VF Corporation Reports First Quarter Results And Maintains FY24 Earnings Outlook

VF Corporation (NYSE: VFC) has 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