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VF Corporation Delivers Solid Results for Q1 FY23
VF Corporation Reports Solid Top-Line Performance in First Quarter and Revises Full Year Fiscal 2023 Outlook Due to Currency Impact
Q1’FY23 Financial Highlights
- Revenue $2.3 billion, up 3% (up 7% in constant dollars) with big four brands up 2% and the balance of the portfolio up 9%
- The North Face revenue $0.5 billion, up 31% (up 37% in constant dollars)
- Vans revenue $0.9 billion, down 7% (down 4% in constant dollars)
- Operating margin 2.8%, down 640 basis points
- Return of $194 million to shareholders through cash dividends
FY23 Financial Outlook
- VF is maintaining its currency adjusted FY23 outlook while revising its earnings outlook on a reported dollar basis to reflect ongoing negative impacts from foreign currency fluctuations; they now expect adjusted EPS of $3.05 to $3.15, implying 4% to 7% growth versus the prior year on a constant dollar basis
- Total VF revenue up at least 7% in constant dollars, unchanged from the previous outlook
- Adjusted operating margin approximately 13.2% versus previous outlook of approximately 13.6%
- Adjusted cash flow from operations approximately $1.2 billion; Capital expenditures approximately $250 million, both unchanged versus previous outlook
- Excludes the impact of a payment VF anticipates making in FY23 of approximately $857 million plus additional accrued interest relating to an assessment from the Internal Revenue Service (IRS) for the dispute regarding the timing of income inclusion associated with VF’s acquisition of Timberland in 2011, as previously disclosed.
Steve Rendle, Chairman, President and CEO of VF said:
“We delivered solid top-line results in Q1, ahead of our initial expectations, led by strong consumer engagement with our outdoor, streetwear and active brands amidst a softer consumer environment and inflationary pressures. Importantly, we are maintaining our operating outlook for FY23, a testament to the resiliency of our purpose-built family of brands. While uncertainty persists across geographies and marketplaces from ongoing macro-economic headwinds, we are focused on the things that we can control and will continue our strategic investments to ensure long-term, sustainable and profitable growth.”
First Quarter Fiscal 2023 Income Statement Review
Revenue increased 3% (up 7% in constant dollars) to $2.3 billion driven by increases in the EMEA and Americas regions partially offset by a decline in the APAC region primarily due to COVID lockdowns in China.
Operating income on a reported basis was $63.4 million. On an adjusted basis, operating income decreased 48% (down 40% in constant dollars) to $77.5 million. Operating margin on a reported basis was 2.8%. Adjusted operating margin decreased 340 basis points to 3.4%.
COVID-19 Outbreak Update
The majority of VF’s supply chain is currently operational. Raw material suppliers in China are currently operational, though the 8-week lockdown in China during VF’s first quarter has resulted in logistics challenges which are contributing to ongoing product delays. Suppliers are complying with local public health advisories and governmental restrictions. Most final product manufacturing and assembly suppliers are largely back to normal operating levels. In North America, no stores were closed during the first quarter. Currently, all stores are open. In the EMEA region, no stores were closed during the first quarter due to COVID-19. Currently, all stores are open. In the APAC region, including Mainland China, 12% of stores (including partners) were closed at the beginning of the first quarter with a peak of 23% of stores closed and an average of 14% of stores closed throughout the quarter. No stores were closed at the end of the first quarter and all stores are currently open.
Balance Sheet Highlights
Inventories were up 92% compared with the same period last year, driven by an increase of in-transit inventory of approximately $550 million as VF modified terms with the majority of its suppliers to take ownership of inventory near point of shipment rather than destination. Accounts payable also increased 91%, which was largely driven by the increase of in-transit inventory. VF returned approximately $194 million of cash to shareholders through dividends during the quarter.
Read the financial results from each other Quarter of fiscal 2023 below:
