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VF Corp Reports Vans Revenue Flat in Q4, However Up 20% FY22

VFC REPORTS BROAD-BASED GROWTH IN FOURTH QUARTER AND INTRODUCES FULL YEAR FISCAL 2023 OUTLOOK

Q4’FY22 Financial Highlights:

• Revenue $2.8 billion, up 9%
• The North Face® revenue $0.8 billion, up 24%
• Vans® revenue $1.0 billion, flat
• Gross margin 51.9%, down 20 basis points
• Operating margin 6.8%, up 210 basis points

FY22 Financial Highlights:

• Revenue $11.8 billion, up 28%, excluding acquisitions, up 23%
• Gross margin 54.5%, up 180 basis points
• Operating margin 13.8%, up 720 basis points
• Return of $1.1 billion to shareholders through $773 million in cash dividends, $350 million of shares repurchased

Steve Rendle, Chairman, President and CEO of VF said:
“I am pleased with the progress we have made advancing our strategic priorities while successfully navigating another eventful year. We largely delivered on the commitments we made at the outset of Fiscal 2022 by achieving broad-based growth across our family of brands. A portion of our active segment did not achieve its potential. We understand the issues, we have the right people in place and we know we will do better. Our performance is testament to the incredible breadth and depth of talent across our organization and our teams continue to be highly resourceful, committed and passionate.

We will continue to thoughtfully invest in our brands and value-enhancing strategic growth opportunities and I am confident VF has a long runway for sustained, profitable and broad-based growth ahead.”

Fourth Quarter Fiscal 2022 Income Statement Review
Revenue increased 9% to $2.8 billion driven by increases in the EMEA and North America regions partially offset by a decline in the APAC region primarily due to COVID lockdowns.

Gross margin decreased 20 basis points to 51.9%, primarily driven by incremental freight costs.

Operating income on a reported basis was $192 million. On an adjusted basis, operating income increased 30% to $224 million.  Operating margin on a reported basis was 6.8%.

Full Year Fiscal 2022 Income Statement Review
Revenue increased 28% to $11.8 billion. Excluding the impact of acquisitions, revenue increased 23%, driven by increases in our largest brands and regions.

Gross margin increased 180 basis points to 54.5%, primarily driven by a higher proportion of full price sales more than offsetting incremental freight costs.

Operating income on a reported basis was $1.6 billion. On an adjusted basis, operating income increased 109% to $1.5 billion, including a $94 million contribution from acquisitions.

COVID-19 Outbreak Update
To help mitigate the spread of COVID-19 and in response to public health advisories and governmental actions and regulations, VF has modified its business practices, including the temporary closing of offices and retail stores, instituting travel bans and restrictions and implementing health and safety measures including social distancing and quarantines. The zero tolerance policy in China in response to COVID-19 is impacting some specific raw material suppliers within the country. The majority of VF’s supply chain is currently operational. Suppliers are complying with local public health advisories and governmental restrictions. Most final product manufacturing and assembly suppliers are back to normal operating levels. Continued port congestion, equipment availability and other logistics challenges have contributed to ongoing product delays. VF is working with its suppliers to minimize disruption and is employing expedited freight strategically as needed. VF’s distribution centers are operational in accordance with local government guidelines while maintaining enhanced health and safety protocols.

In North America, no stores were closed during the fourth quarter. Currently, all stores are open.

In the EMEA region, 6% of stores were closed at the beginning of the fourth quarter and at the end of the fourth quarter and currently no stores are closed due to COVID-19. In the APAC region, including Mainland China, no stores were closed at the beginning of the fourth quarter. 12% of stores were closed at the end of the fourth quarter. Currently, 19% of stores are closed. VF is continuing to monitor the COVID-19 outbreak globally and will comply with guidance from government entities and public health authorities to prioritize the health and well-being of its employees, customers, trade partners and consumers. As COVID-19 uncertainty continues, VF expects ongoing disruption to its business operations.

Adjusted Amounts due to activities associated with the acquisition of the Supreme® brand. Total transaction and deal related activities include an increase in the estimated fair value of the contingent consideration liability of $8 million in the fourth quarter of fiscal 2022 and a decrease of $150 million in fiscal 2022, and integration costs of approximately $1 million in the fourth quarter of fiscal 2022 and $7 million in fiscal 2022.

FY23 Financial Outlook
(Based on the following assumptions): No additional significant COVID-19 related lockdowns in any key commercial or production regions, with the current restrictions in China expected to ease from the beginning of June 2022. No significant worsening in global inflation rates and consumer sentiment.

• Total VF revenue up at least 7% in constant dollars
• The North Face® revenue up low double digit percent; Vans® revenue up mid-single digit percent
• Gross margin up approximately 50 basis points
• Operating margin approximately 13.6%
• Adjusted cash flow from operations approximately $1.2 billion; Capital expenditures approximately $250 million