VF Corp., which is completing the spinoff of its Jeans division at the end of the business day Wednesday and moving its headquarters to Denver, Colo. this weekend, had a decent fourth quarter after a number of cost adjustments.
However, investors were less thrilled about its full-year guidance, and a deeper dive indicates a slowdown in its outdoor and active segments, both of which posted lower sales and profits in the fourth quarter.
In a Nutshell: The fourth-quarter bottom line for the period ended March 30 showed lower profits, but still managed to best Wall Street’s expectations for adjusted diluted earnings per share by 2 cents. A closer look at one of its supplemental charts–the one for segment revenues and profits on a constant currency basis–however, indicates some concerns ahead, which were reflected in its fiscal year 2020 guidance.
The company said its outdoor division saw revenues fall 3.6 percent to $1 billion from $1.04 billion, while profits declined 10 percent to $31.8 million from $35.3 million. Revenues at its active segment fell 3.4 percent to $1.14 billion from $1.18 billion, as profits slid 3.2 percent to $232.6 million from $240.2 million. Its work category also saw some declines, with revenues down 1.1 percent to $453 million and profits down 0.9 percent to $45 million.
“Fiscal 2019 marked one of the most significant periods of transformation in VF’s 120-year history, highlighted by our announcement to spin off our Jeans business as an independent, publicly traded company,” Steve Rendle, VF chairman, president and chief executive officer, said. Rendle also noted that the company remained focused on delivering “another year of strong financial results and top quartile returns to our shareholders.”
On a full year basis, net income rose 91 percent to $1.26 billion, on a 12 percent revenue gain to $13.85 billion.
Net Sales: Net revenues rose 6 percent to $3.21 billion from $3.05 billion. Excluding Kontoor Brands, revenues were up 8 percent. Gross margin fell 20 basis points to 50.3 percent.
Earnings: Net income was down by almost half, or 49 percent, to $128.8 million, or 32 cents a diluted share, from $252.8 million, or 63 cents, a year ago.
Adjusted diluted EPS was 60 cents, which excluded items like expenses connected with the spinoff of Kontoor Brands, costs associated with relocating its global headquarters and certain brands to Denver, and charges related to strategic decisions such as ceasing operations in Argentina and business model changes in other countries in South America.
The adjusted diluted EPS was good enough to best Wall Street’s estimates of 58 cents, on revenues of $3.21 billion.
Investors weren’t happy with the guidance for fiscal year 2020, and sent shares of VF down 3.5 percent to the $88.89 trading range at the mid-day session on Wednesday. That’s because VF guided adjusted EPS in the range of $3.30 to $3.35, on a revenue expectation of between $11.7 billion to $11.8 billion. Both forecasts were below Wall Street’s consensus estimates of $4.26 on revenues of $14.64 billion before VF posted its fourth-quarter and full-year earnings report.
CEO’s Take: According to Rendle, “As we enter fiscal 2020, our portfolio is well positioned, and our growth and momentum are strong, fueled by the investments we are making in support of our long-term strategy.” The bold decisions we continue to make to evolve our company underpin the transformational journey we’re on to deliver on our commitment to be a purpose-led, performance-driven and value-creating enterprise capable of delivering sustainable long-term shareholder value.”