Skip to main content

Growth is Slowing at Vans. That’s Not Good for VF.

VF Corp.’s Vans business saw growth slow in the second quarter as the company’s overall earnings and revenues missed Wall Street’s expectations.

In a Nutshell: President and CEO Steve Rendle said, “We’re pleased with the strength of our second quarter and first half results, driven by our two largest brands and our international and direct-to-consumer platforms.

Rendle added that the “quality and fundamentals of our business remain solid as a result of the focus and strategic execution of our business teams around the globe.”

The company said inventories were up 10 percent, compared with year-ago inventory levels.

Net Sales: Net revenues for the quarter ended Sept. 28 were up 5.3 percent to $3.39 billion from $3.22 billion.

By business segment, Outdoor rose 3.4 percent to $1.52 billion from $1.47 billion, with sales in its key brand The North Face up 8 percent for the quarter. Active was up 8.5 percent to $1.41 billion from $1.30 billion, buoyed by a 14 percent increase in sales from Vans–although that was lower than the 27 percent growth rate in the year-ago quarter. VF’s Work business slipped 3.6 percent to $435.6 million from $451.7 million. The balance of revenues was classified as Other income.

International sales rose 4 percent, with revenue from China up 20 percent in the quarter. Direct-to-consumer revenue was up 11 percent, with digital revenue up 15 percent for the period.

For the quarter, gross margin rose 90 basis points to 52.9 percent, mostly due to a shift to higher-margin businesses.

Earnings: Net income rose 28 percent to $649.0 million, or $1.61 a diluted share, from $507.1 million, or $1.26, a year ago. On an adjusted basis, EPS was $1.26.

Related Stories

Wall Street was expecting EPS of $1.31 on revenues of $3.42 billion.

The company reported total transaction and deal-related expenses of $9 million in the second quarter connected to the acquisition of its Icebreaker and Altra brands, as well as total costs of $18 million connected to several initiatives such as its jeanswear spin-off, which now operates under the name Kontoor Brands Inc.; the relocation of its global corporate headquarters to Denver, Colo., and the wind down of its South American jeanswear business.

For full year fiscal 2020, VF said it still expects earnings per share in the range of $3.32 to $3.37. The company continues to project revenue to increase 6 percent to $11.8 billion. The Outdoor segment is also expected to meet earlier projections of 6 percent growth. Revenue for the Active business is projected to rise 8 percent to 9 percent, up from earlier guidance of an increase between 7 percent to 8 percent. Work revenue is expected to increase between 2 percent to 3 percent, revised downward from earlier guidance of 3 percent to 5 percent.

VF said its international revenue will likely rise 4 percent to 5 percent, an increase from prior guidance of between 4 percent to 6 percent. Direct-to-consumer revenue growth was guided to a gain of 11 percent to 12 percent, which includes a projection of 25 percent growth in digital, up from prior forecasts of a gain of 10 percent to 12 percent.

CEO’s Take: Rendle said, “Despite an increasingly uncertain geopolitical and macroeconomic environment, we are confident in the trajectory of our business as we move into the second half of our fiscal year, as reaffirmed by our outlook. We remain deeply committed to transforming VF into a more consumer-minded and retail-centric organization while delivering superior returns to shareholders.”

Separately, VF in the quarter returned $171 million of cash to shareholders through dividends. The company did not repurchase any shares in the second quarter, and has $3.8 billion remaining under its current share-repurchase authorization.