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V.F. Corp (VFC) Stock Declines as Q2 Earnings & Revenues Miss
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Shares of V.F. Corporation (VFC - Free Report) fell more than 3% before the market trading session on Oct 22, following the drab second-quarter fiscal 2022 results. Both top and bottom lines lagged the Zacks Consensus Estimate, while the metrics grew year over year. The company’s road to recovery was affected by pandemic-led disruptions. However, positive demand trends have led management to retain its fiscal 2022 view.
Shares of this Zacks Rank #4 (Sell) company have declined 10.3% in the past three months against the industry’s growth of 1.5%.
Q2 Highlights
V.F. Corp’s adjusted earnings per share of $1.11 surged 66% from the year-ago quarter’s levels. However, the bottom line lagged the Zacks Consensus Estimate of $1.17. On a constant-currency (cc) basis, adjusted earnings per share were up 63%. Earnings per share included a 2 cent contribution from acquisitions.
Net revenues of $3,198.2 million rose 23% year over year but missed the Zacks Consensus Estimate of $3,501 million. At cc, revenues were up 21%. Without the impacts of acquisitions, revenues rallied 19% (up 17% at cc) on gains from VF's largest brands. The top line also gained from growth in the EMEA and North America regions, which experienced pandemic-led negative impacts in the prior-year quarter.
Revenues in the United States were up 27% year over year on a reported basis and at cc. Revenues in the Americas (non-U.S.) increased 29% (up 22% at cc). In the EMEA region, revenues rose 19% (up 17% at cc). APAC revenues increased 13% on a reported basis (up 8% at cc) and the same in Greater China improved 9% (up 3% at cc). The company’s international revenues were up 18% year over year on a reported basis (up 15% at cc).
Channel-wise, wholesale revenues were up 17% year over year (up 16% at cc). Revenues in the company’s direct-to-consumer business advanced 32% (up 31% at cc), while digital revenues advanced 24% (up 22% at cc).
The adjusted gross margin expanded 300 basis points (bps) to 53.9%, including a 20 bps gain from acquisitions.
The adjusted operating income increased 56% (up 53% at cc) year over year to $534 million, while the adjusted operating margin expanded 360 bps to 16.7%. The adjusted operating income included acquisition-related contributions of $8 million.
Image Source: Zacks Investment Research
Segmental Details
Revenues in the Active segment rose 16% to $1,392.2 million (up 14% at cc). The Outdoor segment reported revenues of $1,506.6 million, up 31% year over year (28% growth at cc). Revenues in the Work segment grew 18% year over year (up 17% at cc) to $299.2 million.
Financial Details
V.F. Corp ended the fiscal second quarter with cash and cash equivalents of $1,360.1 million, long-term debt of $4,682.8 million, and shareholders’ equity of $3,598.5 million. Inventories were up 2% year over year, amounting to $1,464.7 million.
For the six months ended September 2021, the company used an operating cash flow of $171.1 million. It returned $192 million to shareholders through dividend payouts.
The company declared a quarterly cash dividend of 50 cents per share, payable Dec 20, 2021, to shareholders of record as of Dec 10.
As part of its liquidity-preservation actions amid the coronavirus outbreak, V.F. Corp previously suspended its share-repurchase program temporarily. It then issued a $2.8 billion share-repurchase authorization, which was again suspended on Apr 7, 2020, as a precautionary measure against the pandemic.
Other Updates
V.F. Corp continues to adjust its business operations per the government guidelines associated with the COVID-19 pandemic. Although the majority of the company’s supply chains are currently operational, it has witnessed manufacturing capacity constraints in the fiscal second quarter due to the resurgence of lockdowns in certain countries. Port delays, equipment availability and other logistics challenges have also been dragging.
The company is working with its suppliers to minimize disruptions. Its distribution centers are operating in accordance with government guidelines to maintain safety and health protocols. All stores in North America and EMEA regions were open in the fiscal second quarter, while only 5% of stores in the APAC region, including Mainland China, were closed at the beginning of the quarter. Currently, all stores are operating. However, management expects business disruptions to persist in the near term.
V.F. Corporation Price, Consensus and EPS Surprise
Despite the ongoing disruptions and sluggish quarterly results, management retained its fiscal 2022 view. It expects revenues of $12 billion, which suggests year-over-year growth of 30%. The guidance includes $600 million of revenue contribution from the Supreme brand. The Zacks Consensus Estimate for fiscal 2022 revenues is pegged at $11.9 billion.
On a segmental basis, the company expects revenue growth of 25-27% for Outdoor, up from the prior mentioned 24-26%, and 19-20% for the Work segment, up from the previously communicated 16-18%. Meanwhile, it anticipates revenues in the Active segment to grow 35-39%, down from the earlier mentioned 37-39% rise.
International revenues are predicted to rise 24-26%, down from the prior mentioned 25-27%. Region-wise, revenues in EMEA are expected to increase 30-32%, up from the earlier stated 29-31%, along with 30-32% growth in the Americas (non-U.S.) region, up from the previously mentioned 28-30% rise. However, revenues in the APAC region are expected to rise 12-14%, down from the previously stated 18-20%. The company predicts direct-to-consumer revenue growth of 34-36%, down from 39-41% mentioned earlier. This includes 20% growth in digital revenues, down from the earlier stated 29-31%.
The company anticipates an adjusted gross margin of 56%, suggesting growth of 270 bps year over year. It expects an adjusted operating margin of 13%, suggesting growth of 500 bps.
V.F. Corp continues to envision adjusted earnings per share of $3.20, including a contribution from the Supreme brand of 25 cents. The Zacks Consensus Estimate for fiscal 2022 earnings is currently pegged at $3.13.
The company expects an adjusted operating cash flow of $1 billion for fiscal 2022. It expects an effective tax rate of 15% and a capital expenditure of $350 million.
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V.F. Corp (VFC) Stock Declines as Q2 Earnings & Revenues Miss
Shares of V.F. Corporation (VFC - Free Report) fell more than 3% before the market trading session on Oct 22, following the drab second-quarter fiscal 2022 results. Both top and bottom lines lagged the Zacks Consensus Estimate, while the metrics grew year over year. The company’s road to recovery was affected by pandemic-led disruptions. However, positive demand trends have led management to retain its fiscal 2022 view.
Shares of this Zacks Rank #4 (Sell) company have declined 10.3% in the past three months against the industry’s growth of 1.5%.
Q2 Highlights
V.F. Corp’s adjusted earnings per share of $1.11 surged 66% from the year-ago quarter’s levels. However, the bottom line lagged the Zacks Consensus Estimate of $1.17. On a constant-currency (cc) basis, adjusted earnings per share were up 63%. Earnings per share included a 2 cent contribution from acquisitions.
Net revenues of $3,198.2 million rose 23% year over year but missed the Zacks Consensus Estimate of $3,501 million. At cc, revenues were up 21%. Without the impacts of acquisitions, revenues rallied 19% (up 17% at cc) on gains from VF's largest brands. The top line also gained from growth in the EMEA and North America regions, which experienced pandemic-led negative impacts in the prior-year quarter.
Revenues in the United States were up 27% year over year on a reported basis and at cc. Revenues in the Americas (non-U.S.) increased 29% (up 22% at cc). In the EMEA region, revenues rose 19% (up 17% at cc). APAC revenues increased 13% on a reported basis (up 8% at cc) and the same in Greater China improved 9% (up 3% at cc). The company’s international revenues were up 18% year over year on a reported basis (up 15% at cc).
Channel-wise, wholesale revenues were up 17% year over year (up 16% at cc). Revenues in the company’s direct-to-consumer business advanced 32% (up 31% at cc), while digital revenues advanced 24% (up 22% at cc).
The adjusted gross margin expanded 300 basis points (bps) to 53.9%, including a 20 bps gain from acquisitions.
The adjusted operating income increased 56% (up 53% at cc) year over year to $534 million, while the adjusted operating margin expanded 360 bps to 16.7%. The adjusted operating income included acquisition-related contributions of $8 million.
Segmental Details
Revenues in the Active segment rose 16% to $1,392.2 million (up 14% at cc). The Outdoor segment reported revenues of $1,506.6 million, up 31% year over year (28% growth at cc). Revenues in the Work segment grew 18% year over year (up 17% at cc) to $299.2 million.
Financial Details
V.F. Corp ended the fiscal second quarter with cash and cash equivalents of $1,360.1 million, long-term debt of $4,682.8 million, and shareholders’ equity of $3,598.5 million. Inventories were up 2% year over year, amounting to $1,464.7 million.
For the six months ended September 2021, the company used an operating cash flow of $171.1 million. It returned $192 million to shareholders through dividend payouts.
The company declared a quarterly cash dividend of 50 cents per share, payable Dec 20, 2021, to shareholders of record as of Dec 10.
As part of its liquidity-preservation actions amid the coronavirus outbreak, V.F. Corp previously suspended its share-repurchase program temporarily. It then issued a $2.8 billion share-repurchase authorization, which was again suspended on Apr 7, 2020, as a precautionary measure against the pandemic.
Other Updates
V.F. Corp continues to adjust its business operations per the government guidelines associated with the COVID-19 pandemic. Although the majority of the company’s supply chains are currently operational, it has witnessed manufacturing capacity constraints in the fiscal second quarter due to the resurgence of lockdowns in certain countries. Port delays, equipment availability and other logistics challenges have also been dragging.
The company is working with its suppliers to minimize disruptions. Its distribution centers are operating in accordance with government guidelines to maintain safety and health protocols. All stores in North America and EMEA regions were open in the fiscal second quarter, while only 5% of stores in the APAC region, including Mainland China, were closed at the beginning of the quarter. Currently, all stores are operating. However, management expects business disruptions to persist in the near term.
V.F. Corporation Price, Consensus and EPS Surprise
V.F. Corporation price-consensus-eps-surprise-chart | V.F. Corporation Quote
Outlook
Despite the ongoing disruptions and sluggish quarterly results, management retained its fiscal 2022 view. It expects revenues of $12 billion, which suggests year-over-year growth of 30%. The guidance includes $600 million of revenue contribution from the Supreme brand. The Zacks Consensus Estimate for fiscal 2022 revenues is pegged at $11.9 billion.
On a segmental basis, the company expects revenue growth of 25-27% for Outdoor, up from the prior mentioned 24-26%, and 19-20% for the Work segment, up from the previously communicated 16-18%. Meanwhile, it anticipates revenues in the Active segment to grow 35-39%, down from the earlier mentioned 37-39% rise.
International revenues are predicted to rise 24-26%, down from the prior mentioned 25-27%. Region-wise, revenues in EMEA are expected to increase 30-32%, up from the earlier stated 29-31%, along with 30-32% growth in the Americas (non-U.S.) region, up from the previously mentioned 28-30% rise. However, revenues in the APAC region are expected to rise 12-14%, down from the previously stated 18-20%. The company predicts direct-to-consumer revenue growth of 34-36%, down from 39-41% mentioned earlier. This includes 20% growth in digital revenues, down from the earlier stated 29-31%.
The company anticipates an adjusted gross margin of 56%, suggesting growth of 270 bps year over year. It expects an adjusted operating margin of 13%, suggesting growth of 500 bps.
V.F. Corp continues to envision adjusted earnings per share of $3.20, including a contribution from the Supreme brand of 25 cents. The Zacks Consensus Estimate for fiscal 2022 earnings is currently pegged at $3.13.
The company expects an adjusted operating cash flow of $1 billion for fiscal 2022. It expects an effective tax rate of 15% and a capital expenditure of $350 million.
3 Better-Ranked Stocks to Consider
PVH Corp (PVH - Free Report) currently sports a Zacks Rank #1 (Strong Buy) and has a long-term earnings growth rate of 59.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Carter’s (CRI - Free Report) currently has an impressive long-term earnings growth rate of 21.1% and a Zacks Rank #2 (Buy).
Lululemon Athletica (LULU - Free Report) has a long-term earnings growth rate of 20%. The company has a Zacks Rank #2 at present.