Good day, and welcome to the VF Corporation First Quarter 2013 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Lance Allega, Director of Investor Relations. You may begin, sir.

Thank you, operator. Hello, everyone, and thank you for joining us today to discuss VF's first quarter 2013 results. Before we begin, I'd like to remind participants that certain commentary included in today's prepared remarks and the Q&A session may constitute forward-looking statements under the definition of federal securities law. Forward-looking statements include management's current expectations, estimates and other projections about our business, results of operations and the industries in which VF operates. Actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those projected in the forward-looking statements are discussed in the documents filed with the SEC. Additionally, participants on today's call may discuss non-GAAP financial measures. You'll find the appropriate reconciliations in our press release, which was issued about an hour ago, and in our website at vfc.com. Joining us on today's call will be VF's Chairman and Chief Executive Officer, Eric Wiseman; Bob Shearer, our Chief Financial Officer; and our group presidents, Scott Baxter, Karl Heinz Salzburger and Steve Rendle. Following our prepared remarks, we'll take your questions. [Operator Instructions] And now I'll turn the call over to VF Chairman and CEO, Eric Wiseman. Eric?

Thanks, Lance. Good morning, everyone, and thank you for joining us today. 2013 is off to a great start for us with results beating our expectations. Consistent with what we told you in February, our first quarter revenue growth rate was a few points below our full year target of 6%. And as we've seen over the last year, our diverse model continues to deliver great bottom line results, especially from our lifestyle brands and our international and direct-to-consumer businesses. In fact, our record earnings per share in the first quarter was a little better than our expectations. And with record revenues and record gross margin, it's another fantastic quarter for VF. During the quarter, our Outdoor & Action Sports business grew revenues by 10% amid concerns about fluctuating weather conditions impacting our cold-weather brands. Our international business was up 6%, despite continued economic weakness in Europe and an inventory overhang in China. And our direct-to-consumer business rose 12% with strength both here and abroad, even in a generally sluggish macro environment. While the economic environment is, overall, a headwind, we are very encouraged and proud of the consistent improvement in our profitability. Both gross and operating margins showed substantial expansion over the prior year's first quarter with gross margin up 240 basis points and adjusted operating margin rising by 130 basis points. Together, this growth in profitability enabled VF to deliver a 25% improvement in adjusted earnings per share to $2.43. Looking to the balance of 2013. With a slightly stronger-than-expected start to the year, we're raising our full year adjusted earnings guidance by $0.05 per share to $10.75. With 3 quarters still ahead of us and many dynamics at play, we feel it's prudent to maintain a fairly cautious approach to guidance while we continue to seek and…

Thank you, Eric. First quarter global revenues for The North Face were up 6%, fueled by very strong growth in the brand's D2C business, which increased 25%. Globally, we also saw a slight increase in our wholesale business. In the Americas region, revenue was up 3%, helped by winter weather that arrived mid-January and continued until just recently. In fact, our D2C performance was strong in the quarter, up low double digits and the highest comps in over a year, driven by solid sell-through of winter-related apparel, including insulated jacket, fleece and shells, as well as spring-weight rainwear and performance athletic apparel, clearly evidence that The North Face brand is strong and its product coveted as the industry's best, all of which gives us confidence that we have a great year ahead of us. Looking out towards fall, as expected, retailers have remained cautious with their orders, which were in line with our expectations. So definitely a good start to 2013 and great confidence in our ability to achieve high single-digit revenue growth for the full year. As I outlined on our year-end call, we are focused on 3 key areas to grow The North Face brand in 2013: product innovation, marketing and D2C. And with the first quarter behind us, we're definitely firing on all cylinders in these initiatives. First up, product. Product innovation is at the core of The North Face DNA. It motivates performance, stirs adventure and inspires people to get outdoors. Building on the success of our activity-based model, we've got a great new collection due out this fall known as Steep Series. This brand-new premier line of snowsports apparel is inspired by our expedition-level products and will be complementary to our outdoor Summit Series collection. Featured this fall in ski specialty shops, our own stores…

Thank you, Steve, and good morning, everyone. Outside the Americas, The North Face brand grew 11% with balanced strength on a DTC and wholesale basis. In Europe, The North Face saw a modest increase in revenues, driven by strong results from our DTC business, offset by a modest decline in the wholesale channel. In fact, The North Face DTC business in Europe was a real bright spot in the quarter with nearly 30% growth, including more than 30% growth in online sales. Although the overall consumer environment remains soft in Europe, our DTC comps were up at low double-digit rate, which demonstrates the brand is strong and gaining share against our competitors. We are confident to say that we believe that The North Face is the best positioned brand in the outdoor industry in Europe. On the product front, given the great product innovations mentioned by Steve, as well as our European Daypack [ph] collection and the strong equipment offering, we are quite pleased with consumer reception and growing brand awareness. And specifically, we see robust opportunities for European-specific fits, colors and regional-relevant product to create an even greater connection with our consumers' active lifestyles. And speaking of connecting with consumers, we continue to find great ways to share our brand story and engage them on many levels. A highlight from this winter was our sponsorship of the Freeride World Tour, the world's premier big mountain, freeskiing and snowboarding competition, where our athletes won the men's snowboard and men's skis competition. This tour was viewed live by over 300,000 people with hundreds of videos and articles available online and in print. Turning to Asia. We continue to see excellent momentum for The North Face brand with revenues up nearly 40%, driven primarily by outstanding growth in China partner expansion and a larger spring-summer product offering. In China, we opened 20 new partner doors and successfully converted Hong Kong to an owned market during the quarter, which added an additional 60 partner doors. Our efforts here are also focused on building brand awareness and engaging consumers around the outdoors. In fact, we recently hosted the largest amateur ski and snowboard competition in China with more than 400 participants. We're also currently executing on integrated marketing campaign to promote our spring Summit Series and hiking footwear. The industry best products, improving retail experience and leading the outdoor conversation with consumers gives us great confidence in 2013. Now let's move onto Vans. Steve?

Global revenue for Vans in the first quarter was up 25% with strong double-digit growth in all 3 regions, including both the wholesale and D2C businesses. This impressive performance puts the brand well on track to become VF's second largest brand in 2013 behind The North Face. Momentum continued in the Americas region, with more than 20% growth on revenues balanced across our D2C and wholesale channels. Of particular note in our wholesale business are very strong sell-throughs of men's apparel, a business that is gaining significant momentum. In fact, on a year-over-year basis, it's up more than 50%. It's a great sign that our styles and efforts to connect with consumers are working in concert to drive substantial growth. On the footwear side, we continue to perform very well. In many cases, Vans is the top performer in many of our key accounts. Building on our core classics business with new materials, prints and collaborations, from Metallica to Marvel Comics, and new styles, such as the Authentic Hi, we are broadening the opportunities for growth in our core business. As you know, one of our key growth drivers is geographic expansion. This strategy, with particular focus on the East Coast in 2013, is an ongoing success. By working closely with key partners and opening our own retail stores, using aggressive target-city marketing and providing product innovation in weatherized classic Vans footwear and apparel, we are driving awareness and affinity for Vans in big important new markets. We continue to excel on the consumer connectivity front as well, engaging consumers in creative activity-based ways. The best and most recent example is the Vans Custom Culture national high school art competition. The contest, which is in its fourth year, drew more than 1,400 entries from high school art classes in all 50 states. Charged with creating a work of art from a blank pair of Vans shoes, this year's winner will be crowned at the Whitney Museum in New York in June, receiving $50,000 to support that school's commitment to art. Continuing to focus on geographic expansion and consumer connectivity, we also successfully launched the first stage of our new global brand campaign called Anthem. The Anthem campaign seeks to significantly increase brand awareness through a unified global effort, which centralizes the historical authenticity of Vans Off the Wall culture. And finally, we're hard at work laying plans as the new sponsor of the U.S. Open of Surfing in Huntington Beach in July. As the largest surf contest of its kind in the U.S., we can't wait to bring Vans Off the Wall culture to the epicenter of surf. Now I'll pass it over to Karl Heinz who will take us through some international highlights.

Outside the Americas, Vans revenues were up 30% with similar wholesale growth and DTC growth north of 40%. In the first quarter, Vans continued its outstanding momentum in Europe with revenue up more than 30%. We continue to see strong share gains in this crucial market, which gives us great confidence that we'll deliver another year of impressive growth. So impressive, in fact, that Vans is on track to become VF's second largest brand in Europe behind Timberland this year. Our efforts to drive Vans Off the Wall culture deeper into Europe are also proving successful. We have House of Vans Berlin in January, hosting 3 nights of music, photography, skate culture and street fashion. This event drew almost 5,000 attendees with 370,000 visitors participating via live webcast. This event served to bring youth culture together, a unique opportunity for us to educate consumers about our products amid a backdrop of music and art, ultimately creating a deeper emotional connection with the Vans brand. During the quarter, we opened stores in Paris, Maastricht, Glasgow and Düsseldorf and underwent a major retrofit of our economy store in London to showcase our new Vans retail concept. Vans Asian business also posted strong results in the first quarter, growing more than 20%. Here we have seen success with product collaboration that have regional and local aspects, such as our Year of the Snake product line in China. These products have proven to be very effective in ensuring that the brand remains relevant in the region and inspirational to the youth culture there. Here, too, we're using special events like the House of Vans experience, as we've hosted in Europe, to drive consumer interest and lead the conversation of youth culture. Also, I'm very happy to report that we successfully converted South Korea to an owned market during the quarter, an exciting country for future growth. Overall, a great start to the year for Vans globally and much more to come. With that, let's move on to Timberland.

Thanks, K.H. In line with our expectations, global revenues for Timberland were up 2% in the first quarter. As we start our second full year of VF ownership, we're very pleased with the progress we're making against our strategic initiatives to position the brand for long-term growth. Our expectations for full year revenue growth remain in the mid-single digit constant dollar range. In the Americas, revenue increased at a mid-single-digit rate. With more seasonably weather -- seasonable weather conditions and efforts around rigorous product segmentation and rightsizing distribution, Timberland is gaining traction with growth in the brand's D2C and wholesale businesses. On the product front, both core and new programs performed well, demonstrating what we believe to be a genuine interest in both heritage and new styles. The men's boots business saw a great success due to a combination of proactive inventory and style management. A great example of this is dividends classic yellow boot, which achieved strong growth at full price in the quarter, reinforcing and underscoring its iconic status. That said, Timberland is not relying solely on its product archives to drive growth. New styles like the Stormbuck Lite Oxford and Newmarket Cupsole 2.0 saw great results in the first quarter following well-supported launches. These products embody a successful blend of classic and new, which is the backbone of Timberland's Best Then. Better Now marketing campaign. The new campaign, which is set to launch this fall, marks the celebration of the company's 40th anniversary. On the Timberland PRO side, we're also building momentum with great innovations like our Anti-Fatigue Technology and new products like Hyperion and Boondock. PRO continues to set the standard for the comfort and protection needs of this very demanding industrial consumer. Timberland's D2C business achieved strong double-digit growth in the quarter. More favorable weather and our targeted operational initiatives designed to drive conversion proved quite successful. In our own doors, we're also continuing work on creating a more streamlined premium selling environment, one that allows us to better showcase the product and brand and ultimately provide a much more enjoyable consumer experience. Online, we're working to strengthen our mobile capability, upgrading consumer messaging and better leveraging affiliates and partners. Together, these initiatives are paying dividends. Consumers have responded very well with conversion up in all formats throughout the quarter. Overall, a great quarter and very pleased with the progress we're making. Now here's Karl Heinz to take you through Timberland's international business.

Timberland's revenue outside of the Americas were flat year-over-year, including a mid-teen increase in Asia, offset by a mid single-digit decline in Europe. In line with expectations, revenues for Timberland in Europe were down at the mid-single digit versus last year. In a still soft market, our D2C business was a bright spot, up at mid-teen rate. This was offset by a low double-digit decline in our wholesale business with continued particular weakness in Southern Europe, Timberland's largest market. Echoing Steve's comments, here, too, we are very encouraged by the progress we continue to make against our strategic initiatives. In fact, and though it's still early, we're happy to report that initial signs for fall footwear bookings are positive, a clear indicator that gives us great confidence that we are positioned right where we expect it to be. In footwear, we did see some bright spots in the quarter, including success in our transitional product offerings, Stormbuck assortment and in our classic collections for both men and women. We also saw positive results in our apparel business with specific strength in outerwear and pants. We did see a make [ph] in Timberland's 40th anniversary. Our marketing efforts are focused there on cash message [ph] and heritage. We also recently deployed a new email marketing system, which will allow us to target consumers on a more customized and relevant basis and gain key insight going forward. Asia's Timberland business continues to perform well and grew at mid-teens rate, both in wholesale and DTC, with positive results across all product categories. We opened one new retail door during the quarter, as well as one e-commerce site, both in China, and are making great strides connecting with consumers in the region. Now I'll turn it over to Scott to take a look at Wrangler.

Thank you, Karl Heinz, and good morning, everyone. First quarter global revenues for Wrangler were down 2%. In our Americas business, revenues were about flat with increases in our Western Specialty and Latin American businesses, offset by a slight decline in sales to our U.S. mass channel. Recall that in the first quarter of 2012, we pulled forward seasonals due to a very early spring here in the U.S., which created exceptional growth in that period. We expect second quarter global revenues for Wrangler to increase at a mid-single-digit rate. Overall, the Wrangler business is in line with our expectations for the full year. In our mass channel, our jeans and Wrangler advanced comfort products continue to gain significant momentum. And our Premium Performance Cowboy Cut in our Western Specialty business is exceeding our expectations, really spot on with this very important and growing customer base. We're also hard at work with our key retail partners, enhancing our brand's in-store presentation. From mass to specialty, we have a number of initiatives geared at more meaningful ways to tell the Wrangler story, a story of innovation, authenticity and value. We're also seeing encouraging results and success with our expansion in the sporting goods, outdoor and regional mid-tier locations, all very important channels that allow us to really dial in the product, brand presentation and how we tell the Wrangler story to a broader range of consumers. Quarter-after-quarter, I seem to mention it and I will again here, too, Wrangler in Latin America posted strong results, fueled by growing brand awareness and great reception to our retail expansion, particularly in Argentina and Chile. And on the marketing front, we're excited to announce that we drafted New Orleans Saints quarterback, Drew Brees, to join the Wrangler team. Drew's dependability, work ethic, family values and personal generosity make him a natural fit for Wrangler. So stay tuned and look for a new campaign expected to launch sometime in August. And now, here's Karl Heinz with a few words on Europe.

While our Wrangler business in Europe was down at a mid-single-digit rate, it was also in line with our expectations, and we are seeing some bright spots. Our innovation focus on denim performance and fit is paying off, and our new products are selling through well. As a result, we are experiencing strengths in the emerging markets, particularly Russia, and a few of our key accounts across Europe. Also, due to a continued focus on operating efficiencies, our profitability continues to improve. Now back to Scott with Lee.

Thank you, Karl Heinz. Revenues for the Lee brand on a global basis were down 6% in the quarter, which was about in line with expectations. And here, too, the comparison was pretty tough due to the seasonal's pull forward in last year's same period. In 2013, we continue to expect modest growth on a global basis, driven by mid-single-digit growth in the Americas, with particular strength in the second and third quarters as new introductions and seasonal product lead the way. Revenues for the Lee brand are expected to increase at a mid-single-digit rate. Given the ongoing challenges in the mid-tier channel, which, ultimately, we feel are short term in nature, we remain vigilant about creating new growth opportunities. Advanced fall bookings for new product, including Perfect Fit for women and Modern Series for men, are very encouraging and a clear indicator that our products are being well received. Another great example, one that you've heard me talk about on previous calls is our Lee Platinum Label collection. A few quarters ago, we started with a small test of this product with one of our key department store partners, and we're pleased to report that it has continued to gain sizable momentum. In fact, following strong consumer response, we're adding an additional 150 doors this year, which should bring the total to nearly 450 locations by year end, so a great case study of how innovative product and consumer connectivity can generate an excellent long-term growth opportunity. Now back to Karl Heinz to discuss Lee's international business.

In Europe, during the first quarter, Lee brand revenues were down at a mid-single-digit rate. Here as well, we are beginning to experience some success with our new product innovation. During the quarter, we saw good sell-through of our new Stretch Deluxe women's product across most of our key accounts. And this quarter, we're launching a new collection for men called Blue Label. In our DTC business, although still quite small, we are encouraged by double-digit comp performance in our new retail format. We will continue to roll out this new format with additional owned and partner stores opening in 2013. This is on the heels of successful launches in 2012. Lee also benefited from improved operating efficiencies and is delivering stronger profitability. The business is on track with our full year expectations. In Asia, Lee continues to be impacted by efforts to rightsize channel inventory levels. As we stated on our fourth quarter call, Lee's performance in Asia will be particularly challenging in the first half with the expectation that the business begins to normalize in fourth quarter of this year. Even though sales were down, profitability exceeded expectations, driven by favorable product mix and lower product costs. We have seen solid results with the recent introduction of Urban Riders' eThink [ph] and Stretch Deluxe. So our new products are doing well, just tempered by current channel dynamics. Additionally, we are increasing the number of partner door locations, executing very focused marketing campaigns and expanding our digital and e-commerce capabilities. Now I turn it over to Bob, who will take you through our financial highlights in greater detail.

Thanks, Karl Heinz. Well, I'll wrap up today's call with some additional commentary around our first quarter results and our strengthened full year guidance. VF's total revenues were up 2%, which was in line with our expectations. Recall that back in February, we indicated that we expect to just modest growth in the first quarter due to tough comparisons against a very strong performance in last year's first quarter, in part due to some timing shifts in shipments. So we're tracking right on plan. And as a reminder, our revenue comparison was negatively impacted by about 1% from the sale of John Varvatos in April of 2012. Gross margin, a key component of VF's long-term growth story, was right in line with our expectations, improving by 240 basis points to an all-time high of 48.1%. As discussed in the press release, we saw improvements across nearly all our businesses with the biggest improvement coming from our Jeanswear coalition, as well as the continued shift in our mix toward higher-margin businesses. For the full year, we remain very comfortable with maintaining our previous guidance for a 100 basis point improvement in gross margin. Our SG&A ratio, as a percent of revenues, rose 100 basis points to 34.4% in the first quarter. Half of that increase came from our growing D2C business and the other half is due to higher levels of marketing spending. This is a significant year of investment for us in direct to consumer with an all-time high number of new store openings planned. And as you know, most of the benefit from those new store openings will come in the second half of the year, when our direct-to-consumer business is strongest. And as previously indicated, we are increasing our marketing investments behind our brands, given the success we've…

Thanks, Bob. No real additional comments. We're thrilled with our start to the year, confident in our outlook and ready for your questions.

[Operator Instructions] And we'll take our first question from Kate McShane with Citi.

Bob, I was wondering if you could help us understand, your inventories look like they're in very good shape on the balance sheet, but regionally, can you walk us through what the inventories are like in Europe and China at this point in time?

Yes. Actually, Kate, we're in good shape across-the-board. As you know, we've -- this is an area we put a lot of focus, and that focus has been placed on our global inventory levels. The calls that we've referenced in the past, we have -- we do those calls on a global basis and touch base with the -- our leaders around the globe. So our inventories right now across our businesses, across our brands and across our geographies are really in pretty good -- are in good shape.

Okay, great. And then my second question is I'm just wondering if you could talk through your backlog into the back half of the year, now that you have an increased visibility into that. Was the backlog better or worse than you expected when you last spoke to us in February? And is there still possibility for The North Face to get more orders at this point in time for winter?

Kate, this is Steve. I'll take this question since you seem to have The North Face in the middle of it. It's -- we've come through the fall booking season, and we mentioned the caution that's in the retail community. And this year's booking sequence is a little bit longer. There's longer tail to this than we've seen historically. So it's a little early for us to cite actual numbers. But I can tell you that the orders that we're taking in are very much in line with our expectations, in our high single-digit guidance that we gave in our year-end call.

Moving on, we'll take our next question from Bob Drbul from Barclays.

Guys, I got 2 questions. The first one is on Timberland. Timberland Europe, are there any plans to rationalize the Southern Europe exposure? And what could be the inflection point in the European business there?

Bob, this is Karl Heinz here. As you know, Southern Europe is this -- the largest market for Timberland in Europe, particularly Italy. And we all know Italy at the moment is a tough spot to sell any kind of goods. We have 2 kinds of channels where we work with Timberland. One is the wholesale channel, which clearly suffered, especially in Southern Europe, as we said in the press release. The other one is DTC, which has 2 components, one is owned stores and the other one, which has -- Timberland has a great presence, is partnership stores. Now even in a challenged market like Italy, where we have 150 stores, we have seen last year, actually, positive comps on our owned -- on partnership stores and the same for Q1. So we just won also an award in the U.K. for the hottest footwear company, which we're pretty confident that, clearly, we're not immune from what is happening in the market. But the fact that in our own stores the comps are good shows that the brand is strong.

Got it, okay. And then the -- my second question is around the mid-tier channel for you guys, maybe Eric or, I don't know, Steve. But the denim business in the mid-tier and the outlook there in some of the other brands you have in the mid-tier, can you just help us understand how you have that estimated and forecasted for the rest of the year right now?

Bob, it's Eric. I'll take a shot at that since it's across VF -- our 3 biggest businesses in the mid-tier are Lee Jeans business, our Vans business and our Licensed Sports business, and there's really no change in our outlook from where we started the year. The channel has been a little difficult for a host of reasons that have been well documented in the press. And the interesting thing is, actually, there may be -- it may get a little bit better for us than we're currently thinking. And the reason I'm saying that is around the Lee business. JCPenney is indicating that they're going to try to attract their traditional shopper, and that traditional shopper was a good Lee customer. And to the extent they're successful at getting that traffic back in the door, we're very confident that the Lee brand has the right products and value equation to get more business. The Vans business in the channel has actually done pretty well at JCPenney, in particular, who decided to use Vans as an action point to connect with youth consumers. Our Vans business is actually up. So we're pretty confident about that. And the Licensed Sports business is so much a factor of which teams are playing and who's winning, and there's no change in that. Did that get to that heart of your question?

Yes, definitely.

Moving on, we'll take our next question from Michael Binetti from UBS.

First off, maybe Bob, I -- can you talk a little bit more about the gross margins for the year, maybe look at the cadence over the next few quarters to help us with our models? And also, can you talk about -- and maybe how much of the improvement in the quarter was from things like product costs versus longer-term drivers?

Sure, Michael. So the cadence of gross margin, as you might expect, the second quarter -- actually, each quarter will show nice improvement on our gross margins. In the second quarter, the improvement will be less than it was in the first quarter. And then the third and fourth quarters, it'll be a little less than it was in the second quarter. The bigger improvements, as you said -- what drove the first quarter improvement, really consistently seeing that 60 to 70 basis points from mix. So in the first quarter of the 240 basis points, about 70 was related to mix and the remainder was related to primarily product costs. Yes, in the first quarter, a significant portion of that was related to Jeanswear. And that'll continue, not as strongly but will continue into the second quarter as well. So -- but I'd repeat one of the things that -- one of the comments that I made in my commentary is that we expect to see gross margin expansion in across-the-board in nearly every one of our businesses on a full year basis. And actually, we saw that in the first quarter. So we're seeing improvement across-the-board, but Jeanswear clearly led the way in the first quarter.

So -- and then if I could just follow-up a little bit, maybe a little bit more color on Timberland. I think -- obviously, that's been in the spotlight as you guys look to try and accelerate that, and I think that -- especially the direct to consumer coming in at high teens was a pretty unexpected number and fairly good. It seems fairly good, particularly given unit growth might still be sluggish. Can you just talk about the brand a little bit and what's going right now? We've -- you guys have talked a lot about how apparel will be launched in the second half or what -- maybe some of the other things you're doing right now and maybe look ahead to the apparel in the second half. And then maybe also just talk about the operational initiatives. You mentioned that you're working on the D2C doors there.

Okay, Michael. This is Steve. Karl Heinz and I'll split this. I'll cover the Americas piece and toss the ball to Karl Heinz for the international piece. So as I mentioned, we're really encouraged with our Timberland business. Over 14, 15 months ago, we began to wrap our arms around this, begin to work diligently on a lot of the integration initiatives, which focused mostly on operational improvements and improving product and getting clarity around what the brand stands for. And what you see coming into 2013 is really that paying off across both our wholesale and D2C channels. Our product pipeline, as I mentioned, the heritage product, as well as the new products, are resonating very nicely across all channels. Our marketing message is very clear, and you can see that in how consumers are responding in our online environment. And we're very -- looking forward to the launch of our new campaign this fall. Now the operational comments that I made around D2C, we have a new leader within our D2C channel, and that leadership team really bore down on the key performance indicators across the retail channel. And we focused very hard on that retail environment, first and foremost, improving the clarity of this -- of the in-store, narrowing down the assortments and focusing, first and foremost, on servicing consumers and conversion. And we've seen that really pay off nicely and are very confident with how that will lead us on through the balance of the year.

Michael, moving to Asia, first. In Asia, we continue to do well with Timberland. As I mentioned in the script, we are up both in DTC and in wholesale. We have great presence in Japan, in Malaysia. In Taiwan and Hong Kong, we have subsidiary. And also the brand is now embedded in our headquarter in Hong Kong with our branch. So they will particularly benefit for our know-how we have in China with Timberland. As we mentioned, it's a little bit -- we -- I mean, we're just starting with China. So that is, for sure, a great opportunity. Europe, I touched before. I think what is pleasing -- I always say we're not immune from what is going on in Europe. And we all know what the situation is. But we do see great results, especially in our DTC, which is an indicator that the brand is healthy. We were up mid-teens, which is very strong in Q1, which gives us confidence. And also, as I mentioned, the future -- the fall orders are coming in, actually, a little bit better than we expected. So all in all, Timberland, I guess, we are pleased with this brand.

Moving on, we'll take our next question from Erinn Murphy from Piper Jaffray.

My first question is actually surrounding the denim business in Asia. I mean, understanding the inventory overages just in the channel there, has there been any change in terms of how you're thinking about the potential stabilization there in the second half? And how should we, in this context, think about China and the growth there as we progress throughout the balance of the year this year? That's my first part.

Erinn, Karl Heinz here. Obviously, again, Lee has been one of our strongest performers in the last years in China, and we don't change that in the midterm. It has been strong growth, very profitable. As we said, there is a short-term issue, this overhang in inventory in the channel, which, by the way, is only related to jeans. We don't see that in all our other brands, and they're all doing nicely as we saw. You heard the numbers on The North Face. So long term, we're absolutely confident that we go back where we have been. As we mentioned, by the end of the year, we plan -- we expect this to stabilize.

Okay, that's helpful, Karl Heinz. And then just -- I guess a second question for you, following up on the European kind of macro situation. I mean, how are you seeing -- or have you seen any kind of change in consumer trends in terms of shopping patterns or even -- either channel preference? Maybe it is a little bit of distortion towards the DTC, just given the sustained weakness there. And then I guess, secondly, if you could call out -- I mean, clearly, Southern Europe is already very weak, and you've called that out, as many companies have. But any other markets that either over-indexed or under-indexed relative to your average trend in Europe? That could be helpful to kind of frame up the context there.

Yes. So the good news is we have a diversified portfolio of brands, which help us -- and the second good point is we are not overexposed in one area. We do -- we are pretty diversified in many countries in Europe, especially in the big 5 -- in the 5 countries and also in the emerging markets. So again, we see some softness, for sure, in the -- in southern hemisphere, in Spain and Italy. And Spain just announced numbers yesterday, so they're not really encouraging. But the good news is, again, because we have this diversified portfolio of brands, and you see the results, we still continue to deliver on brands are really stellar. We don't expect Europe to change significantly in the future. We don't expect it to get worse and probably not get better. But again, we're pretty confident. On the DTC side, we said that it's a great opportunity for us going forward. We don't have the size of the D2C business we have here in North America, and we are building it up. We're investing in people, talents. We're actually accelerating now the opening of stores. So overall, our plans for Europe, while this year, a little bit softer, but we reconfirm what we have said, which is mid-single digit up. But longer term, we plan to go back to the usual growth which we had in the past.

Erinn, it's Eric. I'll add just a little bit of color to that, because it gets -- let me speak about VF's model, which we think is so important to our consistent success. If you look at our big 3 brands in Europe, Timberland, Vans and The North Face, The North Face and Vans are primarily built out in Northern Europe, and we're doing exceptionally well. Timberland is primarily -- was -- the biggest market is Italy. But it's that portfolio that lets us get through -- a year like 2012, I think we were up 10% in Europe. All the other heads are nodding. That's the right number. And we're looking at high single digits for this year. And it really is because we're able to say, "All right, if we can't affect the economy in Italy, and we can't, what we can do is increase the investment in our Northern European brands, where the economies are stronger." And that's exactly what we're doing. And that's why Vans has had so much success in Northern Europe is we've just chosen to invest more there because that we can take action on. While we respond prudently where -- there are more challenges in Southern Europe, and that's how we work our models. So thank you for letting me make that statement.

Just a final point. We never talked about the other brands. Clearly, the top 3 brands are the major drivers. But this year's -- we saw in Q1, and particularly in the full year, on our other brands, like SmartWool, Napapijri, Kipling, Eastpak, we all expect them to grow in Europe this year, which is positive news.

Moving on to your next question from Omar Saad from ISI Group.

I wanted to follow up -- I know the DTC mix has been one of the drivers on the gross margin side. Could you kind of remind us where you are in terms of DTC penetration, what percentage of the business it is overall, where it was a few years ago, and how high you think it can go over time? Cannibalization with the wholesale channel, is that something you think about? And then how does online fit into your kind of long-range thinking about the direct channel?

I'll start with that, to respond to the first point in terms of the penetration that we have. We're -- in a few years, it wasn't all that long ago that our percentage was really quite low in direct to consumer. So it's expanded very, very nicely over the past number of years. In 2012, D2C was represented 21% of our total business in 2013. We expect D2C to be 23% of our business, and we're excited about laying out our plans for the future over the next 5 years. But it's safe to say that we do expect to continue to see direct to consumer expanding as a percent of our total business.

And online, cannibalization with wholesale, is there any channel conflict there? Has that been an issue at all? And then online, how it fits in?

Sure. Omar, Eric here. The -- we try very hard to use this as a supportive strategy for our brands and to avoid cannibalization. And we actually work with our wholesale partners to where -- they know where we're going to put store. A great example of this is Vans, which in the last 2 or 3 years, has put up a lot of stores around New York City, around Boston, now around Philadelphia, where we didn't have substantial distribution. And we just didn't have the doors there that let the brand speak to the customers. So we're putting the doors there. And that's true in markets in Europe and in Germany. It's true in the U.K. That's how we look at it. And we have so much runway, because we ended last year with roughly 1,100 doors across all of our brands across the world. So we're so relatively undeveloped that we still see lots of runway before the cannibalization thing comes into play. The e-commerce thing is a tricky thing. Because we don't know if that's -- we can't really say where those customers are coming from, whether they're new customers to the brand, whether they used to shop in our stores or somebody else's stores. What we do know is we have to create a compelling way for our consumers to engage with our brands from their phones, from whatever devices they have, and we have to let them shop while they're there. And that's a rapidly growing piece of our business and a rapidly growing piece of the consumer experience, not just in the U.S., but also in Europe, where I think last year, we put new websites up in 7 countries.

Yes.

Is that correct? In 7 countries last year. So we're beginning to do that there. And I don't know how to discuss the cannibalization of that because we know it's the right thing to do. And if it elevates the brand experience, which we think it does, it should be good for everybody.

Omar, I guess I'd just add to that is all of that, of course, is supported by a very strong profitability in our direct-to-consumer businesses and really high returns on the investments that we make. It's what gives us the permission and the reasons that we continue to invest heavily.

The last bit of color I'll add to that, because it get to some of Karl Heinz's observations about the strength of our DTC business in Europe, where our wholesale business is not so great in some markets. I do think that there, we're putting up our best -- when we open a store, we're all in. And we put a -- bring the brand to life the best way we know how, with strong inventory across all the styles. And some of our wholesale customers' aren't able or willing to do that now in this environment, and our willingness to do that, I think, is helping us. And it shows that when you put the whole brand out there in all its glory in a retail environment, people are still shopping.

Moving on, we'll take our next question from Lindsay Dunkermann [ph].

Just -- I was hoping you could -- as we look at the MG&A line, can you tell us the increase, the split between sort of brand investment, DTC spending and then mix or other corporate items? So in other words, how much of the increase is a function of your investment in direct versus your investment in brand-building stuff?

Yes. Bob would be happy to take that question.

Right. So in the first quarter, there's a 100 basis point increase in our SG&A, and it was evenly split. At the beginning of the year, on our initial guidance, we indicated that from a marketing standpoint that we were going to up our spend this year. Right now, we're continuing to plan and -- on an increase of more than $60 million in the marketing side and about double the rate of our revenue increase. As I said in my comments, the reason we're willing to do that is because we absolutely believe with a lot of confidence, we're getting a great payback on those investments. And we support that with some science behind that in terms of measuring results. And yes, the other side is related to the heavier pay -- or the heavier investments in the direct-to-consumer side as well, the high number of new store openings. So in that first quarter, it was exactly half and half, 100 basis point increase.

On the direct-to-consumer piece, you talked about investments upfront in the year and then generating greater returns on that in the back half. Can you just remind us sort of by concept where your increases in square footage are and where you expect to see the most improvement?

Yes. The -- what I can say is this is that, clearly, where we're reinvesting in opening new stores in high number of new stores is absolutely aligned with where we have our strongest returns. A high percentage of the new store openings is in the Vans, within the Vans brand around the globe, not just in the U.S. but in Europe as well. And then, of course, The North Face and Timberland really round out the top 3. That's where the investments are going.

Yes. And that's split slightly more than half in the U.S. and slightly less than half internationally. So it's a global strategy.

Okay. Have you given us actual store count?

We did. We said that we'd open about 160 new stores this year.

Okay. And then if you can comment at a high level how you guys think about the deal environment out there, the M&A opportunity, what the pipeline might look at -- might look like and how you think of as far as -- where multiples are today relative to where you'd like them to be?

Yes. We're still actively looking. I don't normally respond this way, but I just don't know that the environment is a lot different than what it's been. A lot of the deals that we've made have resulted from long-standing relationships and -- that, again, have been built over a period of time. So it's the same approach that we use today, and we're still looking. In terms of multiples, the same kind of thing. The multiples don't -- from what we see and what we're willing to pay, it really don't vary a lot unless a business is really in a trough. Then we might have to pay a little more, right, in terms of the multiples. But it just doesn't -- from our viewpoint, it just doesn't change a lot over time. Good brands are still treasured possessions, and to get the right brands requires the right kind of investment.

Moving on, we'll take our next question from Mitch Kummetz from Robert Baird. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Two questions. Let me start with Bob. I'm trying to gauge how conservative your gross margin guidance is on the year? You're saying up 100 basis points. It sounds like you're expecting mix to be about 60 to 70 basis points of that. Just in the first quarter, the benefit that you got from lower input costs, I think puts you in the black, 30 to 40 basis points even on a year. So -- I mean, what are the other puts and takes here that gets you to kind of your guidance on the year?

Yes. So what happens, Mitch, of course, as the year goes on, as the year goes on, we won't see the same benefit that we saw from Jeanswear in the first quarter. Obviously, all this is about what we're comping against in the earlier part of last year. And in 2012, in the first quarter of 2012, we brought in very, very high denim cost, right. So we were comping against that. That's why the big improvement. In the second quarter, you remember the sequencing last year, as we looked at, the improvements started to come as costs came down in the Jeanswear business. So in the second quarter, we're matched up against costs, which weren't quite as high as they were in the first quarter. So as I said earlier, the -- on the improvement in gross margin, the second quarter will clearly be less than it was in the first quarter. And then in the latter part of the year, the cost from a cost standpoint is more normalized at that point in time. We just -- we don't have the same kind of impact from the Jeanswear side. We're also -- I mean, we're seeing some benefit, even in Imagewear, for example. Our costs there were higher last year, and they've come down some. But in the second half of the year, again, a much more normalized situation relative to product costs. But what we have is we continue to have that mix impact that we've -- we very consistently talk about and you just mentioned, will help us in the second half of the year. So that's really the way to think about it, a little bit bigger product cost impacts in the early part of the year and then that continuation of our mix benefit coming in the latter part of the year. And sure, we're always going to be a little bit cautious relative to the guidance. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: So there's -- so there aren't any real puts and takes of significance, other than the costs and the mix as we think about the year?

Yes, those are the 2 bigger factors. What we're also seeing is some benefit, but it's just not at the same magnitude. From efficiencies that we see, controlling the inventories, when we reduce our inventories by over $100 million like we did in the first quarter, it just creates less exposure related to inventories. So there are some efficiency gains. As I said, we expect to see gross margin improvement in every single business on an annual basis, and that's not driven by product costs. It's just driven by controlling inventories and having great product and be able to get -- to earn the margins. So yes, there are some other factors. But yes, those are the big pieces. Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division: Okay. And the second question I had is I'm just curious, with the slow start that we've had this spring, I mean, you guys talked about the impact that, that had on Q1, some benefits, some negatives, but what's the impact that has on Q2? Do we lose kind of -- I mean, how significant is your at-once business in Q2? And do you lose -- or do you think you lose out on any business there versus a year ago, given the slow start to spring? And any maybe backup of in-season inventory at retail right now?

Let me take a shot at part of that. Last year, we shipped some of our spring merchandise in the first quarter because it was a warmer year. So this year, that's going to be a second quarter shipment for pieces of our business, compounded by the fact that it's been a cooler-than-normal quarter for us so far. So we were shipping the goods this quarter, but right now, they're not selling. How that's going to play out, my guess is summer will come. It will get warm and that stuff will sell. The question will be, does -- do the -- does the summer get here in time that they sell at full price? And that, I don't know the answer to. All-in, I think we're going to get through that period just fine. Does anybody else even want to enhance that comment at all?

I think it -- this is Scott. I think it equalizes itself out. I feel really good about the spring. I think it's a compelling offer that we have. We have a nice assortment out there. And summer will come. It's just a little bit about 6-week differential from last year. You saw the weather changed about 6 weeks early last year. It's about 6 weeks later this year. But if you go back to '11, you go back to '10, it's back to a normal pattern this year, maybe a week or 2 cooler, but I feel confident going forward.

Mitch, this is Steve. From an Outdoor & Action Sports position here in the Americas, the season is actually lining up consistent with how our goods flow. Our biggest spring business in the first quarter would be Reef, and Reef had a very good quarter, follow that with Vans. And the results that we posted for Vans were extremely strong. And in The North Face, that we saw very good sell-through of our winter-weight goods. We typically sell quite a bit of spring rainwear in the first quarter, which then leads us into the Sportswear sets in the second quarter. That's when equipment has shifted to opening up. And all of that really is lining up nicely to deliver against our plans.

Moving on, we'll take our final question from Christian Buss from Crédit Suisse. Christian Buss - Crédit Suisse AG, Research Division: Yes. I was wondering if you could provide some perspective on the new channels of distribution you've opened up over the last year or so for Vans, and what you've seen there, what successes you've had. And if you could talk a little bit about the LXVI product, that would be helpful as well.

Sure. Chris, this is Steve. So really, the only new channel we've opened up over the last 12 months was moving into Foot Locker with the LXVI collection. Otherwise, Vans stays very, very committed to the disciplined product take -- product segmentation strategy across a very clear set of channels. Our LXVI collection has done very well with Foot Locker. They remain very confident as do we in the growth potential of that particular line extension. As we access the consumer that's adjacent to our core Action Sports consumer in the athletic space, so very positive and continue to see growth and commitment from where we've extended.

And gentlemen, at this time, I'd like to turn the conference back over to you for any additional or closing remarks.

Yes. Thank you, all, for your time and attention this morning. We do have an event coming up between now and our second quarter earnings release on June 11 in New York City, where we're going to be laying out our 5-year growth plans. And we're looking forward to that meeting. I hope you are as well, and we hope to see you there. Thanks so much.

That will conclude today's conference. We thank you for your participation.