VFC - VF CORP at Morgan Stanley Global Consumer & Retail Conference EVENT DATE/TIME: NOVEMBER 13, 2012 / 3:20PM GMT

Transcription

1 THOMSON REUTERS STREETEVENTS EDITED TRANSCRIPT VFC - VF CORP at Morgan Stanley Global Consumer & Retail Conference EVENT DATE/TIME: NOVEMBER 13, 2012 / 3:20PM GMT

2 CORPORATE PARTICIPANTS Bob Shearer VF Corporation - SVP, CFO CONFERENCE CALL PARTICIPANTS Joe Parkhill Morgan Stanley - Analyst PRESENTATION Joe Parkhill - Morgan Stanley - Analyst Good morning. I am Joe Parkhill of Morgan Stanley, its branded apparel and footwear analyst. Today we have with us CFO of VF Corp., Bob Shearer. VF Corp. is one of the world's largest branded apparel companies, manages over 30 brands, brands such as The North Face, Vans and Timberland. Their portfolio is shifting more towards an outdoor and action sports and more international, which are both higher-margin businesses, which should create faster EPS growth in the future. With that, I will let Bob speak. Thanks, Joe. Good morning, everyone. Appreciate you joining us today, hear a little bit about our story. We will start with the obligatory comments on forward-looking statements. And I know you're fast readers, so let's get started. So I know that you are familiar with our brands. We do have a diverse portfolio, as you can see from the slide. This diversity is really an important part of our story, and also of the success that we've been experiencing, particularly of late. Here is what it does. It allows us to minimize the risk associated with the mono-brand approach, while maximizing the opportunities across these many different brands and across geographies and across a variety of markets. Obviously, just owning these brands isn't the key to success. It is what we do with these brands that makes us successful. So here is our model; just wanted to touch on this. The people that run our brands -- we call it the front end of the business -- they have responsibly for knowing and understanding their consumers better than anyone else, better than anyone else in the world. We do a lot of market research around that to understand consumers that are using our brands, for sure. They then have the responsibility to translate that consumer knowledge into innovative products. And then their responsibility is to connect with consumers through a variety of different avenues through wholesale, finding the right mix of wholesale, retail and also online. Now here is what VF then brings to the table, and the simple solution is platforms. For example, we bring strong operational and financial disciplines, a global infrastructure that we can build out these brands across the globe. Also, a technology platform as well. A centralized supply chain; their responsibility is to provide great service at the lowest cost available. So it is the combination, it's the combination of very, very strong consumer knowledge with these operational disciplines that has made it work for us. Now, the Corporation also has a responsibility to make sure that we have a strong and growing portfolio. You can see acquisitions have been a really important part of our story. A lot of times we talk about our story and we use the word transformation. We are clearly a very, very different company than we were, say, back in the year So making acquisitions like The North Face, Vans, 7 For All Mankind and, most recently, Timberland, it has accounted for three of our five largest brands, three of the billion-dollar plus brands within VF today, and represent, as you can see from the chart, about $7 billion of the nearly $11 billion that we will report in

3 Now, we are not afraid to exit businesses. The most recent example of that would be the John Varvatos. We exited -- we sold the Varvatos business in April of The biggest example here would be our intimate apparel business. We sold that back in the mid-2000 period. And those divestitures accounted for, at the time that they were sold, $1.3 billion in revenues. Now acquisitions, as I said, really an important part of our story, what we've been able to do. But what is most important with these is not just acquiring the brands, as I said, but it is what we have been able to do with these brands since the time of acquisition. You can see The North Face. The North Face was about a $200 million business when we acquired it; today, closing in on $2 billion. Vans is another great example. About a $300 million, $350 million business at the time of acquisition; closing in on $1.5 billion. So again, it is the growth that we've seen with these businesses since the time of acquisition. You can see, most of our acquisition activity has been in the outdoor and action sports area. In the year 2000, we were only a $400 million business. It was mostly represented by JanSport, and also had just acquired The North Face at that point. And growing to nearly $6 billion today in That is a 25% rate of growth. And just as important, maybe more important, is the profitability improvement that we've seen. The 6.5% on the chart here, that is pretty representative of the kinds of margins that we see at the time of acquisition. And you can see we've grown those operating margins to the highest in VF today at about 20%. So once again, back to that model, it is the combination of consumer knowledge and our operating platforms that give us the opportunity to grow the top line, while expanding our profitability. All right, so I'd like to touch on where we are guiding to for I'll start with revenues. We expect to report $10.9 billion in revenues. That represents a 15% increase over 2011, 17% on a constant dollar basis. Clearly helped by the Timberland acquisition. It was a big acquisition for us. On an organic basis, we will report about 8% organic growth in constant dollars. And I'd ask you to keep in mind that all those percentages are impacted by about 1% from the Varvatos acquisition. In other words, they would be about 1% higher without that. Moving to gross margins, we expect to improve our gross margin by about 80 basis points in Now, the same thing that has been driving our gross margin improvement in the past is driving this year as well; most of it is mix. As our higher-margin businesses become a bigger part of the overall pie, it is improving our gross margin. Now clearly, some cost-reduction as well, particularly in our jeanswear contributed, but mostly, it is due to a mix. So that is true today and that will be true tomorrow, as well. And what that is leading to is a stronger operating margin performance, as well. On an adjusted basis, we will report just below 14% operating margins; so really nice improvement there over the past couple years as well. On an EPS basis, expecting to report $9.60 a share. That is a 17% increase over All right. So what I'd like to do now is just touch on the coalitions, the coalitions within VF Corporation. I'll start with outdoor and action sports, which in 2012 will represent about 53% of total VF Corporation. The growth rate there will be 30% plus; once again, includes the acquisition of Timberland. But on an organic basis, we are looking at kind of mid-teen percentage growth. So once again, with or without the Timberland acquisition, really strong growth continues in our outdoor and action sports businesses. And I might add with improved profitability in 2012 off the very high level of Our next largest coalition is our jeanswear business. It is one of our more mature businesses, to be sure. It is expected to grow at a mid-single-digit rate in Now, it seems like all we talked about frankly in 2011 was our jeanswear business, with the cotton cost increases and the impact on margins and that kind of thing. But this coalition is back on track. It is growing and it is one of our most profitable businesses. So between the two, about 80% of total VF accounted for between outdoor and action sports and jeanswear. 3

4 The remaining coalitions are Imagewear, our sportswear and contemporary brands. Our Imagewear business is one that you may not know so well. It is a uniform and also a licensed sports business. It represents about 10% of total VF. We are looking for mid-single-digit percentage growth in 2012 in Imagewear. And our sportswear and contemporary brands, they are not our largest coalitions, to be sure, but we are looking for a really nice year in both of those coalitions. Looking for high single-digit percentage growth in both sportswear and contemporary, and also significant improvements in profitability in both. So once again, all in all, pretty much hitting on all cylinders when it comes to our coalitions and our businesses, both from a revenue standpoint and also a margin improvement standpoint. So just a few weeks ago, we reported our third-quarter results. And we thought rather than taking you through all the numbers on a year-to-date basis, what we might do is take a little bit different approach and address the top five questions that you've been asking of us around our results. And so the very first question I want to address is can The North Face brand's momentum continue. The answer is absolutely yes. We are as confident as ever in our ability to continue to grow The North Face brand, and there are four primary reasons for that. First of all is innovation and product. We spend more, we spend very effectively in terms of product innovation. We have a great product development team in The North Face. We support that with the best outdoor athlete team, which give their input to our product, in the world. And what we are able to do is to develop products like you see in the chart here. The jacket on the left is called the Zero Jacket, the middle product is called the ABS Vest. Now, this vest will keep you alive if you happen to be in an avalanche. Don't know if that interests many of you, but it is a really, really cool product. It's kind of an airbag system is what it is. And the product on the right -- watch our footwear business. It is about to enter a new stage here, for sure. That product is called the Verto Glacier boot. So again, our footwear business will be an avenue of growth for us. Secondly is our balanced US and international growth. The Americas today is nearly three quarters of our total business for The North Face on a global basis. Once again, see a lot of opportunity to continue to grow our business through the US and throughout the Americas, through existing doors, opening new doors, expanding our presence in terms of new geographies like South America. So absolutely, we will continue to grow and gain share in the Americas. Let's move to Europe. TNF is the largest outdoor brand in Europe. But the region only accounts for 20% of total brand revenue. So that kind of says it all. So our market share is actually quite low in any one country. Our store counts are quite low in any one country. What we've seen is when we invest, when we focus on an individual country within Europe, put some marketing dollars behind it and really attack the region, we get great, great results. And that's exactly what we are doing today and what we will continue to do looking forward. Asia, also a big opportunity. Especially in China, where TNF has the opportunity to actually define the outdoor category in China. We just recently in Shanghai held Investor Days, talked about all of our brands there. And what we said was that we pay a lot of attention to the differences between cultures. We need to make our brand speak properly to the cultures in China, for example. So once again, a lot of consumer research. And when we talk about defining the category, it's exactly what we mean. So our business today for The North Face in Asia is really quite small. It is about $160 million. What we said during our investor meeting just a few weeks ago was that we expected a growth rate of 26% against that on an annual basis over the next five-year period. If you would like to learn more about that, we'd invite you to go to VFinChina.com. You can see a lot more about this brand and others in terms of our growth plans. Third reason, continued successful expansion into new activity-based categories. It was a little less than two years ago, what we decided to do was reorganize our Product Development Group. We are much more focused now on very specific activities of the athletes that are enjoying our brand. So areas that we really hadn't specifically focused on previously, like back-country skiing, trail running, training and yoga, all now have individuals specifically focused on developing new products. 4

5 So here is what that is doing. It's expanding the reach of the brand to a broader base of consumers, and also distribution channels that we just weren't getting at previously, and obviously fueling growth. And then the fourth area is our DTC growth, retail stores and e-comm. That's really pretty straightforward. Today, across the globe, we have only about 100 North Face stores. A very, very low number. They are very profitable for us. Obviously, we will expand that. In addition to that we have an e-comm business that represents a pretty small but very profitable piece of the overall brand. So once again, to those four areas, a lot of reasons why we are so confident in our ability to continue The North Face growth that we've enjoyed. All right, the second question. Conditions in Europe are challenging. What are we seeing? No question, conditions do remain challenging in Europe, for sure, and we said all along, we are not immune to that. We are not immune to what is taking place in Europe. But we are absolutely confident in the strength of our portfolio, and on a relative basis, we're going to continue to outperform our competition. Now in February this year, we guided to the expectation that our European business should grow at a low-double-digit rate, which we again confirmed on our call just a few weeks ago. In the third quarter, VF's revenues in Europe did grow, but at a slower rate, at 3% in constant dollars. Now there were reasons for that. It was slower than the double-digit growth posted in the first half of the year. But what we said was that we expected a reacceleration of that growth in the fourth quarter, driven by another quarter of exceptional growth within Vans, which we've been seeing all year long, a number of new store openings across Europe and also a number of brands and marketing investments. On the call last month, we also noted that we are stepping up our marketing spend in the fourth quarter to support our strongest and most profitable brands in key markets. That would primarily include The North Face, as well as Vans in Europe. And once again, these investments that we've done, we've made in the past, they've proven to give us a great ROI. What it does it will help push through revenues in the fourth quarter and also help us establish that momentum going into next year. And I think it is also worth repeating here that the brand portfolio idea that I talked about -- I talked about earlier and the diversification, it is clearly a competitive advantage. Not all of our brands in Europe are growing at the same rate, to be sure. For example, as I mentioned, Vans, they are growing at a 40% plus rate. Our jeans business in Europe, pretty tough category, it has been declining over the last couple years. But what we've been able to do is because of the strength of the portfolio, we've been able to make all of that work and mitigate short-term market conditions and provide us with strong growth. Okay, the third question that you've been asking is are we concerned about slowing growth in China. Obviously, watching the conditions there really closely in China. It does remain the strongest overall market in the world, so no, we are not overly concerned. In fact, last month at our investor day in Shanghai, we announced that total revenues for all VF businesses in China should be about $460 million this year. So not huge, growing substantially. It's a nice base, but it's only 4%, is the point of the VF's total global revenue. So pretty small with respect to our overall Company size, and also small with respect to the market opportunity that is created in China. And here, too, on the idea of the portfolio, our portfolio and the diversification is clearly a competitive advantage. We are not relying on just one brand to grow our business in China, but a portfolio of five very strong brands. So overall, our business there, very scalable; very young, frankly, in our efforts in China. So looking forward over the next five years, this is what we said. We said we expect VF revenues in China to grow at a 21% CAGR through And a lot of that has to do with distribution. In terms of distribution to support that growth, we expect to grow from 2300 doors today to 6000 over the next five years. So again, the message there for us, with our brands really just getting started, and we clearly have the brands to make it work. Next question is how is Timberland doing. Our performance is right on plan. We are as confident as ever in terms of the opportunities that we laid out at the time of acquisition related to the Timberland business. 5

6 So here is what we said. At the beginning of the year, we said we expected to reach about $1.7 billion in revenues for the brand, and that is just about where we will be; we will be just a little under the $1.7 billion mark in the year. Now, what we've done is we have taken a number of actions that have cleaned the business up, you might say. We've cleaned the distribution up. We've also -- there is no apparel right now in the numbers. There was in the year prior to our ownership. That will come back next year. Also, FX has had a significant impact on us as well, a few percentage points. So even with those top-line impacts, the negative impacts, still expect a slight constant dollar growth for the year in We are also making a lot of progress in putting in place the foundation to support future growth. And first is that apparel, the apparel opportunity that I mentioned, especially here in the US. We will be launching that in the fall of next year. Opening full-price retail stores is another opportunity that we've seen, for sure. That's again particularly here in the US. Asia, of course, a big opportunity for us. The Timberland brand does a big business in Japan, not so big in China. We expect to grow our China business by 30% per year for Timberland over the next five years, and of course, we will continue to grow the very, very strong footwear business. Women's is another opportunity. Now, on a cost synergies basis, we indicated that we had a target of about $35 million of cost reduction. That's what we said at the time we announced the acquisition. We are ahead of that in It is improving our operating margin, for sure. The business reported in the 8% to 9%, an operating margin of 8% to 9% in the years prior to our acquisition. This year, it will be more in the 10% to 11% area, so nice improvement there. And we are on track. We committed to a 15% operating margin by 2015, and we are absolutely on track to achieve that 15% target. And also -- one of the other opportunities in terms of improving the profitability is within the retail businesses, we pointed out at the time of acquisition, our four-wall profitability is in the 30% range; theirs was about 16%. We will improve that. And also, our efficient tax structure provides opportunities there, as well. So again, really confident in the $1.10. And this is the first full year of ownership; we acquired this business in September of last year. First full year this year contributing $1.10 a share. And also, very, very confident in what is ahead. The last question that you've asked is how should we think about our jeanswear business looking forward. Our jeanswear business today is in really good shape. We have two of the strongest jeans brands in the world in Lee and Wrangler. They generate very, very healthy margins and a lot of cash for us. So in the US, both Lee and Wrangler are winning with new product innovations. It has really been kind of interesting to us. We've talked a lot about our innovation platform, and it is so easy to get your mind around the next fabrication for The North Face that takes climbers to the top of Mount Everest. Our jeanswear business has been as successful in our innovation platform as any of our businesses. They are introducing new products, and it is not necessarily maybe the same glitz as climbing to the top of the world. But it is about a comfort and fit story, and it has been really successful. And we've added $100 million to $150 million of revenues that we wouldn't have otherwise had. So the businesses are doing really well. Our Wrangler Western business, some of you may be familiar with, it has delivered 10 consecutive quarters of strong revenue growth. In Europe, it is probably our most challenged piece of business today. Revenues are declining. It is a very tough category, as I said, but we are improving the profitability there over where we've been. Latin America is an area of growth for us, as is clearly Asia and particularly in China. Now an exciting addition to the jeanswear portfolio this year was the launch of Rock & Republic. Some of you may be familiar with that. It is a brand that has done really well for us and our wholesale partner, Kohl's. What it does is it demonstrates the capabilities that we have within our jeans business. It is a really strong group. And in terms of margins, as I said earlier, we spent a lot of time last year talking about the impact of cotton on our margins. Happy to say that these businesses are absolutely back on track. The year is playing out really pretty much as we had planned, if not even a little bit better, in terms of the profitability within our jeanswear businesses. The jeans margins are returning to more normalized levels, and you will absolutely see that in this fourth quarter, when our operating margin will be in the high teens for the fourth quarter. 6

7 So once again, really talented group, to be sure. We were able to weather the storm last year, made some really good decisions around pricing offsetting costs, put us in a good place right now. And on a longer-term basis, we are targeting a mid-single-digit percentage growth for our jeanswear business. All right, five, the question is what does the five mean on the chart. Here is what it refers to. Back in the early part of 2011, actually it was March 2011, we laid out for all of you what our five-year plans were and our commitments to you for the next five years. So the base period was The period was then through 2015, is what we were looking at. And we kept things pretty straightforward in terms of five. It was a five-year plan. We committed to growing revenues by $5 billion over the five-year period, and we also committed to adding $5.00 of earnings per share over that five-year period. So let's take a look at how we are doing. In terms of revenues, start at the top. So once again, committing to that $5 billion, which represents a 10% revenue growth rate. In 2011, the first year of that new plan, we reported 23% top-line growth. In 2012, at the $10.9 billion mark, we should report 15% growth on top of that. So a little perspective here is in just two years of the five-year plan that we committed to, or the $5 billion, we will have achieved over $3 billion of the growth of the $5 billion that we committed to, again, in just two years. Our operating margins, our commitment there, our target there, was a 15% operating margin. At the time in 2010 we were close to the 13%. Making really, really nice progress, as you can see, on an adjusted basis. And by the way, the adjusted means it excludes the acquisition-related expenses of Timberland; also excludes the gain on the sale of Varvatos, just to make sure that's clear. So I said earlier we expect that adjusted operating margin to be just below the 14% area in But keep in mind, that is held down by Timberland; the operating margins of Timberland, as you saw earlier, are well below the average of VF Corporation. That speaks to the opportunity that we see, for sure. The businesses that existed prior to Timberland, the operating margin there would be more in the mid-14% area. So again, really making nice progress, ahead of plan, clearly, in terms of moving towards that 15% operating margin. In terms of earnings per share, with the expanded operating margin, implies 12% per year growth. In the year 2011, increased our EPS by 27%; in 2012, by another 17%, to the $9.60 mark that we referenced earlier. And in cash flow, we generate a lot of cash in VF Corporation. We committed to $1 billion plus of cash generation. In 2012, we expect to be around the $1.2 billion mark. In summary, as I said on our last call, my closing comments were that the VF story is stronger than ever. Revenues are strong and growing. Our profitability and the improvement in profitability has been outstanding. And our balance sheet, despite making a considerable acquisition, remains very, very strong and flexible. So thanks for your attention. I guess we have a little bit of time for some questions. QUESTIONS AND ANSWERS Unidentified Audience Member You've obviously had a pretty strong story through the last few years. But I'm curious. I mean, I can go through the South Shore Mall in Boston and look at a forever 21 that is two stories high and square foot almost rivals the mall anchors, and I think about that and Zara and H&M. And I'm thinking 7

8 a lot of these people are on the lower -- who are shopping here are the lower end of some of your -- specifically your active and sports brands. And I realize your active and sports brands have a certain amount of performance attached to them. But I'm just wondering -- do you look at that and see a group that has come down in price via the -- or because of the bad economy, and look at what this administration is probably going to do to taxes in the next few years, and say, hey, how much -- could this happen to us? Are there any low-priced competitors on the horizon, especially for sports and action? And how do you monitor this and think about your pricing power going forward in this sort of environment? One of the things we look at, frankly, is the model that they use in terms of product development. We are always impressed with that, because it is that newness of product that does clearly get our attention. We don't compete so directly with many of the businesses that you mentioned specifically. We do, however, have a fairly significant business in the mass channel. So we do cover different tiers of distribution. Our jeans business is the business that plays most in the mass channel. But here is the solution. What we always believe -- and I mentioned it several times today -- I talked about the investments that we make behind our brands, I talked about the investments we make behind product as well. And keeping those -- keeping the product and brand really fresh and strong has been what we've seen over time has worked really well for us. So we put a very, very high premium in terms of new product and that new product development area. It is why you hear us talk so much about our innovation platform. Other brands and businesses just aren't investing the same; they don't have the capability to do that. We think that is a real competitive advantage. So what we believe is, sure, do the changes in the economy, do we watch that closely? Absolutely. But as you can see, what we decided to do this year was to put more dollars behind our marketing and even more dollars behind product development. For us, that has been the winning formula. Unidentified Audience Member Could you talk about what you think your pricing power is going forward relative to the CPI? Same comment. I would have to refer to exactly the same points that I've just made. Pricing power has everything to do with the brand and strength of the brand. So what we have seen is -- we do think that there are some limitations in terms of pricing, for sure. What I mean by that is that not just us, but our competitors as well, prices have come up a bit over the last year in particular. We don't necessarily -- we don't see a lot of pricing going forward in our businesses anyway. That is not what we are looking for. But on the other hand, costs are pretty stable as well. So that's what we see right now. One of the questions we often get is what about jeanswear. We had the biggest pricing increases across our business in the businesses and channels of distribution that you might lease expect it, and that is in our jeanswear business. But it is because the cost went up so dramatically. And what we did was we only offset half of the cost increase with pricing. And I said earlier about the strength of our jeanswear team, we think we managed through that actually pretty darn well. Other questions? 8

9 Unidentified Audience Member (inaudible) Given your ability to manage multiple brands, have you thought of buying any turnaround brands like Quiksilver or Billabong? And then do you -- how do you approach divestitures, like Imagewear or Nautica brands that you would consider shutting to become more of an outdoor company? Yes, so the first question again was given our -- would we think about -- okay, yes. So I can't be specific about any business. But what I can tell you is this. We have looked at turnaround brands for sure. The North Face is the best example we have of a turnaround brand. It was losing a fair amount of money in the year that we bought it. So here is how we approach that. The work that we do is primarily related to the strength of a brand. We know that we do more work around consumer research. We want to know what consumers are thinking about the brand that we are thinking about. Right? So our due diligence includes all the normal legal and financial and that type thing. But what we do more than anyone else is work around what the consumer has to say about a brand. So yes, if the brand message is strong and the brand is strong, but it is really tarnished because, in the case of The North Face, it is just not getting product out on time -- the product it was putting out was really good product, it just wasn't getting it on the shelf -- those are exactly the kind of things we would look at. So again, without being specific, sure, we would absolutely look at a turnaround situation if the brand was really strong. Now, how do we think about divestitures? You mentioned a couple businesses. You mentioned Nautica and Imagewear. The key is this. As long as -- if a business works within our portfolio -- and clearly, we do have some business -- like our Imagewear business is not so much brand-driven as some of our other businesses are. We talk a lot about our brands and our portfolio of brands and how important it is. But it is a really strong business that gives us revenue growth and really high earnings and generates a lot of cash. And there is not a lot wrong with that model. So what we do is we are constantly analyzing our portfolio, constantly, for areas that we might look at divestitures. And as I said earlier, right now we are really pretty much hitting on all cylinders when it comes to the portfolio that we have. Some different businesses in there, to be sure, but all have a place. But under a constant evaluation. Other questions? I know -- we answered all your questions, right, through the approach with the five questions? Which is what we were trying to do, at least cover a number of the questions that you might have. There is one right there. I knew if we waited long enough. Unidentified Audience Member What efficiencies do you derive from the portfolio approach in terms of manufacturing logistics, and how do you analyze that? Probably the biggest benefit that we've seen -- and Timberland is a pretty good example -- Timberland is a really good bootmaker. They make a fair amount of their own product in their own plants, and they are good at it. What we've brought, and where the opportunity -- and frankly, this is one of the areas I said earlier that from a cost-reduction standpoint and efficiency, we are finding a little bit more than we first thought -- this is one of those areas. We manage inventories really well. The processes that we have in place to be able to control inventory and inventory risk, what we make, when we make it, how much we make and all those kinds of things, have been probably the area of biggest opportunity that we've seen across the acquisitions. 9

10 Now, every acquisition is a little bit different. With The North Face, we brought The North Face on to our global sourcing platform, and clearly, there were just strictly cost reductions. So it is all part of the evaluation. It absolutely is. We talked a lot about Timberland being the most recent example in terms of the opportunities that we saw relative to reducing the cost structure and bringing them into our platform. But once again, the most important features -- those are pieces that absolutely put icing on the cake. But the most important characteristics are what the brand stands for and the ability to grow the brand. So that is how we think about acquisitions specifically. Does that answer your question? Unidentified Audience Member (inaudible - microphone inaccessible) Yes, so what we do is -- I talked earlier about our model. And what I said was what is separate within our model is brand performance. Everything that has to do with the ownership of a brand is separate and distinct by its own group and by region -- in the US, in Europe and also in Asia. That is -- those are separate and distinct groups on their own. They make those decisions. What we do is from -- I'll call it the back end of the business -- not very flattering, I know -- but the back end of the business is from the manufacturing side, distribution side, that is where we really see the economies of scale. That is where we clearly leverage the scale of VF Corporation. And that is where we see -- when we talk about cost reduction and efficiencies and that kind of thing, that is where we see the most opportunity. So yes, we do; we manage our supply chain on a centralized basis, for sure. The rest of the business, that front end of the business, is business by business, region by region, brand by brand. It is also -- I might add it is also how we reward our people, on a by-brand basis. And then we also look at that across the globe by brand. Again, brands are everything in our business and it's exactly how we think about it, and we reward performance. Any others? Okay, thank you very much. Thanks for joining us today. DISCLAIMER Thomson Reuters reserves the right to make changes to documents, content, or other information on this web site without obligation to notify any person of such changes. In the conference calls upon which Event Transcripts are based, companies may make projections or other forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks, which are more specifically identified in the companies' most recent SEC filings. Although the companies may indicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized. THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES THOMSON REUTERS OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS. 2012, Thomson Reuters. All Rights Reserved T17:24: