VF Corporation (NYSE: VFC) today reported financial results for
its second quarter (Q2'FY24) ended September 30, 2023, and
announced a transformation program and quarterly per share dividend
of $0.09, a 70% decrease from the previous quarter’s dividend. 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
- Loss per share $(1.16) versus Q2'FY23 loss per share $(0.31),
impacted by the additional tax expense booked as a result of the
Timberland tax case ruling; adjusted earnings per share $0.63
versus Q2'FY23 adjusted earnings per share $0.73
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% (up 17% in constant dollars), benefiting
from on-time deliveries, which negatively impacted the prior year
period due to supply chain disruption
- Vans® down 21% (down 23% in constant dollars)
- Wholesale down 1% (down 3% in constant dollars), primarily
driven by the Americas, down 11%
- Direct-to-Consumer (DTC) down 3% (down 5% in constant dollars)
and up 10% excluding Vans® (up 9% in constant dollars)
- Americas down 11% and down 3% excluding Vans®
- International business up 10% (up 5% in constant dollars)
- Greater China up 8% (up 14% in constant dollars), with the APAC
region up 2% (up 6% in constant dollars)
- EMEA revenue up 14% (up 6% in constant dollars), reflecting
growth across all channels
Reinvent
The company introduces Reinvent, a transformation program to
enhance focus on brand-building and to improve operating
performance and to allow us to achieve our full potential. Our
first announced steps in this transformation cover four key
priorities: Improve North America results, Deliver the Vans
turnaround, Reduce costs, Strengthen the balance sheet.
- Establish global commercial organization, inclusive of an
Americas region: Change the operating model with the
establishment of a global commercial structure. 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.
- Sharpen 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.
- Appoint 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.
- Optimize cost structure 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 our structure.
- Reduce debt and leverage: In addition to improving
operating performance, VF is committed to deleveraging the balance
sheet. The reduction in dividend announced today is one of the
steps towards this objective.
FY24 Outlook
- The company withdraws its previous FY24 revenue and earnings
guidance and updates 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
- The following factors are now assumed to significantly impact
revenue and profit negatively in 2H'FY24
- Vans' performance is not anticipated to improve in 2H'FY24
- A more difficult US wholesale environment
- Reinvent will likely result in charges including cash and
non-cash items
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 leverage."
Summary Revenue
Information
(Unaudited)
Three Months Ended
September
Six Months Ended
September
(Dollars in millions)
2023
2022
% Change
% Change (constant currency)
2023
2022
% Change
% Change (constant currency)
Brand:
Vans®
$
748.8
$
952.1
(21
)%
(23
)%
$
1,486.3
$
1,899.0
(22
)%
(23
)%
The North Face®
1,128.8
950.8
19
%
17
%
1,667.0
1,431.9
16
%
15
%
Timberland®
488.6
524.2
(7
)%
(10
)%
742.5
793.6
(6
)%
(8
)%
Dickies®
171.4
186.4
(8
)%
(9
)%
308.1
356.8
(14
)%
(14
)%
Other Brands
496.6
467.1
6
%
4
%
916.7
860.9
6
%
5
%
VF Revenue
$
3,034.2
$
3,080.6
(2
)%
(4
)%
$
5,120.6
$
5,342.2
(4
)%
(5
)%
Region:
Americas
$
1,568.5
$
1,754.1
(11
)%
(11
)%
$
2,752.3
$
3,139.2
(12
)%
(13
)%
EMEA
1,062.0
932.4
14
%
6
%
1,646.4
1,527.0
8
%
3
%
APAC
403.7
394.0
2
%
6
%
721.9
676.0
7
%
11
%
VF Revenue
$
3,034.2
$
3,080.6
(2
)%
(4
)%
$
5,120.6
$
5,342.2
(4
)%
(5
)%
International
$
1,656.7
$
1,511.4
10
%
5
%
$
2,683.4
$
2,503.4
7
%
5
%
Channel:
DTC
$
1,111.6
$
1,146.1
(3
)%
(5
)%
$
2,085.2
$
2,145.2
(3
)%
(3
)%
Wholesale (a)
1,922.7
1,934.5
(1
)%
(3
)%
3,035.4
3,197.0
(5
)%
(7
)%
VF Revenue
$
3,034.2
$
3,080.6
(2
)%
(4
)%
$
5,120.6
$
5,342.2
(4
)%
(5
)%
All references to the periods ended
September 2023 relate to the 13-week and 26-week fiscal periods
ended September 30, 2023 and all references to the periods ended
September 2022 relate to the 13-week and 26-week fiscal periods
ended October 1, 2022.
Note: Amounts may not sum due to
rounding
(a) Royalty revenues are included in the
wholesale channel for all periods.
Q2'FY24 Income Statement Review
- Revenue $3.0 billion, down 2% (down 4% in constant currency)
with the big four brands down 3% (down 5% in constant currency) and
the balance of the portfolio up 6% (up 4% in constant currency)
- The North Face® revenue $1.1 billion, up 19% (up 17% in
constant currency)
- Vans® revenue $0.7 billion, down 21% (down 23% in constant
currency)
- Gross margin 51.3%, down 10 basis points; Adjusted gross margin
51.3%, down 20 basis points due primarily to unfavorable rate
- Adjusted gross margin headwinds of 50 basis points of
unfavorable rate impact, partially offset by tailwinds of 20 basis
points from favorable mix and 10 basis points of foreign currency
exchange rate benefits
- Operating margin 12.0%, up 1,490 basis points; adjusted
operating margin 12.0%, down 30 basis points
- Adjusted operating margin contraction driven by 30 basis points
of unfavorable constant currency gross margin impact and 30 basis
points of deleverage, partially offset by 30 basis points of
foreign currency exchange rate benefits
- Loss per share $(1.16) versus Q2'FY23 loss per share $(0.31),
impacted by the additional tax expense booked as a result of the
Timberland tax case ruling; adjusted earnings per share $0.63
versus Q2'FY23 adjusted earnings per share $0.73
Balance Sheet Highlights
- Inventories decreased by $269 million during Q2’FY24, down 10%
relative to last year; inventory composition remains mostly core
and excess replenishment inventory
Shareholder Returns
- Return of $117 million to shareholders through cash dividends
in Q2'FY24
- VF’s Board of Directors declared a quarterly dividend of $0.09
per share, reflecting a 70% decrease from the previous quarter's
dividend. This dividend will be payable on December 20, 2023, to
shareholders of record at the close of business on December 11,
2023. Subject to approval by its Board of Directors, VF intends to
continue to pay quarterly dividends.
Webcast Information
VF will host its second quarter fiscal 2024 conference call
beginning at 4:30 p.m. Eastern Time today. The conference call will
be broadcast live via the Internet, accessible at ir.vfc.com. For
those unable to listen to the live broadcast, an archived version
will be available at the same location.
About VF
Founded in 1899, VF Corporation is one of the world’s largest
apparel, footwear and accessories companies connecting people to
the lifestyles, activities and experiences they cherish most
through a family of iconic outdoor, active and workwear brands
including Vans®, The North Face®, Timberland® and Dickies®. Our
purpose is to power movements of sustainable and active lifestyles
for the betterment of people and our planet. We connect this
purpose with a relentless drive to succeed to create value for all
stakeholders and use our company as a force for good. For more
information, please visit vfc.com.
Financial Presentation Disclosure
All per share amounts are presented on a diluted basis. This
release refers to “reported” and “constant dollar” amounts, terms
that are described under the heading below “Constant Currency -
Excluding the Impact of Foreign Currency.” Unless otherwise noted,
“reported” and “constant dollar” amounts are the same. This release
also refers to “adjusted” amounts, a term that is described under
the heading below “Adjusted Amounts - Excluding Transaction and
Deal Related Activities and Tax Items.” Unless otherwise noted,
“reported” and “adjusted” amounts are the same.
Constant Currency - Excluding the Impact of Foreign
Currency
This release refers to “reported” amounts in accordance with
U.S. generally accepted accounting principles (“GAAP”), which
include translation and transactional impacts from foreign currency
exchange rates. This release also refers to “constant dollar”
amounts, which exclude the impact of translating foreign currencies
into U.S. dollars. Reconciliations of GAAP measures to constant
currency amounts are presented in the supplemental financial
information included with this release, which identifies and
quantifies all excluded items, and provides management’s view of
why this information is useful to investors.
Adjusted Amounts - Excluding Transaction and Deal Related
Activities and Tax Items
The adjusted amounts in this release exclude transaction and
deal related activities associated with the review of strategic
alternatives for the Global Packs business, consisting of the
Kipling®, Eastpak® and JanSport® brands. Total transaction and deal
related activities include costs of approximately $1 million in the
first six months of fiscal 2024.
The adjusted amounts in this release exclude the impact to tax
expense resulting from the decision by the U.S. Court of Appeals
for the First Circuit on September 8, 2023 that upheld the U.S. Tax
Court’s decision in favor of the Internal Revenue Service regarding
the timing of income inclusion associated with VF’s acquisition of
The Timberland Company in September 2011. The adjusted amounts also
exclude the impact to tax expense resulting from the decision by
the General Court on September 20, 2023 that confirmed the decision
of the European Union that Belgium’s excess profit tax regime
amounted to illegal State aid. The net impact to tax expense was an
increase of approximately $696 million, excluding the reversal of
accrued interest income, in the second quarter and first six months
of fiscal 2024, as a result of these two rulings.
Combined, the above items negatively impacted earnings per share
by $1.79 during the second quarter and first six months of fiscal
2024. All adjusted amounts referenced herein exclude the effects of
these amounts.
Reconciliations of measures calculated in accordance with GAAP
to adjusted amounts are presented in the supplemental financial
information included with this release, which identifies and
quantifies all excluded items, and provides management’s view of
why this information is useful to investors. The company also
provides guidance on a non-GAAP basis as we cannot predict certain
elements which are included in reported GAAP results.
Forward-looking Statements
Certain statements included in this release are "forward-looking
statements" within the meaning of the federal securities laws.
Forward-looking statements are made based on our expectations and
beliefs concerning future events impacting VF and therefore involve
several risks and uncertainties. You can identify these statements
by the fact that they use words such as “will,” “anticipate,”
“estimate,” “expect,” “should,” and “may” and other words and terms
of similar meaning or use of future dates, however, the absence of
these words or similar expressions does not mean that a statement
is not forward-looking. All statements regarding VF’s plans,
objectives, projections and expectations relating to VF’s
operations or financial performance, and assumptions related
thereto are forward-looking statements. We caution that
forward-looking statements are not guarantees and that actual
results could differ materially from those expressed or implied in
the forward-looking statements. VF undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, except
as required by law. Potential risks and uncertainties that could
cause the actual results of operations or financial condition of VF
to differ materially from those expressed or implied by
forward-looking statements include, but are not limited to: the
level of consumer demand for apparel and footwear; disruption to
VF’s distribution system; changes in global economic conditions and
the financial strength of VF’s customers, including as a result of
current inflationary pressures; fluctuations in the price,
availability and quality of raw materials and finished products;
disruption and volatility in the global capital and credit markets;
VF’s response to changing fashion trends, evolving consumer
preferences and changing patterns of consumer behavior; VF's
ability to maintain the image, health and equity of its brands;
intense competition from online retailers and other
direct-to-consumer business risks; third-party manufacturing and
product innovation; increasing pressure on margins; VF’s ability to
grow its international, direct-to-consumer and digital businesses;
VF’s ability to find and amplify consumer tailwinds, build brands
on multiple growth horizons and leverage platforms for speed to
scale and efficiency; retail industry changes and challenges; VF’s
ability to execute its transformation and other business
strategies, including cost reduction and productivity initiatives
and the update and maintenance of an agile and efficient operating
model and organizational structure; VF’s and its vendors’ ability
to maintain the strength and security of information technology
systems; the risk that VF’s facilities and systems and those of our
third-party service providers may be vulnerable to and unable to
anticipate or detect data or information security breaches and data
or financial loss; VF’s ability to properly collect, use, manage
and secure business, consumer and employee data and comply with
privacy and security regulations; foreign currency fluctuations;
stability of VF’s vendors’ manufacturing facilities and VF’s
ability to establish and maintain effective supply chain
capabilities; continued use by VF’s suppliers of ethical business
practices; VF’s ability to accurately forecast demand for products;
actions of activist and other shareholders; VF’s ability to
recruit, develop or retain key executive or employee talent or
successfully transition executives; continuity of members of VF’s
management; changes in the availability and cost of labor; VF’s
ability to protect trademarks and other intellectual property
rights; possible goodwill and other asset impairment such as the
impairment charges related to the Supreme® reporting unit goodwill
and indefinite-lived trademark intangible asset; maintenance by
VF’s licensees and distributors of the value of VF’s brands; VF’s
ability to execute acquisitions and dispositions, integrate
acquisitions and manage its brand portfolio; business resiliency in
response to natural or man-made economic, public health, political
or environmental disruptions; changes in tax laws and additional
tax liabilities, including for the timing of income inclusion
associated with our acquisition of the Timberland® brand in 2011;
legal, regulatory, political, economic, and geopolitical risks,
including those related to the current conflicts in Ukraine and the
Middle East; changes to laws and regulations; adverse or unexpected
weather conditions, including any potential effects from climate
change; VF's indebtedness and its ability to obtain financing on
favorable terms, if needed, could prevent VF from fulfilling its
financial obligations; VF's ability to pay and declare dividends or
repurchase its stock in the future; climate change and increased
focus on environmental, social and governance issues; VF's ability
to execute on its sustainability strategy and achieve its
sustainability related goals and targets; risks arising from the
widespread outbreak of an illness or any other communicable
disease, or any other public health crisis, including the
coronavirus (COVID-19) global pandemic; and tax risks associated
with the spin-off of our Jeanswear business completed in 2019. More
information on potential factors that could affect VF’s financial
results is included from time to time in VF’s public reports filed
with the SEC, including VF’s Annual Report on Form 10-K, and
Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished
with the SEC.
VF CORPORATION
Condensed Consolidated
Statements of Operations
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
September
Six Months Ended
September
2023
2022
2023
2022
Net revenues
$
3,034,239
$
3,080,600
$
5,120,575
$
5,342,195
Costs and operating expenses
Cost of goods sold
1,479,028
1,498,177
2,464,297
2,541,159
Selling, general and administrative
expenses
1,192,284
1,251,320
2,302,343
2,406,571
Impairment of goodwill and intangible
assets
—
421,922
—
421,922
Total costs and operating expenses
2,671,312
3,171,419
4,766,640
5,369,652
Operating income (loss)
362,927
(90,819
)
353,935
(27,457
)
Interest expense, net
(55,644
)
(33,903
)
(105,363
)
(65,165
)
Other income (expense), net
(3,510
)
(9,280
)
(7,077
)
(103,994
)
Income (loss) before income
taxes
303,773
(134,002
)
241,495
(196,616
)
Income tax expense (benefit)
754,470
(15,570
)
749,617
(22,224
)
Net loss
$
(450,697
)
$
(118,432
)
$
(508,122
)
$
(174,392
)
Net loss per common share (a)
Basic
$
(1.16
)
$
(0.31
)
$
(1.31
)
$
(0.45
)
Diluted
$
(1.16
)
$
(0.31
)
$
(1.31
)
$
(0.45
)
Weighted average shares
outstanding
Basic
388,338
387,688
388,249
387,625
Diluted
388,338
387,688
388,249
387,625
Cash dividends per common share
$
0.30
$
0.50
$
0.60
$
1.00
Basis of presentation of condensed
consolidated financial statements: VF operates and reports
using a 52/53 week fiscal year ending on the Saturday closest to
March 31 of each year. For presentation purposes herein, all
references to periods ended September 2023 relate to the 13-week
and 26-week fiscal periods ended September 30, 2023 and all
references to periods ended September 2022 relate to the 13-week
and 26-week fiscal periods ended October 1, 2022. References to
March 2023 relate to information as of April 1, 2023.
(a) Amounts have been calculated using
unrounded numbers.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
September
March
September
2023
2023
2022
ASSETS
Current assets
Cash and equivalents
$
498,912
$
814,887
$
552,811
Accounts receivable, net
1,889,804
1,610,295
1,834,598
Inventories
2,481,051
2,292,790
2,749,894
Other current assets
373,795
434,737
550,940
Total current assets
5,243,562
5,152,709
5,688,243
Property, plant and equipment,
net
916,571
942,440
984,115
Goodwill and intangible assets,
net
4,592,015
4,621,234
4,878,722
Operating lease right-of-use
assets
1,307,643
1,372,182
1,217,172
Other assets
1,082,561
1,901,923
1,015,890
Total assets
$
13,142,352
$
13,990,488
$
13,784,142
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
$
1,023,276
$
11,491
$
1,692,745
Current portion of long-term debt
966
924,305
832,136
Accounts payable
992,911
936,319
1,022,408
Accrued liabilities
1,527,680
1,673,651
1,798,702
Total current liabilities
3,544,833
3,545,766
5,345,991
Long-term debt
5,656,725
5,711,014
3,526,101
Operating lease liabilities
1,121,658
1,171,941
1,022,451
Other liabilities
609,091
651,054
803,963
Total liabilities
10,932,307
11,079,775
10,698,506
Stockholders' equity
2,210,045
2,910,713
3,085,636
Total liabilities and stockholders'
equity
$
13,142,352
$
13,990,488
$
13,784,142
VF CORPORATION
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
September
2023
2022
Operating activities
Net loss
$
(508,122
)
$
(174,392
)
Impairment of goodwill and intangible
assets
—
421,922
Depreciation and amortization
142,701
130,623
Reduction in the carrying amount of
right-of-use assets
190,423
185,880
Write-off of income tax receivables and
interest
921,409
—
Other adjustments
(765,672
)
(1,477,990
)
Cash used by operating activities
(19,261
)
(913,957
)
Investing activities
Capital expenditures
(96,343
)
(89,958
)
Software purchases
(42,597
)
(47,858
)
Other, net
(10,791
)
6,112
Cash used by investing activities
(149,731
)
(131,704
)
Financing activities
Contingent consideration payment
—
(56,976
)
Net increase from short-term borrowings
and long-term debt
109,663
855,955
Cash dividends paid
(233,172
)
(388,284
)
Proceeds from issuance of Common Stock,
net of (payments) for tax withholdings
(2,392
)
(1,931
)
Cash provided (used) by financing
activities
(125,901
)
408,764
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
(21,190
)
(85,888
)
Net change in cash, cash equivalents
and restricted cash
(316,083
)
(722,785
)
Cash, cash equivalents and restricted
cash – beginning of year
816,319
1,277,082
Cash, cash equivalents and restricted
cash – end of period
$
500,236
$
554,297
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Three Months Ended
September
% Change
% Change Constant Currency
(a)
2023
2022
Segment revenues
Outdoor
$
1,713,679
$
1,555,328
10
%
8
%
Active
1,082,287
1,260,110
(14
)%
(16
)%
Work
238,273
265,162
(10
)%
(11
)%
Total segment revenues
$
3,034,239
$
3,080,600
(2
)%
(4
)%
Segment profit (loss)
Outdoor
$
296,750
$
260,439
Active
133,970
180,255
Work
8,515
39,500
Other (b)
—
(157
)
Total segment profit
439,235
480,037
Impairment of goodwill and intangible
assets
—
(421,922
)
Corporate and other expenses
(79,818
)
(158,214
)
Interest expense, net
(55,644
)
(33,903
)
Income (loss) before income
taxes
$
303,773
$
(134,002
)
(a) Refer to constant currency definition
on the following pages.
(b) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Other primarily includes sourcing activities
related to transition services.
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Six Months Ended
September
% Change
% Change Constant Currency
(a)
2023
2022
Segment revenues
Outdoor
$
2,543,376
$
2,323,952
9
%
8
%
Active
2,148,296
2,514,055
(15
)%
(16
)%
Work
428,903
504,040
(15
)%
(15
)%
Other (b)
—
148
*
*
Total segment revenues
$
5,120,575
$
5,342,195
(4
)%
(5
)%
Segment profit (loss)
Outdoor
$
253,089
$
213,588
Active
257,752
394,286
Work
15,346
74,502
Other (b)
—
(382
)
Total segment profit
526,187
681,994
Impairment of goodwill and intangible
assets
—
(421,922
)
Corporate and other expenses
(179,329
)
(391,523
)
Interest expense, net
(105,363
)
(65,165
)
Income (loss) before income
taxes
$
241,495
$
(196,616
)
(a) Refer to constant currency definition
on the following pages.
(b) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Other primarily includes sourcing activities
related to transition services.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Three Months Ended September
2023
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
1,713,679
$
(35,745
)
$
1,677,934
Active
1,082,287
(27,329
)
1,054,958
Work
238,273
(1,456
)
236,817
Total segment revenues
$
3,034,239
$
(64,530
)
$
2,969,709
Segment profit
Outdoor
$
296,750
$
(7,360
)
$
289,390
Active
133,970
(6,551
)
127,419
Work
8,515
(627
)
7,888
Total segment profit
439,235
(14,538
)
424,697
Corporate and other expenses
(79,818
)
42
(79,776
)
Interest expense, net
(55,644
)
—
(55,644
)
Income before income taxes
$
303,773
$
(14,496
)
$
289,277
Diluted net loss per share
growth
(280
)%
(11
)%
(291
)%
Constant Currency Financial
Information
VF is a global company that reports
financial information in U.S. dollars in accordance with GAAP.
Foreign currency exchange rate fluctuations affect the amounts
reported by VF from translating its foreign revenues and expenses
into U.S. dollars. These rate fluctuations can have a significant
effect on reported operating results. As a supplement to our
reported operating results, we present constant currency financial
information, which is a non-GAAP financial measure that excludes
the impact of translating foreign currencies into U.S. dollars. We
use constant currency information to provide a framework to assess
how our business performed excluding the effects of changes in the
rates used to calculate foreign currency translation. Management
believes this information is useful to investors to facilitate
comparison of operating results and better identify trends in our
businesses.
To calculate foreign currency translation
on a constant currency basis, operating results for the current
year period for entities reporting in currencies other than the
U.S. dollar are translated into U.S. dollars at the average
exchange rates in effect during the comparable period of the prior
year (rather than the actual exchange rates in effect during the
current year period).
These constant currency performance
measures should be viewed in addition to, and not in lieu of or
superior to, our operating performance measures calculated in
accordance with GAAP. The constant currency information presented
may not be comparable to similarly titled measures reported by
other companies.
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Six Months Ended September
2023
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
2,543,376
$
(33,412
)
$
2,509,964
Active
2,148,296
(27,262
)
2,121,034
Work
428,903
(304
)
428,599
Total segment revenues
$
5,120,575
$
(60,978
)
$
5,059,597
Segment profit
Outdoor
$
253,089
$
(6,245
)
$
246,844
Active
257,752
(6,073
)
251,679
Work
15,346
(558
)
14,788
Total segment profit
526,187
(12,876
)
513,311
Corporate and other expenses
(179,329
)
(230
)
(179,559
)
Interest expense, net
(105,363
)
—
(105,363
)
Income before income taxes
$
241,495
$
(13,106
)
$
228,389
Diluted net loss per share
growth
(191
)%
(7
)%
(198
)%
Constant Currency Financial
Information
VF is a global company that reports
financial information in U.S. dollars in accordance with GAAP.
Foreign currency exchange rate fluctuations affect the amounts
reported by VF from translating its foreign revenues and expenses
into U.S. dollars. These rate fluctuations can have a significant
effect on reported operating results. As a supplement to our
reported operating results, we present constant currency financial
information, which is a non-GAAP financial measure that excludes
the impact of translating foreign currencies into U.S. dollars. We
use constant currency information to provide a framework to assess
how our business performed excluding the effects of changes in the
rates used to calculate foreign currency translation. Management
believes this information is useful to investors to facilitate
comparison of operating results and better identify trends in our
businesses.
To calculate foreign currency translation
on a constant currency basis, operating results for the current
year period for entities reporting in currencies other than the
U.S. dollar are translated into U.S. dollars at the average
exchange rates in effect during the comparable period of the prior
year (rather than the actual exchange rates in effect during the
current year period).
These constant currency performance
measures should be viewed in addition to, and not in lieu of or
superior to, our operating performance measures calculated in
accordance with GAAP. The constant currency information presented
may not be comparable to similarly titled measures reported by
other companies.
VF CORPORATION
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three and Six Months Ended
September 2023
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended September
2023
As Reported under
GAAP
Transaction and Deal Related
Activities (a)
Tax Items (b)
Adjusted
Revenues
$
3,034,239
$
—
$
—
$
3,034,239
Gross profit
1,555,211
—
—
1,555,211
Percent
51.3
%
51.3
%
Operating income
362,927
328
—
363,255
Percent
12.0
%
12.0
%
Diluted earnings (loss) per share
(c)
(1.16
)
—
1.79
0.63
Six Months Ended September 2023
As Reported under
GAAP
Transaction and Deal Related
Activities (a)
Tax Items (b)
Adjusted
Revenues
$
5,120,575
$
—
$
—
$
5,120,575
Gross profit
2,656,278
—
—
2,656,278
Percent
51.9
%
51.9
%
Operating income
353,935
1,446
—
355,381
Percent
6.9
%
6.9
%
Diluted earnings (loss) per share
(c)
(1.31
)
—
1.79
0.49
(a) Transaction and deal related
activities reflect activities associated with the review of
strategic alternatives for the Global Packs business, consisting of
the Kipling®, Eastpak® and JanSport® brands,
which totaled $0.3 million and $1.4 million for the three and six
months ended September 2023, respectively. The transaction and deal
related activities resulted in a net tax benefit of $0.1 million
and $0.4 million in the three and six months ended September 2023,
respectively.
(b) Tax items include the impact to tax
expense resulting from the decision by the U.S. Court of Appeals
for the First Circuit on September 8, 2023 that upheld the U.S. Tax
Court’s decision in favor of the Internal Revenue Service regarding
the timing of income inclusion associated with VF’s acquisition of
The Timberland Company in September 2011. The net impact to tax
expense was an increase of approximately $670.3 million in the
three and six months ended September 2023, excluding the reversal
of accrued interest income, as a result of this decision. Tax items
also include the impact to tax expense resulting from the decision
by the General Court on September 20, 2023 that confirmed the
decision of the European Union that Belgium’s excess profit tax
regime amounted to illegal State aid. The net impact to tax expense
was an increase of approximately $26.1 million in the three and six
months ended September 2023, as a result of this ruling.
(c) Amounts shown in the table have been
calculated using unrounded numbers. The GAAP diluted earnings per
share was calculated using 388,338,000 and 388,249,000 weighted
average common shares for the three and six months ended September
2023, respectively. The adjusted diluted earnings per share impacts
were calculated using 389,487,000 and 389,181,000 weighted average
common shares for the three and six months ended September 2023,
respectively.
Non-GAAP Financial Information
The financial information above has been
presented on a GAAP basis and on an adjusted basis, which excludes
the impact of transaction and deal related activities and certain
tax items. The adjusted presentation provides non-GAAP measures.
Management believes these measures provide investors with useful
supplemental information regarding VF's underlying business trends
and the performance of VF's ongoing operations and are useful for
period-over-period comparisons of such operations.
Management uses the above financial
measures internally in its budgeting and review process and, in
some cases, as a factor in determining compensation. While
management believes that these non-GAAP financial measures are
useful in evaluating the business, this information should be
considered as supplemental in nature and should be viewed in
addition to, and not in lieu of or superior to, VF's operating
performance measures calculated in accordance with GAAP. In
addition, these non-GAAP financial measures may not be the same as
similarly titled measures presented by other companies.
VF CORPORATION
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three and Six Months Ended
September 2022
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended September
2022
As Reported under
GAAP
Transaction and Deal Related
Activities (a)
Specified Strategic Business
Decisions (b)
Impairment and Pension
Settlement Charge (c)
Adjusted
Revenues
$
3,080,600
$
—
$
—
$
—
$
3,080,600
Gross profit
1,582,423
—
3,283
—
1,585,706
Percent
51.4
%
51.5
%
Operating income (loss)
(90,819
)
—
47,644
421,922
378,747
Percent
(2.9
)%
12.3
%
Diluted earnings (loss) per share
(d)
(0.31
)
—
0.10
0.94
0.73
Six Months Ended September 2022
As Reported under
GAAP
Transaction and Deal Related
Activities(a)
Specified Strategic Business
Decisions (b)
Impairment and Pension
Settlement Charge (c)
Adjusted
Revenues
$
5,342,195
$
—
$
—
$
—
$
5,342,195
Gross profit
2,801,036
—
8,364
—
2,809,400
Percent
52.4
%
52.6
%
Operating income (loss)
(27,457
)
331
61,422
421,922
456,218
Percent
(0.5
)%
8.5
%
Diluted earnings (loss) per share
(d)
(0.45
)
—
0.13
1.14
0.81
(a) Transaction and deal related
activities reflect activities associated with the acquisition of
Supreme Holdings, Inc. and include integration costs of $0.3
million for the six months ended September 2022. The transaction
and deal related activities resulted in a net tax benefit of $0.1
million in the six months ended September 2022.
(b) Specified strategic business decisions
include costs related to VF's business model transformation of
$45.2 million and $51.2 million during the three and six months
ended September 2022, respectively, related primarily to Corporate
actions and resulting restructuring costs. Specified strategic
business decisions also include costs related to a transformation
initiative for our Asia-Pacific regional operations of $2.4 million
and $10.2 million in the three and six months ended September 2022,
respectively. The specified strategic business decisions resulted
in a net tax benefit of $10.1 million and $12.3 million in the
three and six months ended September 2022, respectively.
(c) VF recognized noncash impairment
charges related to the Supreme reporting unit goodwill and
indefinite-lived trademark intangible asset of $421.9 million
during the three and six months ended September 2022. The
impairment charges were driven by non-operating factors including
higher interest rates and foreign currency fluctuations.
A noncash pension settlement charge of
$91.8 million was recorded in the Other income (expense), net line
item during the six months ended September 2022. The pension
settlement charge resulted from the purchase of a group annuity
contract, which was an action taken to streamline administration,
manage financial risk associated with pension plans, and to
transfer a portion of the liability associated with VF's U.S.
pension plan to an insurance company.
The impairment and pension settlement
charges resulted in a net tax benefit of $58.6 million and $72.4
million in the three and six months ended September 2022,
respectively.
(d) Amounts shown in the table have been
calculated using unrounded numbers. The GAAP diluted earnings per
share was calculated using 387,688,000 and 387,625,000 weighted
average common shares for the three and six months ended September
2022, respectively. The adjusted diluted earnings per share impacts
were calculated using 388,483,000 and 388,439,000 weighted average
common shares for the three and six months ended September 2022,
respectively.
Non-GAAP Financial Information
The financial information above has been
presented on a GAAP basis and on an adjusted basis, which excludes
the impact of transaction and deal related activities, activity
related to specified strategic business decisions, impairment and a
pension settlement charge. The adjusted presentation provides
non-GAAP measures. Management believes these measures provide
investors with useful supplemental information regarding VF's
underlying business trends and the performance of VF's ongoing
operations and are useful for period-over-period comparisons of
such operations.
Management uses the above financial
measures internally in its budgeting and review process and, in
some cases, as a factor in determining compensation. While
management believes that these non-GAAP financial measures are
useful in evaluating the business, this information should be
considered as supplemental in nature and should be viewed in
addition to, and not in lieu of or superior to, VF's operating
performance measures calculated in accordance with GAAP. In
addition, these non-GAAP financial measures may not be the same as
similarly titled measures presented by other companies.
VF CORPORATION
Supplemental Financial
Information
Top 4 Brand Revenue
Information
(Unaudited)
Three Months Ended September
2023
Six Months Ended September
2023
Top 4 Brand Revenue Growth
Americas
EMEA
APAC
Global
Americas
EMEA
APAC
Global
Vans®
% change
(25
)%
(6
)%
(33
)%
(21
)%
(26
)%
(11
)%
(20
)%
(22
)%
% change constant currency*
(26
)%
(12
)%
(31
)%
(23
)%
(26
)%
(15
)%
(17
)%
(23
)%
The North Face®
% change
3
%
38
%
37
%
19
%
5
%
26
%
41
%
16
%
% change constant currency*
3
%
29
%
43
%
17
%
5
%
19
%
47
%
15
%
Timberland®
% change
(22
)%
10
%
6
%
(7
)%
(22
)%
9
%
12
%
(6
)%
% change constant currency*
(23
)%
2
%
11
%
(10
)%
(22
)%
3
%
16
%
(8
)%
Dickies®
% change
(7
)%
35
%
(44
)%
(8
)%
(16
)%
28
%
(35
)%
(14
)%
% change constant currency*
(7
)%
25
%
(43
)%
(9
)%
(16
)%
21
%
(32
)%
(14
)%
*Refer to constant currency definition on
previous pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended September
2023
% Change
% Change Constant
Currency*
Geographic
Revenue Growth
Americas
(11
)%
(11
)%
EMEA
14
%
6
%
APAC
2
%
6
%
Greater China
8
%
14
%
International
10
%
5
%
Global
(2
)%
(4
)%
Six Months Ended September
2023
% Change
% Change Constant
Currency*
Geographic
Revenue Growth
Americas
(12
)%
(13
)%
EMEA
8
%
3
%
APAC
7
%
11
%
Greater China
14
%
20
%
International
7
%
5
%
Global
(4
)%
(5
)%
Three Months Ended September
2023
% Change
% Change Constant
Currency*
Channel Revenue
Growth
Wholesale (a)
(1
)%
(3
)%
Direct-to-consumer
(3
)%
(5
)%
Digital
(3
)%
(5
)%
Six Months Ended September
2023
% Change
% Change Constant
Currency*
Channel Revenue
Growth
Wholesale (a)
(5
)%
(7
)%
Direct-to-consumer
(3
)%
(3
)%
Digital
(4
)%
(4
)%
As of September
2023
2022
DTC Store
Count
Total
1,251
1,283
*Refer to constant currency definition on
previous pages.
(a) Royalty revenues are included in the
wholesale channel for all periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231030802670/en/
Investor Contact: Allegra
Perry ir@vfc.com
Media Contact: Colin Wheeler
corporate_communications@vfc.com
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