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V.F. (VFC) Up 23.1% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for V.F. (VFC - Free Report) . Shares have added about 23.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is V.F. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
V.F. Corp Q2 Earnings Miss Estimates, Sales Fall Y/Y
V.F. Corp reported soft second-quarter fiscal 2023 results, with the top and bottom lines missing the Zacks Consensus Estimate and declining from the year-ago quarter’s readings. Results were hurt by a tough operating environment, including the COVID-related disruption in China, macro-economic and geopolitical headwinds, and the near-term challenges at Vans.
Nonetheless, the resiliency of VFC’s brand portfolio and strength in the outdoor, active, streetwear and workwear units are tailwinds.
Q2 Highlights
V.F. Corp’s adjusted earnings per share of 73 cents declined 34% year over year and missed the Zacks Consensus Estimate by a penny. On a constant-currency (cc) basis, adjusted earnings per share were down 27%.
Net revenues of $3,080.6 million dipped 4% year over year and lagged the Zacks Consensus Estimate of $3,103 million. At cc, revenues were up 2%. The top line gained from growth in the EMEA and APAC regions, partly offset by lower sales in the Americas region. Revenues of the company’s big four brands were down 5% (up 1% at cc), while the rest of the portfolio increased 4% (up 13% at cc).
VFC’s Outdoor emerging brands in aggregate rose 14% on solid growth at Ultra, registering a double-digit growth rate in road running and trail running. Ultra grew in mid-teens in the Americas and triple-digits in EMEA. Globally, both wholesale and direct-to-consumer businesses recorded low single-digit growth in the quarter. Four of VFC’s five largest markets posted sturdy double-digit growth.
Revenues in the Americas were down 3% year over year on a reported basis and 3% at cc. In the EMEA region, revenues dipped 4% (up 12% at cc). APAC revenues decreased 6% on a reported basis (up 2% at cc), whereas revenues in Greater China fell 15% (down 10% at cc). V.F. Corp’s international revenues slipped 5% year over year on a reported basis (up 8% at cc).
Channel-wise, wholesale revenues were down 4% (up 3% at cc) year over year. In the direct-to-consumer channel, revenues declined 4% (down 1% at cc). The digital channel witnessed a revenue decline of 7% and 1% on a reported and cc basis, respectively.
Gross margin decreased 230 basis points (bps) to 51.4%, mainly driven by increased costs and promotional activity, partly offset by price increases. On an adjusted basis, gross margin decreased 240 bps to 51.5%.
Adjusted operating income decreased 29.1% year over year to $378.7 million. The adjusted operating margin contracted 440 bps to 12.3% due to lower gross margin.
Segmental Details
Revenues in the Outdoor segment rose 3% to $1,555.3 million (up 10% at cc). The Active segment reported revenues of $1,260.1 million, down 9% (down 4% at cc) year over year. Revenues in the Work segment fell 11% year over year (down 9% at cc) to $265.2 million.
Financial Details
V.F. Corp ended the fiscal first quarter with cash and cash equivalents of $552.8 million, long-term debt of $3,526.1 million and shareholders’ equity of $3,085.6 million. Inventories were up 88% year over year, amounting to $2,749.9 million.
For the six months ended September 2022, VFC used an operating cash flow of $914 million from the continuing operations. V.F. Corp returned $194 million to its shareholders through dividend payouts in the fiscal second quarter and $388 million in the first half. VFC declared a quarterly cash dividend of 51 cents per share, reflecting a 2% rise from the prior quarter’s dividend. This will be payable Dec 20, 2022, to its shareholders of record as of Dec 12.
Other Updates
V.F. Corp continues to adjust its business operations per the government guidelines associated with COVID-19. Most of its supply chain is operational at present. Although its raw material suppliers across China are currently operational, it saw an eight-week lockdown in China during the first quarter of fiscal 2023. This led to logistics-related issues causing ongoing product delays. VFC is working with its suppliers to minimize disruptions. Its distribution centers are operating in accordance with the government guidelines to maintain safety and health protocols.
All stores in North America and EMEA regions remained open during the reported quarter. In the APAC region, including Mainland China, no stores were shut at the start of the quarter with a peak of 7% stores (including partner doors) closed and an average of 3% of stores shuttered throughout the reported quarter. At the end of the reported quarter, 4% of stores were shut and currently 7% of stores are closed.
Outlook
For fiscal 2023, VFC is reaffirming its constant dollar revenue growth of 5-6%. It expects 6.5 points of impact from foreign currency fluctuations on reported revenues. Management expects North Face to grow at least 12%. Vans for will be down in the mid-single digits the fiscal year.
With a more impactful promotional landscape, reflecting the increased levels of inventory across the marketplace and the US dollar strengthening, VFC forecasts a year-over-year gross margin decline of 100-150 bps compared with the prior stated decline of 50 bps. Lower gross margin and higher foreign currency woes induce a fall of nearly 11% in the adjusted operating margin guidance, down from the earlier mentioned 12%.
V.F. Corp envisions earnings per share of $2.40-$2.50 compared with the $2.60-$2.70 stated earlier. Earnings per share of $3.18 were recorded last year. Management noted that VFC’s balance sheet remains sound, with liquidity likely to exceed $2.3 billion by the year-end.
Adjusted cash flow from operations is likely to be $0.9 billion for fiscal 2023. Capital expenditure is expected to be $230 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -10.13% due to these changes.
VGM Scores
Currently, V.F. has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise V.F. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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V.F. (VFC) Up 23.1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for V.F. (VFC - Free Report) . Shares have added about 23.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is V.F. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
V.F. Corp Q2 Earnings Miss Estimates, Sales Fall Y/Y
V.F. Corp reported soft second-quarter fiscal 2023 results, with the top and bottom lines missing the Zacks Consensus Estimate and declining from the year-ago quarter’s readings. Results were hurt by a tough operating environment, including the COVID-related disruption in China, macro-economic and geopolitical headwinds, and the near-term challenges at Vans.
Nonetheless, the resiliency of VFC’s brand portfolio and strength in the outdoor, active, streetwear and workwear units are tailwinds.
Q2 Highlights
V.F. Corp’s adjusted earnings per share of 73 cents declined 34% year over year and missed the Zacks Consensus Estimate by a penny. On a constant-currency (cc) basis, adjusted earnings per share were down 27%.
Net revenues of $3,080.6 million dipped 4% year over year and lagged the Zacks Consensus Estimate of $3,103 million. At cc, revenues were up 2%. The top line gained from growth in the EMEA and APAC regions, partly offset by lower sales in the Americas region. Revenues of the company’s big four brands were down 5% (up 1% at cc), while the rest of the portfolio increased 4% (up 13% at cc).
VFC’s Outdoor emerging brands in aggregate rose 14% on solid growth at Ultra, registering a double-digit growth rate in road running and trail running. Ultra grew in mid-teens in the Americas and triple-digits in EMEA. Globally, both wholesale and direct-to-consumer businesses recorded low single-digit growth in the quarter. Four of VFC’s five largest markets posted sturdy double-digit growth.
Revenues in the Americas were down 3% year over year on a reported basis and 3% at cc. In the EMEA region, revenues dipped 4% (up 12% at cc). APAC revenues decreased 6% on a reported basis (up 2% at cc), whereas revenues in Greater China fell 15% (down 10% at cc). V.F. Corp’s international revenues slipped 5% year over year on a reported basis (up 8% at cc).
Channel-wise, wholesale revenues were down 4% (up 3% at cc) year over year. In the direct-to-consumer channel, revenues declined 4% (down 1% at cc). The digital channel witnessed a revenue decline of 7% and 1% on a reported and cc basis, respectively.
Gross margin decreased 230 basis points (bps) to 51.4%, mainly driven by increased costs and promotional activity, partly offset by price increases. On an adjusted basis, gross margin decreased 240 bps to 51.5%.
Adjusted operating income decreased 29.1% year over year to $378.7 million. The adjusted operating margin contracted 440 bps to 12.3% due to lower gross margin.
Segmental Details
Revenues in the Outdoor segment rose 3% to $1,555.3 million (up 10% at cc). The Active segment reported revenues of $1,260.1 million, down 9% (down 4% at cc) year over year. Revenues in the Work segment fell 11% year over year (down 9% at cc) to $265.2 million.
Financial Details
V.F. Corp ended the fiscal first quarter with cash and cash equivalents of $552.8 million, long-term debt of $3,526.1 million and shareholders’ equity of $3,085.6 million. Inventories were up 88% year over year, amounting to $2,749.9 million.
For the six months ended September 2022, VFC used an operating cash flow of $914 million from the continuing operations. V.F. Corp returned $194 million to its shareholders through dividend payouts in the fiscal second quarter and $388 million in the first half. VFC declared a quarterly cash dividend of 51 cents per share, reflecting a 2% rise from the prior quarter’s dividend. This will be payable Dec 20, 2022, to its shareholders of record as of Dec 12.
Other Updates
V.F. Corp continues to adjust its business operations per the government guidelines associated with COVID-19. Most of its supply chain is operational at present. Although its raw material suppliers across China are currently operational, it saw an eight-week lockdown in China during the first quarter of fiscal 2023. This led to logistics-related issues causing ongoing product delays. VFC is working with its suppliers to minimize disruptions. Its distribution centers are operating in accordance with the government guidelines to maintain safety and health protocols.
All stores in North America and EMEA regions remained open during the reported quarter. In the APAC region, including Mainland China, no stores were shut at the start of the quarter with a peak of 7% stores (including partner doors) closed and an average of 3% of stores shuttered throughout the reported quarter. At the end of the reported quarter, 4% of stores were shut and currently 7% of stores are closed.
Outlook
For fiscal 2023, VFC is reaffirming its constant dollar revenue growth of 5-6%. It expects 6.5 points of impact from foreign currency fluctuations on reported revenues. Management expects North Face to grow at least 12%. Vans for will be down in the mid-single digits the fiscal year.
With a more impactful promotional landscape, reflecting the increased levels of inventory across the marketplace and the US dollar strengthening, VFC forecasts a year-over-year gross margin decline of 100-150 bps compared with the prior stated decline of 50 bps. Lower gross margin and higher foreign currency woes induce a fall of nearly 11% in the adjusted operating margin guidance, down from the earlier mentioned 12%.
V.F. Corp envisions earnings per share of $2.40-$2.50 compared with the $2.60-$2.70 stated earlier. Earnings per share of $3.18 were recorded last year. Management noted that VFC’s balance sheet remains sound, with liquidity likely to exceed $2.3 billion by the year-end.
Adjusted cash flow from operations is likely to be $0.9 billion for fiscal 2023. Capital expenditure is expected to be $230 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -10.13% due to these changes.
VGM Scores
Currently, V.F. has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise V.F. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.