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VF Corporation Publish Fiscal 2024 Q2 Results
VF Corporation reported second quarter fiscal 2024 results and the launch of Reinvent, a comprehensive transformational program. With EMEA revenue up 14% reflecting growth across all channels, but with significant sales declines for Vans In North America. Quarterly per share dividend of $0.09 is a 70% decrease from the previous quarter’s dividend and as the company implements the initiatives associated with Project Reinvent, it is withdrawing its FY24 revenue and earnings outlook and updating its FY24 free cash flow guidance.
Q2’FY24 Financial Highlights
Revenue down 2% (down 4% in constant dollars) to $3.0 billion
Bracken Darrell, President and CEO, said: “In my first 100 days, as I have spent time with our brands, teams, and customers around the world, I have developed even stronger conviction in the company’s significant potential, which is far greater than what we are delivering today. Our transformation plan, Reinvent, will improve our brand-building and execution while addressing with urgency our top priorities of improving North America, accelerating the Vans turnaround, significantly reducing our fixed costs and reducing leverage. We are excited about the long term, starting with these first major steps toward improving our near-term performance, positioning us to return to growth and generate shareholder value.”
Q2’FY24 Operating Highlights
The North Face® delivered another quarter of double-digit revenue growth, up 19% benefiting from on-time deliveries, which negatively impacted the prior year period due to supply chain disruption.
- Vans® down 21%
- Wholesale down 1% primarily driven by the Americas, down 11%
- Direct-to-Consumer (DTC) down 3% and up 10% excluding Vans®
- Americas down 11% and down 3% excluding Vans®
- International business up 10%
- Greater China up 8% with the APAC region up 2%
- EMEA revenue up 14% reflecting growth across all channels
The company is introducing Reinvent to enhance focus on brand-building and to improve operating performance. The first announced steps in this transformation cover four key priorities: Improve North America results, deliver a Vans turnaround, reduce costs and strengthen the balance sheet. The following changes are being made:
The establishment of a global commercial organization, inclusive of the Americas region: This includes the creation of an Americas regional platform, modeled on the company’s successful operations in EMEA and APAC. With this change, Martino Scabbia Guerrini has been promoted to the newly created role of Chief Commercial Officer, with responsibility for go-to-market execution globally.
Sharpening brand presidents’ focus on sustainable growth: A direct consequence and intent of the operating model change, which is particularly critical at this stage for the Vans brand, enables brand presidents to direct greater focus and attention to long-term brand-building, product innovation and growth strategies.
Appointing a new Vans president: Kevin Bailey will be stepping down from the position of Global Brand President, Vans. Kevin will remain on the Executive Leadership Team reporting to Bracken Darrell, and will transition to lead Reinvent, the company’s business transformation plan, and the project teams driving the work. An external search is underway for a new brand president for Vans and in the interim, Bracken Darrell will take a more active role in leading the brand and delivering its turnaround strategies.
Optimising cost structures to improve operating efficiency and profitability: Implement a large-scale cost reduction program, which we expect to deliver $300 million in fixed cost savings, by removing spend in non-strategic areas of the business,and simplifying and right-sizing their structure.
Reduceing debt and leverage: In addition to improving operating performance, VF is committed to deleveraging the balance sheet. The reduction in dividend is one of the steps towards this objective.
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FY24 Outlook
The company has withdrawn its previous FY24 revenue and earnings guidance and updated its free cash flow projection: Free cash flow for FY24 is expected to be approximately $600 million compared to the previous guidance of approximately $900 million. Vans’ performance is not anticipated to improve in 2H’FY24 and combined with a more difficult US wholesale environment and charges including cash and non-cash items from Reinvent, will negatively impact revenue and profit in 2H’FY2
Matt Puckett, CFO, said: “Despite pockets of continued strong performance throughout the first half and solid profit margins in the second quarter, it’s not enough and we are not making sufficient progress at Vans or in the US. Our transformation plan, Reinvent, directly addresses these areas in particular and importantly, commits to lowering our cost structure by $300 million. Through this effort and our ongoing evaluation of all aspects of our business, we remain laser- focused on cash generation and debt reduction, with the intent to return to growth, drive higher ROIC and reduce
