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VF Corp Reports Balanced Q2 Performance & Revised Full Year Outlook
Q2’FY23 Financial Highlights
- Revenue $3.1 billion, declined 4% with big four brands down 5% and the balance of the portfolio up 4%
- The North Face revenue $1.0 billion, up 8%
- Vans revenue $1.0 billion, down 13%
- Gross margin 51.4%, down 230 basis points
- Operating margin 2.9%, down 2,040 basis points
- Earnings (loss) per share (EPS) $(0.31), down 126%
H1’FY23 Financial Highlights
- Revenue $5.3 billion, down 1% with big four brands down 2% and the balance of the portfolio increasing 6%
- The North Face revenue $1.4 billion, up 15%
- Vans revenue $1.9 billion, down 10%
- Gross margin 52.4%, down 240 basis points
- Operating margin 0.5%, down 1,460 basis points
- Earnings (loss) per share $(0.45), down 129%
FY23 Financial Outlook
VF is maintaining its constant dollar revenue outlook but revising its earnings outlook to reflect increased negative impacts from foreign currency fluctuations as well as heightened inventory levels and increased promotional activity in the marketplace. Total VF revenue up 5% to 6% in constant dollars, unchanged from the previous outlook. Adjusted gross margin down 100 to 150 basis points, compared to the previous outlook of down 50 basis points. Adjusted operating margin 11.0%, compared to the previous outlook of approximately 12.0%. Adjusted EPS is now expected to be in the range of $2.40 to $2.50, versus $3.18 in the prior year and compared to the previous outlook of $2.60 to $2.70.
Adjusted cash flow from operations at least $0.9 billion, compared to the previous outlook of $1.0 billion; Capital expenditures approximately $230 million versus the previous outlook of $240 million.
Steve Rendle, Chairman, President and CEO of VF said:
“VF’s balanced performance in Q2 demonstrates the resiliency of our brand portfolio against a more disrupted global marketplace. Our purpose-built portfolio of iconic, deeply-loved brands continues to benefit from tailwinds in the outdoor, active, streetwear and workwear spaces while we also actively address the near-term challenges at Vans, the ongoing COVID-related disruption in China, and the broader macro-economic and geopolitical headwinds, which have created tremendous uncertainty for all businesses and consumers.
In the near term, in light of the challenging environment, we are acting proactively to generate increased revenue through the balance of the year while protecting profitability by tightly controlling all non-strategic spend. I am confident in our ability to deliver on our targets and to maximize the potential of all our brands when the environment improves. We will remain focused on the things we can control and will continue leveraging VF’s unique business model and competitive strengths to drive consistent, sustainable and profitable growth.”
Second Quarter Fiscal 2023 Income Statement Review
Revenue decreased 4% to $3.1 billion driven by increases in the EMEA and APAC regions partially offset by lower sales in the Americas region.
Gross margin decreased 230 basis points to 51.4%, primarily driven by higher costs and promotional activity partially offset by price increases. On an adjusted basis, gross margin decreased 240 basis points to 51.5%.
Operating income (loss) on a reported basis was $(90.8) million. Operating margin on a reported basis was 2.9%. On an adjusted basis, operating income decreased 29% (down 22% in constant dollars) to $378.7 million. Adjusted operating margin decreased 440 basis points to 12.3%.
COVID-19 Update
In North America, no stores were closed during the second quarter. Currently, all stores are open. In the EMEA region, no stores were closed during the second quarter due to COVID-19.
Currently, all stores are open. In the APAC region, including Mainland China, no stores were closed at the beginning of the second quarter with a peak of 7% of stores (including partner doors) closed and an average of 3% of stores closed throughout the quarter. At the end of the second quarter, 4% of stores were closed and, as of today, 7% of stores are closed.
Read the financial results from each Quarter of fiscal 2023 below:
