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V.F. Corporation (VFC - Free Report) reported second-quarter fiscal 2024, wherein the bottom line lagged the Zacks Consensus Estimate, while the top line beat the same. Both metrics declined year over year.
Shares of VFC fell more than 7% before the trading session of Oct 31. This might be due to lowered guidance. This Zacks Rank #5 (Strong Sell) company has lost 10.3% in the past three months compared with the industry’s 7.4% decline.
Q2 Highlights
V.F. Corp’s adjusted earnings of 63 cents dropped 13.7% year over year and missed the Zacks Consensus Estimate of 65 cents per share.
Net revenues of $3,034 million fell 2% year over year but beat the consensus estimate of $2,995 million. At constant currency (cc), revenues also dipped 4% year over year.
Revenues in the Americas declined 11% year over year on a reported basis and at cc. In the EMEA region, revenues grew 14% (down 6% at cc). Revenues in the APAC region increased 2% on a reported basis (up 6% at cc). The company’s international revenues were up 10% year over year on a reported basis (up 5% at cc).
Channel-wise, wholesale and direct-to-consumer revenues were down 1% and 3% year over year on a reported basis, respectively. Meanwhile, our model estimated wholesale revenues to decline 5.4% and direct-to-consumer revenues to grow 3%. At cc, wholesale revenues fell 3%, while the same for the direct-to-consumer channel dropped 5%. Excluding Vans, direct-to-consumer revenues were up 9% in cc. Meanwhile, the digital channel witnessed a revenue decline of 3% on a reported basis and 5% on a cc basis.
The adjusted gross margin contracted 20 basis points (bps) to 51.3%. The metric reflected 50 bps of adverse rate impacts (including promotions), partly offset by a favorable mix of 20 bps and benefits of 10 bps of positive foreign currency exchange rates.
Adjusted operating income declined 4.1% year over year to $363.3 million. The adjusted operating margin of 12% was down 30 bps due to 30 bps of an adverse gross margin impact and 30 bps of deleverage, partly offset by 30 basis points of an adverse foreign currency exchange rate.
Image Source: Zacks Investment Research
Segmental Details
Revenues in the Outdoor segment rose 10% to $1,713.7 million (up 8% at cc) beating our estimate of 8.2% growth. The Active segment reported revenues of $1,082.3 million, down 14% year over year on a reported basis and 16% at cc. Our model predicted Active revenue to decline 12%. Revenues in the Work segment fell 10% year over year (down 11% at cc) to $238.3 million and came ahead of our estimate of 18% decline.
Financial Details
V.F. Corp ended the fiscal second quarter with cash and cash equivalents of $498.9 million, long-term debt of $5,656.7 million, and shareholders’ equity of $2,210 million. Inventories were up 10% year over year, amounting to $2,481.1 million.
In the six months ending Sep 30, 2023, the company used an operating cash flow of $19.3 million. It returned $117 million to shareholders through dividend payouts in the fiscal second quarter. The company declared a quarterly cash dividend of 9 cents per share, to be paid out on Dec 20, 2023, to shareholders of record as of Dec 11.
V.F. Corporation Price, Consensus and EPS Surprise
Management noted lower-than-expected progress at Vans or in the United States. As a result, it withdrew its previous fiscal 2024 revenue and earnings guidance. The free cash flow is likely to be $600 million, down from the prior mentioned $900 million. It anticipates a liquidity of $2.2 billion by the end of fiscal 2024.
The company does not expect any improvement in Vans' performance in the second half of fiscal 2024. Also, it foresees a tougher US wholesale environment.
That said, VFC introduced a transformation program, Reinvent, to enhance focus on brand-building and improve operating performance. The new plan focuses on four objectives, including improving North America performance, Vans’ turnaround, reducing costs and strengthening the balance sheet.
This large-scale cost-reduction program is expected to deliver $300 million in fixed cost savings by reducing spend in non-strategic areas, and simplifying and right-sizing its structure.
The Zacks Consensus Estimate for GES’ fiscal 2023 sales and EPS implies improvements of 3.4% and 9.9%, respectively, from the year-ago period’s reported levels.
MGM Resorts currently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 81%, on average.
The Zacks Consensus Estimate for MGM’s 2024 sales and EPS indicates year-over-year increases of 2.2% and 31%, respectively.
lululemon athletica, a yoga-inspired athletic apparel company, carries a Zacks Rank of 2 at present. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 17% and 18.4%, respectively, from the year-ago reported figures.
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V.F. Corp (VFC) Lags Q2 Earnings Estimates, Withdraws View
V.F. Corporation (VFC - Free Report) reported second-quarter fiscal 2024, wherein the bottom line lagged the Zacks Consensus Estimate, while the top line beat the same. Both metrics declined year over year.
Shares of VFC fell more than 7% before the trading session of Oct 31. This might be due to lowered guidance. This Zacks Rank #5 (Strong Sell) company has lost 10.3% in the past three months compared with the industry’s 7.4% decline.
Q2 Highlights
V.F. Corp’s adjusted earnings of 63 cents dropped 13.7% year over year and missed the Zacks Consensus Estimate of 65 cents per share.
Net revenues of $3,034 million fell 2% year over year but beat the consensus estimate of $2,995 million. At constant currency (cc), revenues also dipped 4% year over year.
Revenues in the Americas declined 11% year over year on a reported basis and at cc. In the EMEA region, revenues grew 14% (down 6% at cc). Revenues in the APAC region increased 2% on a reported basis (up 6% at cc). The company’s international revenues were up 10% year over year on a reported basis (up 5% at cc).
Channel-wise, wholesale and direct-to-consumer revenues were down 1% and 3% year over year on a reported basis, respectively. Meanwhile, our model estimated wholesale revenues to decline 5.4% and direct-to-consumer revenues to grow 3%. At cc, wholesale revenues fell 3%, while the same for the direct-to-consumer channel dropped 5%. Excluding Vans, direct-to-consumer revenues were up 9% in cc. Meanwhile, the digital channel witnessed a revenue decline of 3% on a reported basis and 5% on a cc basis.
The adjusted gross margin contracted 20 basis points (bps) to 51.3%. The metric reflected 50 bps of adverse rate impacts (including promotions), partly offset by a favorable mix of 20 bps and benefits of 10 bps of positive foreign currency exchange rates.
Adjusted operating income declined 4.1% year over year to $363.3 million. The adjusted operating margin of 12% was down 30 bps due to 30 bps of an adverse gross margin impact and 30 bps of deleverage, partly offset by 30 basis points of an adverse foreign currency exchange rate.
Image Source: Zacks Investment Research
Segmental Details
Revenues in the Outdoor segment rose 10% to $1,713.7 million (up 8% at cc) beating our estimate of 8.2% growth. The Active segment reported revenues of $1,082.3 million, down 14% year over year on a reported basis and 16% at cc. Our model predicted Active revenue to decline 12%. Revenues in the Work segment fell 10% year over year (down 11% at cc) to $238.3 million and came ahead of our estimate of 18% decline.
Financial Details
V.F. Corp ended the fiscal second quarter with cash and cash equivalents of $498.9 million, long-term debt of $5,656.7 million, and shareholders’ equity of $2,210 million. Inventories were up 10% year over year, amounting to $2,481.1 million.
In the six months ending Sep 30, 2023, the company used an operating cash flow of $19.3 million. It returned $117 million to shareholders through dividend payouts in the fiscal second quarter. The company declared a quarterly cash dividend of 9 cents per share, to be paid out on Dec 20, 2023, to shareholders of record as of Dec 11.
V.F. Corporation Price, Consensus and EPS Surprise
V.F. Corporation price-consensus-eps-surprise-chart | V.F. Corporation Quote
Outlook
Management noted lower-than-expected progress at Vans or in the United States. As a result, it withdrew its previous fiscal 2024 revenue and earnings guidance. The free cash flow is likely to be $600 million, down from the prior mentioned $900 million. It anticipates a liquidity of $2.2 billion by the end of fiscal 2024.
The company does not expect any improvement in Vans' performance in the second half of fiscal 2024. Also, it foresees a tougher US wholesale environment.
That said, VFC introduced a transformation program, Reinvent, to enhance focus on brand-building and improve operating performance. The new plan focuses on four objectives, including improving North America performance, Vans’ turnaround, reducing costs and strengthening the balance sheet.
This large-scale cost-reduction program is expected to deliver $300 million in fixed cost savings by reducing spend in non-strategic areas, and simplifying and right-sizing its structure.
Stocks to Consider
Some better-ranked companies are MGM Resorts (MGM - Free Report) , Guess (GES - Free Report) and lululemon athletica (LULU - Free Report) .
Guess currently sports a Zacks Rank of 1 (Strong Buy). GES has a trailing four-quarter earnings surprise of 43.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GES’ fiscal 2023 sales and EPS implies improvements of 3.4% and 9.9%, respectively, from the year-ago period’s reported levels.
MGM Resorts currently has a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 81%, on average.
The Zacks Consensus Estimate for MGM’s 2024 sales and EPS indicates year-over-year increases of 2.2% and 31%, respectively.
lululemon athletica, a yoga-inspired athletic apparel company, carries a Zacks Rank of 2 at present. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 17% and 18.4%, respectively, from the year-ago reported figures.