VF Corporation Reports Third Quarter Fiscal 2024 Results And Announces Strategic Portfolio Review
VF Corporation (NYSE: VFC) has reported financial results for its third quarter (Q3'FY24) ended December 30, 2023, announcing a quarterly per share dividend of $0.09 and reiterating FY24 free cash flow guidance.
Q3'FY24 Financial and Operating Highlights
- Revenue down 16% (down 17% in constant dollars) to $3.0 billion
- The quarter was negatively impacted by a shift in timing of wholesale deliveries, which was most pronounced for The North Face and the EMEA region
- Loss per share $(0.11) versus Q3'FY23 earnings per share $1.31; adjusted earnings per share $0.57 versus Q3'FY23 adjusted earnings per share $1.12
- The North Face® down 10% (down 11% in constant dollars); in the first nine months of FY'24 revenue is up 4% (up 3% in constant dollars)
- APAC region up 26% (up 28% in constant dollars), including Greater China up 31% (up 32% in constant dollars)
- Vans® down 28% (down 29% in constant dollars), inclusive of deliberate actions taken to right-size inventories in the Wholesale channel
- Americas region down 24% (down 25% in constant dollars)
- International business down 5% (down 8% in constant dollars)
- APAC region up 2% (up 3% in constant dollars), including Greater China up 5% (up 7% in constant dollars)
- EMEA region revenue down 7% (down 12% in constant dollars)
- Inventories at the end of Q3'FY24 down 17% relative to last year
- Net debt at the end of Q3'FY24 reduced by approximately $640 million relative to last year
Bracken Darrell, President and CEO, said: "Our third quarter top-line performance was disappointing. However, we are confident the actions we are implementing as part of Reinvent will enable VF to stabilize and then grow revenue and improve operational performance across brands and regions. We have already begun to see the impact of our efforts to right-size the company’s cost structure and improve its inventory position, resulting in stronger than expected cash flow and expanded gross margin in the quarter. This quarter marked the beginning of the next phase of our transformation plan: resetting the marketplace for Vans, reviewing our brand portfolio and continuing to build the organization of the future. As we approach the end of this fiscal year, my confidence in VF’s future is rising."
Reinvent
During the quarter, the company continued to execute the Reinvent transformation program, which aims to enhance focus on brand-building and to improve operating performance. The initial four priorities of Reinvent are to improve North America results, deliver the Vans turnaround, reduce costs and strengthen the balance sheet. The company will continue to pursue opportunities to simplify and streamline its processes and invest in the business to drive brand heat and accelerate a return to growth.
Strategic Portfolio Review
Consistent with the goals of Reinvent, VF has initiated an in-depth strategic review of the brand assets within the portfolio, in alignment with the Board of Directors, to ensure the company owns the brands that it believes create the greatest long-term value.
FY24 Outlook
The company reaffirmed its free cash flow guidance for FY24 of approximately $600 million.
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Summary Revenue Information (Unaudited) |
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Three Months Ended December |
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Nine Months Ended December |
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(Dollars in millions) |
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2023 |
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2022 |
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% Change |
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% Change (constant currency) |
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2023 |
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2022 |
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% Change |
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% Change (constant currency) |
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Brand: |
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Vans® |
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$ |
668.2 |
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$ |
926.9 |
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(28 |
)% |
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(29 |
)% |
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$ |
2,154.5 |
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$ |
2,825.9 |
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(24 |
)% |
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(25 |
)% |
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The North Face® |
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|
1,192.1 |
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|
1,321.2 |
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(10 |
)% |
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(11 |
)% |
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|
2,859.0 |
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2,753.2 |
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4 |
% |
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3 |
% |
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Timberland® |
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473.0 |
|
|
595.5 |
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(21 |
)% |
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(22 |
)% |
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|
1,215.5 |
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1,389.1 |
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(13 |
)% |
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(14 |
)% |
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Dickies® |
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|
147.9 |
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177.0 |
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(16 |
)% |
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(17 |
)% |
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|
456.0 |
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|
533.7 |
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(15 |
)% |
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(15 |
)% |
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Other Brands |
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|
479.1 |
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|
510.1 |
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(6 |
)% |
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(7 |
)% |
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|
1,395.9 |
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|
1,371.0 |
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2 |
% |
|
1 |
% |
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VF Revenue |
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$ |
2,960.3 |
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$ |
3,530.7 |
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(16 |
)% |
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(17 |
)% |
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$ |
8,080.9 |
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$ |
8,872.9 |
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(9 |
)% |
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(10 |
)% |
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|
|
|
|
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Region: |
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Americas |
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$ |
1,586.4 |
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$ |
2,093.9 |
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(24 |
)% |
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(25 |
)% |
|
$ |
4,338.7 |
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$ |
5,233.1 |
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(17 |
)% |
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(17 |
)% |
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EMEA |
|
|
912.3 |
|
|
983.3 |
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(7 |
)% |
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(12 |
)% |
|
|
2,558.7 |
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|
2,510.4 |
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2 |
% |
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(3 |
)% |
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APAC |
|
|
461.6 |
|
|
453.4 |
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2 |
% |
|
3 |
% |
|
|
1,183.5 |
|
|
1,129.3 |
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5 |
% |
|
8 |
% |
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VF Revenue |
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$ |
2,960.3 |
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$ |
3,530.7 |
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(16 |
)% |
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(17 |
)% |
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$ |
8,080.9 |
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$ |
8,872.9 |
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(9 |
)% |
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(10 |
)% |
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International |
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$ |
1,546.2 |
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$ |
1,629.3 |
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(5 |
)% |
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(8 |
)% |
|
$ |
4,229.6 |
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$ |
4,132.7 |
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2 |
% |
|
0 |
% |
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Channel: |
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DTC |
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$ |
1,786.2 |
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$ |
1,937.4 |
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(8 |
)% |
|
(9 |
)% |
|
$ |
3,871.4 |
|
$ |
4,082.6 |
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(5 |
)% |
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(6 |
)% |
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Wholesale (a) |
|
|
1,174.1 |
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|
1,593.3 |
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(26 |
)% |
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(28 |
)% |
|
|
4,209.5 |
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|
4,790.3 |
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(12 |
)% |
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(14 |
)% |
|
VF Revenue |
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$ |
2,960.3 |
|
$ |
3,530.7 |
|
(16 |
)% |
|
(17 |
)% |
|
$ |
8,080.9 |
|
$ |
8,872.9 |
|
(9 |
)% |
|
(10 |
)% |
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All references to the periods ended December 2023 relate to the 13-week and 39-week fiscal periods ended December 30, 2023 and all references to the periods ended December 2022 relate to the 13-week and 39-week fiscal periods ended December 31, 2022. |
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Note: Amounts may not sum due to rounding |
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(a) Royalty revenues are included in the wholesale channel for all periods. |
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Q3'FY24 Income Statement Review
- Revenue $3.0 billion, down 16% (down 17% in constant dollars)
- Gross margin 55.1%, up 20 basis points; adjusted gross margin 55.3%, up 40 basis points
- Adjusted gross margin tailwinds of approximately 175 basis points from favorable mix, partially offset by headwinds of approximately 135 basis points of unfavorable rate impact, largely driven by transactional foreign exchange rates
- Operating margin (1.1)%, down 1,570 basis points; adjusted operating margin 9.3%, down 560 basis points
- Adjusted operating margin contraction driven by 610 basis points of deleverage, partially offset by 40 basis points of favorable constant currency gross margin impact and 10 basis points of translational foreign currency exchange rate benefits
- Loss per share $(0.11) versus Q3'FY23 earnings per share $1.31; adjusted earnings per share $0.57 versus Q3'FY23 adjusted earnings per share $1.12
Balance Sheet Highlights
- Inventories decreased by $333 million during Q3’FY24, down 17% relative to last year
- Net debt at the end of Q3'FY24 reduced by approximately $640 million relative to last year
Shareholder Returns
- Return of $35 million to shareholders through cash dividends in Q3'FY24
- VF’s Board of Directors declared a quarterly dividend of $0.09 per share. This dividend will be payable on March 20, 2024, to shareholders of record at the close of business on March 11, 2024. Subject to approval by its Board of Directors, VF intends to continue to pay quarterly dividends.
