Greetings, and welcome to the VF Corporation Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Joe Alkire, Vice President of Investor Relations and Financial Planning & Analysis for VF Corporation. Thank you. Please go ahead.

Good morning, and welcome to VF Corporation's third quarter fiscal 2019 earnings call. Participants on today's call will make forward-looking statements. These statements are based on current expectations and are subject to uncertainties that could cause actual results to differ materially. These uncertainties are detailed in documents filed regularly with the SEC. Unless otherwise noted, amounts referred to on today's call will be on an adjusted constant dollar basis which we define in the press release that was issued this morning. We use adjusted amounts as lead numbers in our discussion because we believe they more accurately represent the true operational performance and underlying results of our business. You may also hear us refer to reported amounts which are in accordance with US GAAP. Reconciliations of GAAP measures to adjusted amounts can be found in the supplemental financial tables included in the press release, which identify and quantify all excluded items and provide management's view of why this information is useful to investors. During the first quarter of fiscal 2019, the Company completed the sale of its Nautica brand business. During the first quarter of fiscal 2018, the Company completed the sale of its Licensed Sports Group or LSG business. In conjunction with the LSG divestiture, VF executed its plan to exit the licensing business and completed the sale of the assets of the JanSport brand collegiate business in the fourth quarter of 2017. Accordingly, the Company has included the operating results of these businesses in discontinued operations to their respective dates of sale. Unless otherwise noted, results presented on today's call are based on continuing operations. Joining me on today's call will be VF's Chairman, President and Chief Executive Officer, Steve Rendle; and Chief Financial Officer, Scott Roe. Following our prepared remarks, we'll open the call for questions. Steve?

Thank you, Joe. And good morning, everyone. I could not be more proud of VF’s third quarter performance. As I reflect back on my time as CEO, I am reminded of the commitments we made in Boston almost two years ago. At that meeting, we stated our intention to increase the metabolic rate of the company, while pursuing a specific set of strategic choices. Today, we have made significant progress against those initiatives. And even in-spite that intense workload, our people delivered VF’s strongest quarter in the last two years. My profound thanks for the dedication and hard work of our VF associates around the globe. I am proud to be part of this great team. And I’d like to call out a few exceptional performances that we have seen over the past quarter. The North Face made significant progress in their journey to return to their rightful leadership position as the largest most influential global outdoor brand. The brand’s focus on purpose-led brand and product innovation is starting to gain attention and traction. My congratulations to the team. This has been an intense two plus year journey. And while it’s not complete, we’re starting to see their hard work payoff. Vans has delivered another exceptional quarter of growth, further cementing their rightful place as the number three global sport lifestyle brand. While obviously a brand this size won’t grow at these exceptional rates forever, we have great confidence in their ability to sustain double-digit growth by relying on Not Just One Thing to drive this business to $5 billion by 2023. Our international business remains resilient amid political uncertainty and macroeconomic pressures that we’re reminded of every day. Our diversified international platform continues to deliver high single-digit growth. We declared China a strategic investment priority and it is paying…

Thanks, Steve. And good morning, everyone. We are pleased to report another strong quarter with balanced growth across our largest brands and strategic platforms. We continue to track ahead of the financial targets established at the beginning of the year, as well as the long range plan commitments we laid out in Boston nearly two years ago. We continued to invest in our strategic priorities and we are increasingly encouraged by the returns that we're seeing. These proof points give us even more confidence that our growth trajectory is sustainable as we head into fiscal 2020. Before diving into the results for the quarter and our increased outlook for the full year, I'd like to provide a brief update on the upcoming Kontoor Brands spin-off. We filed the initial Form 10 registration statement with the SEC in mid-December. We remain on track for a public filing in early March. However, the government shutdown has the potential to delay the public filing. We will keep you posted as our timeline evolves. Both VF or RemainCo and Kontoor Brands will host investor roadshows in the company months leading up to our anticipated separation date at the end of April. So now let's review the results of the third quarter. Total revenue increased 10%, driven by strength across our core brands, including our international and direct-to-consumer platforms. Organic revenue increased 9% or 12%, excluding Kontoor Brands. Organic D2C revenue increased 11% with 23% growth in Digital and a 12% increase in total comp sales. Excluding the impact of acquisitions, our store count was essentially unchanged versus a year ago. Our wholesale business increased 7% organically led by 35% growth in China and a high-single-digit growth in the US. Importantly, excluding Kontoor Brands, wholesale increased at a low-double-digit rate on an organic basis as…

[Operator instructions]. Our first question comes from the line of Michael Binetti with Credit Suisse. Please proceed with your question.

Hey, guys. Good morning. Let me congrats on a really nice quarter there. I guess just looking at third quarter, North Face, really nice to see acceleration there. I was interested to see the 9% direct-to-consumer growth in contrast with the wholesale 25% growth. I was wondering if you could just add some context of both of those. I know with the long range plan you have very big D2C and obviously Digital ambitions. And I know the brand is well spread through a lot of the wholesale channel that you wanted to be in and there’s point of fact that you pulled back some of in the past few years. How do you look at that wholesale growth rate as -- how much of that is coming from new distribution versus like-door growth? Maybe just add some context to that on how you see wholesale for that business going forward, if that's maybe some of the refill as you’re going to get momentum in the brand, or how should we think about that?

Yes, Mike, Scott here. I'll start that, at least, the -- first of all, it's -- there is a little bit of shifting as we talked about in Q2, there are some orders shifted to the right. We also said in the prepared remarks that based on strong demand and sell through we saw a little bit from the fourth quarter coming to the third quarter, which puts a little bit of a distortion, if you just isolate on Q3's wholesale. That's why we tried to show you first half, second half and give you a better -- a more balanced perspective. But I would say in general, what we're seeing is not necessarily new distribution. It's really seeing more velocity sell-through and maybe slightly more penetration as the brand has gained a little more momentum and heat but not so much like opening up a new -- a big new customer or things like that. Steve, I don't know if you want to add anything?

And I'd add to that Michael. What's you're seeing really is the result of two, three years of really intense work of cleaning up the marketplace, segmenting the customer base and now placing the appropriate products in each of their key retail partners, be it specialty to some of the large nationals. You're seeing improvement in quality of products. So that is resulting in the velocity of sell-through that prompted that pull forward of the Q4 into Q3 giving you that distortion in the wholesale number. But we continue to be very confident in our D2C numbers. The results that we delivered this quarter are right in line with our expectations. We do see opportunities to improve and ideas there would be strengthening the retail environment, stronger merchandising, more focused big seasonal stories as the product offers continue to improve in the coming seasons.

Mike, I'll just -- I don’t know if it helps. But our long range plan on the brand from a wholesale standpoint going back to that topic is mid single-digits. And that's still what we see over a long period of time, so -- and are trying to model it going forward.

I was just curious how it's emerging with some of the growth rates above and below the long range plan. But I guess looking forward on Vans, it looks like your planned X currency about 15% growth in fourth quarter. So if we put that together with the third quarter with the second half, it looks a lot like what you've been telling us the back half. It's going to look like it wasn't going slow as much as some people feared if there are some -- I guess some fashion element or trend element fields in particular. And you did add some color about the Slip-ons taking over as a bigger percent growth driver. I guess you did make some comments the next year will be low double-digits in line with your long-term plan. Would you help us to add any context you can at this point as it seems like some of the product portfolio that’s driving the growth is turning over. What gives you confidence? Obviously we can see that you’re comping the comp here but can you help us think about how you're building up to the low doubles for next year based on where the product portfolio is going today?

Yes, I guess that this is unusual at this point in the year that we would give you shaping on 2020. But the reason we did is we wanted to convey our confidence that we're not hitting a wall here, or some of the things that we've heard questions back from your side of the community, not necessarily you specifically. So we look -- we see our order book, we see our trends. We're looking at forward -- the consumer feedback that we're seeing in our online environment, in our database. So we have confidence in our long range growth. Could it be a little better? As I said, at the very beginning of the year, it could be better. We really haven't seen the brand slow down materially. Again, at some point the laws of gravity do establish themselves. I think the most important thing to you remember is, we have confidence in the long range plan. And so far, we really haven't seen that slowdown. We're really encouraged. I'm glad you picked up on that, Michael, because the resurgence of the Slip-ons is just a proof point of Not Just One Thing. And we think that's a great thing to keep in mind as you think about the forward growth trajectory of Vans.

Our next question comes from line of Erinn Murphy with Piper Jaffray. Please proceed with your question.

I wanted to follow-up on Europe. You talked about a little bit of moderation. I was hoping you could maybe drill down by regions. Are there any countries that you're seeing particularly lag at this point? And then with Vans Europe specifically you've had two consecutive quarters of kind of 9% to 10% constant currency growth. I know you guys have made some wholesale adjustments. But I'm just curious is this the right way we should think about the business as you kind of think about the shaping into 2020 for Europe specifically?

Yes. Erinn, maybe I'll start there. So it's true that our Europe business has moderated compared to last year. That's also important to remember last year grew 12% and so we would say that you're comping a hard comp and even with the moderation in growth, we're still tracking at or above our long range plan. So we would say our business is stable on a constant currency basis and still tracking ahead of our long range commitment. So I think it's important to keep that perspective in mind.

And on a higher level to your comment, Erinn, we really -- we watch all the countries that we were all aware of, UK, Italy, France where we see particular political issues. But we really have not seen it have a dramatic impact on our business. We continue to see good balanced growth in tracking right along our long range plan.

And I guess -- and the other part of your question I think was behind that, Erinn is, is this kind of growth rate what we should expect for Vans in Europe? In our recent Investor Day, we talked about high single-digit growth and we're confident that, that's -- that is absolutely doable, right now we're tracking I guess a little bit ahead of that. So I'd say you should not think of a material change in trajectory of the Vans business in Europe.

And then on Timberland, it was nice to see a pick up in North America. I'm curious, if you could talk about some of the collaborations you've done with that brand. It seems like it's starting to pick up a little bit. Would love to hear how that's being received? And then I know Europe, you commented on weather for Timberland being a bit of the headwind there, but curious again just the product piece, how are you feeling about the receptivity there with some of the newness you’ve infused? Thanks.

I'm not surprised you picked up on Timberland’s activity and collabs, I think it's something they've all been -- they've been very good at. I think what you’d see now is a more methodical and aligning with collabs that really help enhance and grow the brand. And using the boot and finding ways to really spark greater interest in how that -- the classic category comes to life for consumers. In Timberland Europe, we did see a slowdown in our business. We don't really -- we don't see that changing our long-term view of the brand. I think the positive is to really focus on here is the diversification strategy that we've been talking about for the last number of quarters. We really see that taking hold, in Europe our non-classics, including women's grew over 20% for the quarter and we saw double-digit growth in those same categories here in North America. And often times we forget the power of our Timberland PRO business that was up double-digits for the quarter. What we saw was some softness in the boot category in Europe specifically. We do really relate that to the weather. And really continue to drive forward on the diversification strategy. With the addition of Christopher Raeburn as the brand’s Global Creative Director and placing a new Design Director in this business, we're just methodically moving along our reset plan to put this brand back in place to deliver its portion of our five year growth plan.

Thank you. Our next question comes from line of Matthew Boss with JPMorgan. Please proceed with your question.

Great. And congrats on a nice quarter, guys. I guess on the gross margin front as we think beyond this year, any larger picture change to the 40 to 50 basis point tailwind that you've been seeing from mix? And then is it still fair to think about the remaining margin components between product costs, pricing and FX? I think you've said in the past that that's basically a wash. Is that kind of best to think about the mix and then the remaining components?

The short answer is yes and yes. That 50 plus or minus basis points we see and even have known in the fourth quarter we -- if you look at RemainCo, the 50 basis point mix, when you see in our implied guidance, there’s a little bit of drag from FX and Kontoor in the overall margin. And as we look forward, again, we're not giving guidance but we’ve said consistently, we see that 50 bps going forward, input costs over time, our assumption has been and the history has proven have ebbed and flowed, but pricing has at least offset and in some cases, given us rate increase. So that's a long way of saying we're really -- we're still really comfortable with where we're at. We're seeing good evidence of those margins falling through and expect that would be true going into next year.

That's great. And then more from a category perspective on Jeanswear. Can you just touch on the drivers behind the 3Q decline, the full year guide reduction there? And just how to think about this segment going forward?

Yes, maybe I'll start there. So, in the third quarter profitability was fairly flat. And if you look at the implied guidance that suggest in the fourth quarter there’ll be a pull back and I guess I would say we’re going to let the Kontoor Group talk about what the future looks like. But a little bit of perspective, one of our jobs as we prepare for the spin is to prepare this company along with the Kontoor management to give them a solid platform and the best opportunity for success going forward and that means we’re -- frankly we’re cleaning up a few things. There’s some inventory given Sears bankruptcy, that’s a little elevated, we’re working to get that down or I should say the Kontoor team is working to get that down and they’ll make progress on that by the end of the year, underperforming doors in certain markets where we don’t see big opportunities we’re looking to rationalize in. And important to note on the supply chain, as you think about optimizing the supply chain for Kontoor going forward, we have historically had commingled products, we’re moving products into Kontoor-only plants or vise versa, VF. And when you make those moves you have short-term disruptions which increase costs, your efficiencies go down, but that short-term and that’s episodic, that has a beginning and an end. And as you think about going forward, optimized focused supply chain around the unique business model of the Kontoor business is going to be bettered for them and we’ll continue to be that strategic weapon that they have seen historically going forward.

And Matt, let me add, Kontoor has in Wrangler and Lee, two of the most iconic brands in America. We have got a very experienced management team. We’ve got a supply chain. There’s been a historical strength and it’s evolving to be in line with where this brand see itself going. We need to look more long-term on what the brand -- what the suite of brand is capable of, as we move through the work we’re doing to prepare these brands to be stood up as their own separate public company.

And Matt, just one other perspective that maybe helpful, I don’t know if it’s behind your question but a lot of this short-term stuff, the timing of the Sears bankruptcy, other things like that. While the timing is hard -- was not necessarily you to predict as we think about our model and our expectations for the business going forward, it’s really unchanged. So, you got to -- I would encourage you to look past some of the short-term noise that happens in a transition like this and focus on the strength of these brands, the model, the consistency going forward and that’s really what we see going forward and I think as you talk to Kontoor in the roadshow, those would be the themes that they develop.

Thank you. Our next question comes from the line of Laurent Vasilescu with Macquarie Group. Please proceed with your question.

Good morning, and thanks for taking my question. I wanted to follow-up on the wholesale guidance for the year, it was raised nicely from your originally 9% to 10% and now 11%. This would suggest 4Q wholesale revenue would grow in the mid teen rate on an organic basis. Is that the right way to think about it, Scott? And what are the brands that are driving that growth for the fourth quarter and then how should we think about that number as barometer for the out-quarters?

Yes, so as usual Laurent I think you’ve got it. You might be a little hot, but high single-digit organic growth on the organic is kind of where we would say the implied guidance would take you and it's the same brands that are driving through the year, right? So Vans, The North Face are the two biggest drivers.

We're seeing good wholesale growth here with Timberland in the North America market.

Yes, that's right. Timberland North America, particularly strong. So ...

And Dickies as we've reset new product across much of their distribution, we're seeing good solid wholesale growth there as well.

And in the prepared remarks -- just filling on that last comment, Work, we said would accelerate in the fourth quarter. And obviously that's a predominantly wholesale business.

Okay. Very helpful. And then I want to shift focus on the strategic investments. I think they were up 12% in the first quarter then up 8% and now up 5%. I think you said in the prepared remarks, you're going to increase that investment by $45 million in the fourth quarter. How should we think about these investments for the out-year for 2020?

Yes. So again, I’d take you back to Boston and just remind you of the algorithm that we talked about. So in general we said we would maintain our level of investment as our revenue increased and we will start to see leverage that inflection point hit this year. And we expect to continue to see leverage as you look into next year and beyond. So that's the big picture. When we look at -- I think you should think about these incremental investments as an acceleration. It's not new initiatives. It’s things on our roadmap where we see evidence of return and we believe that by opportunistically advancing some of these investments we can either shore-up or even accelerate our top-line growth. So the first commitment is to the shareholder and delivering on our commitments. And you can and will expect leverage next year as when we get to the guidance. The other thing I'd say is if you are looking at the quarters and I know you're in the bowels of the model right now, but that 5% of our strategic investments, that’s -- there is a steady state of investment around those strategic priorities. And I mentioned some phasing. So there is some phasing of that baseline spending between Q3 and Q4. And in addition, we’ve made an incremental $45 million investment since the last time we talked 90 days ago. So all that says there is some noise between Q3 and Q4, that's why we’ve put in the prepared materials of first half, second half because I think that's more indicative of the underlying operating trend and performance of the business and kind of takes all that noise out so that you can really see what's going on.

Thank you. Our next question comes from the line of Sam Poser with Susquehanna. Please proceed with your question.

Good morning. Thank you for taking my question. I just want to follow-up. There was some shift of some expenses from third quarter to fourth quarter and that’s sort of excluding that $45 million?

Yes, that's right. And again, Sam, I mean we're not getting into the clarification. What I would just say to you again just repeating what I said to Laurent is, that's why the second half in our opinion is more indicative of the underlying trend of the business. Remember a year ago, you had a stub period, you had year-end change. There is a lot of mechanics around it, creates some noise as you look at quarter-to-quarter. That's why I would just reiterate that the second half is the best look to try to get a beat on what the trend of the business is.

And then, but I'm just going to ask a question. You talked about M&A and that you're well-positioned for it. And yesterday, there was a little bit of a story going around, and I wanted to know if you wanted to discuss anything regarding Manhattan Beach, California?

I'll answer that, Sam. Obviously, M&A continues to be our number one choice of our capital allocation. And I think you all know us well and you've seen how we have been reshaping our portfolio to align with where we see our strengths in the larger consumer marketplace across Active, Outdoor and Work. I would encourage you to remember those facts. And when you read things in the news like that, you don't necessarily always have to believe rumors.

And then just lastly. Could you talk a little bit about sort of the momentum in North Face and the evolution of the Timberland business and sort of how you're thinking about The North Face and Timberland over the next two years on a growth and sort of brand positioning perspective?

Sure. I'll start and if I leave something out, I know, Scott will fill it back in. First on The North Face, this is -- we've been on a multi-year journey, where we started first to kind of really reset that solid foundation with management, the work we did around cleaning up for distribution, the product segmentation, the investments behind product. And I think now you see really an elevated brand voice that’s pushing The North Face and their influence to the top of the conversation. And it's really coming from their focus on being purpose-led and the guiding principles that the leadership team has put in place. I think how you can think about this going forward Sam is that you will continue to see this brand innovate, the FUTURELIGHT product that I mentioned in my prepared remarks is a great proof point of our innovation engine, working on specific technologies that help differentiate our brands. And you will begin to see a methodical cadence season-by-season, new platforms, new stories that continue to elevate The North Face as that lead Outdoor brand and really tipping up their influence. And we've committed to the 6% to 8% growth over the five year period. As we said in our remarks, we see that high single-digit next year. The confidence that we have in the team, the strategy and how they're executing right now is what's reinforcing that. Timberland, it's really a lot of that same playbook that we've been talking about. We've reset our management team. We're surrounding that team now with really good design capability and creative talent. And that will only help enhance our work on diversifying the product offer, while respecting the classics, building out these new growth vectors and the diversification into these more lifestyle, women's and outerwear that will put us in a position to achieve the mid single-digit growth that we committed to in Boston. I'll be honest, Sam, we're a little bit behind that. But we were pretty clear what our trajectory would look like. Vans was strong when we spoke with you all in Boston. We committed to North Face accelerating and following North Face acceleration would come Timberland. And we're really seeing that work nicely. And with the Work vector that we've committed to delivering on its portion of our long-term growth, we really feel confident about the plan we’ve put forward and our ability to execute that.

Thank you. Our next question comes from the line of Camilo Lyon with Canaccord Genuity. Please proceed with your question.

Thanks. Good morning, guys. Great job on the quarter. Just circling back on Vans, in prior discussions of the last year I think the conversation around Vans was centered around managing its off-lending. This quarter seems to -- not even seems but clearly indicates that there's still a lot of growth and demand for the brand. And I think that in that prior soft landing sort of definition, you are really actively managing the wholesale piece with the DTC piece being the wildcard. So the question relates to this low double-digit growth expectation that you laid out for next year. If you could just parse out how you're thinking about those two channels from a growth rate contribution perspective? Because it seems you obviously have the ability to manage at wholesale, but the DTC component that continues to surprise to the upside. So I'm wondering what does that DTC component correspond to in that low double-digit expectation?

Yeah, I guess one thing before we even get into that, just a reminder since acquisition this brand has grown at a mid teen rate. And you think about the forward guidance being at a mid teen rate. So, over a very long period of time, the brand has demonstrated its ability to find that growth path -- those growth paths on a consistent basis. So if you think about D2C, high single to low double is what was in our long range plan. And we still see that as the long range. Again, when we come from our current level of performance and moderate into that, a lot of big numbers, hard comps, eventually we still believe that that is the long range growth path. Again, what makes it a little hard for Steve and I to get our hands on is, so far we have not seen even with the extremely large size of this business, we have still not seen that moderation at this point.

And, Camilo, this is one of our D2C and Digital are one of our key strategic choices and the investments that we're making on an annual basis and where we're able to put additional dollars behind that strategy. Vans is a large part of what's informing those investments and those dollars are being put to work there as they are in other brands. But their connection with their consumer, the growth of their loyalty program, how they use that Digital platform or our customs platform, it really is hard to call, when you have a brand that has such an intimate connection with a very unique and specific consumer group and they're able to execute that both online and in-store in a way that's consistent with their overall culture. We've modeled it to the best of our ability and we do believe over time that's where it will settle in. But right now is this brand here resets itself and claims that number three spot, we're really happy with the growth and we will continue to invest behind it because we think that is the differentiator for them but it’s also the differentiator for our larger platform of brands and how we’d be able to leverage that across our other big consumer-focused businesses.

I’ll just add one thing, you noticed, I think I commented earlier that we unusually for this point in the year gave some shaping to next year and we have visibility not quite as far in footwear as we do in some of the other businesses, but through late spring I’d say we can see visibility on the order book and that gives us confidence that we’re not going to see a massive slowdown from the wholesale side looking into next year. So that’s probably one of the things behind your question. Again, we do have more forward visibility and from everything we can see we continue to see that momentum.

Just to clarify, so with that comment on the wholesale piece you just made, Scott, it seems like the implied DTC in this low double-digit expectation is actually more conservative than the rate that you’ve been running at. Is that -- am I thinking about that correctly?

Yes, that’s right.

Okay, great.

So it could be better. Again we’re just -- we’ll be back in 90 days and give you an update.

Got it. And then just my second question, you have given great color on the regions and what you’re watching out from a macro perspective. I was just hoping to get maybe some high level color on the inventory in the channel of the big three brands by region and how you feel that looks coming out of the season?

I guess, I would just say in general inventories outreach out and in our own are generally clean and I would say even very clean. There are a few pockets I mentioned in Kontoor inventory and our in VF inventory we own, is elevated from where they that teams wants it to be and we’re taking actions to bring that in. But when you look at it in the total of VF, we’re happy with where we’re at, we’re in good shape.

Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Good morning everyone and congratulations on the results. On a couple of calls back you talked about the transforming of the industry and what’s happening in the apparel world. And you talked about refurbished goods and how each of the different brands would be transforming itself a little bit and how they distribute goods and how they sell goods. What are you seeing there, whether it’s a sustainable part, whether it’s subscription, whatever it maybe. What do you think there and how you’re planning? And then on another note, just workwear, any updates on the workwear and what you’re seeing there in terms of demand and growth and product initiatives for next year? And lastly, just components of SG&A and how they are planned? Thank you.

So, Dana, I’ll start with your first question on how we’re looking at some of these new models. Clearly the consumer is driving across the really the broad global space. We’ve had a couple pilots that we spoke to you about. North Face most notably, looking at really taking back products, refurbishing those products and then putting them back out for sale. We have a couple rental pilots that have been underway with our Kipling brand most notably in Europe. And in all cases these have proven to be very positive, very successful and advancing our ability to work more one-on-one with our consumers. So we will continue to expand on that. It's an area where we see investment not only here within the corporate center in being able to strengthen our understanding to build partnerships that will benefit our brand but it's also helping our brands find these places where they can connect and look for these new growth vectors beyond traditional wholesale and B2C. In the case of workwear, we -- what you see happening there is really the portfolio of brands that we've assembled here. Our historical strong brands like Red Kap and Bulwark, Timberland PRO, on the top end of our segmentation and in the middle sits Dickies. Working on bringing innovative products both in footwear and apparel, we've got some really interesting products around enhancing motion in apparel. Dickies bringing elements of stretch to their apparel, Red Kap really having been the key innovator there partnering with some of our Outdoor brands and understanding how to bring stretch into performance apparel of bringing it to Work to enhance the workers' experience and comfort in their day-to-day life. But I would say the most important thing around the Work is we see an evolving trend not only here in North America but in Europe of this emerging makers’ community. And we are extremely well-suited with our portfolio of brands to play to that consumer to participate and how they begin to define themselves and this is the area where we bring our brand building capabilities to bear and really position ourselves, define ourselves to these consumers and place ourselves in their everyday life to enhance their experiences. And you can really see this taking shape in much of our social media campaigns specifically with Dickies right now, but really confident in where we are with our Work evolution. And I’m happy to let Scott talk to you about the SG&A question.

It's going to be mostly around Work now, just kidding. So the SG&A algorithm is really unchanged, Dana, from what we've talked about in the Boston plan. They were focusing on distorting our investments against our strategic priorities, which we’ve consistently laid out, things like demand creation, data, digital, technology, our global business technology, advanced manufacturing, innovation et cetera. And there we're getting leverage on the back-end of the business, that's the power of our platforms, right? And so when you think about continue to invest in those drivers of growth, accelerated top-line and then leverage on the back-end, that's how you at the VF level see that the operating margin expansion through the combination of gross margin expansion and SG&A leverage.

Thank you. Our last question for this morning will come from the line of Alexandra Walvis with Goldman Sachs. Please proceed with your question.

You mentioned at the beginning that you were closely monitoring the situation in China and you've given some helpful color on your thoughts on that market before across the board and you saw pretty strong trends in that market and acceleration from the last quarter. I wonder if you could dive into that a little bit on how you're seeing the strength of the consumer, maybe how that splits across different consumer groups or areas of the country? And at the stage in time, thoughts on the outlook there?

I will go ahead and start and then Scott can fill in the blanks. Where we see the consumer is really through the lens of who are our specific consumers. In general, the economy though slowing is growing well and our consumers in the price points that we bring to market continue to resonate. And we feel we are in a really strong position in how our brands present themselves specifically through lifestyle component, the products from a seasonal basis and the price points position us very well to continue to compete, continue to grow. And I would just remind you that our penetration or overall brand awareness continues to have tremendous upside. And as we grow our influence, we'll see those numbers grow. But today, where we are, there continues to be a tremendous amount of headroom for us to grow in.

And just putting some numbers around that, we saw a pretty meaningful acceleration in our China business this year, approaching -- high-teens approaching 20% and in fact if you look at VF RemainCo, it's in the mid-20s this year after high single-digits a year ago. So nice acceleration in the business and that gives us confidence in our forward look for the region.

Thank you. This concludes our question-and-answer session. At this time, I'll turn the floor back to Mr. Rendle for any further comments.

Thank you everybody for joining us today. I would love to start-off by complementing and thanking our VF team across the globe. We have absolutely increased our metabolic rate. We have been doing a lot over the last 24 months to evolve and reshape ourselves into the company that you see us emerging as. And we could not do that without the talent and the commitment of our people. We're intently focused on executing our strategic plan. We're excited to help our Kontoor colleagues position themselves to stand up as an independent publicly traded company here as we move into the second quarter and position themselves for strength but concurrently position VF to continue our transformation and our long-term growth plans. So thank you for joining us today and we look forward to talking to you in May.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.