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VF Corporation Report COVID-Impacted Fourth Quarter + Forecasts Strong Fiscal 2022

VF fourth quarter and full year fiscal 2021 impacted as anticipated by COVID, with initial fiscal 2022 outlook indicating strong recovery growth.

Full year fiscal 2021
Revenue from continuing operations decreased 12 percent to $9.2 billion; excluding acquisitions, adjusted revenue decreased 13 percent.

Active segment revenue decreased 15 percent including a 15 percent decrease in Vans^® brand revenue and a 3 percentage point revenue growth contribution from acquisitions; Outdoor segment revenue decreased 11 percent including a 9 percent decrease in The North Face^® brand revenue; Work segment revenue increased 7 percent  including a 9 percent increase in Dickies^® brand revenue;

International revenue decreased 7 percent including a 1 percentage point revenue growth contribution from acquisitions; Greater China revenue increased 24 percent

Direct-to-Consumer revenue decreased 5 percent including a 3percentage point revenue growth contribution from acquisitions; Digital revenue increased 67 percent including a 9 percentage point revenue growth contribution from acquisitions;

Gross margin from continuing operations decreased 260 basis points to 52.7 percent; on an adjusted basis, gross margin decreased 220 basis points to 53.3 percent, including a 10 basis point positive impact from acquisitions; operating income from continuing operations was $608 million.

Adjusted operating income from continuing operations decreased 45 percent to $742 million, including a $34 million contribution from acquisitions;

Cash flow provided by operating activities from continuing operations was approximately $1.2 billion; free cash flow from continuing operations was approximately $1.0 billion.

Full year fiscal 2022 Forecast
Revenue is expected to approximate $11.8 billion, reflecting growth of approximately 28 percent, including an approximate $600 million contribution from the Supreme^® brand.

COVID-19 Outbreak Update
The majority of VF’s supply chain is currently operational. Suppliers are complying with local public health advisories and governmental restrictions which has resulted in isolated product delays. VF is working with its suppliers to minimize disruption. VF’s distribution centers are operational in accordance with local government guidelines while maintaining enhanced health and safety protocols.

In North America, approximately 15 percent of stores were closed at the end of the third quarter. The majority of the closures were Vans^® stores, predominantly based in California. In addition, other stores were operating with reduced capacity. Since that time, most stores have re-opened, including all VF-owned stores in California, with less than 5 percent of stores closed at the end of the fourth quarter. Currently less than 5 percent of stores remain closed.

In the EMEA region, approximately 50 percent of stores were closed at the end of the third quarter. Since that time additional stores have been re-closed, with approximately 60 percent of stores closed at the end of the fourth quarter. Some stores in the EMEA region have re-opened since the end of the quarter and currently approximately 20 percent of stores are closed.

Nearly all of VF’s owned retail stores in the APAC region, including Mainland China, were open during the quarter and remain open.

As COVID-19 uncertainty continues, VF expects ongoing disruption to its business operations.

Discontinued Operations – Occupational Workwear Business
On January 21, 2020, VF announced its decision to explore the divestiture of its Occupational Workwear business. In late April 2021, VF entered into a definitive agreement to sell its Occupational Workwear business.

Fourth Quarter Fiscal 2021 Income Statement Review
Revenue increased 23 percent to $2.6 billion. Excluding the impact of acquisitions, revenue increased 16 percent  driven by VF’s largest brands, e-commerce growth and an increase in the APAC region, which experienced a significant negative impact from COVID-19 in the prior year period. The fourth quarter of fiscal 2021 also included an extra week when compared to the fiscal 2020 period due to VF’s 53-week fiscal 2021.

Gross margin decreased 100 basis points to 52.1 percent, primarily driven by elevated promotional activity to clear excess inventory and the timing of net foreign currency transaction activity. On an adjusted basis, gross margin decreased 120 basis points, including a 60 basis point positive impact from acquisitions, to 52.7 percent.

Operating income on a reported basis was $122 million. On an adjusted basis, operating income increased 98 percent to $173 million, including a $34 million contribution from acquisitions. Operating margin on a reported basis increased to 4.7 percent. Adjusted operating margin increased 260 basis points, including a 100 basis point positive impact from acquisitions, to 6.7 percent.

Full Year Fiscal 2021 Income Statement Review
Revenue decreased 12 percent to $9.2 billion. On an adjusted basis, excluding the impact of acquisitions, revenue decreased 13 percent, driven by store closures and lower consumer demand as a result of the COVID-19 outbreak and related government actions and regulations. The fourth quarter of fiscal 2021 also included an extra week when compared to the fiscal 2020 period due to VF’s 53-week fiscal 2021.

Gross margin decreased 260 basis points to 52.7 percent, primarily driven by elevated promotional activity to clear excess inventory and the timing of net foreign currency transaction activity, partially offset by favorable mix shift toward higher margin businesses. On an adjusted basis, gross margin decreased 220 basis points, including a 10 basis point positive impact from acquisitions, to 53.3 percent.

Operating income on a reported basis was $608 million. On an adjusted basis, operating income decreased 45 percent to $742 million, including a $34 million contribution from acquisitions.

Operating margin on a reported basis decreased 220 basis points to 6.6 percent. Adjusted operating margin decreased 480 basis points, including a 20 basis point positive impact from acquisitions, to 8.0 percent.

Balance Sheet Highlights
Inventories were down 18 percent compared with the same period last year. In fiscal 2021, VF returned approximately $760 million of cash to shareholders through dividends. Cash flow provided by operating activities from continuing operations was approximately $1.2 billion in fiscal 2021 and free cash flow from continuing operations was approximately $1.0 billion. VF ended fiscal 2021 with approximately $1.45 billion of cash and short-term investments in addition to more than $2.2 billion remaining under VF’s revolving credit facility. As part of the company’s liquidity preservation actions during the ongoing COVID-19 outbreak, the company has suspended its share repurchase program and did not repurchase any shares in fiscal 2021. VF has $2.8 billion remaining under its current share repurchase authorization.

Full Year Fiscal 2022 Outlook
Revenue is expected to approximate $11.8 billion, reflecting growth of approximately 28 percent, including an approximate $600 million contribution from the Supreme^® brand. By segment, revenue for Outdoor is expected to increase between 23 percent and 25 percent; revenue for Active is expected to increase between 34 percent and 36 percent; and, revenue for Work is expected to increase between 10 percent and 12 percent.

International revenue is expected to increase between 25 percent and 27 percent. By geographic region, in the EMEA region, revenue is expected to increase between 29 percent and 31 percent. In the Asia Pacific region, revenue is expected to increase between 18 percent and 20 percent. And, in the Americas (non-U.S.) region, revenue is expected to increase between 28 percent and 30 percent.

Direct-to-consumer revenue is expected to increase between 38 percent and 40 percent, including Digital revenue growth of between 29 percent and 31 percent.