Bracken Darrell
President and Chief Executive Officer at VF
Thank you, Allegra. Hello, everyone, and thank you for joining us today. As I open this call, you can see it was a good Q3. What I'm most excited about is what you really can't see yet. Our transformation is well underway and Q3 was an excellent quarter of progress across our business inside -- inside the company. We're systematically making the -- remaking the company for long-term value-creation, double-digit operating margins and strong and sustained growth. We showed you in October nine work streams that will essentially bring us to best-of-breed processes. And you know we have -- we've reset the entire leadership team. But you might not be aware that we're now resetting the rest of the organization beneath those leaders.
So between the work streams we spoke about in October and the organization changes I'm explaining here, we're building new structures and processes to be more effective, more efficient and in the end, more creative. It's not just about saving money. It's about in the end, we will be a reinvented company, better-positioned to deliver strong and sustainable returns for investors. If I sound energized by this, it's because I am. This is going to create strong value, great products, elevated brands and a terrific place to grow and learn for our people.
Now enough about what's going on inside the company, let's talk about what we just reported. Q3 was stronger than we expected. We grew revenue 2% while we significantly improved profitability. The key point to make here is that the actions we've taken during our -- we've taken so-far are delivering results.
Now let me call some important features of the quarter. Virtually every brand was stronger this quarter than last quarter. The North Face and Timberland both grew. Delivered another quarter of sequential improvement in trend. Regionally, the Americas delivered another strong quarter of improvement, going positive for the first time in over two years.
Our wholesale channel was positive on a global basis. DTC showed progressive improvement again this quarter globally. Gross margins were up 150 basis-points and operating margins were up 360 basis-points to over 11% and net-debt was down nearly $2 billion. None of these were a surprise to us, but it's a quarter of measurable progress across-the-board.
Now to really understand our trend-line, you need to look at our Q3 and Q4 together. While Q3 results are better-than-expected, some of what benefited this quarter's outsized wholesale performance due to stronger reorders, lower cancellations and orders pulled forward by our retail customers into Q3 from Q4. Regardless, we feel really good about the underlying performance for the second-half of the year.
Now let me give you an update on Reinvent. As I indicated in our Q2 earnings Investor Day Part 1 and the start of this call today, we're making strong progress on our transformation program. You'll recall, we have four stated priorities. First, lower our cost base. We're on-track to deliver the initial $300 million in gross cost-savings with another $55 million generated during Q3. Remember, this is the $300 million we said would be fully actioned by the end of last quarter, so Q2 and fully reflected in the P&L by the end of this coming quarter, so Q4 by the end-of-the fiscal year, as we promised. The work is complete. The cost-reduction is showing up and all $300 million will be in the run-rate as we exit fiscal '25 as planned.
On-top of that, you've heard Paul and me say we have no intention of stopping here. As of our October Investor Day, you know why we said that, because we were in fact already working on process and organizational changes as I referenced early in the call, they will contribute to unlocking another $500 million to $600 million in operating income expansion, half of that into SG&A. That's part of our approach to delivering our medium-term operating margin target in fiscal year 2028 of at least 10% before any growth. So-far, so good, everything is on-track.
Let me underline a point that might already be obvious to you by now. While the cost side of these work streams will help us return to sustained double-digit profitability, this work is even more important than the bottom-line impact it will deliver. These actions are absolutely instrumental towards enabling growth. They form part of a comprehensive plan to enable the company to be more creative and more powerful in-product creation and marketing.
These projects enable this creativity through better consumer insight and targeting, as well as the standardization of all the processes we can to best-in-class levels to enable higher impact from good ideas in both revenue and profitability. We also continue to reinvest some of those savings back into product creation and brand-building. You'll hear more about these areas at our upcoming Investor Day or two, more on that later.
The second priority is to strength -- was to strengthen our balance sheet. We made big progress during the quarter with a reduction of net-debt of almost $2 billion versus this time last year. Just to reemphasize that, we have reduced the net-debt, not including lease obligations, which are required from an accounting standpoint to be included when we Call-IT net-debt. So excluding those lease obligations, we've reduced the net-debt by almost 40% in the last year alone.
So we're demonstrating our commitment to move our leverage ratio down to three ways. First, we divested non-strategic assets: planes, buildings and of course, Supreme. Second, we reduced our working capital primarily by cleaning up our inventory and making it fresh. And finally, and most importantly, we're improving our operating earnings. You now see how effective this triple-thread approach can be to rapidly dropping our leverage levels -- leverage levels. There's more to do, but we are squarely on-track to continue to delever the balance sheet to get to our 2.5 medium leverage -- medium-term leverage target.
Our third priority was to fix the US. As you know, we adopted our global commercial model in the Americas a year or so ago to try to bring its performance up toward the other regions' historical performance levels, and it's working. Our Americas business improved again relative to last quarter with revenue up 2% in Q3 versus down 9% in Q2. That's the first-quarter of growth in over two years. It's early days. So we may not see growth every quarter as turnarounds often aren't linear, but it's good to see green numbers again. And we have a lot and I do mean a lot of improvement ahead of our Americas business.
Finally, deliver the vans turnaround. The brands over -- the brand's overall performance in Q3 was down 8%, a further improvement compared to last quarter, down 11%. I feel very good about the steps we're taking, but sustained turnarounds take time. Underneath the numbers, I want to call-out a few things, primarily in our key focus areas of product and marketing.
New products continue to outperform our big established franchises. New School remained the number-one growth driver and the number two franchise globally and is in-line with our strategy to win with youth and women. We won't rely on just one style to build our business in the future and we have momentum in our newest styles, both Highland and Epelin, Highland and Epelin.
In many ways, the Vans brand continues to have enormous potential. It was recently named the number three most authentic brand from the Authenticity 500 Index as the ranking of the world's most authentic brands. This -- the message here is that we have a lot of growth potential as we keep improving our execution. Brand elevation is also fertile ground for Vans as evidenced by exceptionally strong sell-out for our OTW holiday collaborations, including the Satoshi partnership, Homegirls collaboration and Beatrice demont and those two last ones are targeted at women.
The new Americas regional platform is also starting to deliver. For the holiday period, our US non -- excuse me, for the holiday period, our US non-value channel footwear generated strong positive sell-out year-over-year for the first time since February of 2022, led by our largest accounts. We are making progress and are more confident than ever of the brand's growth potential. We have a lot of pistons to fire on -- to fire on advance, product, marketing, distribution, brand elevation and more and we're putting each one in-place. I couldn't be more excited about the initial work done by Sun Advance and you'll hear more about it directly from her just in just a few weeks.
Now let's turn to the North Face, where revenue in Q3 was up 5% versus last year and positive in each region with even stronger performance in DTC. We're pushing the boundaries with our marketing and our brand-building. Notably, the North Face Skims of collaboration set a new bar for global collaborations, execution and impact and was one of the fastest selling collections in the history of North Face.
We were also thrilled to see our product teams being recognized with multiple awards for design and innovation across footwear and apparel. The North Face core underlying brand history is oversized relative to the size of this business in my opinion, and I love that position. It means growth is ahead. You'll hear more about the plans for Northface directly from the brand President, Carolyn Brown at that Investor Day.
Finally, I'll say just a few words about Timberland. The brand was also positive for the quarter with revenue up 12% versus last year. Performance was driven by core strength across regions, supported by the iconic campaign launched in September. Nina Flood is our new Timberland brand present there and she'll give you more on our more color on our plans at the next Investor Day.
Now looking ahead, the second-half of this year is expected to be broadly in-line with our expectations. As I said earlier, we did a little better in Q3, driven by the stronger-than-expected DTC and outsized wholesale performance and expect the Q4 trend to be a little lower relative to Q3. Turnarounds are not linear. For fiscal year '26, the first-half of next year could look similar to the second-half of this one as we put more of our game plan in-place. And overall, we feel terrific about the progress we're making.
Now I want to say a few words about that Investor Day that I've mentioned several times. We -- now at Part 1 back-in October 2024, we unveiled our corporate strategy, showing you how we are rebuilding the company from the ground-up. You heard about our focus on cost and creating a solid P&L structure. That's only the start of what we're doing to transform VF. The best is yet to come.
And in fact, we're coming back on March 6th, marked that in your calendars with Part 2 here in New York, which is focused on-brand strategy, where you'll get to hear directly from our brand Presidents. Of course, of course, they're still relatively new to our business and their roles, but I can't wait for you to meet them. This really is the most exciting part of our transformation. And when you -- and when you'll hear -- and you'll hear about it in our plans for growth. As you've heard me say before, we are here we're all here and it's all about growth in the long-term.
I'm now going to hand over to Paul, who is sitting in front of me wearing a Philadelphia Eagles Jersey shoulder pads and a helmet and Van's cleats, which we don't actually sell publicly, but he had them made. You may know Paul is quite an Eagles fan and they are going to the Super Bowl. And he'll take you through the financials in more detail and I'll come back at the end for closing remarks. Paul?
