% unfavorable impact from foreign currency. Revenues in the Europe region increased 5% in the three months ended June 2025, including a 6% favorable impact from foreign currency. Revenues in the Asia-Pacific region increased 13% in the three months ended June 2025, including a 3% favorable impact from foreign currency. Global direct-to-consumer revenues for Outdoor increased 9% in the three months ended June 2025 compared to the 2024 period, including a 2% favorable impact from foreign currency, with revenue growth across both brands and all regions. Global wholesale revenues increased 7% in the three months ended June 2025, compared to the 2024 period, including a 1% 29 VF Corporation Q1 FY26 Form 10-Q Table of Contents favorable impact from foreign currency, primarily driven by an increase in the The North Face ® brand in the Europe and Asia-Pacific regions and the Timberland ® brand in the Americas region. Segment profit margi n increased in the three months ended June 2025 compared to the 2024 period, reflecting higher gross margin, prim arily driven by f avorable foreign currency impacts, lower discounts and lower product costs. Active Segment Three Months Ended June (Dollars in millions) 2025 2024 Percent Change Segment revenues $ 699.7 $ 776.7 (9.9 %) Segment profit 56.8 71.5 (20.5 %) Segment profit margin 8.1 % 9.2 % The Active segment includes the following brands: Vans ® , Kipling ® , Eastpak ® and JanSport ® . Global revenues for Active decreased 10% in the three months ended June 2025 compared to the 2024 period, including a 1% favorable impact from foreign currency. Revenues in the Americas region decreased 12%, including a 1% unfavorable impact from foreign currency. Revenues in the Asia-Pacific region decreased 15%. Revenues in the Europe region decreased 4%, including a 5% favorable impact from foreign currency. Vans ® brand global revenues decreased 14% in the three months ended June 2025 compared to the 2024 period, including a 1% favorable impact from foreign currency. The overall decline w as most significantly impacted by a 15% decrease in the Americas region, including a 1% unfavorable impact from foreign currency. Revenues in the Europe region decreased 12% in the three months ended June 2025, including a 4% favorable impact from foreign currency. Revenues in the Asia-Pacific region decreased 17% in the three months ended June 2025. The decline in Vans ® was partially attributed to deliberate strategic actions taken in the first quarter of Fiscal 2026, including exiting value-channel wholesale customers and closing unprofitable owned retail stores in the Americas region, and reducing wholesale store fronts and inventory in the Asia-Pacific region (specifically in China). Global direct-to-consumer revenues for Active decreased 14% in the three months ended June 2025 compared to the 2024 period, including a 1% favorable impact from foreign currency. The decrease was primarily driven by a decline in the Vans ® brand in the Americas region. Global wholesale revenues decreased 6% in the three months ended June 2025, including a 1% favorable impact from foreign currency. The decrease was primarily due to a decrease in the Vans ® brand in the Americas region in the three months ended June 2025. Segment profit margin decreased in the three months ended June 2025 compared to the 2024 period, primarily due to lower leverage of operating expenses due to decreased revenues. All Other Three Months Ended June (Dollars in millions) 2025 2024 Percent Change Revenues $ 248.5 $ 238.7 4.1 % The "All Other" grouping includes the following brands: Dickies ® , Altra ® , Smartwool ® , Napapijri ® and Icebreaker ® . The "All Other" grouping represents the aggregation of brands that do not meet the quantitative threshold for disclosure and it is not a reportable segment. Global "All Other" revenues increased 4% in the three months ended June 2025 compared to the 2024 period, including a 1% favorable impact from foreign currency. Revenues in the Americas region increased 4%. Revenues in the Asia-Pacific region increased 18%, including a 2% favorable impact from foreign currency. Revenues in the Europe region remained flat, including a 5% favorable impact from foreign currency. VF Corporation Q1 FY26 Form 10-Q 30 Table of Contents Reconciliation of Segment Profit to Loss From Continuing Operations Before Income Taxes There are three types of costs necessary to reconcile total segment profit t o con solidated loss from continuing operations before income taxes. These costs are (i) corporate and other expenses, discussed below, (ii) interest expense, net, which was discussed in the “Consolidated Statements of Operations” section, and (iii) profit (loss) re lated to the "All Other" category, discussed below, which includes the following brands: Dickies ® , Altra ® , Smartwool ® , Napapijri ® and Icebreaker ® . The "All Other" grouping represents the aggregation of brands that do not meet the quantitative threshold for disclosure and it is not a reportable segment. Three Months Ended June (Dollars in millions) 2025 2024 Percent Change Corporate and other expenses $ 104.6 $ 115.5 (9.5 %) Interest expense, net 41.1 40.9 0.4 % "All Other" profit (loss) 4.5 (7.6) * *Calculation not meaningful 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 decrease in corporate and other expenses for the three months ended June 2025 was primarily due to cost savings from Reinvent and lower information technology costs, partially offset by higher Reinvent restructuring charges and project-related costs. The increase in "All Other" profit (loss) for the three months ended June 2025 was primarily due to higher gross margin, driven by higher quality inventory and f avorable foreign currency impacts. International International revenues increased 2% in the three months ended June 2025 compared to the 2024 period, including a 3% favorable impact from foreign currency. Revenues in the Europe region increased 4%, including a 6% favorable impact from foreign currency. In the Asia-Pacific region, revenues increased 4% in the three months ended June 2025. Revenues in Greater China (which includes Mainland China, Hong Kong and Taiwan) decreased 5% in the three months ended June 2025, including a 1% favorable impact from foreign currency. R evenues in the Americas (non-U.S.) region decreased 11% in the three months ended June 2025, including a 5% unfavorable impact from foreign currency. Inte rnational revenues were 53% and 51% of total revenues in the three-month periods ended June 2025 and 2024, respectively. Direct-to-Consumer Direct-to-consumer revenues decreased 3% in the three months ended June 2025 compared to the 2024 period, including a 1% favorable impact from foreign currency. VF's e-commerce business decreased 2% during the three months ended June 2025, including a 2% favorable impact from foreign currency. The decrease was primarily driven by declines in the e-commerce business in the Americas and Asia-Pacific regions. Revenues from VF-operated retail stores decreased 3% during the three months ended June 2025, including a 1% favorable impact from foreign currency. There were 1,113 V F-operated retail stores at June 2025 compared to 1,158 at June 2024. Direct-to-consumer revenues were 41% and 42% of total revenues in the three-month periods ended June 2025 and 2024, respectively. Wholesale Wholesale revenues increased 1% in the three months ended June 2025 compared to the 2024 period, including a 1% favorable impact from foreign currency. The increase was primarily driven by increases in the Europe and Asia-Pacific regions, partially offset by a decrease in the Americas regions. Wholesale revenues were 59% and 58% of total revenues in the three-month periods ended June 2025 and 2024, respectively. 31 VF Corporation Q1 FY26 Form 10-Q Table of Contents ANALYSIS OF FINANCIAL CONDITION Consolidated Balance Sheets The following discussion refers to significant changes in balances at June 2025 compared to March 2025: • Decrease in accounts receivable — primarily due to the seasonality of the business and the timing of collections. • Increase in inventories — primarily due to the seasonality of the business and planned inventory purchases. • Increase in short-term borrowings — primarily due to $350.0 million of borrowings under VF's $2.25 billion senior unsecured revolving line of credit (the “Global Credit Facility”) as of June 2025, to support seasonal working capital requirements. • Increase in accounts payable — primarily due to the seasonality of inventory purchases. The following discussion refers to significant changes in balances at June 2025 compared to June 2024: • Increase in accounts receivable — primarily due to foreign currency fluctuations and timing of collections from customers. • Increase in other assets — primarily due to an increase in deferred income tax assets. • Increase in short-term borrowings — primarily due to $350.0 million of borrowings under the Global Credit Facility as of June 2025, to support increased working capital requirements. • Decrease in the current portion of long-term debt — primarily due to the prepayment of $1.0 billion of long-term debt due in December 2024 related to the DDTL and the early redemption of $750.0 million of long-term notes in March 2025, partially offset by the reclassification of €500.0 million of long-term notes due in March 2026 to current liabilities and foreign currency fluctuations. • Decrease in long-term debt — primarily due to the reclassification of €500.0 million of long-term notes due in March 2026 to current liabilities, partially offset by foreign currency fluctuations. Liquidity and Capital Resources We consider the following to be measures of our liquidity and capital resources: June March June (Dollars in millions) 2025 2025 2024 Working capital $935.9 $1,088.2 ($91.8) Current ratio 1.3 to 1 1.4 to 1 1.0 to 1 Net debt to total capital 80.5% 76.8% 82.9% The decrease in working capital and the current ratio at June 2025 compared to March 2025 was primarily due to a net increase in current liabilities driven by increased short-term borrowings and accounts payable, as discussed in the "Consolidated Balance Sheets" section above. The decrease was partially offset by a net increase in current assets driven by higher inventory balances and cash and cash equivalents, partially offset by lower accounts receivable, as discussed in the "Consolidated Balance Sheets" section above. The increase in working capital and the current ratio at June 2025 compared to June 2024 was primarily due to a net decrease in current liabilities driven by decreased current portion of long-term debt, 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 increase in the net debt to total capital ratio at June 2025 compared to March 2025 was primarily driven by an increase in net debt due to increased short-term borrowings, as discussed in the "Consolidated Balance Sheets" section above, and foreign currency fluctuations on long-term debt. The increase in net debt was partially offset by higher cash and cash equivalents at June 2025. The decrease in the net debt to total capital ratio at June 2025 compared to June 2024 was primarily driven by a decrease in net debt due to the prepayment of $1.0 billion of long-term debt in October 2024 related to the DDTL and the early redemption of $750.0 million of long-term notes in March 2025, as discussed in the "Consolidated Balance Sheets" section above, partially offset by foreign currency fluctuations. 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 Global Credit Facility, available cash balances and international lines of credit. VF Corporation Q1 FY26 Form 10-Q 32 Table of Contents In summary, our cash flows from continuing operations were as follows: Three Months Ended June (In thousands) 2025 2024 Cash used by operating activities $ (145,460) $ (30,714) Cash used by investing activities (49,013) (9,035) Cash provided (used) by financing activities 338,955 (37,444) Cash Used by Operating Activities Cash flows related to operating activities are dependent on loss from continuing operations, adjustments to loss from continuing operations and changes in working capital. The increase in cash used by operating activities in the three months ended June 2025 compared to June 2024 was primarily due to an increase in net cash used by working capital. The increase in net cash used for working capital was needed to support inventory purchases and higher performance-based annual bonus payouts. Cash Used by Investing Activities The increase in cash used by investing activities in the three months ended June 2025 was primarily due to proceeds from the sale of assets of $45.6 million in the three months ended June 2024, related to a sale leaseback transaction of a distribution center and sale of a corporate-owned aircraft. Cash Provided (Used) by Financing Activities The increase in cash provided by financing activities during the three months ended June 2025 was primarily due to a $380.7 million net increase in short-term borrowings for the periods compared to support working capital requirements. Share Repurchases VF did not purchase shares of its Common Stock in the open market during the three months ended June 2025 or the three months ended June 2024 under the share repurchase program authorized by VF's Board of Directors. As of the end of June 2025, 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 supported 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. The agreement for the Global Credit Facility, as amended in May 2025, includes a consolidated net indebtedness to consolidated net capitalization financial ratio covenant, 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 agreement. The covenant calculation also excludes consolidated operating lease liabilities. The agreement requires the pledge of certain assets of VF and certain of its subsidiaries pursuant to the agreement. Additionally, the amended agreement restricts the total amount of cash dividends and share repurchases to $500.0 million annually, on a calendar-year basis. The terms for the DDTL Agreement, as amended in August 2024, 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. As of June 2025, VF was in compliance with all covenants. VF had a global commercial paper program that allowed for borrowings of up to $2.25 billion to the extent that it had borrowing capacity under the Global Credit Facility. The U.S. commercial paper borrowing program was terminated as of May 2025 and the euro commercial paper borrowing program was terminated as of January 2025. Short-term borrowings under the Global Credit Facility as of June 2025 were $350.0 million. Standby letters of credit issued u nder the Global Credit Facility as of June 2025 were $0.3 million, leaving approximately $1.9 billion available for borrowing against the Global Credit Facility at June 2025 , subject to applicable financial covenants. VF h as $92.9 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 $42.9 million a t June 2025. Additionally, VF had $642.4 million of unrestricted cash and cash equivalents at June 2025. 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. At June 2025, March 2025 and June 2024, the accounts payable line item in VF’s Consolidated Balance Sheets included total outstanding obligations of $887.1 million, $481.7 million and $843.0 million, 33 VF Corporation Q1 FY26 Form 10-Q Table of Contents respectively, due to suppliers that are eligible to participate in the SCF program. Rating Agencies At the end of June 2025, VF’s long-term debt ratings were ‘BB’ by Standard & Poor’s ("S&P") Global Ratings and 'Ba2' b y Moody’s Investors Service ("Moody's"). VF's credit rating outlook was 'stable' by S&P and 'negative' by Moody's at the end of June 2025. 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 per share during the three months ended June 2025, and the Company declared a cash dividend of $0.09 per share that is payable in the second quarter of Fiscal 2026. Subject to approval by its Board of Directors, VF intends to continue to pay quarterly dividends. Contractual Obligations Management’s Discussion and Analysis in the Fiscal 2025 Form 10-K provided a table summarizing VF’s material contractual obligations and commercial commitments at the end of Fiscal 2025 that would require the use of funds. As of June 2025, there have been no material changes in the amounts of unrecorded commitments disclosed in the Fiscal 2025 Form 10-K, except as noted below: • I nventory purchase obligations decreased by approximately $534.0 million at the end of June 2025 primarily due to timing of inventory shipments. 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 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 2025 Form 10-K. There have been no material changes in VF's accounting policies from those disclosed in our Fiscal 2025 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 2025 Form 10-K. 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, footwear and accessories; 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; VF Corporation Q1 FY26 Form 10-Q 34 Table of Contents fluctuations in the price, availability and quality of raw materials and finished products, including as a result of tariffs; 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, "The VF Way" 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 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, 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; business resiliency in response to natural or man-made economic, public health, cyber, political or environmental disruptions, including any potential effects from changes in tariffs and international trade policy; changes in tax laws and additional tax liabilities; legal, regulatory, political, economic, and geopolitical risks, including those related to the current conflicts in Europe, the Middle East and Asia 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 2025 Form 10-K.