V.F. Corporation (VFC)

Investor Day 2014

← View all transcripts

Sep 17, 2014

Ladies and gentlemen, would you please welcome Vice President of Investor Relations, Lance Alega. Hello, everybody. Welcome. A couple of housekeeping items. Wanted to let you know that remember to turn off your cell phones. It would be very nice to turn off the ringer so we're not interrupted up here. There is Wi Fi in the building to VF guest. The password and the login is guest and guest, very difficult, both capitals. So gg, guest, guest. And speaking of technology, I wanted to say, we really appreciate you guys making the personal trip, the physical trip to be here today. It's really meaningful to us and to continue to be able to foster these relationships and have these in person communications interaction with you guys. It's really meaningful to us. It's really a humbling experience that everybody takes such great interest in our company and the stories we have to tell and to give us the venue and the opportunity to continue to tell these stories. So just really wanted to thank you for being here today. A couple of housekeeping items. I'm not going to read the disclosure statement, but clearly we're here today to talk about the future and there are certain things that are out of our control over that period. And certainly, you can take a look at the presentations here. I'm sure all of you are probably on Page 176 already. But nonetheless, it was a very, very, very good meeting. From a general perspective, following along with your books there today, this is the general outline of the day. We'll kind of click down a little bit from the VF level and then go into really kind of setting the stage about before acquisition, during acquisition and certainly our future. The four sections there with innovation, consumers, serving consumers directly and expand geographically should look very familiar to you. It is the growth strategies that we laid out certainly for VF Corporation last June at our 5 year investor meeting there. So we'll get through that. There'll be about a 15 minute break midway point in the morning and then we'll do lunch probably around 11:45 noon. That'll be about 45 minutes or so. Then we'll regroup and each of you has a picture on your badge. It's either a bag, a boot or a jacket. So we'll break you off into those groups. And we're going to rotate you through 3 immersions to give you a little bit better insight and in-depth read into the company and certainly from a style perspective and where inspiration comes from for design. And then ultimately, we'll close it out, come back for a question and answer session and you guys will have an opportunity to shop as well. But again, thank you very much for being here. And I will now turn it over to our Chairman, President and Chief Executive Officer, Eric Wiesen. I'll also thank you, those of you who made the trip here to be with us personally. Appreciate you doing that. Know that it takes a lot of time to do that and expresses to us, as Lance said, a lot of interest in what we're doing. I'll also acknowledge this is a web cast. So for everybody who's listening right now, but not present, we're glad you could be with us as well. It's my honor today to tee up what is going to be a very deep look at the strategies around what is now VF's 3rd largest brand, Timberland. We have I love that we're doing this in the middle of September, because it was in the middle of September 3 years ago that we closed on what was the largest what is the largest acquisition in VF's 115 year history. It was really important for us to get this right. I don't know that you underappreciate how focused we were on getting this right. And by getting it right, I meant we had to have a successful integration. We had to get the business started up right and get it off to a good start while it was on our watch, because this was big and complex. And by complex, what I mean is, it was the largest international business we had ever acquired. It is the largest direct to consumer business we'd ever acquired. It was the most complex supply chain integration we've ever attempted. And while we were doing all that in the last 36 months, we had to get around platform stuff. So Timberland's Asia Pacific business was based in Singapore. Ours is based in Hong Kong. Today Timberland is part of our Hong Kong structure and process and platform and technology. Over in Europe Timberland had an their international business was actually headquartered in Wexan, England. As most of you know, we've opened a new international headquarters in Stavio, Switzerland and Timberland is now part of that. But those are very complicated moves to make. And while we were doing all that, one choice we made was to invest thousands and thousands of hours in deep consumer research in all of the markets that are most important to Timberland. We made that choice, thought about it a lot because we had a lot going on. But we made that choice because those deep consumer insights formed the foundation for all the choices we were going to make around geographic expansion, marketing and brand. So we've had a lot going on. And today, you're going to hear a lot about everything we've been doing over the last 3 years. They'll give you the details. My perspective on that is if you think about the cover of our annual report this year, I'm sure all of you think about that all the time. What it says on it is powerful brands, powerful platforms, 1VF. Successfully completing acquisitions is about buying the powerful brand, leveraging our powerful platforms and wrapping our arms around it and embracing it as part of what 1VF means to us. When I talk about platforms, the way we think about them are we think about geographic platforms. I just gave you some examples of how Timberland has become part of our geographic platforms. It's also about capability platforms. And capability for us are business processes that improve inventory management and profitability. And it's also about capabilities like consumer insights, where we have a lot of knowledge around consumer insights and we share that with the businesses that we bought. All of that ultimately happens with people, and I could not be more proud of nor more appreciative of the people at Timberland and the people at VF who work with the people of Timberland to get us to the place that we are today. Proud of them and very grateful for everything they've done over the last 3 years. Today, we're going to talk about the next 5 years. We'll talk about the future of Timberland. You're going to get a complete reveal on what this brand is capable of over the next 5 years. My wish is that you leave today, understanding that we are capable of getting these things done, and we're committed to doing that. And we are both. We will get this plan done. We have a history of doing what we say and we're going to get that done here. Again, it comes down to the people. I think this is perhaps the most exciting time in the history of Timberland. We've been looking at Timberland and following it for decades. But when we look at it today and look at what it can become rather rapidly, it's staggering the potential that this brand has with consumers. It's staggering and we know that because we measure it. And we have a team in place here that's very capable of getting all of that work done. So we will reveal all of that. I am very bullish on this brand and very confident in our people. And I'm appreciative that you came here today to hear this story. And with that, I'm going to turn the program over to Steve Rendle, the Senior Vice President of the Americas for VF. Thank you, Eric. So good morning, everybody. I will echo Lance's and Eric's appreciative comments about you being here with us today. We know you're busy and we really enjoy these opportunities to tell our stories. All of our brands have great stories to tell. This one's particularly topical in that it's new. It's new for you to really look in that it's new. It's new for you to really look behind the curtain and see what we've done the last 3 years and to get to know our leadership team here. So, today really is about Timberland. What I'd like to do is just a quick overview of a few things from a VF standpoint. But I would tell you by the end of today, our goal would be to have you walk away with 2 things. 1 would be to have a much stronger understanding for how we leverage our powerful platforms to enable our businesses to scale. And the second one would be to have a renewed confidence on our Timberland growth strategies and our plan on how this brand will grow across the globe and do that through really getting to know and understanding the strength and capabilities of our leadership team that we'll present to you today. So VF is built on the strength of powerful brands and our powerful platforms. Eric just mentioned that. Our brands are global in their reach and they have a unique opportunity to speak to a diverse set of consumers across the diverse set of activities, sectors, categories of product, as well as channels of distribution. And our best in class platforms, which you hear us talk a lot about, really are the competitive advantage that we have from a business standpoint. Platforms such as our back office capabilities in supply chain, human resources and finance. But on our front end, it would be our international platform, B2C, strategy, consumer insights. You hear us talk a lot about our focus on our consumer, how we bring that to life in our brand management capability and most importantly as of late is the investments we're making in innovation. When we fully utilize these, it gives our brands a unique competitive advantage. There are a number of things that we have to fuel the growth of VF and things that give us confidence that we'll continue to deliver on the promise of strong year over year expansion of our top and bottom line. The first one is our organic growth. We have a proven capability and ability to grow our existing businesses in a way that outperform the market. In our 17 by 17 plan, we laid out that this will be about 80% of our growth. 2nd is our international platform. Growing in this platform is significant, a very significant part of our long term success. In 2013, our international revenue reached $4,300,000,000 and represented just about 40% of our total revenue. We laid out last year that by 2017, we expect our international platform to grow at about an average rate of 13% a year and achieve 43% of our total revenue. 3rd one is our innovation platform. We continue to see this one grow in importance. We know that the consumers are becoming more and more difficult to connect with and our brands have to have new and innovative ways to really come to the top of our consumers' mind and grab that mind share. We need to think about it from a through a lens of product innovation. We need to think about it through the lens of our store environments and you'll see some examples of that today here. We need to think about the messages and the stories that we deliver to really pop to the top of our consumers' consideration set to make sure that they think of our brands first when they are prepared to buy products. Direct to consumer is a particular strength of VF's and we'll continue to grow in this area. Today, we have about 1300 stores across 11 brands and by 2017, we'll be approaching about 1800 stores. In addition to our store contribution is e commerce. We all know how important e commerce and the ability for businesses to connect digitally with consumers is. For us, we'll continue to see value here and have this particular part of our D2C platform continue to grow profitable contributions. But probably the more important part beyond the revenue and the profit, it's the unique way that we're able to connect with our consumers, delivering them rich content that again connects them emotionally to our brands and keeps them connected and knowledgeable about what we're doing. In 2012, this represented about $250,000,000 of our D2C and by 2017, we've committed to get to $750,000,000 across the globe. And finally, acquisitions. We have proven that we have the ability to acquire brands that build on the strength of our current businesses and you'll see that today. And we have confidence in our ability to integrate them quickly and effectively, maximizing the opportunities to benefit from the platforms that we have and the business expertise that we bring from VF. From 2,009 to 2013, the weighting of the individual coalition's contribution to the larger VF shifted to be more heavily represented by our outdoor and action sports businesses. This shift was driven by the acquisition of Timberland for sure, but it was also through the continued year over year growth, double digit growth of our Coalition Outdoor and Action Sports Coalition brands, most notably The North Face and Vans. As we look to 2017, the Outdoor and Action Sports business is expected to grow from 56% of our total revenue to 66%. And as we walked you through last year in New York, all of our businesses will pull their weight and deliver their individual growth rates as we achieve our goal of 17x17. It's important to know that in that Outdoor and Action Sports number, there's $1,300,000,000 of acquisition revenue contemplated there. So, quick reminder, the brands that make up our Outdoor and Action Sports Coalition, 8 of them are anchored here in the Americas, 3 of them, Kipling, Napapiri and Eastpak are anchored in our international platform in Stabio. Each one of these has a unique capability to connect with their consumers and each one of them is number 1 or number 2 in their category from a point of share. Last year, we committed to add 5,200,000,000 dollars in revenue from 2012 to 2017, growing our outdoor and action sports businesses from $5,900,000,000 to $11,100,000 This equals about a 14% 5 year compounded growth rate. 11% of that growth will come from organic growth and 3% or that $1,300,000,000 I mentioned a moment ago will come from acquisitions. And I'm happy to tell you that 2 years into our journey, we believe we are well on our way to deliver on the 5 year organic growth rate of 11%. So again, thank you for taking time to be with us today. So much has been done here at Timberland put this brand in a position to grow in the future and we could not be more excited to give you a peek behind the curtain of what this team has been doing the last 3 years and the strategies that they have in place to grow to the future. So reminder, we do our job today. You'll walk away with a very strong understanding of how VF, how we leverage our platforms to enable our brands to scale. And hopefully, you'll walk away with a dramatically renewed confidence in our ability to grow this Timberland brand based on the strength and capability of the leadership team that you'll hear speak to you for the balance of the day. So thank you. I will now hand it over to the very capable hands of our President, Patrick Frist, who is also the President of our Outdoor Coalition here in the Americas. Thanks, Steve. Thank you, Steve, and thank you all for being here today to join us in what we believe is a very exciting day. The team is fired up and great for you guys to hear some new people speak from VF that you haven't perhaps seen before. We don't call this a combat for Timbaland. We really look at this as a second act. And to kick it all off, what we'd like to do is show you a little video that takes you through the evolution that we've gone through over the last 3 years. Could we roll the video, please? So we think that that video says it all. It's really a show of the evolution of the brand from its past, its heritage into a more modern brand crafted for today and for new and modern consumer as well. And what's really exciting about right now for the brand is that we have better momentum than ever before. We're growing. We have great momentum. And what's really exciting about that is the fact that we're growing across all of our regions, across all of our categories, across all of our genders and also across all of our channels of distribution, which is probably the first time that's ever happened to the brand for a very, very long time. When we look at the what we're going to be talking about here today, it's really going to be about that evolution, how we've been able to take what we inherited from the Schwartz family over 3 generations and what we've done to really reengineer, restructure and integrate the brand into VF and now how we're building momentum for the future. Taking you back a little bit into history here and talking about where we were when we came into the acquisition, Revenue had been pretty flat, I would say, and as you can see, over the previous years from 2006 to 2011. And actually, what's not visible in here is that during this time, we also had a pretty severe decline in the North American market specifically. When we look at the operating margin, not a lot of progress was made there either, going from a 10.4% to 7.9% operating margin. So not really a very profitable brand during that time. So when we came in as a team, there were a couple of or actually 4 different things that we were very focused on. The first thing was the aim that we had to turn the North American business around. And of course that's really important to VF that our anchor brands, our large brands are very strong in their whole market. We need to be really anchoring ourselves where we come from. At the same time of course it was very, very important that we continue the international growth both in Europe and in Asia during that time. And we had to try to rebuild the apparel initiative here in North America. As most of you guys know, we were under license when we came in. PVH had a license that started in 2007. As part of the acquisition, we actually discontinued that license and we took a 1.5 year break here in the U. S. While we repositioned our apparel and also put it on to the International Design Center platform that we have in London. So for us that was really important. We also had to shift all of our sourcing from the Li Fang sourcing engine onto the VF sourcing engine. So we had to rebuild the apparel. We had to relaunch it here in North America. And Jim Dave is going to talk a little bit about the reboot of the brand that we did in 2013 later today and Diane will touch on it as well in her presentation. We also needed to continue to expand our direct to consumer business, very important in all the types of direct to consumer business, our full price stores, We needed to right size our outlet stores. We needed to supercharge our e commerce business. And we needed to continue to expand geographically as well, really important of course for the brand. It was a global brand when we came in. However, we saw a lot of opportunity to continue to grow in the countries we were at, but also in new countries around the globe. But first of all, and I've talked to some of you guys about this, some of you that were fortunate enough to share some really nice seafood last night and some of you this morning, we took really a page out of the playbook as we came in. We needed to slow down before we sped up. And what does that mean? Well, we needed to put a foundation in place before we got going to ensure that we had a solid ground to stand on. And the way that we do that at VF is we start with making sure that we, of course, got the right vision for the brand. We had to articulate a new vision for the brand. When we came in, the vision for the brand was to be the number one outdoor brand on earth by 2013. And as most of you know, we already had the number one outdoor brand on earth. So we were certain that we're going to do that again. And actually, one more interesting thing perhaps is the fact that the end consumer did not see us as the number one outdoor brand. We'll talk a lot about that today. We'll share with you how the end consumer saw this brand. Secondly, we needed to build an optimal structure. One of the things that we know well and you guys know that we know well is how to build a great structure, an organizational structure. So, we needed to make sure we had the right one. 3rd, we needed to make sure we had the right process as well to be able to execute in an optimal way for the brand. And we needed to do all of that while we ensured that we did not break the great unique culture of Timberland. And that's one of the most the hardest things to do when you actually do an acquisition is to ensure that that culture is maintained because that's is to ensure that that culture is maintained because that's part of what you buy. That's part of the goodwill. And that's really for you that have been following VF for a long time, that's something that VF is really good VF really allows the brands to be the brand. And for us, it was critically important since this was also such a large brand and it was global. So we had to figure out how to do that. And we also wanted to make sure that we kept the values of the Timberland brand. That was really important to us. So I'll talk a little bit more about this now. So the first thing we did was to articulate a new vision to be the largest and most sustainable outdoor lifestyle brand on earth. So what does that mean? Well, it was important to us to talk about being the largest because we wanted to send a very clear message to everybody that worked in Timberland that we were going to grow. We're all about growth at VF and we certainly were going to be all about growth at the Timberland brand. But we also wanted to be conscientious of the culture. So in being large, we could also do more good. So that was really important. Most sustainable was important because we wanted to continue to send a message that we were going to again play homage to the culture in terms of what we put into our products, how we made our product, where we made our product and how we thought as a corporate citizen. That was still important. But here we also added the sustainable business model because one of the things that is our job is to make sure that we put a sustainable business model in place so that this brand will thrive in years to come. And last, we put lifestyle at the end of outdoor because we wanted to also send a clear message that we were taking a new direction. We were shifting the brand into a new direction. 2nd thing, we restructured the brand and here the consumer starts to come in. We needed to realign our product organization behind a consumer target. And what does that mean? Well, this brand was very much an intuitive product led brand when we came in. A lot of art, not so much science. We needed to shift it and shift the focus to becoming a strategic brand led by consumer insights. And that took about 2, 2.5 years to do. And we're going to talk a lot about that today. Also needed to align our marketing globally because once we had landed on that consumer, we needed to make sure that our messaging was consistent across the globe as we went to market. And of course, here in North America and I touched on this with several of you this morning, it was really important for us to reorganize our sales organization by channel of distribution to ensure that we could be effective in our go to market. In terms of the right process, it was again here very important for us to align behind the consumer. And what we did was we made sure that the consumer came in early through the process from a total head perspective. We needed to align on that silhouette of the end consumer before we, as a second step, pushed it into the go to market process that starts out globally with all the commonalities that we can find. And then as we go through our process, becomes more and more regional to ensure that we capture all of the local nuances and all of the opportunities that sit out there in our regions. And thirdly, of course, we had to attach it to the sales and operations planning, rigor and discipline, if you like, of VF. So we now had a complete front end to back end approach to our process, something we do so well at VF and we now have implemented at Timberland. And again, we needed to do all of that while we maintain the values and the culture of Timberland. And the values of humanity, humility, integrity and excellence, I can announce happily here today that they remain intact. The only thing that we really did was we took a long hard look at the definition of these values because we wanted to ensure that they were understood by all of our associates across the world. And as you know, we operate in about 85 countries today with Timberland. So it was important for us that if we were going to use these values and use them as a filter for the brand, we needed to make sure everybody understood about them. So we did that and we also maintained all of our CSR initiatives. Now it was a little bit tricky because of course VF has a CSR initiative that has 3 pillars, resource efficiency, sustainable products, employee and community engagement, but we were able to actually align the Timberland initiatives behind the VF pillars. And so we've been able to continue to drive all of the initiatives that we originally had at Timberland as we've gone through this acquisition. So very powerful and that's how we've maintained the culture. Now you guys have seen this slide before. Eric showed it for the first time last year on the 11th June at the Investors Meeting in New York. And this is really about the 4 platforms or growth strategies of B. F. Of leading in innovation, serving consumers directly, connecting with consumers and expanding geographically. And we're going to spend the rest of today really talking about these four things and show you how Timberland is now aligned behind these four strategies. So what we wanted to do is really start by talking about something that I think has fundamentally been the most important thing for Timberland as we think about our product strategies. We have a new product formula and you'll hear almost every presenter I think today talk about this. And as you walk around the building today, if you ask anybody here what is SPG, I can almost guarantee that everybody would be able to answer that question or at least I hope so. So what is it all about? Well, the main thing that the end consumer told us as we started to learn more about how they saw the brand was that you guys need to dial up the S. Historically at Timberland, you probably had more of a PGS or a GPS formula here, but it was very clear to us that, first of all, people love this brand. They really love this brand. It was incredible for me as a leader and for all of us, I would say, as a team to experience a brand where there was no negativism around the brand whatsoever. Everybody loved it. It was just unclear how it could be relevant to them today in the modern world. So by asking the questions and by doing the research, we understood that, hey guys, if you dial up the S, maintain performance, but a different type of performance, not necessarily going to the top of the mountain performance. Give me performance that gives me comfort and versatility and I'll be on, I'll be on, I'm on. And then, by the way, don't give away the G, right? We still want the green, but give it to me more as a gift with purchase. Style, performance and green in that order and I'm going to start buying more product from you and I'm going to get heavily engaged with the brand. So this is a really important thing. SPG, that's our product formula and there's going to be a lot more to come with that. And when we also looked at inside of Leading and Innovation as one of our growth strategies in terms of our focus, it was important for us to make sure that we were focusing on the things that would create growth. And the first one, of course, the most obvious one perhaps is men's casual footwear. Men's casual footwear is a heritage category for the brand and we needed to ensure that we did a better job in men's casual footwear. I talked to some of you about the need to be disciplined about our SKU assortment for example in terms of how many SKUs we have and so forth. We took a really big stab at making a better job in terms of what kind of product we were producing. But we did it again through that SPG lens for men's casual footwear and it's really paid off. Secondly, we needed to tie it better to men's apparel and here comes the process again tying it together in that toe to head fashion, right, really important. And then having the right message as we go through the process and our go to market process. So men's apparel from a toe to head perspective was important. It was also very important because we needed to reboot it here in North America and we needed to do a better job of giving the international markets better apparel because of the heavy reliance that we have of course on our direct to consumer business around the world. So very important. Then we have 2 categories women's footwear and our North American Pro business. And the women's footwear specifically, we've been in women's footwear for a very long time. However, we saw that we could do a better job there. So we really took a slowdown to speed up approach in women's footwear specifically. We wanted to make sure that we were making the right footwear. So we've done a lot of work to rejig and refocus our women's footwear. And we see the women's footwear certainly as a growth category right now. But when we look into the future, there's an enormous runway for us when we look at women's footwear. Timo will be speaking specifically to women's footwear as it relates to our business in Europe where we're doing very well with it right now. And then we have the North American Pro business and some of you have had the opportunity to talk to Diane I think at the OR show where she's talked a little bit more deeply about the pro business. Right now, the pro business is a professional business. Diane will talk to it a little bit more today and it's predominantly a North American business. We see a great runway for the North for the pro business internationally, geographically as we go forward. We also see an opportunity in pro with apparel, which focus category growth that you have for the brand still in place today, 2 really strong areas where we're growing right now and 2 great areas for the future. We talked about connecting with consumers and this brand has probably done the most comprehensive consumer insights work of any brand at VF. We spent 2 years, talked to 18,000 consumers across 8 countries, 14 cities and we learned a lot. And Jim is going to tell you a lot about what we did there later on today. And what we did was we landed on 1 consumer segment which is really important, one common consumer across the globe, the outdoor lifestyle. So that now enables us to be very focused around how we create product, the message that we send and how we think about the market size for the brand. Serving consumers directly, the next growth category, of course, very important to us. We're focused here on opening new stores, accelerating e commerce that I talked about early on and relentlessly driving comp store growth around the globe. Talking about expanding geographically, as you guys know the plan for Timbaland this year is $1,700,000,000 And when we look at the marketplace for apparel and footwear around the world, it's really big. As you guys know, it's a $1,000,000,000,000 marketplace. But when we click down a level to the market that we actually look at, which is more the premium market, it's about $625,000,000,000 For Timberland, with that outdoor lifestyle consumer that I talked about, in our 8 markets where we do our research, we see a market opportunity of about $36,000,000,000 Now that's only in the 8 markets that we've been talking about. So you can imagine here what an opportunity, what a runway just in those 8 countries for this brand as we go into the future. So that's what we've been doing. That's what we've been focused on. So how do you guys think we're doing right now? How is it all going? Well, it's going pretty well. Remember what I talked about when I started out. I talked about slowing down to speed up. That's exactly what we did in 2011 2012. We didn't really grow. We took a step back because we had to put our house in order. That's what we have done. Sometimes people forget about history, but it's not dissimilar to what happened with The North Face when we acquired North Face way, way back then when I was still a child. And then what happened was we started to grow, right? We put our house in order and we started to grow. And in 2013, we grow with 5%, we grew with 10% in North America. And then now we're in 2014 and the acceleration begins, right? During that time, we also managed to become more profitable. In other words, we grew our profitability by 500 basis points. And of course, that's an attribute to how we do things here at VF and how we do it now at Timna. So moving into the future, what does 2019 look like? Now I know that you guys are already turning over the page, but I've been asked to pause here because this is such a great moment for the Timberland team, right, for all of us that have been working so hard because it's so fun when you have the 1st year, everything looks so grim and then you're getting through it and you're starting to grow and you're going like how big is big, right? And we think that by 2019 that big looks like $3,100,000,000 Now $3,100,000,000 if somebody would have asked me that when I started in 2011, I didn't think we were going to be able to talk about it this quickly. I absolutely thought we were going to get there. But now it's within reach. We truly believe it's within reach. And what this day is all about is making you guys believe, right? We're going to show you all of the reasons to believe. We're also going to make sure that you understand how the build is for this $3,100,000,000 So for in terms of dollars, it's a $1,400,000,000 build. Reason to believe here is 13% CAGR, which we believe is very possible since we're accelerating this year 12%. Looking at the revenue by region, again, reason to believe very balanced growth across all of our regions, 2014, 2015, doubling our size in Asia over this period of time. And when we look in another way in revenue by channel, wholesale growing 11% to $2,000,000,000 D2C to $900,000,000 twelve percent CAGR and our e commerce of course growing fastest at 31%. And by product category, our footwear here growing at a CAGR of 12%. Of course, it's our most mature category. But again, remember what I told you, we're doing great in men's casual footwear, we're accelerating in women's footwear. Of course, this is going to be the largest chunk of dollars that we're adding. But again, here apparel is accelerating in this plan, getting to $680,000,000 over the time of 2019. And all of this while we improve our profitability by another 500 basis points, going from 13% to 18% operating income. So there we are, €3,100,000,000 that's what we're going to be talking about here today, 13% to 18% operating income in terms of profitability. And that concludes my presentation today. I'm now going to give it over to Lisa DeMarcus, our VP of Global Product for both footwear and apparel and she's going to start getting you guys excited with some real stuff, not just numbers. Okay? Thank you very much. Thank you, Patrick. Good morning, everybody. Welcome to our home in lovely New Hampshire on a beautiful sunny day. Thank you for bringing the weather. It's fantastic. So as the speakers earlier said, we're so excited to have you here. It's such a joy for me to have just a quick opportunity to take you through just a brief overview of our product process and what we do here at Timberland and how we get product to life. But before we start, just a quick reminder of what those key initiatives are that Patrick mentioned earlier. And the things that I'm going to talk about today, which are really about the focus categories of growth that I'm responsible for. And those are, again, to build men's casual footwear to sort of capture more market share, to develop men's apparel, to build brand equity as a lifestyle brand, as Patrick mentioned, and of course, to build sort of an established brand, as Patrick mentioned, and of course, to build sort of an established foundation in women's casual footwear. So those are the key initiatives that we'll talk about. And where it all starts, the product process really begins with building integrated product collections at the core. That's what the energy is really surrounding every season. And how we do that is really through 4 key inputs. The first, as Patrick said, you'll hear across every presentation today, you're going to hear it until you don't want to hear it anymore, but that's the most important factor, is through our consumers. So the grant of having such an unbelievable research engine funded by VF to let us understand what our consumers know about us as a brand and even more importantly, what they expect us from a brand. It was really, really crucial to figuring out how we're going to develop products in the future. So through these consumer insights, we now have a really clear understanding of both their emotional and their functional needs. And guess what they told us? We need things that are simple to solve for our complicated lives that are inherent to our lifestyle. So things like comfort, all day comfort. No one's willing to sacrifice comfort anymore. And this is equal from men to women, believe it or not. They want versatility. They want products that take them from the morning until the night and all those many stops that kind of happen in between their day because we know we all have very busy lives and our end consumer, the outdoor lifestyle, definitely has a very busy lifestyle. And what can we do to sort of help resolve those kinds of things in terms of versatility without complication and without having to think about it? Do I need to pack a separate pair of shoes? Do I need to carry an extra jacket? And last and not certainly not least is protection from the elements. And of course, this means weather, right? Of course, when we do a really good job of protection against weather. But they also told us that we need that we need a little bit more protection from their elements that they sort of encounter every day. So think about sort of commuting to work and somebody steps on your shoe and scuffs your shoe. That's a problem. Can you solve that for me? You're meeting friends later for dinner and somebody spills wine on your jacket. Can you solve that for me? These are things that are very complicated in their lives that they said simply, can you help us with this? So again, lots of consumer insights driving this process and you'll hear more about this in my presentation and every presentation for the rest of the day. So everything is through a consumer lens. The second input, very big, is trend. So our creative process is led by Chris Paulus, who you're going to meet a little bit later this afternoon, who's fantastic and awe inspiring. And he and his team every year work with global trend agencies to determine what are the relevant global brand trends that Timberland as a brand can amplify, meaning that we can't and we won't access every big trend that comes down the way every season unless it fits in with our brand direction and we can tell a bigger story around it. So what this process really enables us to do is sort of capture those next seasonal color palettes, the next new patterns, the prints, the trends, heel heights for women, lash shapes for men's shoes, all these things that are going to make us much more trend relevant for our lifestyle or consumer every season. The 3rd key input, this is the big one. This is where we really have this amazing toe to head design process. So this is collaboration now across every product category, every both genders, every team working together to really deliver 1 cohesive consumer led on trend brand execution every season. That we then can really free story tell through our strong brand marketing communications led by the talented Jim Davey, who you're going to hear from later. So these are really the 4 key inputs that drive the process. And as Patrick said earlier, centered in the middle is our Style, Performance and Green framework. So as Patrick said, SPG in that order of importance, style first, then performance and my gift with purchase is the green, is not just our product strategy, but again, what our consumers have told us they need from us. And as Patrick said, style was the number one thing. And true, in points in time, I've been here for 14 years and blessed with that. Sometimes it's been PSG, GPS, a little bit in between. Now we know that our consumers love us around the world and they appreciate and respect us. But they didn't see us really as a stylish brand for them. Yes, they knew us for our rugged durability and our quality and our heritage, all the beautiful things that this brand is known for, but style not so much. So we quickly had to change that perception like on a dime to really expand that style offering because we knew we had it locked and loaded in that rugged aesthetic. But what consumers were looking for is a little bit more style, a little bit modernity, more contemporary looks that they can put together and really expand their horizons in terms of the Timberland product offering. So how do we do that? Really through our now what we're calling internally is our rugged to refined style spectrum. This is what really has now expanded the Timberland look and feel in terms of product as we move into fall 2014. So instead of me talking about it, why don't we see how that comes to life for fall 2014? So our first two looks that you'll see today is going to be our most rugged expression. So this is what Timberland looks and feels like on the most rugged sort of vernacular of that kind of style. So, here you'll see what you would typically expect from Timberland in a season for fallwinter. Really beautiful, rugged, waterproof with anti fatigue technology, so you have the comfort as well in a boot framework. And in jackets, you have fantastically warm waterproof feature guide high vent technology, which is another great access point because we get to have friends with North Face now and we get to share technologies, which is absolutely fantastic. So using high vent technology is what you'll see in these jackets, completely waterproof, completely insulated, down jackets keep you warm and cozy during the winter. Great little woolen knits to kind of finish off the look. And of course, accessories, great sort of rugged accessories to sort of finalize that look and feel. So this represents the most rugged expression. Then maybe you guys could just step back. The next two looks right here are the most refined expressions. So this is where this is how refined it gets. So it still looks and feels like Timberland, right? But look at the difference in terms of contemporary styling, lightweight leather jackets, a little bit more form fitting to the body, skinny fit jeans, both in men's and women's and chinos and denim. And now on the foot, a little bit more refined lash shape, a little bit dressier, but still looks fantastic with jeans and leather. So this is the most refined we get. And the best combination that we think is this great hybrid in between, which was Rugged Meets Refined, I don't know how it is, okay, are these two looks. So this is the exact expression of where classics are represented with a modern twist. So things like rugged quality, durable materials like wool Melton is now sort of expressed in a more tailored expression in terms of jackets and finishing products. So again, still looks and feels like Timberland, but more of that hybrid between the 2 that great mash up. And on the foot, we don't just do boots, ladies and gentlemen, we do shoes, we do cup sole ideas. And again, just expressed here, much more trendy, much more on the fashion side, but a great little cup sole that also, by the way, features our Sensaflex technology and our anti fatigue technology. So not only do they look great, they feel great on your foot all day long. So from rugged to refined, fallwinter 2014, this is how Timberland represents style going forward. Good? Okay. Thank you very much. Okay. Thank you, ladies and gentlemen. Someday I'll look like that, probably not. So that's not where it stops. So style is of course the number one thing. We've heard that, we've understood that. But performance is part of who we are. We have built unbelievable performance capabilities in our products for over 41 years. Sort of from the highest waterproof standard in a 6 inches boot to now what Patrick talked about earlier, delivering things that are more tied to the functional needs of our outdoor lifestyle or consumer. Things like comfort, versatility, lightweight capability, things are going to take me from day to night, climate control, don't let me have to think about it, just do it for me. But never sacrificing the style component as a result, really important point. And last but not least is the G component. So as Patrick said, is who we are. This is in our brand values. This is in our DNA. We do good things. And our consumers are now appreciating brands that do good things. And using sustainable materials and innovations in organic and recycled, using leathers that are from silver and gold rated tanneries is what we do. And we'll continue to push on this path because it is part of our DNA. And it's really, really important. This is really the gift with purchase for our consumers. So SPG is the strategy, as we just said, combined with our outdoor heritage, which is very, very big, our craftsmanship, our durability, sort of our style and our sustainability notion, all sprinkled on top with a little bit of what we call our good old New England ingenuity, which is just how we solve for things here and just get stuff done, is really how every single product earns our mark and how our strong brand reputation has continued for over 40 years. So really, really important. Couple of other focused strategies to talk about because they're very, very, very true to life right now. When we did our consumer research, we also heard from our consumers that they predominantly knew us as a fallwinter brand, no surprise, and really boots at the center. So we have to really turn this notion around from style and performance in green to really infuse that formula into more spring and summer transitional lifestyle toward ahead collections to really become much more of a year round lifestyle brand for them, because we can't just show up in fallwinter anymore. And what you'll see to the left of me and to the right of you is some mannequin displays, you can check that out during the break, of what just a small sampling in men's and women's looks like from Tow to Head for springsummer 2015. And again, using that transitional lifestyle Tow to Head idea is really bringing us to life in terms of a year round brand. And the next strategy, very, very important, is to be local and be global and drive local. And what I mean by that, very, very important, we're a huge global brand. We always have been, we always will be. And we know that there's differences from around the world. There There's differences in style and make from the U. K. To Portugal, from Korea to Taiwan, from Chicago to New York. And we address all these specific regional market needs within our product build every season. But at the same time, really importantly, making sure that the total brand execution looks and feels the same globally. And we do this consistently across Men's and Women's. So we believe and as Patrick said earlier, through all this, we're really confident we can deliver another $1,100,000,000 additional dollars in footwear revenue over the 5 year plan, which will get us to $2,500,000,000 in footwear. And in apparel, an additional $330,000,000 in apparel dollars over the revenue plan of 5 years to get us to $680,000,000 which is about a $78,000,000 split between footwear and apparel. And our reasons to believe, in summary, is through our consumers. We are now not an intuitive product led company. We're not a sales led company. We're a consumer led company. Everything we do comes through the lens of our end consumer. They drive everything. And through what I'm very proud of, our very strong product organization, which is now structured to support collaboration and consistency across all product genders, product categories, all teams working together to deliver one unified look for the brand. And lastly and probably most importantly is through our SPG Formula Style Performance in Green, which delivers Timberland style from rugged to refined with performance and purpose to our end consumers globally. Pretty cool stuff, I thank you for your time. Appreciate all the inputs later. And I would like to introduce my close friend and colleague, John Healy, who's going to take you through the innovation and advanced concept process. Thank you. Nice job. Yes. Good morning, everybody. Welcome to New Hampshire. The weather that we have for you today is like this every day of the year, which actually wouldn't be the best thing for our brand because we love winter here in Timberland as well. So let's talk about innovation. Innovation, of course, is a big growth driver for many, many companies, especially so with product centric companies, Timberland being a great example of that. It's such an important thing in today's economy that even the most innovative companies like Facebook are constantly worried about innovation. They're constantly worried about one of their competitors leapfrogging them from an innovation standpoint and taking market share. They're also worried about it because they know it's not easy, okay? It takes a lot of hard work, and it takes a consistent effort over years to develop innovation and keep it rolling. And it's true that the roots of great innovation are never just in the technology itself. A good example of that is Microsoft. Microsoft would have won the technology war with Apple if it was simply about buying a technology and placing it into a product. It's about the brand as well, okay? And we believe at Timberland that your innovation has to match your brand. You can't just take anything, put it into a product and hope that it wins. You have to look at your brand's consumer. Who are you selling your products to? Where are they buying it from? And get that into your product in a very, very meaningful way. You have to address the product from the perspective of, is this something that my consumer wants to buy? You've heard us talk a lot today about and you will continue to hear us talk today about consumer driven insights, which really led to our SPG formula. So when Timberland puts innovation into a product, we're going to do it in such a way that our consumer loves the look the product, loves the feel of the product, but also gets that dramatic performance. So that is really that's one reason, if we look at our brand and our consumer, you may never see Timberland make a road running shoe, okay? But what you will see is we will use that SPG formula and we will get products with great style, great comfort, fantastic durability and do it in a way that's as environmentally conscious as possible. And I have to say, I don't think there's a better brand in the world to bring you innovation. We've been doing it in footwear since 1973. And we have a long history of coming to the market with products that actually just changed the market space. So our yellow boot was the 1st fully waterproof work boot in the world. This thing was so good, driven by passion to create this, that it literally launched the Timberland brand. That product was not Timberland when it got going, but that boot was so popular. It was called the Timberland. As you probably saw in one of the earlier videos, It actually created a Timberland brand. We also have other products, the Euro Hiker, right? In the days of somewhat uncomfortable Euro looking hiking shoes that you had to break in forever, right, we came up with the Eurohiker, which used a running shoe midsole technology put into a hiking shoe, which gave you fantastic comfort and cushioning and still kept the style of the Eurohiker. And our 5,009 rugged boat shoe created the rugged casual category, right, by taking the ruggedness, the durability and the performance of a rugged bottom and putting it on a more refined boat shoe upper. And so Timberland has a fantastic history of innovation and we've had great success through the years. But now we have something even better. Since we've joined with VF, we now have this, as you've probably heard maybe once or twice this morning, a consumer insights driven process, which allows us to take our great innovation engine and really focus that in to our consumer and what our consumer needs. And it's truly from an innovation standpoint, it's an insights driven process, okay? We listen to our consumer. We look out around the globe. We get global insights to see what's going on in the world, what are the trends. We also look inside of our own industry to see what our competitors are doing, what our manufacturing partners are doing and what else is happening within our industry that would point to innovations that we need to bring to the market. And lastly, I think this last thing we do better than anybody, we do something called activity insights, where we truly examine really down deep what's going on with the activity, whether that activity is skipping across the stage or whether that activity is on a trail or in a city, and it enables us to really deliver a product that works with the consumer and with that activity. I'll talk about that more when I tell you about our new SensorFlex technology. And all of this work brings comes forward in a number of different types of innovation. Now, the most common innovation that people think about is product innovation, which typically results in a new product being introduced. And we do that, of course, and it shows up in our performance category. So, we've brought anti fatigue technology to the market, which gives you unparalleled comfort when you're on the job 9 hours a day, SensorFlex technology, which I just mentioned, and of course the host of weather related technologies that Timberland has brought to the market. We also have just this fantastic materials innovation engine that enables us to bring new materials consistently to the market. I won't talk a lot about that today because you're going to meet Emily Allotte in the immersion session and she's going to take you through all of these. But remember that the materials we work on performance, we work on environmental materials so that we can bring recycled content to our product and make things better from an environmental standpoint. And of course, from a leather standpoint, there's no one that matches Timberland. The other thing we need to look at is the manufacturing process, which generates cost efficiencies within our world of footwear manufacturing. It's interesting because the footwear manufacturing process is pretty old. I mean, it's been going on for years and it's also very traditional. And today, when you think about the fact that on your average shoe, which is constructed of over 50 parts, 50 separate parts, And it takes 120 sets of hands on that product to get it from the start to the end of the production line, okay? I see that and I say there is just a fantastic opportunity to work on that process and understand how we can drive efficiencies there to get products to the market at a much better price for our consumer. Now what do you do once you have the innovation? I've already discussed it's not easy. You need to work consistently at it, right, and you of course never have 100% hit rate. If you have 100% hit rate on your innovations, you're not trying hard enough. Once you get innovations, the strategy has to be to drive those innovations into your products. And Timberland is a very interesting company because it's not a running shoe company where we do a running shoe innovation and everything goes in running shoes. We're able to drive our innovations into lots of different product lines. So our anti fatigue technology started out in our pro division, but you will find that technology now in many, many casual shoes. Our green rubber technology, which puts 42% recycled content into our rubber outsoles, has found its way in many areas of our business. And even a technology like CoolMax Fibers, which crosses over between footwear and apparel, is something that finds itself in many, many places. Once you put the investment in, take that investment and drive it through your product line. So let's I mentioned SensorFlex technology a little while ago. Let's take a couple of minutes and talk about this technology. We introduced this in spring 'fourteen, and it truly is an example of iterative development and working with technologies to get it into the right product for your consumers and something that really reflects the brand. I'm wearing a pair today. They feel fantastic and I'm comfortable up here. So, really, this is a very interesting technology because what we did was basically turn things upside down. It's very traditional in footwear manufacturing to put the softest materials up against the foot and the hardest materials against the ground, which tends to give you sort of a board like feel. What we did was put a supportive layer underneath the foot to provide stability and then we put all the cushioning and suspension underneath that supportive layer. And it originally started as, as I mentioned, trail running technology And then we took that and we adapted that so that it not only can work in our trail running shoes or trail running shoes, it also works fantastically in casual shoes. And this is one of those moments that you get when you're doing inventive things is you take a prototype and you test it with your consumers, and your consumer starts giving you feedback that you didn't realize you were at the beginning. You're like, holy mackerel. Everyone who tries these shoes on loves them, and they love them whether they're outside walking on uneven terrain. They also love them when they're walking down the hallway. It produces this thing called a ride. The stride and the comfort that you get in every step is just fantastic. So that's SensorFlex technology. I'm going to show you a little video now which explains some of that, probably better than I did. Please notice when you watch the video that in addition to some technology stuff in there, it's not a traditional tech video. It reflects also Timberland's switch to style and sort of our SPG formula that shows itself off in the video itself. When we originally shot that video, they wanted me to do the flip. I said no. Okay. So you've seen some things. Now why should you believe them? So recently, if you've seen the press releases, this is somewhat new, is that VF is investing in innovation centers. And one of those innovation centers will be in footwear and one of those innovation centers will be in apparel. And the innovation center will serve all of the brands that do that product. So for the footwear innovation center, which will be located in the beautiful state of New Hampshire, That innovation center will drive innovation across all VF footwear brands. That is just a fantastic opportunity to take a talented team and the passion behind that team and drive innovations across multiple brands. Also understand that any time you're working with innovation, it is always a two way street, okay? We think that we know what we're doing when we drive the innovation, but then once we talk to the consumer and once we talk to the brand, they can adjust our thinking and then we drive that back into the product, okay? And so that will exist in this innovation center is that it's not just one brand with one innovation team. It's an innovation team communicating with multiple brands. So things that we learn at The North Face, we can bring to Timberland. Things that we learn at Timberland, we can bring to The North Face and back and forth. It's really going to drive a lot of momentum behind innovation. It's really going to accelerate what we're doing. 2nd reason is, as we've discussed before, even in innovation, the consumer is the focus. We will delight them with what we bring to the market by listening to them and giving them products that they want. And the last, and probably to me one of the most important things, it says heritage and authenticity on the screen, that's the Timberland brand. There's no other brand that can bring innovation in the way that Timberland does in the authentic way that we do and drive it into as many products as we do. So thank you. And I believe we're taking a break at the moment. Yes. So we're going to take a quick 15 minute break. You guys caught that, right? Dollars 3,100,000,000 Good stuff, right? Dollars 3,100,000,000 right? Quick break, there's coffee outside here, restrooms are right in the corner. So 15 minutes, we'll start back up at 10:35. Great. Okay. Welcome back, everybody. So my name is Jim Davey. I head up Global Marketing for Timberland. And I'm really excited today to tell you the story of our brand evolution over the last 3 years. I think you get a sense from what you saw this morning and from the speakers already that it's been an amazing 3 years already. And so I'm going to dig in a little bit more and just give you the story of what's been going on with this brand over the last 3 years. And this story has 3 chapters. The first, we'll talk about Timberland pre acquisition in 2011, 2012. We'll talk about how we rebooted the brand in 2013. And then we'll talk about what that means for the brand going forward into 2014 and 2015. And so if we look back, we think about what the brand was like in 2011, we took a snapshot of it. You'd see a lot of powerful brand assets that we had that drove this to $1,000,000,000 brand over 40 years. We had a rich history in heritage, both from an outdoor perspective and from an industrial perspective. We had an amazing connection to consumers around the world. And maybe most importantly, we had one of the most iconic products ever built in this industry, which is the yellow boot. But if you would dig in a little bit further, you'd see a confusing brand image for consumers around the world. There was a lack of clarity around what the brand stood for every time you experience the brand. And depending on your vantage point, it was maybe a hiking brand or it was a work brand or it was a fashion brand, it was a core outdoor brand, maybe it was a comfort brand, even a hip hop brand. So it was really challenging to create global product plans, global retail plans, global marketing plans with so many segments. And so at the time, what we did is we turned to consumer insights to lead the way. And at the time, this is one of the biggest insights projects that we ever did with Timberland, but really getting to the consumer for the first time to understand where we stood and what they were looking for from us. And the first thing we found was amazing brand awareness around the world. Now this is a slide of U. S, but what you find here if you look at all the different footwear competitors there, it's basically Nike, Adidas and Timberland. So 83% awareness. So 8 out of 10 people knew the Timberland brand. And that number was more like 9 out of 10 in some of the European countries. And so it gave us a lot of confidence because we weren't trying to build this brand from, say, a 40% awareness level. We had 8 out of 10 people already knowing Timberland. So it gave us a lot of confidence in terms of the foundation that we had. And Patrick referenced this a little bit earlier, but what we also found is the outdoor enthusiast consumer was a stretch for us. They didn't see us as a technical brand. They didn't see us as a performance brand. Maybe a little bit in the hiking world, but overall, these were the kind of brands with North Face at the top that people were looking for, for these activity based solutions for the outdoors. But a really different story when we started talking to the outdoor casual consumer. It was so interesting, sitting in these focus groups for 12 months around the world and we'd hear the same things again and again, which was, yes, I know Timberland. I think I've got a pair of boots. I love them. Great quality, great heritage. But I'm not sure I've really heard from you recently. And so what was interesting is they loved Timberland, but they had a view of the brand that might have been 10 or 15 years old, maybe something that they had from high school or something after high school during college. So, they had a kind of an old view of what that brand was about. And so, what was interesting is that it set up a very, very clear challenge for us in terms of what we need to accomplish to be more relevant to this casual consumer. It's basically what they told us was, I love you for all this stuff on the left hand side of this graph, quality, heritage, outdoor performance, check, check, check, right? But what I haven't seen yet is the stuff on the right hand side. And that's the stuff that's actually driving my purchase more than anything else. So that's the kind of stuff that I want to see from Timberland. If you can combine those together, that really creates some white space in the market for us, I think, because we're bringing our past in terms of industrial and outdoor roots and performance. But now as Lisa talked about serving it up in a whole different range of styles that are more contemporary and more modern, more relevant to this lifestyle. So rebooting the brand, 2013. First thing that we did was we started off with a very clear brand promise, not just to consumers, but to ourselves around the world about what we wanted to stand for every single time someone had an interaction with Timberland. It was a very simple statement. It was the quality, authenticity and rugged outdoor heritage you trust with new style, performance and green elements that may surprise you. So really blending the best of the old with the best of the new. And the consumer facing version of that was a very simple and powerful statement, best then, better now that you've seen today. So the next thing we did was we quickly thought about what does this mean from our marketing communication strategy. And just like product, we realized we needed to be S 1st, P 2nd and G 3rd. So a lot of the communication that we started creating really drove home the style point and broaden the performance as a differentiator and brought in the G as a gift with purchase. The next thing we did is we created a brand new look and feel for the brand. So this is some of the imagery you saw from fall 2013. But what we did is we brought the brand back into the city for the first time. So out of the mountains and back into the city, we thought about our industrial roots as something to drive off. It was both men and women. It was highlighting not just footwear, but toe to head, so apparel and accessories at the same time. And even with our traditional looks, our traditional outdoor looks, we really strive to find that emotion in the moment and to connect in a very relevant way with emotional shots that would bring you into the brand and make you think a little bit about a little bit differently about what Timberland could offer you going forward. We then took advertising and said this needs to fuse the old and the new. It needs to be an aspirational story that is believable from Timberland, but still evolves the brand to a new place and a new more modern place. So why don't we run one of the tapes of the fall 'thirteen ads that ran around the world? So again, aspirational outdoor based stories, that ramped up style, but were still believable from Timberland and moved the brand to a new place. And the same strategy on the print side as well, a really confident way of showing what Timberland is about. So you recognize the leather that's part of our heritage, maybe the quad needle stitching, great rugged model, but he's wearing a beautiful $800 leather jacket and we've restyled that classic yellow boot in a much more stylish way. So again, a great incarnation of best then, better now. And the same thing even more so maybe in the women's side, fantastic looking tall leather boot, great leather jacket and a very new look and a very new feel for the brand across the world. And this idea of across the world was really important, right, because we wanted to show up consistently globally. That was one of the keys that we learned from this research. So here, I think you see a great shot of some of the billboards that we did in Hong Kong, really just overtaking this great shopping street and showing up as a big brand, which is a big piece of what we wanted to do. And also using the yellow boot as a facilitator, not shying away from this iconic product that helped build this brand. So we call this our family tree ad. And basically what it is, it's the yellow boot introducing the new line of Timberland products. So again, the quality and authenticity that you respect with the yellow boot, but now new styles and silhouettes that may surprise you. And why this was really important is because part of what you want to do when you're building a brand is keep it consistent everywhere. And sometimes your hardest challenge is with retail accounts who may want to kind of put your own spin, their own spin on your brand. So what we did here with this ad is we were able to assert whatever that retailer wanted to talk about in this ad, but still have that consistency across the entire campaign anchored by the idea of best then, better now. So it was a mechanic that allowed us to keep great consistency as we went into the marketplace. The other thing we wanted to do is not just think about the what, but also think about the how in terms of how we communicate it. So traditional advertising, of course, is going to be important. Even more so as we go forward, there's a new model that we put in place in fall of 'thirteen. And we call this the content and publishing model. So we created about 300 pieces of content, everything from highly produced ads that would last 6 months to Facebook posts that would last 6 hours and everything in between. What we then did is took all those stories and published them out to all the different places where we could find our consumers online. So sometimes we use our media dollars through paid media. Sometimes we use our own media in terms of our social media networks. And sometimes we got written about on other people's networks. But the whole idea here was multiple pieces of content, multiple stories, reporturing our brand to a new range of consumers, constantly being pushed out into the digital space and using data to understand if we're doing a good job. So here's a good example of that. This is called the Mark Makers program that we launched last year. And the idea is pretty simple. We find these cultural influencers from around the world. We'd send them a bunch of our stuff, the fall 13 assortment. They'd assort it with the things that they normally wear. We then do a day in the life kind of photography program with them. We do some videos. We understand about what their life is about. And what's most important is this then turns into a range of content to feed all of our outlets around the world. So on the right hand side, you see a Facebook post from Europe. And in the middle, you see a post from Malaysia. In the bottom left hand corner, you see how we use that currency to gain advantage at Zappos and get the homepage there. So there's this idea these days that currency or I should say content actually becomes currency. And so the more content we have and the more smart we are about putting that in the right places, the more we can change that brand perception even quicker because we know about 70% of decisions these days have some kind of digital component to them. Folks are either browsing online or they're sharing online or they're buying online. So that's where we knew we had to be to be able to connect with this new generation of consumers. At the same time, after doing all this work, we wanted to make sure that when they got into the store, they were having a great brand experience and that we were converting them. And so Lisa talked about this idea of where rugged meats were fine. Well, it's not just in products. We actually have that same idea when we think about the retail experience. And I'll give you an example. What you see on the left hand side is one of our New York City stores. Again, it has the Timberland DNA, but, veers a little bit more towards the rugged side, whereas a store in Taiwan may have a little bit of a different assortment, a different color palette, and may be a little bit more on the refined side. So that's that idea of global consistency at local adoption that's so, so critical when you're driving a global brand. And then in Europe, in Barcelona, you might see something in the middle. So again, that idea of creating global consistency around the world, but adapting locally so you can really maximize your efforts with that particular consumer. And as you know, consumers responded in 2013, not just in sales, but all these other metrics that we look at in terms of brand health. So web traffic and engagement, where were they clicking? Were they looking at the new stuff? The PR value that we got from influencers in the world looking at the new Timberland. And then we did a brand strength tracking that showed that we had made great gains in just a short period of time in terms of changing this perception. So we came out of 2013 in a very good place, understanding that we were on the right path with this brand evolution. But at the same time, we knew we still had work to do in defining what is that global consumer target, qualitative and quantitatively, that we can all rally around that can be in our hearts and minds every time we make a product and every time we do a marketing program and every time we make a retail experience for people. And so this is where the power of VF really made a difference. So we were able to invest in a global segmentation study, 8 countries, 18,000 points of data, both qualitative and quantitative, to understand where are we with consumers, what segments are out there, what do they expect next from the brand, what feels too far for the brand to go to, and really gave us a great footprint, a great blueprint actually to move forward with this strategy. And the answer, as you heard earlier, is we did find this one global segment that existed in all the different countries that we went to, this idea of the outdoor lifestyle, which was fantastic because you don't always see that when you're doing a global segmentation project. Sometimes you do these things in those 5 different segments. You need to make a tough call on what you're going to do. We didn't have to do that. We found this one global segment around the world. And what's interesting is the way they view the outdoors is different from the way we had thought about it before. Typically, it's here's my city life and then I get packed up and I go to the outdoors. These guys were more about look, I want the outdoors and sometimes they call it the outside in my life every day in small bits. So it may be a walk in the park at lunch, it may be catching a concert in the park later, it may be meeting friends for drinks by the river afterwards. And so, their outdoors was often an urban outdoors. And as a result, since they were putting the outdoors into their daily lives in little bits, style really, really mattered because they didn't know what was going to happen next. They might be at a soccer game. Next thing you know, they're meeting friends for dinner. And their worst fear is that they end up showing up and they're overgeared. They don't look right. Literally, that's what came through on a lot of this research. They're not fast fashion leaders. That's not what they are. They want to fit in. But it's really important to them that they have that versatility when they get up in the morning. They just want to put on their stuff. They want it to go through the entire day and they weren't finding anything that had those performance attributes that allowed them to feel good no matter the weather or no matter the social occasion. So, some really insightful points from them. And we even got down to the details of like how big a logo do you want on your shirt and are we over logoed or under logoed. So the really minute points of how we make products and how we market to these folks came through the study. So the other reason we like them is that they over index in footwear and apparel purchases. So they buy about 36% more than other folks in the category. So that means feel like they were very engaged in the category and would be going forward. The other thing is they already represented about 28% of Timberland sales already. So it wasn't like we had to go after a brand new customer that didn't know us. We're already doing a pretty good job with this customer already. And most importantly, they were open and interested in hearing more from Timberland, which is what we heard in that first study when we did in 2011 as well. The other reason we thought they were a good choice is because this important idea of the halo effect. And let me walk you through this. So we talked about today focusing all of our efforts, product marketing retail and the outdoor lifestyle. Well, we do have some other segments of important business. One of them is the outdoor functionalist. So this is the person who looks at function first, style second, they care about quality. Maybe they're in Dick's Sporting Goods and they just want a great pair of hiking boots, right? So what we found is that because of the way we're going to market and make products for the outdoor lifestyle, combining style and outdoors, we'd actually get this outdoor functionalist to come along with us. So it was a really important point because this begins to solve that dilemma that I talked about earlier with all the different segments and trying to market every single one of them. We'd get the outdoor functionalist to come along. We'd also get the status craver to come along. Now the Status Craver is someone who buys Timberland because they want style first. They're not so much into the outdoors, but they really like the brand because of style. They care about quality as well. And so the same thing with this segment. If we do a good job against the Outdoor Lifestyleer, we're going to get these other segments to come along. Now, of course, it needs a little bit of tweaking sometimes, right? So we might do a program at Dick's Sporting Goods that's maybe more about the functionalist. So when you see that ad, there might be a little bit of a twist to talk about function or if we're working with Foot Locker and you see the in store experience, there might be a little bit of a twist to go towards style. But overall, this is what allows us to keep that global brand consistency and not confuse consumers about our image and what we stand for going forward. And the other thing we found when we looked at the data is, when we do brand tracking every single year, we look at the entire population, which is that full column. We look at the outdoor lifestyle, which is the column to the right. And this is from a company called Ipsos. And what they do is, from a base of 100, they put together a formula to define what your brand equity is. And it starts off with familiarity. 1st, you know the brand. 2nd, is it relevant to your lifestyle? And then they talk quality, uniqueness and popularity. And it's basically a weighted average of these things with the most important things on the top. So what we found is some nice increases overall in terms of how we did with the general population. But look at the difference between the full column and the OLS column, right? 2x to 2.5x higher in terms of how familiar they are, how relevant the brand is with them. So So it gives us a lot of confidence that we are on the right path with this outdoor lifestyle because the data was already telling us that they were super connected to the brand. So we felt great coming out of this phase of the research that we're on the right track with the outdoor lifestyle. So as a result, it was then well now let's execute. Now let's activate all these learnings and put that into the marketing and to the brand plans as we go forward. So for spring 2014, it was about consistency. It was about driving home this very simple idea of best then, better now with a 3 sixty degree program all the way from film to digital to social media, ending up in store. UC SensorFlex was another piece of that launch as well and being very, very consistent about what we wanted to be with consumers. So this was one of the ads this spring. It was a U. S. Ad, right? So great rugged leather jacket. We switched out to the SensorFlex model of shoe that John showed you earlier. And you got that leather background. The next one I'm going to show you is the European and Asian ad. And I'll tell you why this is important. So this was the Asian ad, right? We switched the jacket to something a little bit more refined, right? So you might be saying, okay, so what? You switched the jacket, big deal. Well, here's why it's important. First is, it's a great example, a great case study of what we mean by global consistency and local adaption. So same look and feel, same DNA of Timberland, but yet Europe and Asia found that item that they think would resonate better in their world. And then the second important point is what Patrick talked about earlier is that these nuances that happen downstream don't happen if you don't have amazing connection upstream with your product and your marketing and your regional leaders and your global leaders, right? And so as Patrick talked about earlier, that's a model now that we can recreate and that we can duplicate again and again to make sure that we're always delivering on this idea of local of Global Meets Local. And again, showing up as a big brand, right? Just a fantastic out of home display in London this spring, showing up as a very, very big brand and surprising a lot of people at the same time. So if we think about fall 14, again, consistency, right? We're going to be about best and better now. We're going to hammer home this idea of aspirational lifestyle stories with our SPG formula. So this is launching in 2 weeks. So there's a 5 page insert in GQ that you'll see. You see a great mix of product. Not only is it just footwear, but it's apparel, it's accessories. It really gives you a sense of that toe to head lifestyle look that we can offer you for your everyday life, not just when the weather is bad or not just when you're going to get outside. You see these around us. So reading that data and understanding that the OLS needs to understand that we're also a brand for the city, but not forgetting the sense of outdoors. So finding that edge where the outdoors meets the city is a great place for our brand to show up, where we really, really do well. Again, global ads, global consistency. And I'll give you a sense of what we look like from a TV standpoint, from film standpoint, again, putting emotion into this brand, not just the functional elements that we had been known for. I'm in the now. I'm at the next. I want the best. I hear the yes. I create the future. Respect the past. I'm made for this moment. I'm built to last. I'm all for change. I'm in for Keith. I strive for good. My passion runs deep. I'm in my element. We think this works with consumers. Actually, we don't think it works with consumers. We know it works with consumers because it's been tested. And we make sure that the consumer all along the way is integrated into this marketing plan. So by the time we launch something, we've got a lot of confidence that's really going to work. The other thing we did is we thought about how do you communicate in digital age. We used to do these printed lookbooks that would get very limited distribution. What you're looking at here is kind of the clicking in the consumer journey that you might go on online with our interactive shoppable lookbook. So in 30 seconds, it gives you a sense of what that new Timberland brand looks like. It gives you a sense of what the new products are. And most importantly, allows you to immediately click and buy that product if you like the way that it's been displayed. So again, something we use around the world, something that allows us to not only think about the what but the how in terms of us connecting with consumers. And then PR and seating to drive excitement. I could probably do about 6 slides of these with different people on it. But what's important is that cultural influencers from around the world are choosing to wear Timberland now. And what's great about it is it's not just one demographic and it's not just the yellow boot. You're seeing a range of some of the biggest celebrities in the world picking Timberlands and deciding that it's a brand that they want to be connected to. So as I said, a range of demos and not just the yellow boot, but a range of products as well that people are interested in. So if we circle all the way back to the challenge that we talked about earlier in the presentation, how do we move from left to right without leaving the left behind? How do we keep that quality and that heritage that people know us for, but evolve that brand to a new place? I think what's great is in a very short period of time, we've made lots of progress. It's been a very short time that people have seen this new timberland. If you think about it, they've been seeing the traditional timberland, the stuff that you saw downstairs at the beginning for 40 years, right? They've been seeing the new timberland for 2 seasons, 8, maybe 9 months, right? And we're already making great progress. I think that's why we think we're just getting started is because when we look at the data and we look at all the consumer research, we think we're at the very beginning of a great run. And also, maybe just as importantly, the model to have this run, right? So consumer insights, we start and end with consumer insights in everything we do from a marketing standpoint. This idea of relentless storytelling, so traditional means, of course, but more and more connecting with people in the digital space where they're making a lot of their purchase decisions. And finally, this idea of global consistency at locally adapted, that's you drive a global brand and having all the frameworks and processes behind that to make that happen. So that's our story over the last 3 years in terms of the evolution of the brand. Next, I will hand off to Ryan Chaddran, who heads up retail and digital commerce, e commerce, and he'll bring you through the next story. All right. Thanks, Jim. How's everyone doing? Thanks for showing up today. It's a real pleasure to be able to share the Timberland D2C journey with you. As you know, the global footprint was a significant factor. The retail footprint was a significant factor in VF's decision to purchase Timberland. And in particular, our global store portfolio was appealing because VF got out of the deal and expanded presence in Europe and Asia. Fast forward from the acquisition to today and you can see that we're at 5.75 $1,000,000 and with a 15% CAGR over 5 years, we'll see that number go to $1,100,000,000 by the end of this strategic plan, which is really exciting for us. That's driven by primarily three things. 1 is our comp store foundation, which is extremely healthy, but it's also fueled by new store openings and a commitment to the digital omnichannel platforms that connect us directly to consumers. If you look at our revenue by region, what stands out, I think most prominently for me is really that the fact is it's pretty evenly distributed by region. And that balance is important for a couple of reasons. First of all, we feel it's sustainable over the long term. And secondly, it means that no single region, no country in specific area is dependent upon for the brand's retail growth. So we spread the risk evenly and we don't pressure any particular region, country or area of the business over one over the other. Now, I like this this is a great way to look at the business. We take our D2C revenue and look by channel mix, right? So, this is percentage of revenue by concept. Most importantly from this slide, I think, to take away is the fact that the channel mix as we move to 2019 really reflects a move towards omnichannel selling. The acceleration of digital relative to continued 4 wall growth is pretty pronounced. Over the life of the plan from 2014 to 2019, we will double the share of e comm in terms of revenue. We'll also increase the pace of our full price store growth and that's important. The third is that there's a very purposeful reduction in the outlet business in terms of revenue. That's driven primarily by a strategy in North America that I'll get to in a little bit, where we're purposely moving away from our outlet driven, promotional driven business towards a full price premium model. So Patrick showed you this slide earlier. If you've been to one of these presentations in the past with Mike Gannaway, he's probably shown this slide. It's the VF model for D2C. It's Timberland's model for D2C. And you can see it's a very straightforward approach to getting to the 2019 target. We ensure that our existing stores continue to be profitable. We leverage digital at the core of everything that we do and we continue to open new stores in the right locations and in the right markets. And that's a little easier said than done. There's an absolute science behind where we open new stores, why and when, and I'll cover that science in a little bit. So we talk about opening new stores specifically. You can see our baseline for store growth right now, 230 in 2014. There's some important regional nuances to consider within the portfolio. First is that in the Americas, as I referenced before, there's a definitive shift away from our outlet model to a full price structure. We're going to nearly triple our full price store count by 2019 in the Americas. In EMEA, we've got a in Europe, we've got a steady performer with significant unrealized potential, particularly, although not exclusively in Eastern Europe. And in Asia Pacific, which is our most expansive retail presence, we have sizable upside there. Both China and Korea provide huge growth runway for us that we've not yet fully exploited. So we feel really confident about this plan. So in terms of opening new stores, I was talking about the science based approach, and it's very true. We're fortunate, as you've heard a few times already, to be part of the VF family. There are assets that we're able to leverage both internally to VF but also with our sister brands in the portfolio that allow us to make more strategic science based decisions around where we go and how we open up stores. And the first thing we start with is what you've heard throughout today, which is a very well defined consumer segment, and that's our outdoor lifestyle. So we look for where they live. We look for where they shop, and those are the targets that we X first. Then we overlay our e commerce data and we look at where our existing consumer base lives, works, shops. And where those 2, that Venn diagram kind of comes together, that's where we have a clearly defined market opportunity. And we divide those market opportunities by full price and by outlet and each one has a model or a blueprint that we follow. But essentially, the strategy remains the same regardless of the store type that we're opening. So in terms of door count over the life of the plan, we're going to add 130 new doors. About 70% of those will be full price. That will move our full complete store count to 360 and that includes just our wholly owned Timberland retail doors. And as you can see, new locations are open pretty much proportionally to the size of each region's business. As we talk about e commerce and this is a hugely important area for us for many reasons, which I'll touch on. Timberland was relatively late to the omnichannel game, but since the acquisition, we've moved fast, enabled by a blueprint that I've got up on the screen that we've used to implement kind of a high paced rollout in the Americas and replicated that same blueprint in Europe and Asia. It's a disciplined approach, as you can see, defining the size of our prize, defining the capabilities that we need and benchmarking them as best in class, identifying the tools that will get us online and into this game quickly, a self assessment, how good are we at the things we need to be good at in order to win in this area, in the space? And then finally, the road map to 2019, how we're going to get there and justify the ROI that we need in order to continue to grow past the life of the strategic plan. Currently, about 43% of our B2C, our omni channel business happens in the Americas. So to me, I look at that, I'd say there's huge potential in underdeveloped markets in Europe and Asia, particularly China and Eastern Europe again, where Timberland is really yet to develop meaningful digital platforms. 1 brand, 1 consumer is sort of the message that we live by in D2C. It's the end game for us in terms of the vision and the strategy for Timberland and digital. We want to leverage our digital capabilities, our database to forge intimate relationships, 1 to 1 relationships with our consumers. Serving them when, where and how they wish to be served in a way that's personal and friendly, but also compelling. And omnichannel integration for us is already happening. It's starting now. And by the end of the 2019 strategic plan, what we will have in place within Timberland, inventory anywhere, employee assisted selling in the store, shop online, pick up in store and then something we call clienteling 2.0. So if you're an old retailer, you know the idea of the black book that retailers used to have to keep information on their best customers and they'd call them when products came in or product went on sale. That intimate relationship again that you develop with your consumer, we're replicating that in the digital space. So both our store managers and folks in the field as well as online and the way we communicate via email and other forms of messaging, again, intimate, via email and other forms of messaging. Again, intimate, personal, we know who you are, what you like, what you don't like and we will serve that up accordingly. Our digital growth CAGR, it's double our D2C CAGR. So if we break out digital and isolate it and look at it in comparison and to us that's as it should be. We have significant growth runway in this space. And you couple that with the idea that there are continually developing technologies in the market that will create additional growth opportunities, some of which we probably don't even know about yet. So that only adds to the bullishness in terms of our belief we can get to this number at the end of the 2019 plan. And when we talk about continuous store comp store growth, this is obviously the underpinning of the structure that we're built on here and the strategy that we have through 2019 get to $1,100,000,000 This is the continued growth of our existing doors. It's driven by a relentless commitment to our retail key performance metrics, conversion, average selling price, traffic, units per transaction. These are not they're not sexy and they're not glamorous, but they're incredibly and intrinsically important to success at retail. And we set ever increasing aggressive KPI targets for the business. And we do that based not on what we've been able to accomplish in the past, but what we believe we know we can accomplish in the future. And as we set those gates and those dates out through 2019, we have a firm belief in our ability to increase our performance in all these metrics, most importantly conversion, which is what we consider to be for us in terms of driving successful comp store business. Just want to take a brief dive at the end of my presentation here into our Americas business specifically. Our strategies in terms of the pyramid, they mirror the overall Timberland D2C strategies, but there's an important difference. And it's what I talked about earlier. Our strategic shift away from the outlet business, one that was promotionally driven, dominated by discounting, is going away and we're moving towards a premium business that's happening right now. But to put it in perspective for you, 71% of our business today comes from our outlets, okay? By 2019, that number goes to 49%. So we will shrink the size of our outlet business considerably over the next 5 years. Omnichannel and digital commerce are absolutely essential to that pivot. And so I'd like to provide a little detail around what we're doing in that space that will help us get to this reduction on the reliance of outlet growth or outlet revenue. So accelerating digital, this is a big case study. One of the many benefits of being in the Via family, another one, is the ability to leverage the great work that other brands are doing in the portfolio. So Vans recently made a massive investment in a website replatforming project. And we were able to capitalize on that opportunity to create an entirely new web platform for Timberland, and that will go live in February of 2015. What's really, really exciting about this for us, besides the flexibility and the new creative that we'll have is the ability to seamlessly integrate content with commerce. And again, with a brand that has the story that we have and the authenticity and the heritage that we have, the ability to kind of combine those 2 to create a more compelling selling proposition to the consumer is priceless. But it also allows us to create one to one customization of the digital experience and that will manifest itself not just in email messaging or targeted geotargeted communications with the consumer, but even online, whether that's our design your own platform in which consumers can actually build their own boots and shoes online and get them shipped directly. But also messaging, when it recognizes a particular consumer comes online, we might show them a specific homepage that's more in tune with what they're interested in shopping based on their prior history, just as an example. But we'll have that flexibility and that mobility with this platform starting next year. So an exciting development for us. We call the strategy digital at the core. You, we all live in a digital ecosystem today, and that's sort of that digital everywhere mindset. And so how we show up in our 4 wall space relative to digital is just as important as what we're doing online, perhaps more so. And this is just an example of the ubiquity that we intend to insert into our entire D2C strategy. This is our interactive DYO touchscreen kiosk that's going into all of our full price stores actually right now. The first one went into Herald Square last week, as a matter of fact. I think there's an example of one out in the lobby. So you should play with that if you have a chance today. Early results, obviously, it's only been out there a week. But what's really interesting, the data that we're getting back from the experience is that on average, a consumer spends between 45 minutes and an hour playing with this thing and is nearly 100% conversion. So everyone that's actually messing around with the screen and designing their own shoe, they're actually buying one. The secondary benefit of this and it's really actually a great one for us is the fact that the associates in store can use this to fulfill items that aren't available within the store for wall space. So customer has a request, wants something that the store doesn't have, doesn't have a size of, they can use this kiosk to go online and get that order sent free shipping to the consumer's home. Some other examples of digital at the core for us, again, as new technologies come online, we vet them across VF. We determine their viability. And as brands adopt them, we pollinate them as quickly as possible across the portfolio. Great example of that, tablet enabled enterprise selling. This is that idea of being able to service a consumer for product that they don't have currently in the store, but the consumer would like. We can do that via tablet. Tablet also enables mobile checkout and tablet also enables mobile CRM. So again, what I brought up earlier, this idea of clienteling 2.0, this is really where the rubber hits the road in terms of that strategy. Customer segmentation, so we just partnered with a new email service provider that gives us incredible flexibility, personalized messaging, geotargeting, triggered emails based on variables like weather. So if we know you live in Chicago and Chicago is about to experience a massive snowstorm, we may serve up an e mail that targets you by name with product that's relevant to the snow that's about to hit you. That kind of flexibility within our database of email consumers is a huge asset for us. And SMS messaging, we were the 1st brand within the portfolio to launch this technology. It's right now focused on our outlet business. It will drive $6,000,000 in revenue this year on a $10,000 investment annually. So pretty good ROI for us on that. And this is a technology we will now roll out across the entire portfolio for the Q4 season. This is a magnificent slide, because for us, this is really what everything all the hard work that we're trying to do to pivot the brand away from outlets and away from promotions and discounting towards a full price business, this is the reality of that hard work. Historically, our web business, very much like our outlets, highly promotional and highly discount driven, this is no longer the case. So we made a strategic decision to abandon that model in 2014. So as you can see in 2013, 36% of our business was done in full price. Fast forward to 2014, 88% of our business is now full price and we've reduced our promotional sales to just 12% of the business. So an exceptional turnaround in a very short amount of time does three things for us, right. Premium brand perception in the market. It's a healthy and sustainable business model, once you pull the needle out. And most importantly for us, it's a strong and very healthy margin rate. So to summarize, the reasons to believe we're going to get to $1,100,000,000 in 20 19, digital commerce, digital at the core, huge global potential, not just what I covered in terms of the Americas and some of the things that we're doing here right now, but the long term capacity of this brand to expand digitally in Europe and Asia is simply phenomenal. Strategic four wall expansion, I talked about the near tripling of our doors of full price business here in the Americas, but also worldwide. Again, runway, both in Europe and Asia that we're very confident in over the long term. Technology investments like our new web platform, like our new e commerce or our e mail service provider, they drive omnichannel excellence and will continue to deliver results for us. And finally, and though most germane probably to our North American model is this channel mix shift. We talked about the doubling of e commerce or digital revenue as a mix percent of mix. But also importantly, this shift away from outlets in the Americas to a full price model and the dramatic impact that will have on profit as we move forward through 2019. So the journey to $1,100,000,000 it's already started, which is very exciting. And we believe 5 years from now, you'll see us flash this number again, only it'll be the baseline for a business that's healthy and sustainable and will continue to flourish in the years ahead. So with that, I'd like to turn it over to Diane Woods, who's our GM and VP of Timberland North America. Thanks. It's still morning, I promise. I'm going to talk to you about the Americas piece of this global brand, and I'm really excited to talk to you about the strategy that we're going to keep going with because frankly, the strategy is already in place and is already starting to work. So now it's talking about how do we take that forward over the next 5 years. So first, over the next 5 years, by 2019, the Americas business will add $705,000,000 bringing us to $1,500,000,000 piece of its global brand. And by region, I'd like to just spend a minute on the pieces that are going to contribute to that. So the U. S, our most developed piece of the business right now, will contribute 75% of that growth. But we'll also have healthy growth out of our Canada business at 15% and then everything south of the U. S, so Mexico, Central America and South America will also contribute 10% to the overall $705,000,000 piece of growth. And that will come from a consumer insights led strategy. So we've already started this journey. You've heard that from a lot of people. We're proving that, that is working for us. And underpinning that are 3 key things for the Americas. The first, focus on profitable long term vision and healthy growth. The second, diversification of our product line. We need to be men's, women's and kids footwear, apparel and accessories. And then 3rd, discipline. When you have a very kind of developed long term business, there are things that have gone over gone on through that period of time that you need to be disciplined within your market and make the right decisions for your brand. That will keep us in our premium position and be really important for us as we move forward and grow the brand. Let's look at it by format. So the Americas business, very developed wholesale business, will grow significantly from a dollar perspective. But the biggest CAGR you see here is our e commerce business. And you just had Ryan tell you quite a bit about what's underneath that. There's a lot of things fueling that growth right now, not only the new platform that we'll do for our e commerce business that Ryan just took you through, but also growing distinction. I don't know if everyone caught the nuance on one of his slides that showed the distinction of serving up content and product to our outdoor lifestyle and the Timberland brand and our industrial consumer with the Timberland PRO brand. There was one slide that showed you both of those. And as we create distinction between those, we'll serve those consumers better. We'll also have discipline within this business because we just introduced our minimum advertised price policy, which governs our online pricing and ensures that it's a level playing field. You have to start winning on service and product and the things that count and not on price. And so our minimum advertised price policy levels that playing field and allows us to win. You saw on there the kinds of things that we're doing when we do digital at the core, like the shoppable interactive catalog. Those things put us on a level playing field also with wholesale partners that we sell, but allow us to really show up strong in the e commerce space. And then lastly, of course, our brand strength and growth through this period will fuel consumers and fuel this growth by sending people to timberland.com to look for their solution. That's a 31% CAGR over the 5 year period, a very achievable, CAGR for this business because we're putting so much behind it with digital at the core. For our wholesale business, as I said before, not looking at short term opportunities. We're looking long term, focused on profitable, healthy growth, and that will be across every channel in which we play. We'll get more into the details of that later, but it's really important to understand how we can coexist across multiple channels and still serve the brand very well, stay true to the brand and create distinction in the market. Segmentation and category expansion is crucial to serve that business. And then last, our retail growth at 10% CAGR over the 5 year period. And as you heard from Ryan, that we will be balancing our portfolio, because that's our brick and mortar business, and we'll be balancing our portfolio through that period to become more full price and maintain our outlet business. Our market opportunity in the Americas is significant. So I want to call out immediately $12,000,000,000 market opportunity is simply the outdoor lifestyle piece of this market. So it doesn't even take into account the fact that when we serve this consumer, we get a piece of the outdoor functionalist market, we get a piece of the style craver market and on top of that, we get the industrial market through our pro brand. So $12,000,000,000 is quite understated for the market opportunity that we have as a brand out here. By proving or focusing on that bull's eye consumer, we're going to go well beyond that. So we're at 775 right now, which is a fraction of what our headroom is here. And so we'll win here because we will bring innovation and our SPG formula and product and we'll play the game better. So I want to take you through 3 essential things that are key growth drivers for us in the Americas. One is product refinement and diversification, very important to us as we move forward and I'm going to take you through kind of what we've done a little bit over the last 2 years and how that will serve us moving forward. Our consumer insights driven strategy, you heard that a lot today. I talk about what that means for the Americas. And then channel discipline and optimization, which takes it from we will grow across all formats, whether it's D2C, e commerce or wholesale, that's a little bit of a deep dive into our wholesale piece of the business. So first, product refinement and diversification. For anyone that I've been speaking to over the last couple of years talking about the strategy in the Americas, you'll know that when we came in, we do have a global product engine. And that means we have a diverse product line from which the Americas creates their assortment. We needed to pull that back significantly at the beginning of when VF acquired the brand because we were very broad in our product offering. And as Jim talked about before, we're very broad in our messaging. So we needed to not only pull in our messaging to a central place that Jim talked about, we need to pull in our product aesthetic to that same central place. And when we did that, we were able to have our internal team, our sales team very focused on one aesthetic, one message that laddered up through our marketing, but our consumers and our customers started getting that consistent message and understanding how those things went together. So we tightened the focus of our product line big time. We brought the SPG formula and brought compelling product to market in a way that we hadn't shown for a while. And what we do now as a team is we're focused on driving product platforms. So we'll introduce a family of product to the market and over the next 3 to 6 seasons, depending on what kind of product it is, we'll add new colors, we'll develop new materials, we'll do new silhouettes and we'll grow that product family over the course of time. This allows us to do product life cycle management with our customers. Our customers want us to stay on a product platform and grow it and develop it with them, but also know when that's run its course and it's starting to come down, we need to be ready with the next thing that's going to come in and replace that to maintain that shelf space and those sales. And so that's how we're running our product line now and rationalizing our SKU count. This helps our retailers greatly. It also helps us be very focused as a team. 2nd, lifestyle. So when we changed our mission to be outdoor lifestyle, that was really important because it said to us, you cannot be a footwear brand. You can't be lifestyle if you're only footwear. You have to have apparel and accessories. And we found from all our research, you change the consumer's perception of a brand much more quickly when you show them a toe to head expression than when you show them footwear. And so this is really important to us from a consumer perception perspective. It's also really important for our growth. So lifestyle means winning in men's, women's and children footwear, apparel and accessories. And as a brand, we need to do this because we need to diversify our product line and where we're making our revenue. So we have lots of levers to pull throughout our growth period. And last, premium positioning. This brand operates in the premium position in the market. It's important that we continue to do things that show the market that we are a premium brand. We have to stay true to our craftsmanship, our heritage, the built to last perspective that we bring to our product, that quality. And so we'll maintain our position in our distribution and we'll bring those premium products to the market so we maintain that positioning. A consumer insights led strategy. If you are not getting that message by the end of this day like I don't know how that could happen. So our outdoor lifestyle or bull's eye target that we're going after. We've talked to you a lot about what this person is like. They care for brands. The brands are important to them. They want to be accepted. It's important what people think of what they look like. They think fashion is important. They think the outdoors is important. So we know the behavioral traits that are important to these people. They want to look good and fit in. And so versatility becomes a key piece here, because they want to go from thing to thing to thing in their life, from occasion to occasion. They want to go to work. And then if somebody calls and says, come meet me for in the park for a walk, they want to be able to do that and then move on to dinner or to go see a show or do whatever it is without ever having to go home, never feeling out of place, they want to look good and fit in. So versatility is key. And then we have Pro. For Pro, which is our industrial piece of the business, apparel and footwear are tools. They have to function, so that this worker on the job can 1, be safe and 2, focus on the task at hand and achieve on the job. They don't need to be thinking about, my coat doesn't let me move the way I want to or my feet aren't protected because they're cold, wet, not safe. And so those become tools. So we know in that piece of the business, a consumer insight led strategy is about protection. It's about making it a tool. The 3rd key growth driver for the Americas is around discipline and optimization. Discipline has been key over the last 2 years as we've kind of slowed down to speed up, as Patrick talked to you about. The first and very big thing we did in the Americas market is allocation of our core product. We had to do this because the core product was over distributed, the market price was not where it should have been and the brand wasn't being served as well as it should have been by some of our customers. And so in doing what we did, which was closing a number of accounts who weren't serving the brand well and then only giving so much product to the market of our core products that we kept demand high. The retails raised at about $30 on average and have stayed there now for over a year, so maintaining much higher retail prices and demand is higher. There's a want in the market for our core product. So this allocation discipline has worked extremely well. We'll continue to do this going forward, and hopefully, hope is not a strategy, but we know we're going to employ these things and they're going to continue to work. Win with winners is a VF concept that we have taken on at Timberland quite a bit. So getting with our key partners, talking about what they need to grow their business, what we would like to do with our brand through their venue. And then when we work together, we win together. It's working very well. This is a great strategy that VF brought to us, and we're seeing great success. I put up a few wholesale partners on the screen where we're growing our business significantly and having some nice wins. Last, channel distinction and segmentation, and this is really important within our wholesale piece of the business. We serve a lot of different channels. The idea of a bull's eye target being the outdoor lifestyleer is really important as you think about these and it's where consumer insights goes from being a brand strategy to actually being a commercial strategy. So when I go talk to somebody in the outdoor space, as an example, our team goes in and says, your consumer is probably the outdoor functionalist. Our bull's eye target is going to be the outdoor lifestyler and we take them through who that consumer is. And what that becomes from a commercial perspective is, I can bring the outdoor lifestyler in your door and help you sell more product and serve the outdoor functionalists because it's a halo target for us. And I can do that by putting, a little more emphasis on certain behavioral traits that the outdoor lifestyle and the outdoor functionalists share. I just play up certain traits a little bit more, as Jim talked about, in the marketing or in the product. And then we're serving that channel with distinction and maybe some unique product. And so the way that we then segment and talk to consumers stays very much under the Timberland brand umbrella, but it serves just like this local versus global thing. It serves that channel very, very well. So why to believe that we can add $705,000,000 over the next 5 years, consumer insights driven strategy? We have a proven ability to grow our brand with this. We've already seen it. It's already started and the momentum will build. 2nd, a huge market opportunity. I'll remind you $12,000,000,000 is only the outdoor lifestyle market opportunity and then we have all the other pieces to go with it. Diversification and expansion of our product portfolio. So this is men's, women's and kids apparel, accessories and footwear. And as we grow across all of those product platforms, we'll serve the brand really well and change that consumer perception to make it stronger over time. A focused strategy and disciplined channel execution. We will not allow our team to get off track on short term possibilities. It's a long term focus here, and we'll stay on strategy, unwavering focus on that strategy. And then lastly, every country and channel grows more profitably. We've reset and improved significantly the profitability of our channels and countries. Now we grow on a much stronger base. Our path is charted. Our team is ready. We'll be $1,500,000,000 by 2019. And now I'm going to turn it over to our outdoor lifestyle in person, Timo, the President of EMEA. Thanks, Laurent. Thanks, Diane. Good morning, everyone. How's it going? Good. Welcome to Europe. I will be taking you through the business, the plan, the strategy for Europe, Middle East and Africa in the next 15 minutes or so to the EMEA region. We will be adding, we will delivering over the next 5 years $380,000,000 incremental dollars within our region to a top line of $1,000,000,000 by 2019. The foundation for that growth you can see here in the middle of the slide, 3 main markets. In the North, we talk about the U. K, adding around 10% of that growth to our top line. In the South Italy, around 13% of the top line. And in the center between that, you have the German speaking countries, Germany, Austria, Switzerland. I think the biggest portion actually of that, around 31% of that total growth. Of course, the reason for that, as you know, Germany is a very healthy country. We have some brand catch up to do there with Timberland. You see that later on the slides. And also it's a rather big sub region with around 100,000,000 people only in those three countries. So big opportunity for us. All in all, we are very excited that the growth is pretty balanced between the more Western European mature markets and the emerging markets in our EMEA region. From a channel perspective, can see not a surprise that the wholesale business being the biggest business for us today is also adding most in terms of dollar value here $230,000,000 incremental or 8% CAGR. The centerpiece here direct to consumer, Our full price brick and mortar stores and outlets are adding €120,000,000 with 12% CAGR. E commerce, we're pretty new in Europe with that business. We just recently opened numerous sites and we'll talk about that a bit later as well. That's a bit lower on the total dollar contribution, but of course the highs in terms of percentage contribution. So that's going to be the channel split contribution over the 5 years for EMEA. Talking about the opportunity for Timberland in the region. As you can see, it is an enormous addressable market. The outdoor lifestyle that Jim talked about before and only that outdoor lifestyle actually spends $8,000,000,000 today on footwear and apparel. And please keep in mind that is only in the 4 countries we research in our study within our 57 countries we are currently active in. So only those 4 countries $8,000,000,000 That has also not taken the halo into account. Also Jim talked about the other consumer groups to get with the outdoor lifestyle and speaking to them specifically that's under 15% on top of those. In total, you can see the region is about 125 countries and 2,000,000,000 people as potential consumers in the long run. So a massive business opportunity for us. Talking about brand health. The brand is really, really strong in Europe. You can see here U. K. And Italy actually in the 90s awareness rates and strong brand health figures that is absolutely on eye level with brands like Nike, like Adidas. So Timberland plays in the same zone here in those two countries. A very, very strong starting point to expand the business and to grow the business. At the same time, kind of we have Germany with 70% awareness, rather a bit lower on the brand equity here, but 70% awareness, rather a bit lower on the brand equity here. But that is even compared to our competitive set in Germany also a strong starting point. But we do know we have some opportunity here. We're investing in that country heavily. From there, as we said, we go into neighboring countries also Germany and from there into Eastern Europe. So a good starting point for this brand in the region. I've been taking now the next few slides through the growth drivers, the 3 big growth drivers for us over the next few years. It's about product, It's about distribution and about communication. And we go through 1 by 1. 1st product. Let's go to the middle of that slide. The product men's casual product which is the stronghold for this brand also in Europe obviously, men's footwear, the classic business, the boot business first of all. But very interesting in the last 2 years 2 thirds of the incremental growth came from new families, came from non classic product, but the younger new families also here kind of talk about the outdoor lifestyle already. And that's a very, very good sign here in men's footwear, 2 thirds of the growth coming from new products. Then on the other side, we go into the lifestyle focus, kind of on your right. There we go from footwear into toe to head, we talk about apparel. So apparel in itself of course for us a huge market as well. And we have a huge monobrand store network owned and franchise partners. We can showcase this head to toe look, the toe to head look in a perfect way. And on the other side, you have of course women's, the other gender. We're also here we started and we have a good business in the classic business, the boot business with women's. We're now adding more feminine styles. We're balancing style, fashion with our heritage in Timberland. That's going to be the way how we address that consumer. The second growth driver, distribution, a straightforward twofold strategy. On the one hand side within this enormous region, we're going to add additional doors simply adding doors points of sale to our door account. On the other hand, of course, we want to increase productivity in existing doors. How we call it, we're adding SKUs on the wall. We're adding styles, options on the wall in our wholesale network. On the other hand, we're following a clear segmentation strategy. You can see the tiering here. We're investing in Tier 0. We're investing in Tier 1. And the qualitative high qualitative brand building doors or tiers. And then you have the cascading down into the more commercial offering in Tier 2 and Tier 3. So very strategic, very rigid distribution strategy we apply in the region. But wholesale is only one part of the business. We have another huge part which is D2C our direct to consumer business. And that channel is of course perfect for storytelling. You can see some pictures here just 2 weeks old from Regent Suite in London, the flagship we just refitted 2 weeks ago. You can see we're celebrating our heritage, but we're also speaking to this outdoor lifestyle consumer in a new way. We're connecting with those people. We're engaging with them. In that store actually we have artists coming in twice per month where people can book time with those artists and customize their boots. It's really kind of like completely crazy about that. We can book them in advance. So but even better the D2C channel, the mono brand channel, the MONO brand stores is not only about storytelling, but we also managed since acquisition to turn that channel into profit. So now D2C for us in the region is a very profitable business. So we can really continue doing that and driving that and growing that. Moreover, talking about the Monobrand channel, our approach of very strategic how we enter markets, how we enter countries. And we're focusing on the main cities first. We call that fortress city approach. We took about the top 15 to 20 cities in Europe. What I mean with that is when we enter a country, we first go into that city and really cover that market, that city in a best most effective way across all our formats. Again, it's Timberland stores only, so Modern Brands stores first of all, but in the owned format, in the franchise partner with shop in shops and with the other format which is footwear plus, which is footwear only so to speak. So all these different formats work hand in hand to really engage also here with the consumer and tell the story in a perfect way. And you can see here Rome and Italy a good example 20 stores are not too many, absolutely not. We can really kind of get a lot of business out of those cities. And then also here if you go further up the other cities some examples, there's huge upside. I might be calling out Germany out again with Munich, Berlin. So a lot of stores potential upside here across the region. Turning to the 3rd growth driver digital. 1st from an e commerce point of view and as I said in the beginning, we're rather new in the e com business. We had the U. K. Site open for a few years now, but only this year 2014 in the 1st 6 months we opened 6 additional sites as you can see the countries here the flags. So now Timberland in Europe we actually pan Western Europe live with our e comm site. So we have access to the consumer directly via our e comm sites. First of course we focused on the site itself. We also have about 30 plus percent of consumers coming through mobile devices. So we have responsive design on the site obviously. Then we focus on the content, having the outdoor lifestyle in mind, so we have the right content there and talk to them. And then of course, it's all about traffic driving and conversion. And I can tell you just that that thing is completely taking off. So a clear growth story for us. It's great to see growing, I'll tell you that. Last but not least about communication. We spent today around 50% of our media buy on digital alone. So we organically connect to the younger consumer base, the all else in mind again. Social media of course is a huge part of that. We actually engaged in a tactical partnership end of last year with the top 20 fashion bloggers in Europe and only that partnership brought us this year 2014 year to date 20,000,000 unique visitors on our sites. It's incredible. PR in general on the other side generated also 2014 year to date 2 60% return on investment. So we reckon that brand is really hot. It's taking off. So in summary kind of for Europe for the region, we feel very, very confident having everything in place to grow the business over the next 5 years. As you can see on point number 1 consumer coming back, we finished our end consumer studies. So everything we do now is consumer insight driven. We have a solid and disciplined distribution strategy in place. We are growing today each country and each channel more profitably. B2C, we turned completely around in the profit since the acquisition and we continue doing that. And last but not least, kind of we are less dependent on our classic product today. And even better, the new product, the younger product categories are growing even faster. So we are very confident that we're going to hit the SEK 1,000,000,000 by 2019. Thank you for that. And then I would like to hand over to Stuart Whitney, Vice President and Managing Director for Asia Pacific. He can't be with us today here unfortunately. He is on baby watch, any time due now, tomorrow, something like that. So we try to call him in from Hong Kong. Stuart, can you hear us? I will stop for you Stuart. Can you hear us Stuart? Okay. Yes, I can hear you Timo. Thank you. Good. So we also have as you can't be with us today, so we have a little gift for you for the latest Timberland family member coming soon, right. So we put it here. Pick it up soon, okay. Well, that's incredibly thoughtful. It's also pretty practical because the last three times I tried to buy those and stratum, they were out of stock. So I think Diane also has them. I think Diane has those on allocation as well. But I want to thank you guys for your understanding. I wish I could be there. The baby is coming no later than Monday. Hopefully it's not coming in the next 15 minutes. But at any rate, I want to walk you through the story. I think it's an exciting one, similar to my colleagues. Just a little bit of background. Timberland is Asia's excuse me, is Versus largest business in Asia. We operate in 18 markets today, 7 of which are subsidiaries. We've got an incredibly balanced business, 30% of our revenue comes from Japan, 30% from China and 40% from the rest of the markets. In addition to that, we're pretty balanced when it comes to D2C and wholesale. We make it the only brand that the majority of our revenue comes from a higher share of our revenue, I should say, comes from our D2C business, about 60% with 40% coming from wholesale. And finally, you've heard a lot about toe to head and head to toe. We truly are a head to toe proposition and offer and have established the brand that way here in Asia. If you look at the revenue that comes from our stores and our partner stores, 50% of that revenue is coming from apparel and accessories, 50% from footwear. So we're excited about that and we know that it can only get better now that we're fueled with the insights and particularly with the VF platform. So moving on to the 5 year plan, and I'll trust that that's up on the slide for you to see. You can see that we're planning to double the business by 2019. We've got a modest growth plan in Japan where we're going to focus on elevating the brand position as well as the distribution profile. We've got significant double digit growth plan in Korea. I have to mention that we launched the business as a direct play this April with the 2nd brand behind Vans to go in from a direct perspective from VF. And we're really excited about the potential of that market. But obviously, the growth story in Asia for Timberland, like it is for most brands, is centered around China. And I mentioned we're the biggest brand for VF in Asia, biggest business. We're only the 4th biggest brand in China. So we have the most to gain, I think, from leveraging BS established platform, whether that's the back office enabling functions, the consumer insight and strategy model that we've been you've heard today or this morning or the distribution planning and profiling tools. In addition to that, we're able to tap into key relationships, whether that's with customers, agency partners or suppliers. And finally, we can leverage Versus significant experience and knowledge in the area of digital and e comm. So the road ahead looks particularly promising. From a channel perspective, I mentioned this a little bit a minute ago, but the good thing here is that you're going to see double digit growth across all channels. And I'll talk a little bit about the D2C and ecom in a minute about how we're going to achieve that from a growth driver's perspective. I want to focus now a little bit on wholesale. And the plan is to grow by about 13% per year, and we're going to drive most of that growth through our franchise partner store network and business in China. We'll do that by expanding doors rapidly. We see plenty of opportunity to more than triple the door count in the next 5 years. We'll deploy the SPG Style Performance and Green model in our merchandising and marketing effectively. And we'll fully leverage Versus front end planning and back end operations expertise. In addition to this, we're going to localize the global messaging. The great thing about the segmentation study that Jim talked about earlier and Lisa as well is that we got a lot of great insights because we that we can effectively deploy in China because we executed it in China, Japan and Korea individually. We're going to build a digital strategy and ecosystem specifically in China, something VF has already done for its big brand. And we're able to recruit, retain, train and develop our talent and leadership pipeline like we've never been able to before. And being part of Via quite truthfully makes that a lot easier. In terms of the market opportunity, obviously, Asia represents the majority share of the population on earth. In addition to that, most folks believe it has the most market potential, especially when you consider the number and size of the emerging and developing markets, but also the fact that the OLS spend is already $16,000,000,000 annually. And that obviously doesn't take into consideration the emerging middle class both in China and India. Our current model, which optimizes the balance between regional and local functional responsibilities and utilizes a set of common business processes, is now powered through the VF Asia regional platform and allows us to drive and ensure consistency of execution, address local market nuances in product and marketing, as Jim and Lisa talked about earlier, and maximize the impact of our investments. And finally, it allows us to support expansion into new markets we're already taking a look at for the future. All of this is going to help us to realize our full potential in a massive market. In terms of growth drivers, many of all the strategies were aligned consistently aligned across the world on the key strategies. And many of the key growth drivers are similar to what you see in the other regions. First off, we're going to amplify consumer connectivity. We'll do that by embedding the OLS consumer insights into everything we do. Secondly, we'll serve consumers directly and do it with distinction. The model brand format is still the preferred channel here in Asia. We have nearly 500 doors between ourselves and our partners to be able to leverage. And it's the way in which we can deliver, in my mind, the optimal brand expression and experience. Thirdly, we'll bring digital to the center of our business. It used to be considered a channel of communication or commerce from our perspective. Now it's integrated into all aspects of our business. And finally, we'll continue to be a leader in the area of sustainability. Consumers in Asia, especially in China, are becoming more and more concerned about the environment and the role that not only government plays, but also commercial enterprise. We want to continue to maintain our position of leadership in this area. Let's dive a little bit deeper into each of the key consumer growth drivers. First off, we'll connect with consumers. BS investment in support has allowed us to identify what's most important to the OLS consumer here in Asia and allows us to position to maximize the insights through relevant, differentiated and compelling product solutions, storytelling and value added services. You heard Jim, Lisa and Ryan all talk about how we're going to integrate that into the formula. Specifically, these insights also support the use of or we're able to utilize these insights in events and collaboration. In particular, the OLS is a highly social consumer and they seek connection. We've taken this insight and we've been able to find the right venues to sponsor to go after the consumer. In addition, we partnered with popular media outlets and properties to be able to secure advertorial space and also event space. Thirdly, we use the insights to target the right key opinion leaders. The right key opinion leaders are those who can increase the brand reach and also shape perceptions for the OLS consumer. Many brands use celebrities here in Asia. Timberland uses style leaders. And you heard Jim go into detail about the mark makers program. That's something that we're doing here as well. We're executing across 6 markets with 11 different style makers. And we've already seen it make a difference in terms of our style quotient. Finally, we're going to use insights to drive conversion through Club Timberland. Now Club Timberland is our CRM program, something I'm particularly proud of. We've got about 250,000 effective members to date across the 6 markets that we're operating in. Those are members that purchase at least once a year and they represent almost 50% of the revenue that comes out of our stores and shops. We've just moved to a new about a year ago, moved to a new digitally based program that allows us to put content and offers and deliver that through the smartphone effectively. We can even customize that depending on the segmentation of the consumer set. It allows us to do these engagements, if you will, 8 to 10 times per year at a cost of less than $5 per member. And these are folks, the consumers that spend more than $300 in our stores each year, which is more than double what nonmembers spend. We launched a pilot program in Singapore about a year ago. And after 1 year, we saw member revenue increases of over 40%. In Taiwan, where the program has been running now for 3 quarters, we've seen member revenue increase by 60%. So we're particularly excited about this opportunity, and we expect to deliver a drive our membership rate up to over 600,000 and for it to represent about 65% of the revenue coming from our stores. And this doesn't include the CRM program that we're building with BS Health to support the China partner stores. Moving to the next key growth driver, serving consumers directly. 60% of our revenue comes from our direct to consumer business. And obviously, we want to leverage these insights in a number of ways. Global through again resources that were supported through V app and experiences with agency partners allowed us to do a global shopper insight that allows us to optimize the consumer journey. The consumer walks through a journey where they're inspired, they're guided, they connect with the brand and then they justify the purchase. We're able to take the insights and maximize that journey in a way or optimize the journey to maximize sales and conversion. We're also able to add value added services. Ryan touched on these pretty significantly as well as in store digital capabilities, which are already in the store and will be coming in the store in the future. Now as a retailer, we launch about 4 collections this season. We build visual merchandising guidelines and planograms so that everything in the store goes where it's designed to go. We train a lot. We provide a lot of tools, competitions and KPI reporting to make sure the consistency and quality of execution is there. We believe that makes a difference in terms of the results, both in terms of sales and in terms of profitability. The next key initiative under serving consumers directly is the merchandising excellence project, which is another VF initiative, where we're developing processes and tools and organizational capabilities to optimize our buying and planning. In addition to this, we're going to improve our allocation methods and introduce dynamic replenishment, which will allow us to optimize the in season management. At the end of the day, what this means is more sales, better inventory utilization and higher margins. So we're very excited the fact that Timberland was selected to pilot the program beginning this year. Finally, we'll build capability in e commerce. You heard this through various presentations, but this is obviously an area of expertise and focus for VF on a global level. They've got a lot of experience that we're going to leverage in China. They're helping us through the experiences with the other brands to build a robust e com strategy to increase the offers that we add in terms of ship to store, return to store, etcetera, and we'll strengthen our CRM program through this strategy as well. Finally, we'll leverage new capabilities and resources that BF is providing. This leads us to the next growth driver, which is putting digital at the center. BS expertise and investments has allowed us to create a digital vision, strategies and an ecosystem. The insights from digital and the use of analytical tools will help us to deliver against important KPIs. Some of those that we look at today are the response to paid, owned and earned media. We also engage in social media across each of the countries excuse me, social media listening across each of the countries. And we engage in web analytics that allows us to evaluate the traffic in order to better manage the content. Jim talked about content. Content distribution model. We're managing the content of all of the social channels to make sure that it coincides with the marketing activities, a sort of social always on content distribution model. In addition to this, we're looking at a regional level to purchase the search engine marketing campaigns and own key search words. This will allow us to maximize the content through via digital distribution. And finally, we're going to build and execute online to offline and offline to online initiative. We've built a 3 year road map, a mobile first strategy that includes things like using social apps like WeChat in China to drive store traffic, utilization of QR codes to increase product content, if you will, and information location based advertising as well as building mobile websites that will enable M Commerce in the future. Our next area, a key driver is leading and sustainability. And for several years, we invested in the G aspect of the formula quite a bit. And we intend to leverage this, not as our first message, as indicated earlier, but as a way to amplify the brand. Obviously, we do this through the green products and initiatives that were discussed earlier. We'll repackage and deliver this through digital and social channels to amplify the message. Another area, key initiative here in Asia is the Ho Chi Minh Desert Reforestation Project, which is in Inner Mongolia, China. It started in 2000. We planted 1,000,000 trees by 2010, and by next year, we'll have planted the 2nd 1,000,000. We utilize this as a regional platform, as a consumer facing campaign and call to action that we activate through our stores for each of the countries here. We connect with consumers, employees as well as customers in our path of service. And finally, from a Green PR perspective, we are getting our disproportionate unfair share, if you will, of PR related to our initiatives in this area. We started about 9 months ago with the campaign around sustainability makes good business sense. In the past 9 months, we've had 36 engagements across all media types, which has generated an ad value of about $1,000,000 and PRF value of about $3,000,000 So we're going to continue this as we go forward. There are several reasons to believe that we can build a compelling proposition that OLS consumers and HALO segments will value that we can realize the brand's full potential in Asia, expanding our distribution reach or share a voice and our share of wallet with the OLS consumer and that we can establish a differentiated and elevated position versus competitors. First off, we've demonstrated the ability to consistently grow and now we have consumer insight led strategy and an innovation pipeline to amplify our efforts. Secondly, we've got limited OLX share of wallet with a massive market that we know is going to continue to grow. Thirdly, we have established ourselves as truly a head to toe proposition, where 50% of our revenue in our own stores and those of our partners is coming from apparel and accessories. 4th, we have a profitable and scaled B2C business that we can continue to leverage. And 5th, obviously, VF's unique front end and back end capabilities and experience and investments is a significant competitive advantage. So I hope you see why I'm excited and we're excited here in Asia about the future of Timberland in this region. Thank you. All right. Thank you, Stuart. Hope all goes well there. Thank you. So that will conclude the morning session. Obviously, great news this morning. So again, dollars 3,100,000,000 14% in the Americas CAGR, 10% in EMEA, 15% in APAC with a doubling of the business. 2019, Americas business is $1,500,000,000 We've got $1,000,000,000 of business in EMEA and then $620,000,000 here doubling, 13% CAGR overall. There's a lot of really exciting stuff happening. I think we're adding $1,000,000,000 in footwear over that 5 year period. So really amazing headroom here ahead of us. We're going to break it now for lunch. Lunch is basically out these doors and back on the patio out back. It's a beautiful New England day, so we'll get out there and enjoy it. We'll be back actually, we can probably organize out there again, look at your badges and we'll kind of figure out where people are going to go from a group perspective. But we'll join 3 folks that will host us to the different immersions following lunch, which will start at about 1 o'clock. That'll take an hour. We'll be back in here. 2 o'clock for those of you on the webcast externally, there's about a 2 hour break now. So if you want do what you need to do and pick it back up around 2 p. M, we'll have some closing remarks and then do a Q and A. And we will conclude after that. So if you want to follow some of us out the back of the room here and we'll go grab lunch. Thank you. I can't see I can't see you now. Hey. She's, she's ready to go. She's ready to go. 8a half. Yeah, he's 8a half pound. He's got to come out soon. 8a half. 8a half. Yeah. 2 weeks left. So he'd be a 9 pounder. That's a Gronk Gronkowski. Yeah, it is. That's a good catch. That's a keeper. It's a keeper, Patrick. Yeah. I mean, Eric sent me a note, told me he ate my lobster roll. That made me that made me that made me hungry. Some peanuts and an apple. It wasn't quite a lobster roll. You ready, Stuart? I'm ready. Okay. That's good. Hi, Lance. So should we begin? Should we begin, Ken? Okay. Hi, again, everybody. I hope you've had a great day so far. Hope you got some lobster rolls and that you've had a good time with those short immersions. We wanted to really get you guys a sense of the culture around the brand and walk you around the building a little bit too. When I spoke to some of you last night and this morning, it was clear to me that one of the things that you guys look to get out of one of these experiences is to really feel the culture of the brand and get to understand whether there's any energy or if there's some great people around. And for sure that's what I hope we've given you today. So just as a wrap up before we start the Q and A, again, you guys have seen this slide. And really there's 3 things I wanted to talk about as we wrap this up. First of all, VF has got our back basically, right? I mean, we're well aligned with the very strong platforms and strategies of VF as a brand, the Timberland brand. Number 2, killer team. I hope you guys really got the sense of the power of the team today, all of the presenters, the detail that goes into building these plans and how we understand our markets around the world, how we understand our consumer and how we understand how to actually go to market with our products. I hope we gave you a good sense of that today. And then thirdly, the brand model, a very clear and articulate vision for the brand, very clear and focused strategies for the brand and also for the regions and for each entity in terms of product and marketing, a very good structure of the company of course and very, very rigorous and deliberate processes to be able to execute the brand and also the go to market ideas that we have. And ultimately great collaboration throughout the organization and how we cooperate around the world which gives us fantastic consistency as a brand. All of those things should be reasons to believe. And you also have in your decks very defined and very precise reasons to believe for each region as well. So having said that, and that kind of wraps it up for the presentations today. We'd now leave the floor to you guys to ask some questions to the team. Wow, a lot of hands. It's going to be active. So in closing, thank you for being with us. Thanks very much. Just a quick question on kind of sourcing and industrialization of some of your processes. You spent a lot of time talking about consumer insights, but where in the continuum are you in taking Timberland's product and using the VF best practices for sourcing? And then I think you kind of touched upon using more automation for footwear kind of where are you in that development process? We missed part of that question. So we were adjusting the stool here. Automation of footwear is that what you're talking about referring to what John Healy was talking about in terms of 120 pairs of hands touching the And best practices. Best practices. Best practices. Best practices. Best practices. Best Okay. So I'll take that. So what's really interesting, of course, with the Timblin acquisition for VF as well is the fact that it's given VF a new capability in terms of understanding how you make real footwear. And saying real footwear, it's not that Vans doesn't make footwear. It's just a different type of footwear. Vans has 2 construction types really in terms of the footwear they make. Timberland has 11 types. And also in terms of materials, we're a very large leather brand as you have probably gathered by your immersions today. So for us, both from an upstream perspective in terms of how we source some of those materials and also in how we produce them and where we produce them has opened VF to a whole new, let's say, segment or category of manufacturing and sourcing, which is also again really important for VF. We've built another capability there. So to answer your question, I would say that we're on our way to understanding very well how to build great footwear. And that's also helped by the fact that we have our own factory in the Dominican Republic that was owned by the Schwartz family before the acquisition that we have invested into over the last 3 years and learning and best practices thing is a two way street. The learning and best practices thing is a two way street. For sure, things like consumer insights and other things that VF has a lot of years of experience at and Timberland did not have a lot of years experience at. You asked about benchmarks. And Timberland has been part of VF now for 3 years. So they've been part of everything that we do. So stuff like the consumer insights work that's happened here is at the same standard same high standard that we have everywhere around VF. We have an HR council. So from an HR practices standpoint, they're completely integrated in part of VF. We learned some things from Timberland. They learned some things from us about that. On sustainability, we learned at VF a lot about our capacity to do more in every area of sustainability based on all the years of work that had happened here. Things like in Europe, our biggest e commerce platform in Europe is Timberland and we learned a lot and in Asia as well. I mean, Stewart's business is huge in Japan and we don't have a big Japanese business. So there's a lot of learnings going both ways. But after 3 years, Timberland and VF, you can't say there's 2 different standards. It's one high level of performance. Craig Scott, the microphone. Thanks. It's Michael Binetti with UBS. On the outlet strategy and maybe just to jump ball, I don't know who's best to answer it. But interesting to hear you say that you feel like you need to close doors in that channel rather than just manage promotions lower to take the brand where you got to and that you've actually got a bunch of momentum going with the brand in full price channels before you decided to do that. I think the financial community is constantly being challenged with how to think about that channel right now. What is it for you that couldn't happen with this turnaround if you kept those doors open? Or what is it about those doors you have to close that you need to happen with the brand to go forward? Why does that have to be physical assets being reduced? That's a great question. I think maybe that was one thing that wasn't 100% clear. We're not actually looking to have fewer outlets. We're looking to keep them constant and growing our full price stores. But what we are looking to do is close outlets in outlet centers that are not potentially the right ones for the brand and relocate them to other places. So we're going to be looking to keep the actual number of outlets constant over the time of the 5 year plan to 2019. Our investment in growing store count would be in the full price stores. Hi. Mitch Kummetz with Robert Baird. I've got 3 I think pretty quick questions. 1 on apparel. I think the number is $680,000,000 by 2019. Is there an assumption for a relaunch of women's North America in there? It's the first. And second on the DTC, the numbers that you've given, is there sort of an underlying comp assumption baked into that plan? And then lastly, Bobby, you could talk about margins, because there wasn't a lot talked about margins, you kind of gave a target of 18%. How do we get there? What's gross margin? What's operating margin? How much of it is mix? I know mix has been a big benefit to the company as a whole. So you can kind of walk us through that. Okay. I'll take the first 2. No, yeslow single digits. Bob, over to you. 5 100 basis points. Next. We are really efficient. There is not an assumption about a build in women's apparel other than outerwear. There's not an assumption about that built into the 2019 plan and the comp number worldwide is a low single digit assumption in our plan. Margin. 500 basis points. Yes, 500 basis points. So, I'll start with the improvement is in operating margin is what we were talking about. It's pretty well evenly split between gross margin and SG and A reductions. On the gross margin side, as you said, Mitch, mix is clearly part of that. It has to do with the D2C component, of course, which has higher gross margins. Within D2C, it has to do with more full price stores, which has higher gross margins. In addition to that, what we found is, especially from a supply chain standpoint, is we found more opportunities, frankly, than we thought when we first acquired the brand in the supply chain side. So, while we found great manufacturing capabilities, we've been able to help with inventory controls and even within the plants, improve the plants as well. And we're also planning on expanding the capacity of our internal capacity. So, all of those things will contribute to the gross margin improvement. On the SG and A side, a lot of it has to do with well, first, I'll start by saying it does not. We don't get the SG and A improvement by reducing our marketing spend. As a matter of fact, our marketing spend today for Timberland is right around 6%. We're actually anticipating expanding that to about 6.5%. And the rest of it is primarily driven by leverage in areas outside of marketing. And within D2C, as you probably anticipate, within D2C, through the productivity gains, we expect improvements there as well. So, that will help to lower our overall SG and A. But a lot of it has to do with leverage, leverage especially related to the top line, which is exactly what we expect to see or we'd expect to see. So pretty evenly split between the 2. Does that answer the question? Good. Thank you. Kate McSheen, Citi. I had two questions. The first was more strategic. Just in the past you've said that before you've acquired a brand, you do a lot of work beforehand in assessing the brand and the health of the brand. But in this case, from what we heard today, it seems like you did a lot of work after the fact as well in terms of consumer research and perception. So at what point when you are acquiring a brand, do you get comfortable? And how do you decide how much work has to come after? And then my second question just has to do with the EMEA CAGR that seems to be accelerating from 5% for the last 5 year CAGR to 10% for this next 5 year CAGR. Just what is the biggest driver of that? I'll take the first one and Timo, you can take the second one. Kate, we actually did have we did do some research on the brand before and during the diligence process. It was more while we were in a process, we didn't have 2 years to do the really deep global segmentation work, but we did do in their key markets. I think we picked 3 or 4 key markets, I don't remember. We did a quick consumer study to understand if the brand had momentum and if so, why and if not, why. So we did do it beforehand. We also pick up because we do all these consumer segmentations. We've done one for Vans. We're doing one for Nautica right now, it's just about finished. We've done one for The North Face. We've done them for lots of brands. And when we do them, we pick up everybody in the space. So during The North Face work, we're picking up information about Timberland along the way, before the idea of acquiring Timberland ever resurfaced. So once we got here, we went all in on research to talk to 18,000 people in 8 countries. It took we said it was a 2 year process. We worked on that every day for 2 years. We had people interviewing people and doing surveys and measuring results. So it was a constant effort. And obviously, during an acquisition process, don't have time to go that deep. Timo? On the acceleration, it's nice that you say that we are accelerating because we said earlier that the plan was after acquisition to slow down to accelerate and exactly that's what we're doing and showing in the numbers here. In terms of contribution, I mean, we talked about the And in terms of contribution, I mean, we talked about the Western European parts adding around 50% of their growth. And the other 50% is coming from emerging markets and D2C half half roughly. So these are the main drivers besides the product categories. But in terms of business, that's about it. Over here in the front. Bob Searle. Thanks. I just have two questions. First one Eric, when you started today, you said this was the largest most complex transaction that the company has undertaken. Does this increase your appetite for an even larger acquisition going forward? How do you think about it from the total VF Corporation perspective? Second question is 3 years ago when you announced this transaction, there was a lot of concern around cannibalization of TNF versus Timberland, how that would play out? Can you just talk about has there been any cannibalization or like the biggest learnings that each brand has benefited from the other? Sure. This was really important for us to get right. I said that in my opening comments because of how large and complex it was. There are two reasons it was really important to us to get this right. The first was we owed it to our shareholders to deliver on the promises that we made when we invested $2,300,000,000 of their money in Timberland. So we take that responsibility very seriously. It was the largest transaction in dollar terms and we had a commitment to our shareholders that we deliver value for that investment. The second was, from the management's perspective to prove to our selves that we could actually integrate successfully integrate a business this large into our company. The reason that was important to me was given our current size, it's I hope that we are continuing to do large acquisitions. But we've never done anything with this geographic scope, a big wholesale business, a big retail business, all the in a different category, making leather boots in the Dominican Republic. That's why we threw so much talent at it, because I thought that if we could get a model, even had this not gone as well as it has, we would have learned something for the next time. Somebody's going to ask me when the next time is, I don't know. But that was part of it was to understand that. Second question was, I'm sorry? The North Face. The North Face. The cannibalization. I don't think I mean, yes, somebody's maybe picking a backpack from Timberland and not from JanSport or The North Face, but I don't think we've had any evidence of any material cannibalization. Steve, Randall, do you want to? Yes. I don't think there's been any material I guess the right way to characterize it. Anything with Patrick laid out, Green Day, the whole group, it's a very distinct and different many ways, these brands complement each other when they sit on the floor because they're really speaking to the consumer from a very different point of view. So I would say there's been little to no if any cannibalization. It's been more complementary. And by the way, that was what we anticipated, right, at the time that we did the acquisition. We really didn't expect that cannibalization based on all the testing that we did around consumers who was buying the product, who was buying the brand. We felt really comfortable that that wasn't going to take place. And I think that's been the case. Since most of Timberland's business is outside of the U. S. And since Stuart's up at 230, Stuart, have you seen any cannibalization in anywhere in Asia between Timberland and The North Face? Yes, from an adjacency perspective and where we're located, we're located in a completely different area, which is consistent with having a different target consumer. So we're competing more effectively against lifestyle casual brands than we are obviously against outdoor brands and outdoor brand is prominent in The North Face. Thanks, Stewart. Hi, there. Laurent Vasilescu from Macquarie. Just following up on Mitch's questions on men's versus women's. What's the mix right now? And then how should we think about that mix with the $3,000,000,000 number? And then on gross margins, I think in 2010, the gross margin was about 49%. Has that changed over the last couple of years? And how should we think about that gross margin for 2018? Do you know the footwear mix for men's wear? Yes, sure. I mean, the footwear mix right today is about 15% of women's footwear. And since our major growing category still is going to be men's casual footwear as we showed to you in the plan, we see the women's growing somewhat in terms of the percentage. But still the big runway for women's is going to be in the years beyond. Timo, is that different in Europe? Is it the mix the same in Europe? Slightly high in women's, but about the same. There's still a huge focus and a big runway. And measly in men's and women's come slightly later, but about the same. And the gross margin, yes, the gross margin wasn't that strong back at the time of acquisition. Our gross margins overall at VF were a little bit lower than at that point. Of course, we've been expanding and the gross margins of Timberland were actually a little bit lower than our average. So, yes, the gross margins have expanded since then for sure. It's been part of the profitability improvement. You saw the chart earlier from roughly the 8% to almost 13%. It's been an important element. And as I said earlier, take that then and yes looking forward, so about of the 500 basis points, about half of that comes from gross margin. So that implies somewhere between 2 points and 3 points of further expansion. Hi. Matt McClintock from Barclays. You just outlined I know it's not apples for apples, but the e commerce CAGR for Timberland that you just outlined today is markedly faster than the total e commerce CAGR that you had your 5 year plan, your previous 5 year plan for the total company. And I was just wondering if you could speak to the optimism for growth in that specific channel and also potentially maybe talk to the geographic expectations for growth in that specific channel, e commerce? Thanks. I'll talk about it for now. I'll ask Timo to talk about Europe. Okay. Why don't you start with Europe? Yes. I can start with Europe. So I mean as I showed earlier, I mean for us it's pretty straightforward. We Timo land in Europe has been life ecom in U. K. Alone for the last 6 years. That was the only coverage in the entire European territory. And this year we started to open Pan Western European ecom business and of course that is driving all that growth. So now it's of course traffic driving, the engagement with the consumer, conversion of that, really the classic e com business KPIs. That's that high CAGR kicking in there. In North America, Diane? In North America, I would say we talked a lot about the replatforming and that puts a whole new baseline for us to do commerce and that coupled with both digital at the core from a marketing perspective, which is creating the conversation between the consumer much more actively to drive people to timberland dotcom, as well as disciplines like map, which levels the playing field from a price perspective really should fuel. I mean, our growth on e comm could have a lot of headroom, a lot of headroom. What about anyhow, Stuart? Well, we only operate e com in the 2 markets right now. Japan, we've been in the market for a few years. It's low single digits as part of our share of our business. And China, where we launched last spring, spring of 2013, so we haven't even had a full year from a calendar perspective in China. So we're considerably behind the other brands and where they've been able to drive the growth there. So we see a lot of headroom there. So I think part of that is the starting point is what you're hearing. And also part of that is for the corporate for overall BF Corporation. It's not too far off actually from moving from $250,000,000 to $750,000,000 is a 25% growth rate or so. And in the 1st year, we were above that. We were 30% plus, so pretty consistent. Thanks. Hi, it's Evran Kopelman, Wells Fargo. My question is on North America wholesale business. Does your forecast for 2018, does it include retailers other than Nordstrom for the apparel business? And then secondly for the men's footwear business, maybe where do you see the biggest growth in kind of the bricks and mortars retail? I understand e com is probably fastest among your wholesalers, but in the bricks and mortar side. Thanks. Okay. And the first question, apparel definitively goes beyond Nordstrom. In fact, we're we have a limited door test with REI rolling out pretty shortly, and we're going after new segments will roll into the outdoor channel shortly. So we have laid out a methodical plan of expansion over the next 5 years, and it is methodical. That is the key word here. We're not racing for the finish line. We want to keep our premium position and make sure that the versatility that we're bringing to market plays out in a premium and boutique way and then likely in the outdoor realm. And as for wholesale, the key channel growth, it's pretty well balanced, to be perfectly honest, across I mean, absolutely, wholesale e comm continues to accelerate at a rapid pace. Our independence base, so all of these smaller families owned often, independent base is a really big piece of our market and will continue to accelerate. And that's fueled partly by men's and women's casual growth. But really, it's very balanced across the channel. Hi. John Kernan from Cowen. A bit of a follow-up question to Evren. I think 2 thirds of your total growth you're planning in the Americas is coming out of whole sale. So where is the incremental distribution coming from? And where should we look for the incremental doors? Thanks. It's not new accounts potentially, but it's a lot of our retailers are expanding their doors for sure, and so we'll hopefully grow with them. It's category expansion. So right now, we may have a smaller business in a lot of these doors than we want as we expand to apparel, to women's, expand our men's business, we have a lot of headroom in our existing footprint. Thanks. It's Omar Saad from ISI. Dollars 3,000,000,000 high teens operating margin, I don't know how many brands can say that in the world, but I don't think there's that many. What are the 1 or 2 things in this brand that you've seen now that you've owned it for a few years that really give you the confidence to put such a bold numbers out there? And is it really just this adding style to the rug, it really just opens up the consumer base and that the brand can appeal to? Is that the key driver here? Are there other things going on? Let me take it. I'll take it. I got it. It really comes down to through the consumer again all this stuff is grounded and then talking to 18,000 people. And the reason you talk to them is you look for opportunities. And what we saw is a lot of opportunity and in all the areas we've talked about today. E commerce for sure going to be a big opportunity. May or may not be incremental because there's a wholesale way to get at that too. But clearly from where we're starting to Bob's point and the points that were made by Timo and Diane, we're just brand new at that. Our ability to open stores outside of the United States and grow our the international business both in Europe and Asia is robust. The ability for us to focus on men's footwear in the right way versus not having a point of view about who our target consumer was and not focusing on the style component, all of those things just open doors for us and we will try to make prudent assumptions about what success might look like in each of those pathways. The responsible add up of that is $3,100,000,000 The truth is you could easily say, shouldn't your don't you still have a women's apparel opportunity? Might your e commerce business might that not get bigger? Might you not be more successful in China? And when we did all that, the way we approach our planning is we try to discount where the upside opportunity is matched by an acknowledgment of some risk. I said it at my lunch table today, so I'll fully disclose this. This is not a big thing, but we probably overestimated Russia in this plan, because when we were doing putting this plan together, Russia wasn't quite what it is today. That's okay. There are other things that I think we have upside to, but we're really comfortable with the 3,100,000,000 absolutely. Could I add one thing to that? Sure. I think one of the things that we also we don't talk a lot about, but it's our Pro business here in North America. That is a very healthy, well managed business that continues to grow well year on year and has grown for a very long time. That's a North American business today. We haven't barely we're taking baby steps outside of North America. We don't even have apparel in there yet. So there's a lot of opportunity we believe also in that business that kind of adds to the what we're doing with the Timberland that you guys see most of the time, right, that we've got right. That business was never in trouble. To what Diane said earlier today, that's a very focused business on an industrial customer that buys Timberland because they either need to survive or do their job better and or be more comfortable in their job. And I think that that's an opportunity that's very, very big in globally. And I'll tell you why it's very big because there's very few branded footwear brands in that category globally. And since the brand is already strong globally, that gives us an opportunity to drive that business from an international perspective as well. And Omar, from a profitability standpoint, the answer to that in terms of where we get all the confidence is because it's more of the same. Really, it's the same kind of things that have driven the first 500 basis points of improvement in operating margins that are the same kind of things that are going to continue to drive the improvements continuous improvements in our D2C performance, expanding our plants, the capacity there. Those are the kind of things that we're really, really confident about because we've been doing it and there's just a lot more come. Hi, Jason. So, Morgan Stanley. I just want to follow-up on the last question and only in the context because we're talking a lot about reasons to believe today. But maybe can you talk about the difference between why Timberland and maybe why we're not here talking about Nautica today in the sense that if you can do 18,000 interviews with consumers, why can't you do why is it Nautica why are we talking about that one today? Is it just that Timberland has much higher recognition and the space in between lifestyle and outdoors is a little bit more unique? Can you explain the difference between the 2? Yes. Well, the reason we're not talking about Nautica is, I mentioned a quick sound bite. We're in the middle of doing a global segmentation project for Nautica as well. We put Timberland ahead of Nautica in the queue because we just put $2,300,000,000 in the table to buy it and we wanted to make sure we got it off to a quick start that we made progress quickly. The Nautica segmentation work is not ready to talk about yet. So I know some things, but we haven't fully wrapped that up and that process is only meaningful when the whole team has kind of wrapped it all up. But that day will come. We will talk about Nautica. It's Jim Duffy. It's Jim Duffy. It's been great to see the progress made with Timberland since the acquisition. A couple of questions related to that. At the time of the acquisition, retail operating margins were stated as an opportunity. How have you progressed relative to that objective Bob? Where do retail operating margins stand right now? And then Eric, I'll give you a moment to think about this one. But what are some of the things that you've learned from the Timberland integration and acquisition that shape your thinking as look towards future acquisitions? On the retail side, the numbers, the reference points that we used at the time of acquisition where we said that in our outdoor and action sports businesses, the four wall profitability of our DTC 30% right on average. And we said that Timberlands was 16%. Right? So that was the starting point that we used. So we said there was a long way to go. And we're partway there. I'd say if I had to put some points around, I mean a little less than halfway there. The introduction and what we also said was the introduction of apparel would be a very important element to that. It will be for sure. So again, we see that pathway to a more normalized 4 wall profitability and continuous improvements in our D2C business. Yes. And the answer to the second part of your question is the tactical piece of it, Jim, is we looked at the challenges and opportunities at Timberland when we were evaluating the business. And it helps us a lot when we're looking at an acquisition. If we have really strong disciplines around it and the business we're acquiring does not. So there's stuff like SKU Management and Inventory Management, both of which drive gross margin and they focus the team on gross. And we reduced I know I've been throwing out a number today, but you know the number. What percentage of Timberland SKUs did we reduce in the last 3 years? We started by it's been a gradual process and it depends a little bit on the different categories. But overall, we reduced the SKUs at about in 2013 by 27% globally. However, that was a little bit different by region. And in North America, for example, Diane made a decision to decrease her SKUs in women's footwear specifically around 70% for spring as an example. So it kind of ebbs and flows a little bit. But overall in 1 year, that one crucial year, we decreased it by about 27%. Now we've built some of that up again because we're now making the right kind of footwear. But those are the kind of disciplines that Eric is talking about that's very hard to do because what do you cut, right? What do you cut? And some of that came through consumer insights learning. Some of it came just by being disciplined and making hard choices, right? And strategy is all about making choices. And I think that's one of the key things that we've done is we've made hard choices along the way. And I guess we've been a little lucky making a lot of the right choices too. But I think that's part of what we do. And that's all part of the slow to speed up because all those things cost us revenue when you first do them. But what you get out of that is you get a team that's focused on doing fewer things, doing them better and those things should be relevant to the consumers. The broader answer to your question, We took a different approach to this acquisition than we have to our others. It was a more robust approach because of the size and the importance of getting it right for the two reasons I mentioned earlier. The discussions that really happened and they happened with presenters who were talking today and Stuart was part of that and Diane was certainly part of that. We sat in a table down actually you guys were in the room that we had all these meetings in. 1 of your breakouts was in that room. And we had a bunch of people here for the summer. And by a bunch of people, I don't know the exact number, 40 or 50 people moved here. And from VF and worked in that space, we had a little dedicated wing in the building. And the discussions we had with the Timberland team were how could we help each other? If this deal is going to close, how could Timberland help VF and how could VF help Timberland? And we had all of that sorted out on day 1. So the day it closed, we had teams that had agreed that if we made these changes to VF, the things that Timberland thought could help VF and at Timberland, and they were all that was pretty much sorted out on the day we closed. And from that day, we had a to do list, teams assigned and we just got at it right away. Diane, do you want to comment on that since you were living in the middle of that? I mean, that to me was the biggest difference and why we've made so much progress and that was part of the model we wanted to teach ourselves, so we could use it on other big deals. Well, I was sharing with some people earlier today that one of the things that I hope you see from management team is it's a real mix of some people with a lot of VF experience and some people with years of experience at Timberland. And the reason that was so important was we did want to you guys were very clear at the beginning. We don't buy brands to dismantle brands. We want the brand to live and plug into the operational model and find efficiencies and things like that. But you have to have the experience, the F team also on the leadership team because otherwise you won't understand how to plug in most effectively and as quickly as you could. So by putting that together and having that team work together, we got there, I would say, more quickly and more effectively. And the team really worked well together. And thinking back, we had to be about 1 year in, there was a conversation about putting a VF veteran, Patrick, in the presidency. And was that a great decision? Was that a tough decision? It was a great decision because you can't, I don't think, understand fully the power of what VF brings to the table unless you have someone that understands the machine and then can bring that to the brand. So that's what strikes me the most about that. Yes. Kerry Callahan, American Trust. As you look to double this business over the next 5 years, could you just tell us what the incremental capital you'll be investing in the business is to fund the plan? I guess, I'm also curious about sourcing footwear, what the plan is there? And then lastly, I'm trying to get a sense of how accretive this will be to VF Corp overall in terms of return on capital, because I would imagine it'd be quite accretive if the plan is executed. Yes. So yes, it would be. When are the plans? So, from a capital standpoint, it's not necessarily it's not capital intensive necessarily. The biggest capital spend will be will largely be related to opening stores. That will be the biggest piece. So, I mentioned that we were going to expand capacity. There's really not a plan right now to expand the size or necessarily significant to scale of our existing plant. It's adding capacity within. So, it's not again, there's not necessarily a lot of pulls our overall returns down somewhat. However, we use our ROE as our measure and we've improved from the time of acquisition to today. The numbers were something like 14% to 16% or a little bit above 16%. And so, a lot of that does have to do with the improvements that we've seen in Timberland and elsewhere in our business, and that will continue to improve. So, it's already fairly high. So, in other words, the Timberland acquisition, despite the size and it being somewhat in the early stages, really hasn't pulled us down that much. So it's quite strong. Just a follow-up on clarification on your North American apparel distribution strategy. You mentioned better department stores. Obviously, you have a long history of the brand in the core department stores like Macy's, Dillard's, Belk, etcetera. Does your plan include going back in there with apparel? And if so, you see it going more with on a different area of the floor more on less on the sportswear area like used to be next to Nautica in a lot of stores for example and more maybe adjacent to North Face or in an outdoor environment such as that? Well, you want to take it Diane? I can take it. I think in general, we've been talking a lot about the apparel today and how important it is for us to maintain the premium entry point that we've now established. When we came in, in 2011, apparel was distributed basically all the way down to SmartCo and Costco, right? So in our cleanup process, our intent was definitely not to go back in there. It was actually also distributed at Macy's at that point. We've reentered that market like Diane talked about today at Nordstrom and in the specialty market. We're going to continue to drive it at the high end as a premium offering within this plan. And right now we don't have a plan to go back into the mid tier if you like, which is I guess what you're asking. So we have a very premium positioning approach to apparel at this point. And I think we discussed also the $415,000,000 that you guys got a glimpse into today and you guys could see how premium that is. Quiet room. Quiet room. Quiet room. If that's if there are no more questions, there's one answer. Nobody asked this question. What was the question? We don't know this number worldwide. We've tried to pull it together, but we're not full that integrated yet. 8% of the U. S. Sales are in the yellow boot. There is a question that we got asked a bunch of times on the side, and now with that monumental fact out of the way, I want to thank all of you for your time and attention. You guys have been maintained a high level of interest in our company and we appreciate it. We hope we continue to create a business model that you remain interested in. That's what we think we're doing and we're doing it nowhere better than we are here at Timberland. It is not easy to take a business like Timberland and change it the way it's been changed by the management team here at Timberland over the last 3 years. It is the hardest thing to do in business is to take a business that was flattish for a period of years and didn't have a focused objective and identify what that objective is, get that right and execute against it all quickly and have that result in momentum in the business. And this business has momentum and it has it around the world. So thank you all for your time and attention today. The store is open. I think you all got a little card to shop with and you're also going to get a little discount on top of that card. So any of you who are interested in stopping at the shop on the way out, please feel free to do that. Thank you. Stuart, thank you.

• Slides