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Revenue Down By 6% For VF Corp In Q3

VF Corp, parent company to Vans and The North Face, between others, released their Q3 results and updated annual forecasts. Let’s have a look.

VF Corp made headlines late December with the $2B acquisition of Supreme. An ambitious move for an ambitious company; a move that should bring an additional $125M of revenue in Q4 2020 and much more in the following years.

Last quarter, VF implemented a new “Management Structure” around their Core and Emerging Brands Portfolio, re-shuffling the brands into two segments:

• Core: Vans, The North Face and Timberland, (Supreme?)
• Emerging: All other brands. (Altra, Icebreaker, Smartwool, Eagle Creek, Eastpak, Jansport, Kipling, Napapijri, Dickies.)

Efforts to counter COVID effects and set VFC on the path to long term success were met with exceptional results in Q2, saluted by the market. Alas, Q3 did not generate the same enthusiasm. Revenue was essentially aligned with market expectations (-6% vs LY) and VF raised its annual revenue forecast ($9.2B vs $9B), but shares lost 7% since the publication, due to degraded profitability.

In short:

Q3 Fiscal 2021 Highlights:

• Revenue decreased 6% to $3.0 billion driven by store closures and lower consumer demand as a result of the COVID-19 outbreak and related government actions and regulations.
• Gross margin decreased 250 basis points to 54.7%, primarily driven by elevated promotional activity to clear excess inventory and the timing of net foreign currency transaction activity.
• Inventories were down 14 percent compared with the same period last year.

Full Year Fiscal 2021 Outlook

• Revenue is now expected to be in the range of $9.1 billion to $9.2 billion, reflecting a decrease of 12 to 13 % on an adjusted basis. The updated outlook includes approximately $125 million of revenue from the Supreme  brand. This compares to the previous expectation of at least $9.0 billion.

• Adjusted earnings per share is expected to be approximately $1.30, reflecting a decrease of approximately 51%. The updated outlook includes approximately $0.05 of adjusted earnings per share from the Supreme^® brand. This compares to the previous expectation of at least $1.20, reflecting a decrease of approximately 55%.

• Adjusted free cash flow is now expected to be approximately $650 million. This compares to the previous expectation of greater than $600 million.

Europe, Middle East, Africa:
In terms of brands and geographies, The North Face performance in EMEA must be saluted. Boosted by both core technical products and best-in-class approach to the lifestyle market (hello TNF x Gucci collab), the brand has seen a +22% revenue increase in our region and a 16% revenue increase in Asia, compensating the Americas 12% fall.

In EMEA, Vans is down -9%, Timberland -11% while Dickies still grows at +7%.

Overall, in the EMEA region, VFC has been stable, growing +1% in the last three months.

Other regions:

• US are down -11%,
• Non-US America is down -17%
• APAC is up +6%, including +18% in Greater China.

In terms of channels, globally, wholesale is down 10% while Direct-To-Consumer is flat, thanks to positive a digital performance (+53%). The number of DTC stores remained stable at 1396 doors, VS 1397 in Q3 2019.

Will Q4 deliver the announced return to growth?