Key Takeaways:
VF Corp reported Q1 revenue of $1.67 billion, beating its own guidance as growth at The North Face and Timberland offset continued weakness at Vans. Shares closed at $18.25 on Tuesday, up 6.6%, before slipping 5.1% in pre-market trading following the release.
"The North Face, Timberland and Altra delivered another quarter of growth," Bracken Darrell, president and chief executive officer at VF Corp, said. He added that Vans Americas DTC continued to grow but was more than offset by declines in global wholesale, which the company expects to improve significantly in the second half.
Revenue excluding the divested Dickies brand rose 1% year over year, or was flat in constant currency, compared with guidance for a low-single-digit decline. Adjusted diluted loss per share excluding Dickies was $0.27, missing the $0.22 loss analysts had expected. Adjusted operating loss excluding Dickies was $95 million, slightly better than the $100 million the company had forecast. Gross margin expanded 100 basis points to 54.9%, driven by favorable mix and cost savings from the Reinvent transformation program.
The results show the uneven recovery underway at VF, which has spent the past two years cutting costs, reducing debt and refocusing its brand portfolio after a prolonged downturn. The company sold Dickies in November for an undisclosed sum and has been streamlining operations under the Reinvent plan. Net debt fell $1.1 billion, or 20%, from a year earlier to roughly $4.4 billion. The board declared a quarterly dividend of $0.09 per share.
Management now expects full-year revenue to rise 2% or more in constant currency, up from prior guidance of 1% to 2%. Adjusted operating margin is forecast at approximately 8%, and free cash flow is expected to be flat to up versus last year's $405 million. The company's leverage target for fiscal year-end is 2.6 times to 2.9 times net debt to adjusted EBITDA.
The guidance raise suggests management's confidence that the Vans turnaround is gaining traction. Investors will watch the second-half wholesale recovery at Vans and the performance of The North Face during the peak winter selling season for signs that the broader rebound is sustainable.
This article is for informational purposes only and does not constitute investment advice.
