We met with VFC management at company headquarters, including:

Eric Wiseman, CEO

Steve Rendle, President and COO,

Scott Roe, CFO

Stephen Dull, Strategy and Innovation

Brendan Sullivan, Direct to Consumer

Our key takeaways follow:

Environment:

• Management calls out weather for having major negative effect on their business, as evidence by the sharp deceleration in trends that materialized in 4Q.
• There is still a lot of cold weather product remaining in the system, and VFC thinks 3Q could get off to a promotional start as retailers / brands work through that carry over product, similar to how 2013 (which followed a very warm 2012 winter) played out.
• Mass has been a very strong channel for them.
• Their guidance already reflected a conservative scenario regarding The Sports Authority (TSA) and other retailer bankruptcies. What is not clear yet is how much negative impact the liquidated product being pumped through the system will have on their business.

Addressing changing shopping habits:

DTC has been an important growth and strategic initiative for VFC in the last several years, now at 27% of total sales. The company's focus has shifted increasingly towards digital, while dialing back on some prior store objectives. The head of DTC highlighted digital as the 1st plank in his 5 plank strategy for direct.

In an effort to address traffic declines, VFC is working to improve conversion through improving customer engagement and implementing better service models. We didn't get details on the specifics, but management is in the process of establishing a set of KPIs to measure success here.

Amazon (including Zappos) is a top 5 account for VFC globally and their #1 account in the EU. At the same time, it doesn't account for more than 3-4% of sales for any individual brand. The North Face (TNF) and Vans don't sell directly to AMZN in the US. VFC is focused on making sure product on the their own DTC is distinct from what's on AMZN and that there is price parity.

A different kind of corporate culture:

Management meetings helped dimensionalize some of the operating practices that make VFC a well run company. We heard the words "innovation" and "consumer insights" multiple times during our half-day of meetings, reflecting VFC's thoughtful and forward thinking approach to business.

VFC takes a disciplined and metrics driven approach to marketing, requiring a 30%-plus return on every dollar of spending. We heard examples of embracing TV advertising because TV still inspires mobile search.

Management discussed a more aggressive approach to innovating in apparel to add more "science" to garments. One specific initiative being tested in Lee China this August uses contouring to flatter a woman's figure. The garments a manufactured using lasers, and VFC owns the IP.

M&A

Management reiterated a desire to acquire another brand that fits within Outdoor & Athletic.

The key challenge has been agreeing on price and families willing to sell.

Management noted they were looking at targets large and small in size.

Our 12-month price target of $73 is based on 20X our 12-24mo forward EPS estimates.

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