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VF Corporation Report 8% Increase in Vans Revenue For Q2 2022

VF Corporation report their Second Quarter fiscal 2022 is not quite as expected, but the Corporation reaffirms their full year fiscal 2022 earnings outlook.

VF Corp missed Wall Street estimates for quarterly results on Friday, as the Vans owner grappled with a resurgence of COVID-19 infections in Vietnam and China and disruptions to its supply chain that led to product delays. “Virtually all of our brands are experiencing delayed collections, styles and, in some cases, insufficient size assortment,” VF’s Chief Financial Officer Matt Puckett said on an earnings call. The company said demand for its sneakers and clothing in China also softened due to rising COVID-19 cases, with revenue from Greater China in the quarter grew only 9%, compared with a 16% rise last year, mainly due to lower demand for the Vans brand. Additionally soaring freight costs, labor shortages and higher prices for raw materials have also been pinching the margins. Vans performance was lower than VF’s other three big brands for the quarter with revenue increase of 7% compaed to The North Face 29%, Timberland 25%, and Dickies increased 19%. Vans was particularly impacted by a big decline in traffic in August during the key back-to-school season, VF, maintained its revenue and profit outlook for fiscal 2022, saying the factory closures were chiefly concentrated in southern Vietnam, which accounts for about 10% of its sourcing.

Revenue from continuing operations increased 23 percent to $3.2 billion; excluding acquisitions, revenue increased 19%. Active segment revenue increased 16% including an 8 percent increase in Vans® brand revenue and an 8% revenue growth contribution from acquisitions; Outdoor segment revenue increased 31% including a 31% increase in The North Face® brand revenue; Work segment revenue increased 18 % including a 21% increase in Dickies® brand revenue.

International revenue increased 18% including a 2% point revenue growth contribution from acquisitions; Europe revenue increased 19%, Greater China revenue increased 9 percent, including a 9% increase in Mainland China.

Direct-to-Consumer revenue increased 32% including an 11% revenue growth contribution from acquisitions.

Digital revenue increased 24% versus the prior year including a 19% point revenue growth contribution from acquisitions; excluding acquisitions, digital revenue increased 54% versus the second quarter of fiscal 2020.

Gross margin from continuing operations increased 290 basis points to 53.7% on an adjusted basis, gross margin increased 300 basis points to 53.9% including a 20 basis point positive impact from acquisitions.

Operating income from continuing operations on a reported basis was $558 million; on an adjusted basis, operating income from continuing operations increased 56% to $534 million including an $8 million contribution from acquisitions.

Full year fiscal 2022 revenue is now expected to be approximately $12.0 billion, reflecting growth of around 30%, including an approximate $600 million contribution from the Supreme® brand.

Second Quarter Fiscal 2022 Income Statement Review
Revenue increased 23% to $3.2 billion. Excluding the impact of acquisitions, revenue increased 19% driven by the EMEA and North American regions, which experienced a negative impact from COVID-19 in the prior year period. VF’s wholesale business continues to be materially impacted by the timing of shipments due to port delays and logistics challenges. Gross margin increased 290 basis points to 53.7%, primarily driven by reduced promotional activity. On an adjusted basis, gross margin increased 300 basis points, including a 20 basis point positive impact from acquisitions, to 53.9%. Operating income on a reported basis was $558 million. On an adjusted basis, operating income increased 56% to $534 million, including an $8 million contribution from acquisitions. Operating margin on a reported basis was 17.5%. Adjusted operating margin increased 360 basis points, including a 30 basis point negative impact from acquisitions, to 16.7%.

Full Year Fiscal 2022 Outlook
VF’s full year outlook assumes no material deterioration to the company’s current business operations as a result of COVID-19 and related governmental actions and regulations. VF’s full year fiscal 2022 outlook includes the following: Revenue is expected to be approximately $12.0 billion, reflecting growth of around 30%, including an approximate $600 million contribution from the Supreme® brand.

By segment, revenue for Outdoor is now expected to increase between 25 – 27%  versus the previous expectation of a 24 – 26% increase; revenue for Active is now expected to increase between 35 – 37% versus the previous expectation of a 37-39% increase; revenue for Work is now expected to increase between 19 – 21% versus the previous expectation of a 16-18% increase.

International revenue is expected to increase between 24 -26%. By geographic region, in the EMEA region, revenue is expected to increase between 30- 32%. In the Asia Pacific region, revenue is expected to increase between 12 -14%. And, in the Americas (non-U.S.) region, revenue is expected to increase between 30 – 32%.

Direct-to-consumer revenue is now expected to increase between 34 -36% versus the previous expectation of 39 – 41%, including Digital revenue growth of about 20 % versus the previous expectation of 29- 31%. Adjusted cash flow from operations is expected to exceed $1.0 billion.