VF Corporation (NYSE: VFC) today reported financial results for
its third quarter (Q3'FY24) ended December 30, 2023, announcing a
quarterly per share dividend of $0.09 and reiterating FY24 free
cash flow guidance.
Bracken Darrell, President and CEO, said: "Our third
quarter top-line performance was disappointing. However, we are
confident the actions we are implementing as part of Reinvent will
enable VF to stabilize and then grow revenue and improve
operational performance across brands and regions. We have already
begun to see the impact of our efforts to right-size the company’s
cost structure and improve its inventory position, resulting in
stronger than expected cash flow and expanded gross margin in the
quarter. This quarter marked the beginning of the next phase of our
transformation plan: resetting the marketplace for Vans, reviewing
our brand portfolio and continuing to build the organization of the
future. As we approach the end of this fiscal year, my confidence
in VF’s future is rising."
Q3'FY24 Financial and Operating Highlights
- Revenue down 16% (down 17% in constant dollars) to $3.0 billion
- The quarter was negatively impacted by a shift in timing of
wholesale deliveries, which was most pronounced for The North Face®
and the EMEA region
- Loss per share $(0.11) versus Q3'FY23 earnings per share $1.31;
adjusted earnings per share $0.57 versus Q3'FY23 adjusted earnings
per share $1.12
- The North Face® down 10% (down 11% in constant dollars); in the
first nine months of FY'24 revenue is up 4% (up 3% in constant
dollars)
- APAC region up 26% (up 28% in constant dollars), including
Greater China up 31% (up 32% in constant dollars)
- Vans® down 28% (down 29% in constant dollars), inclusive of
deliberate actions taken to right-size inventories in the Wholesale
channel
- Americas region down 24% (down 25% in constant dollars)
- International business down 5% (down 8% in constant dollars)
- APAC region up 2% (up 3% in constant dollars), including
Greater China up 5% (up 7% in constant dollars)
- EMEA region revenue down 7% (down 12% in constant dollars)
- Inventories at the end of Q3'FY24 down 17% relative to last
year
- Net debt at the end of Q3'FY24 reduced by approximately $640
million relative to last year
Reinvent
During the quarter, the company continued to execute the
Reinvent transformation program, which aims to enhance focus on
brand-building and to improve operating performance. The initial
four priorities of Reinvent are to improve North America results,
deliver the Vans turnaround, reduce costs and strengthen the
balance sheet. The company will continue to pursue opportunities to
simplify and streamline its processes and invest in the business to
drive brand heat and accelerate a return to growth.
Strategic Portfolio Review
Consistent with the goals of Reinvent, VF has initiated an
in-depth strategic review of the brand assets within the portfolio,
in alignment with the Board of Directors, to ensure the company
owns the brands that it believes create the greatest long-term
value.
FY24 Outlook
The company reaffirmed its free cash flow guidance for FY24 of
approximately $600 million.
Summary Revenue
Information
(Unaudited)
Three Months Ended
December
Nine Months Ended
December
(Dollars in millions)
2023
2022
% Change
% Change (constant currency)
2023
2022
% Change
% Change (constant currency)
Brand:
Vans®
$
668.2
$
926.9
(28
)%
(29
)%
$
2,154.5
$
2,825.9
(24
)%
(25
)%
The North Face®
1,192.1
1,321.2
(10
)%
(11
)%
2,859.0
2,753.2
4
%
3
%
Timberland®
473.0
595.5
(21
)%
(22
)%
1,215.5
1,389.1
(13
)%
(14
)%
Dickies®
147.9
177.0
(16
)%
(17
)%
456.0
533.7
(15
)%
(15
)%
Other Brands
479.1
510.1
(6
)%
(7
)%
1,395.9
1,371.0
2
%
1
%
VF Revenue
$
2,960.3
$
3,530.7
(16
)%
(17
)%
$
8,080.9
$
8,872.9
(9
)%
(10
)%
Region:
Americas
$
1,586.4
$
2,093.9
(24
)%
(25
)%
$
4,338.7
$
5,233.1
(17
)%
(17
)%
EMEA
912.3
983.3
(7
)%
(12
)%
2,558.7
2,510.4
2
%
(3
)%
APAC
461.6
453.4
2
%
3
%
1,183.5
1,129.3
5
%
8
%
VF Revenue
$
2,960.3
$
3,530.7
(16
)%
(17
)%
$
8,080.9
$
8,872.9
(9
)%
(10
)%
International
$
1,546.2
$
1,629.3
(5
)%
(8
)%
$
4,229.6
$
4,132.7
2
%
0
%
Channel:
DTC
$
1,786.2
$
1,937.4
(8
)%
(9
)%
$
3,871.4
$
4,082.6
(5
)%
(6
)%
Wholesale (a)
1,174.1
1,593.3
(26
)%
(28
)%
4,209.5
4,790.3
(12
)%
(14
)%
VF Revenue
$
2,960.3
$
3,530.7
(16
)%
(17
)%
$
8,080.9
$
8,872.9
(9
)%
(10
)%
All references to the periods ended
December 2023 relate to the 13-week and 39-week fiscal periods
ended December 30, 2023 and all references to the periods ended
December 2022 relate to the 13-week and 39-week fiscal periods
ended December 31, 2022.
Note: Amounts may not sum due to
rounding
(a) Royalty revenues are included in the
wholesale channel for all periods.
Q3'FY24 Income Statement Review
- Revenue $3.0 billion, down 16% (down 17% in constant
dollars)
- Gross margin 55.1%, up 20 basis points; adjusted gross margin
55.3%, up 40 basis points
- Adjusted gross margin tailwinds of approximately 175 basis
points from favorable mix, partially offset by headwinds of
approximately 135 basis points of unfavorable rate impact, largely
driven by transactional foreign exchange rates
- Operating margin (1.1)%, down 1,570 basis points; adjusted
operating margin 9.3%, down 560 basis points
- Adjusted operating margin contraction driven by 610 basis
points of deleverage, partially offset by 40 basis points of
favorable constant currency gross margin impact and 10 basis points
of translational foreign currency exchange rate benefits
- Loss per share $(0.11) versus Q3'FY23 earnings per share $1.31;
adjusted earnings per share $0.57 versus Q3'FY23 adjusted earnings
per share $1.12
Balance Sheet Highlights
- Inventories decreased by $333 million during Q3’FY24, down 17%
relative to last year
- Net debt at the end of Q3'FY24 reduced by approximately $640
million relative to last year
Shareholder Returns
- Return of $35 million to shareholders through cash dividends in
Q3'FY24
- VF’s Board of Directors declared a quarterly dividend of $0.09
per share. This dividend will be payable on March 20, 2024, to
shareholders of record at the close of business on March 11, 2024.
Subject to approval by its Board of Directors, VF intends to
continue to pay quarterly dividends.
Webcast Information
VF will host its third 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 Reinvent, Noncash
Impairment Charges, Tax and Legal Items, and Transaction and Deal
Related Activities.” 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 Reinvent, Noncash Impairment
Charges, Tax and Legal Items, and Transaction and Deal Related
Activities
The adjusted amounts in this release exclude costs related to
Reinvent, VF's transformation program. Costs related to Reinvent
were approximately $51 million in the third quarter and first nine
months of fiscal 2024.
The adjusted amounts in this release exclude noncash goodwill
impairment charges related to the Timberland® and Dickies®
reporting units of approximately $257 million in the third quarter
and first nine 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 first nine months of fiscal 2024,
as a result of these two rulings.
The adjusted amounts in this release exclude legal settlement
gains of approximately $29 million recorded in the third quarter
and first nine months of fiscal 2024.
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
third quarter of fiscal 2024 and $2 million in the first nine
months of fiscal 2024.
Combined, the above items negatively impacted earnings per share
by $0.68 during the third quarter of fiscal 2024 and $2.48 during
the first nine 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,”
"believe," “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, such as the Reinvent transformation program, including
cost reduction and productivity initiatives and the update and
maintenance of an agile and efficient operating model and
organizational structure; any inability of VF or third parties on
which we rely, to maintain the strength and security of information
technology systems; the fact that VF’s facilities and systems, and
those of third parties on which we rely, are frequent targets of
cyber-attacks of varying levels of severity, and may be vulnerable
to such attacks, and any inability or failure by us or such third
parties to anticipate or detect data or information security
breaches or other cyber-attacks, including the cyber incident that
was reported by VF in December 2023, could result in data or
financial loss, reputational harm, business disruption, damage to
our relationships with customers, consumers, employees and third
parties on which we rely, litigation, regulatory investigations,
enforcement actions or other negative impacts; any inability by VF
or third parties on which we rely 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 Timberland® and Dickies®
reporting unit goodwill and 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
December
Nine Months Ended
December
2023
2022
2023
2022
Net revenues
$
2,960,283
$
3,530,667
$
8,080,858
$
8,872,862
Costs and operating expenses
Cost of goods sold
1,327,871
1,593,048
3,792,168
4,134,207
Selling, general and administrative
expenses
1,407,548
1,421,586
3,709,891
3,828,157
Impairment of goodwill and intangible
assets
257,096
—
257,096
421,922
Total costs and operating expenses
2,992,515
3,014,634
7,759,155
8,384,286
Operating income (loss)
(32,232
)
516,033
321,703
488,576
Interest expense, net
(63,338
)
(50,230
)
(168,701
)
(115,395
)
Other income (expense), net
30,029
(9,901
)
22,952
(113,895
)
Income (loss) before income
taxes
(65,541
)
455,902
175,954
259,286
Income tax expense (benefit)
(23,089
)
(51,966
)
726,528
(74,190
)
Net income (loss)
$
(42,452
)
$
507,868
$
(550,574
)
$
333,476
Earnings (loss) per common share
(a)
Basic
$
(0.11
)
$
1.31
$
(1.42
)
$
0.86
Diluted
$
(0.11
)
$
1.31
$
(1.42
)
$
0.86
Weighted average shares
outstanding
Basic
388,383
387,739
388,294
387,663
Diluted
388,383
388,192
388,294
388,357
Cash dividends per common share
$
0.09
$
0.51
$
0.69
$
1.51
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 December 2023 relate to the 13-week and
39-week fiscal periods ended December 30, 2023 and all references
to periods ended December 2022 relate to the 13-week and 39-week
fiscal periods ended December 31, 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)
December
March
December
2023
2023
2022
ASSETS
Current assets
Cash and equivalents
$
988,006
$
814,887
$
571,347
Accounts receivable, net
1,314,139
1,610,295
1,564,957
Inventories
2,148,219
2,292,790
2,591,915
Other current assets
485,562
434,737
515,763
Total current assets
4,935,926
5,152,709
5,243,982
Property, plant and equipment,
net
913,384
942,440
932,663
Goodwill and intangible assets,
net
4,360,383
4,621,234
4,932,913
Operating lease right-of-use
assets
1,314,306
1,372,182
1,293,041
Other assets
1,092,475
1,901,923
1,910,698
Total assets
$
12,616,474
$
13,990,488
$
14,313,297
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
$
452,286
$
11,491
$
901,668
Current portion of long-term debt
1,000,596
924,305
910,616
Accounts payable
974,844
936,319
906,340
Accrued liabilities
1,569,557
1,673,651
1,827,610
Total current liabilities
3,997,283
3,545,766
4,546,234
Long-term debt
4,755,252
5,711,014
4,617,441
Operating lease liabilities
1,133,749
1,171,941
1,068,744
Other liabilities
620,997
651,054
761,246
Total liabilities
10,507,281
11,079,775
10,993,665
Stockholders' equity
2,109,193
2,910,713
3,319,632
Total liabilities and stockholders'
equity
$
12,616,474
$
13,990,488
$
14,313,297
VF CORPORATION
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
December
2023
2022
Operating activities
Net income (loss)
$
(550,574
)
$
333,476
Impairment of goodwill and intangible
assets
257,096
421,922
Depreciation and amortization
231,493
192,174
Reduction in the carrying amount of
right-of-use assets
283,002
280,845
Write-off of income tax receivables and
interest
921,409
—
Other adjustments, including changes in
operating assets and liabilities
(36,679
)
(2,061,889
)
Cash provided (used) by operating
activities
1,105,747
(833,472
)
Investing activities
Capital expenditures
(119,662
)
(130,214
)
Software purchases
(52,855
)
(75,460
)
Other, net
(19,477
)
(1,159
)
Cash used by investing activities
(191,994
)
(206,833
)
Financing activities
Contingent consideration payment
—
(56,976
)
Net increase (decrease) from short-term
borrowings and long-term debt
(465,008
)
1,064,601
Cash dividends paid
(268,155
)
(586,335
)
Proceeds from issuance of Common Stock,
net of (payments) for tax withholdings
(2,603
)
(2,571
)
Cash provided (used) by financing
activities
(735,766
)
418,719
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
(4,984
)
(82,512
)
Net change in cash, cash equivalents
and restricted cash
173,003
(704,098
)
Cash, cash equivalents and restricted
cash – beginning of year
816,319
1,277,082
Cash, cash equivalents and restricted
cash – end of period
$
989,322
$
572,984
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Three Months Ended
December
% Change
% Change Constant Currency
(a)
2023
2022
Segment revenues
Outdoor
$
1,738,579
$
2,003,045
(13)%
(15)%
Active
999,396
1,258,682
(21)%
(22)%
Work
222,308
268,940
(17)%
(18)%
Total segment revenues
$
2,960,283
$
3,530,667
(16)%
(17)%
Segment profit (loss)
Outdoor
$
304,741
$
457,027
Active (b)
94,020
146,885
Work
(1,864
)
18,487
Other (c)
—
(134
)
Total segment profit
396,897
622,265
Impairment of goodwill
(257,096
)
—
Corporate and other expenses
(142,004
)
(116,133
)
Interest expense, net
(63,338
)
(50,230
)
Income (loss) before income
taxes
$
(65,541
)
$
455,902
(a) Refer to constant currency definition
on the following pages.
(b) Includes legal settlement gains of
$29.1 million in the three months ended December 2023.
(c) 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)
Nine Months Ended
December
% Change
% Change Constant Currency
(a)
2023
2022
Segment revenues
Outdoor
$
4,281,955
$
4,326,997
(1)%
(2)%
Active
3,147,692
3,772,737
(17)%
(18)%
Work
651,211
772,980
(16)%
(16)%
Other (b)
—
148
*
*
Total segment revenues
$
8,080,858
$
8,872,862
(9)%
(10)%
Segment profit (loss)
Outdoor
$
557,830
$
670,615
Active (c)
351,772
541,171
Work
13,482
92,989
Other (b)
—
(516
)
Total segment profit
923,084
1,304,259
Impairment of goodwill and intangible
assets
(257,096
)
(421,922
)
Corporate and other expenses
(321,333
)
(507,656
)
Interest expense, net
(168,701
)
(115,395
)
Income before income taxes
$
175,954
$
259,286
(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.
(c) Includes legal settlement gains of
$29.1 million in the nine months ended December 2023.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Three Months Ended December
2023
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
1,738,579
$
(28,554
)
$
1,710,025
Active
999,396
(15,054
)
984,342
Work
222,308
(1,072
)
221,236
Total segment revenues
$
2,960,283
$
(44,680
)
$
2,915,603
Segment profit (loss)
Outdoor
$
304,741
$
(6,737
)
$
298,004
Active
94,020
(1,554
)
92,466
Work
(1,864
)
(215
)
(2,079
)
Total segment profit
396,897
(8,506
)
388,391
Impairment of goodwill
(257,096
)
—
(257,096
)
Corporate and other expenses
(142,004
)
156
(141,848
)
Interest expense, net
(63,338
)
—
(63,338
)
Loss before income taxes
$
(65,541
)
$
(8,350
)
$
(73,891
)
Diluted earnings (loss) per share
growth
(108
)%
(2
)%
(110
)%
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)
Nine Months Ended December
2023
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
4,281,955
$
(61,966
)
$
4,219,989
Active
3,147,692
(42,316
)
3,105,376
Work
651,211
(1,376
)
649,835
Total segment revenues
$
8,080,858
$
(105,658
)
$
7,975,200
Segment profit
Outdoor
$
557,830
$
(12,982
)
$
544,848
Active
351,772
(7,627
)
344,145
Work
13,482
(773
)
12,709
Total segment profit
923,084
(21,382
)
901,702
Impairment of goodwill
(257,096
)
—
(257,096
)
Corporate and other expenses
(321,333
)
(74
)
(321,407
)
Interest expense, net
(168,701
)
—
(168,701
)
Income before income taxes
$
175,954
$
(21,456
)
$
154,498
Diluted earnings (loss) per share
growth
(265
)%
(6
)%
(271
)%
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 Nine Months Ended
December 2023
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended December
2023
As Reported
under GAAP
Reinvent (a)
Impairment Charges (b)
Tax & Legal Items
(c)
Transaction and Deal Related
Activities (d)
Adjusted
Revenues
$
2,960,283
$
—
$
—
$
—
$
—
$
2,960,283
Gross profit
1,632,412
4,244
—
—
—
1,636,656
Percent
55.1
%
55.3
%
Operating income (loss)
(32,232
)
50,869
257,096
—
1,003
276,736
Percent
(1.1
)%
9.3
%
Diluted earnings (loss) per share
(e)
(0.11
)
0.10
0.64
(0.06
)
—
0.57
Nine Months Ended December 2023
As Reported
under GAAP
Reinvent (a)
Impairment Charges (b)
Tax & Legal Items
(c)
Transaction and Deal Related
Activities (d)
Adjusted
Revenues
$
8,080,858
$
—
$
—
$
—
$
—
$
8,080,858
Gross profit
4,288,690
4,244
—
—
—
4,292,934
Percent
53.1
%
53.1
%
Operating income
321,703
50,869
257,096
—
2,449
632,117
Percent
4.0
%
7.8
%
Diluted earnings (loss) per share
(e)
(1.42
)
0.10
0.64
1.73
—
1.06
(a) Costs related to Reinvent, VF's
transformation program, were $50.9 million in the three and nine
months ended December 2023, related primarily to severance and
employee-related benefits and certain non-cash asset write-downs.
Reinvent resulted in a net tax benefit of $13.0 million in the
three and nine months ended December 2023.
(b) VF recognized noncash goodwill
impairment charges related to the Timberland and Dickies reporting
units of $195.3 million and $61.8 million, respectively, during the
three and nine months ended December 2023. The impairment charges
resulted in a net tax benefit of $8.1 million in the three and nine
months ended December 2023.
(c) 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 nine
months ended December 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 nine months ended
December 2023, as a result of this ruling.
Legal items include legal settlement gains
of $29.1 million recorded in the three and nine months ended
December 2023 within the Other income (expense), net line item. The
legal items resulted in a net tax expense of $7.5 million in the
three and nine months ended December 2023.
(d) 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 $1.0 million and $2.4 million for the three and nine
months ended December 2023, respectively. The transaction and deal
related activities resulted in a net tax benefit of $0.2 million
and $0.6 million in the three and nine months ended December 2023,
respectively.
(e) Amounts shown in the table have been
calculated using unrounded numbers. The GAAP diluted earnings per
share was calculated using 388,383,000 and 388,294,000 weighted
average common shares for the three and nine months ended December
2023, respectively. The adjusted diluted earnings per share impacts
were calculated using 389,375,000 and 389,246,000 weighted average
common shares for the three and nine months ended December 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 Reinvent, impairment charges, certain tax and legal
items and transaction and deal related activities. 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 Nine Months Ended
December 2022
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended December
2022
As Reported
under GAAP
Transaction and Deal Related
Activities (a)
Specified Strategic Business
Decisions (b)
Impairment and Pension
Settlement Charge (c)
Tax Item (d)
Adjusted
Revenues
$
3,530,667
$
—
$
—
$
—
$
—
$
3,530,667
Gross profit
1,937,619
—
1,582
—
—
1,939,201
Percent
54.9
%
54.9
%
Operating income
516,033
—
10,609
—
—
526,642
Percent
14.6
%
14.9
%
Diluted earnings per share (e)
1.31
—
0.02
0.03
(0.24
)
1.12
Nine Months Ended December 2022
As Reported
under GAAP
Transaction and Deal Related
Activities(a)
Specified Strategic Business
Decisions (b)
Impairment and Pension
Settlement Charge (c)
Tax Item (d)
Adjusted
Revenues
$
8,872,862
$
—
$
—
$
—
$
—
$
8,872,862
Gross profit
4,738,655
—
9,946
—
—
4,748,601
Percent
53.4
%
53.5
%
Operating income
488,576
331
72,031
421,922
—
982,860
Percent
5.5
%
11.1
%
Diluted earnings per share (e)
0.86
—
0.15
1.17
(0.24
)
1.93
(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 nine months ended December 2022. The transaction
and deal related activities resulted in a net tax benefit of $0.1
million in the nine months ended December 2022.
(b) Specified strategic business decisions
include costs related to VF's business model transformation of $8.3
million and $59.5 million during the three and nine months ended
December 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 $2.3 million and $12.5
million in the three and nine months ended December 2022,
respectively. The specified strategic business decisions resulted
in a net tax benefit of $2.7 million and $15.0 million in the three
and nine months ended December 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 nine months ended December 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 nine months ended December 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 expense of $12.2 million and a net
tax benefit of $60.2 million in the three and nine months ended
December 2022, respectively.
(d) Tax item includes a $94.9 million
discrete tax benefit recognized during the three and nine months
ended December 2022 related to the Internal Revenue Service
examinations for tax year 2017 and short-tax year 2018 resulting in
a favorable adjustment to VF's transition tax liability under the
Tax Cuts and Jobs Act.
(e) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
was calculated using 388,192,000 and 388,357,000 weighted average
common shares for the three and nine months ended December 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, a
pension settlement charge and a tax item. 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 December
2023
Nine Months Ended December
2023
Top 4 Brand Revenue Growth
Americas
EMEA
APAC
Global
Americas
EMEA
APAC
Global
Vans®
% change
(31)%
(19)%
(27)%
(28)%
(27)%
(13)%
(22)%
(24)%
% change constant currency*
(31)%
(23)%
(27)%
(29)%
(28)%
(17)%
(20)%
(25)%
The North Face®
% change
(24)%
0%
26%
(10)%
(9)%
13%
34%
4%
% change constant currency*
(24)%
(5)%
28%
(11)%
(9)%
8%
38%
3%
Timberland®
% change
(30)%
(11)%
(1)%
(21)%
(25)%
1%
6%
(13)%
% change constant currency*
(30)%
(16)%
1%
(22)%
(26)%
(5)%
10%
(14)%
Dickies®
% change
(11)%
(15)%
(45)%
(16)%
(14)%
11%
(38)%
(15)%
% change constant currency*
(11)%
(19)%
(45)%
(17)%
(14)%
5%
(36)%
(15)%
*Refer to constant currency definition on
previous pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended December
2023
Nine Months Ended December
2023
% Change
% Change Constant
Currency*
% Change
% Change Constant
Currency*
Geographic
Revenue Growth
Americas
(24)%
(25)%
(17)%
(17)%
EMEA
(7)%
(12)%
2%
(3)%
APAC
2%
3%
5%
8%
Greater China
5%
7%
10%
14%
International
(5)%
(8)%
2%
0%
Global
(16)%
(17)%
(9)%
(10)%
Three Months Ended December
2023
Nine Months Ended December
2023
% Change
% Change Constant
Currency*
% Change
% Change Constant
Currency*
Channel Revenue
Growth
Wholesale (a)
(26)%
(28)%
(12)%
(14)%
Direct-to-consumer
(8)%
(9)%
(5)%
(6)%
Digital
(13)%
(14)%
(9)%
(9)%
As of December
2023
2022
DTC Store
Count
Total
1,271
1,282
*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/20240206366136/en/
Investor Contact: Allegra
Perry ir@vfc.com
Media Contact: Colin Wheeler
corporate_communications@vfc.com
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