VF Corp. Reports Disappointing Q3 Results

VF Corp., a leading footwear and apparel company, experienced a significant setback as its stock tumbled following the release of its fiscal third-quarter results. The company cited underperformance in its iconic brands, North Face and Vans, as the primary reason for the disappointing results.

Warmer-than-usual weather in the Americas region was identified as a key factor affecting North Face sales. The company expressed its commitment to rectifying the situation. Additionally, VF Corp. mentioned a cybersecurity breach in December that further impacted their financial performance.

The stock value of VF Corp. declined by 9.8% during morning trading, marking one of its worst single-day declines since November 1. This follows a substantial drop of 14% after the release of second-quarter results.

During the post-earnings call with analysts, Chief Executive Bracken Darrell addressed the North Face challenges by acknowledging that the average temperature during the quarter was significantly higher than usual, negatively impacting sales. However, he emphasized that as temperatures cooled down in January, North Face sales began to show signs of growth globally.

In regards to Vans, revenue declined sharply compared to the previous year, indicating widespread weaknesses across all regions. Darrell admitted that management played a significant role in the struggles faced by the brand.

One of the critical errors made with Vans was prioritizing and capitalizing on their surge in popularity between 2015 and 2020, driven by cultural trendsetters and celebrity endorsements. This approach led the company to lose sight of its core youthful audience, which had been the main driving force behind Vans' success. The sole focus on fueling the latest trend proved to be a misstep for the brand.

Despite these challenges, VF Corp. aims to address the issues surrounding both North Face and Vans, ensuring a recovery in their performance and reaffirming their commitment to delivering quality products and experiences to their customers.

The Evolution of Vans: A Journey Back to Growth

Darrell, the CEO of Vans, recognizes that the brand lost its way and it's time for a change.

When Darrell took the helm as CEO in July 2023, he knew that he had to invest significant time in working closely with the Vans team. He understood that to fix a brand, you need to start at its core - its purpose and target audience. With this in mind, a comprehensive plan, or as Darrell calls it, a "package," was put in place.

In the pursuit of reviving the brand, Vans had to take some necessary actions. They decided to "clean up" their inventories in the marketplace. These actions, while impacting their third-quarter results, are expected to have an effect on the current quarter as well.

Darrell isn't ready to commit to a specific timeline for Vans' return to growth just yet. But he remains optimistic and firmly believes that it will happen.

Looking at the company's fiscal third-quarter results, VF reported a net loss of $42.5 million, or 11 cents a share. This is in stark contrast to the income of $507.9 million, or $1.31 a share, recorded during the same period last year. It's important to note that these figures exclude nonrecurring items, such as goodwill impairment charges related to the Timberland and Dickies brands. Adjusted profit per share stood at 57 cents, falling short of the FactSet consensus of 77 cents.

Revenue also took a hit, dropping by 16.2% to $2.96 billion. This figure fell below the FactSet consensus of $3.24 billion, impacting all of VF's brands.

Breaking it down further, North Face revenue experienced a decline of 9.8% to $1.19 billion. Vans revenue suffered a substantial tumble of 27.9% to $668.2 million. Timberland revenue slid by 20.6% to $473 million, while Dickies revenue shed 16.4% to $147.9 million. Revenue from all other brands slipped 6.1% to $479.1 million.

When it comes to geographical regions, Americas revenue sank by 24.2% to $1.59 billion, while international revenue eased by 5.1%.

Despite the challenging times, VF remains committed to its long-term outlook. The company reiterated its guidance for free cash flow of about $600 million for 2024.

Looking at the stock's performance, it has experienced a downturn, losing 46.4% over the past 12 months. In contrast, the S&P 500 index SPX has rallied by 19.5%.

Vans may have lost its way, but with Darrell leading the charge and a comprehensive plan in place, the brand is on a journey back to growth. The road may be long, but Vans will once again find its stride and captivate its audience.