VF Corporation Reports First Quarter Results and Maintains FY24 Earnings Outlook

VF Corporation (NYSE: VFC) today announced financial results for its first quarter (Q1'FY24) ended July 1, 2023.

Q1'FY24 Financial Highlights

• Revenue down 8% to $2.1 billion
• Loss per share down 2% to $(0.15); adjusted loss per share $(0.15) vs. Q1'FY23 adjusted earnings per share $0.09

Bracken Darrell, President and CEO, said: “I am honored to lead this great company into the next chapter of its history. I am passionate about building brands through a design-and-innovation lens and creating unique and differentiated products, immersive storytelling and elevated experiences for consumers. VF has a portfolio of globally recognized, iconic brands, a deeply embedded purpose and impressive talent, all of which gives me every confidence we have all the necessary ingredients to unlock the company's significant potential and return to delivering strong, sustainable and profitable growth which will translate to elevated shareholder returns.”

Q1’FY24 Operating Highlights

• The North Face^® delivered its 10th consecutive quarter of double-digit constant dollar revenue growth, up 12%
• Vans^® down 22%, impacted by wholesale in the Americas (down 39% and down 40% in constant dollars) as the turnaround work continues at the brand
• Wholesale down 12%, including wholesale in the Americas down 18%
• Direct-to-Consumer (DTC) down 3% (down 2% in constant dollars) and up 6% excluding Vans^® (up 7% in constant dollars)
• International markets increased by 3% (up 4% in constant dollars)
  • Greater China up 24% (up 31% in constant dollars), leading further improvement in the APAC region of up 13% (up 18% in constant dollars)
  • EMEA revenue down 2% (down 3% in constant dollars), reflecting continued growth in DTC, but lower wholesale revenue

FY24 Outlook

• The company reiterates full year EPS guidance range of $2.05 to $2.25
• Revenue is now expected to be modestly down to flat for the year, reflecting ongoing weakness in our wholesale business and a longer than anticipated turnaround for Vans
• Free cash flow is expected to be in line with previous guidance of approximately $900 million

Matt Puckett, CFO, said: “While our Q1 performance is not reflective of our standards, we achieved our earnings target in the quarter. We remain focused on improving our operational execution, although it will take time for our revenue performance to benefit from actions that are underway. We are well positioned to advance our key priorities this year with an emphasis on increasing operating earnings through improved gross margins, generating healthy cash flow and reducing debt, all of which lead to a strengthened financial position.”

Q1'FY24 Income Statement Review

• Revenue $2.1 billion, down 8% with the big four brands down 11% and the balance of the portfolio up 7%
  • The North Face^® revenue $0.5 billion, up 12%
  • Vans^® revenue $0.7 billion, down 22%
• Gross margin 52.8%, down 110 basis points; Adjusted gross margin 52.8%, down 130 basis points due primarily to increased promotions
  • Adjusted gross margin headwinds include 200 basis points of unfavorable rate impact (including promotions) and 10 basis points of adverse foreign currency exchange rates, partially offset by 80 basis points of mix benefits
• Operating margin (0.4)%, down 320 basis points; adjusted operating margin (0.4)%, down 380 basis points
  • Adjusted operating margin contraction driven by 130 basis points of unfavorable gross margin impact and 250 basis points of deleverage
• Loss per share of $(0.15), down 2%; adjusted loss per share $(0.15) vs. Q1'FY23 adjusted earnings per share $0.09

Q1'FY24 Balance Sheet Review

• Inventories increased by $446 million during Q1’FY24, up 19% relative to last year; primarily driven by core and excess replenishment inventory
  • VF modified terms with the majority of its suppliers in the first quarter of fiscal 2023 to take ownership of inventory near point of shipment rather than destination; this program has now been fully lapped in Q1
• Accounts payable increased 25% relative to last year, which was largely driven by the modified terms with the majority of suppliers

Q1’FY24 Shareholder Returns

• Return of $117 million to shareholders through cash dividends
• VF’s Board of Directors declared a quarterly dividend of $0.30 per share. This dividend will be payable on September 20, 2023, to shareholders of record at the close of business on September 11, 2023. Subject to approval by its Board of Directors, VF intends to continue to pay quarterly dividends

Webcast Information

VF will host its first quarter fiscal 2024 conference call beginning at 4:30 p.m. Eastern Time today. The conference call will be broadcast live via the Internet, accessible at ir.vfc.com. For those unable to listen to the live broadcast, an archived version will be available at the same location.

About VF

Founded in 1899, VF Corporation is one of the world’s largest apparel, footwear and accessories companies connecting people to the lifestyles, activities and experiences they cherish most through a family of iconic outdoor, active and workwear brands including Vans^®, The North Face^®, Timberland^® and Dickies^®. Our purpose is to power movements of sustainable and active lifestyles for the betterment of people and our planet. We connect this purpose with a relentless drive to succeed to create value for all stakeholders and use our company as a force for good. For more information, please visit vfc.com.

Financial Presentation Disclosure

All per share amounts are presented on a diluted basis. This release refers to “reported” and “constant dollar” amounts, terms that are described under the heading below “Constant Currency - Excluding the Impact of Foreign Currency.” Unless otherwise noted, “reported” and “constant dollar” amounts are the same. This release also refers to “adjusted” amounts, a term that is described under the heading below “Adjusted Amounts - Excluding Transaction and Deal Related Activities.” Unless otherwise noted, “reported” and “adjusted” amounts are the same.

Constant Currency - Excluding the Impact of Foreign Currency

This release refers to “reported” amounts in accordance with U.S. generally accepted accounting principles (“GAAP”), which include translation and transactional impacts from foreign currency exchange rates. This release also refers to “constant dollar” amounts, which exclude the impact of translating foreign currencies into U.S. dollars. Reconciliations of GAAP measures to constant currency amounts are presented in the supplemental financial information included with this release, which identifies and quantifies all excluded items, and provides management’s view of why this information is useful to investors.

Adjusted Amounts - Excluding Transaction and Deal Related Activities

The adjusted amounts in this release exclude transaction and deal related activities associated with the review of strategic alternatives for the Global Packs business, consisting of the Kipling^®, Eastpak^® and JanSport^® brands. Total transaction and deal related activities include costs of approximately $1 million in the first quarter of fiscal 2024.

All adjusted amounts referenced herein exclude the effects of these amounts.

Reconciliations of measures calculated in accordance with GAAP to adjusted amounts are presented in the supplemental financial information included with this release, which identifies and quantifies all excluded items, and provides management’s view of why this information is useful to investors. The company also provides guidance on a non-GAAP basis as we cannot predict certain elements which are included in reported GAAP results.

Forward-looking Statements

Certain statements included in this release are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting VF and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” and “may” and other words and terms of similar meaning or use of future dates, however, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding VF’s plans, objectives, projections and expectations relating to VF’s operations or financial performance, and assumptions related thereto are forward-looking statements. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. VF undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Potential risks and uncertainties that could cause the actual results of operations or financial condition of VF to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: the level of consumer demand for apparel and footwear; disruption to VF’s distribution system; changes in global economic conditions and the financial strength of VF’s customers, including as a result of current inflationary pressures; fluctuations in the price, availability and quality of raw materials and finished products; disruption and volatility in the global capital and credit markets; VF’s response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; VF's ability to maintain the image, health and equity of its brands; intense competition from online retailers and other direct-to-consumer business risks; third-party manufacturing and product innovation; increasing pressure on margins; VF’s ability to implement its business strategy; VF’s ability to grow its international, direct-to-consumer and digital businesses; VF’s ability to find and amplify consumer tailwinds, build brands on multiple growth horizons and leverage platforms for speed to scale and efficiency; retail industry changes and challenges; VF’s ability to create and maintain an agile and efficient operating model and organizational structure; VF’s and its vendors’ ability to maintain the strength and security of information technology systems; the risk that VF’s facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data or information security breaches and data or financial loss; VF’s ability to properly collect, use, manage and secure business, consumer and employee data and comply with privacy and security regulations; foreign currency fluctuations; stability of VF’s vendors’ manufacturing facilities and VF’s ability to establish and maintain effective supply chain capabilities; continued use by VF’s suppliers of ethical business practices; VF’s ability to accurately forecast demand for products; VF’s ability to recruit, develop or retain key executive or employee talent or successfully transition executives; continuity of members of VF’s management; changes in the availability and cost of labor; VF’s ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment such as the impairment charges related to the Supreme^® reporting unit goodwill and indefinite-lived trademark intangible asset; maintenance by VF’s licensees and distributors of the value of VF’s brands; VF’s ability to execute acquisitions and dispositions, integrate acquisitions and manage its brand portfolio; business resiliency in response to natural or man-made economic, public health, political or environmental disruptions; changes in tax laws and additional tax liabilities, including for the timing of income inclusion associated with our acquisition of the Timberland^® brand in 2011; legal, regulatory, political, economic, and geopolitical risks, including those related to the current conflict in Ukraine; changes to laws and regulations; adverse or unexpected weather conditions, including any potential effects from climate change; VF's indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent VF from fulfilling its financial obligations; VF's ability to pay and declare dividends or repurchase its stock in the future; climate change and increased focus on environmental, social and governance issues; VF's ability to execute on its sustainability strategy and achieve its sustainability related goals and targets; risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; and tax risks associated with the spin-off of our Jeanswear business completed in 2019. More information on potential factors that could affect VF’s financial results is included from time to time in VF’s public reports filed with the SEC, including VF’s Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished with the SEC.

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