Steve Rendle
Chairman, President and Chief Executive Officer at VF
Thank you, John. And good morning everyone. Welcome to our second quarter call.
As we move through the halfway point of our fiscal year, I remain encouraged by the underlying momentum across the portfolio and the broad-based nature of this strength gives me confidence that we are driving the right strategy to accelerate growth in the quarters ahead. Looking through pandemic-related disruption and near term headwinds in China, we continue to see a healthy retail landscape, a strong consumer outlook and accelerating demand signals across our business. While the recovery has not been as linear as we had anticipated for some parts of our business, I'm proud of how our teams continue to deliver through the volatility. This is certainly where we excel. We are focused on what we can control.
And despite a more challenging environment than we had envisioned, we are able to reaffirm our fiscal '22 revenue and earnings outlook; a clear testament to the resiliency and optionality of our model. We see our business emerging in an even stronger place than before the pandemic. We've accelerated our strategy to be a more digitally-enabled enterprise for driving significant investment behind key capabilities to connect with our consumers. We are driving organic growth as we elevate direct channels, distort Asia, led by China, and accelerate our consumer-minded, retail-centric, hyper-digital business model transformation.
On top of that, our number one strategic priority to drive and optimize our portfolio has netted us significant benefits. Over the past five years, we have strategically evolved and simplified our portfolio from 32 brands to 12 brands, each with significant D2C and international opportunity, squarely focused on large, growing addressable markets. The macro trends around outdoor and active lifestyles, health and wellness, casualization and sustainability have only strengthened over the past 20 months and our current portfolio is well-positioned to benefit from these accelerating tailwinds.
Active portfolio management remains an evergreen process and M&A remains our top capital allocation priority. This is a differentiator and a competitive advantage for VF as we continue to refine our portfolio mix to maximize exposure to the most attractive parts of the marketplace. We are confident that we have the right strategy and our continued execution on each of these key strategic pillars positions VF for a stronger emergence.
Now, moving into our Q2 results. While noisy, our second quarter results highlight ongoing progress against our strategy and reflect a healthy, accelerating underlying business with broad-based strength across our portfolio. I'll start with Vans, which delivered 7% growth in Q2 despite meaningful wholesale shipments pushed into Q3, representing sequential improvement in underlying demand despite a more challenging than anticipated operating environment. The EMEA business has accelerated meaningfully during the quarter. However, in the U.S., encouraging brick and mortar recovery trends, which had been building into July, were impacted by the Delta surge and its implications across our most important markets. This led to sharp shifts in store traffic trajectory during the peak back-to-school window. Additionally, the brand faced headwinds in Asia Pacific with virus disruption across the region and a more challenging near term consumer environment in China.
While Vans Americas Q2 recovery did not meet our expectations, I'm pleased with our team's response. We're focused on what we can control. Our retail associates are driving best-in-class conversion, up 20% relative to pre-pandemic peaks this quarter in the Americas. And despite the impact of expedited freight, the Vans Americas team has brought full price DTC gross margins above fiscal 2020 levels, supported by discounting below pre-COVID levels. At the same time, leveraging our strong inventory position, we've secured additional shelf space at several key wholesale accounts for the second half. So despite a more challenging operating backdrop than anticipated, we are able to hold on to the low end of our prior outlook for Vans and now expect 7% to 9% growth relative to fiscal 2020. We're confident in Vans' strategic choices as evidenced by improving demand signals and strong consumer engagement.
The September Vans Horror collection launch supported the fifth highest sales day on record for our Americas DTC digital business achieving a 100% sell-through within days. We are encouraged by the ongoing strength from Progression Footwear lines, up 15% relative to fiscal 2020 led by UltraRange and MTE and are pleased with the continued growth in Vans Family membership reaching 18.5 million consumers globally. Our confidence in the long-term runway for Vans remains unchanged. The brand came into this disruptive period exceptionally strong and consumer engagement has remained healthy. The active space remains a large and growing TAM and the casualization trend continues to present a long-term tailwind for Vans.
And although Vans remains a very important part of our story, we must remember that VF is not just one brand. We have a diversified portfolio of global brands, each with exposure to attractive TAMs with enduring tailwinds. We have significant shared platforms of expertise, highlighted by our international platforms and global supply chain, which are enabling broad-based profitable growth. And as a result, our model drives ongoing capital allocation optionality to further enhance VF's growth and shareholder return profile.
Matt will build on many of these themes shortly, but I'd like to start with an overview of the broad-based momentum we're seeing across the portfolio. Starting with The North Face, which delivered 29% growth in Q2 despite significant wholesale shipments pushed into Q3, representing a sharp acceleration of underlying demand alongside meaningful margin improvement. Our international businesses are gaining share, while the underlying U.S. business has accelerated meaningfully this quarter on tight inventories driving high quality sales.
We remain encouraged by the strength across categories as TNF has been successful at balancing On- and Off-Mountain messaging to its consumers. On-Mountain platforms like FutureLight, Vectiv and the recently launched Advanced Mountain Kit continue to drive strong sell-through and reinforce TNF's performance credibility. Off-Mountain lifestyle apparel and equipment are delivering outsized growth as strong 365-day demand persisted led by Logowear, Apex and [Indecipherable]. We also saw strong performance for more versatile athletic-inspired products, highlighted by the Wrangler franchise. We are raising the outlook for TNF to 27% to 29% growth in fiscal 2022. We continue to believe this moment for TNF is under-appreciated. This will be a $3 billion business, delivering high-teen growth relative to fiscal 2020 levels, with strong margin expansion underway.
Looking into next year, The North Face will continue to benefit from broad-based brand momentum, fueled by innovation, extremely clean distribution channels, increasing year-round relevancy and ongoing tailwinds from the outdoor marketplace, supported by growing consumer interest in active outdoor lifestyles. We therefore expect The North Face to be at least within its long-term plan range of high-single-digit growth in fiscal 2023.
Moving on to Dickies, which continues to build upon its incredible run, delivering 19% growth in the quarter. The brand is driving their integrated marketplace strategy, supporting growth horizontally across work and work-inspired categories, as well as vertically as they focus on higher tiers of distribution and bring new consumers into the brand. Sell-through remains elevated and demand signals continue to be strong. Across the globe, the Dickies team remains focused on the key drivers of their business, expanding core workwear beyond traditional channels and leveraging the brand's authenticity to accelerate the Lifestyle segment. Icons have been a focus for the marketing and sales teams and the results are compelling, highlighted by the accelerated growth of the 874 Work Pant. There are several versions of this 50-year-old icon, supported by ongoing innovation, which collectively have delivered over 100% growth year-to-date.
In addition to the strong growth trajectory at Dickies, we remain encouraged by the significant margin expansion runway which accelerated in Q2 on the back of strong full price selling and SG&A leverage. We're proud of the continued success at Dickies, which we feel is another under-appreciated part of the story. We are raising the outlook for Dickies to at least 20% growth in fiscal '22, representing at least 30% growth relative to fiscal '20. We expect the brand will approach $1 billion next year as Dickies celebrates its 100-year anniversary.
Next, Timberland delivered 25% growth in Q2, despite significant wholesale shipments pushed into Q3, representing an acceleration of underlying demand over the quarter. The PRO business remains a consistent growth driver for the brand, supported by a new campaign celebrating the skilled trades to inspire the next generation of worthy workers. Despite historically low inventory levels, core boots and outdoor footwear continue to show strength as we head into the holiday, each growing over 40% in Q2. Timberland continues to create and own boot culture with the September introduction of GreenStride Eco-Innovation in boots for the first time. The Solar Ridge Hiker launched with much fanfare in New York City and posted 50% sell-through in North America. Two more GreenStride drops will hit in October, driving further momentum behind its important franchise. At the same time, the TrueCloud collection, another eco leadership story, drove strong traffic and social engagement across all regions.
We believe the Timberland brand is in a much healthier position today relative to where it was before COVID. This leadership team has a sharpened focus on the brand's product architecture, getting back to Timberland's core, work and outdoor, sustainability and craftsmanship, while increasing energy and newness. They have refocused strategic clarity around the target consumer and on executing the right go-to-market set of choices. The brand is demonstrating strong marketplace discipline, reducing discounts and thoughtfully rebuilding depleted inventory while driving significant improvements in profitability.
The integration of Supreme continues to move according to plan and our teams are learning from this highly-productive business, including how they manage product creation, building energy ahead of drops, and optimizing assortments in product flow across regions with great agility. Looking forward, we remain confident in the significant whitespace opportunity for this brand across geographies with a clear opportunity to leverage VF platforms. Supreme remains on track to become VF's fifth billion dollar brand in the coming years.
And lastly, when speaking to the broad-based strength across our portfolio, I'd like to briefly shine a light on our three outdoor emerging brands: Smartwool, icebreaker and Altra. This group collectively represents nearly $550 million in revenue for the mid-to-high-teen growth profile longer term. While smaller today, these brands are all profitable and are exposed to the attractive tailwinds around health and wellness, active outdoor lifestyles and sustainability. And we're seeing it in their results.
The Smartwool brand is up nearly 60% [Phonetic] year-to-date, representing high-teens growth relative to fiscal 2020. We've accelerated investment in brand awareness campaigns, highlighting the high performance and versatility of this product, while targeting an active, younger consumer. We're seeing it pay off with broad-based strength across categories, led by apparel and outsized growth from new consumers.
Our other natural fiber brand, icebreaker, has successfully relocated the core leadership team from New Zealand to our Stabio headquarters, further integrating into our EMEA platform, which will accelerate the brand's global reach. The brand has grown nearly 30% year-to-date with balanced growth across its largest markets in Europe and the U.S. Base layers, tees and underwear represent about 70% of icebreaker global revenue confirming the consumer appeal of a 100% natural product in next-to-skin categories.
And lastly, Altra, the fastest growing brand in our portfolio is celebrating its 10th anniversary this year by establishing its legendary Lone Peak franchise as the number one trail running business in the U.S. The brand has continued to build accolades from the running community with awards from Runners World, Self Magazine, Women's Health and Outside Magazine across multiple franchises. Through the first half of the year, the brand has grown over 60% relative to fiscal 2020 and we expect this to accelerate into the back half of the year as the brand continues to expand its presence in road running with innovative new styles and designs. We see tremendous opportunity for Altra to expand distribution domestically and internationally, leveraging its differentiated product and continued strong tailwinds for this category.
I see significant potential for each of these brands to deliver outsized growth in the years to come. We have demonstrated the ability to scale brands in the big businesses and have confidence that, over time, these outdoor emerging brands will become another strong component of VF's financial algorithm.
As I conclude my prepared remarks, I'd like to remind everyone that before the pandemic, our portfolio was on track to deliver high-single-digit revenue growth and high-teens earnings growth in fiscal 2020. While we remain in a disrupted environment, I believe VF's long-term prospects are even more attractive today. We've accelerated our transformation strategy. We have further optimized our portfolio and importantly, this portfolio today is capable of delivering greater broad-based strength, relative to where we were before the pandemic. This gives us even greater confidence in our ability to drive high-single-digit topline and low-teens earnings growth at a minimum as we emerge as an even stronger company.
And now, I will turn it over to Matt.
