VF Corp., the parent of The North Face (TNF) and Vans, welcomed its new President and CEO Bracken Darrell, 12 days on the job, to his first results call by reporting a Q1 loss of $57.4 million against a loss of $55.96 million in the year-ago period on an 8 percent revenue decline to $2.09 billion from $2.26 billion. Adjusted gross margin fell by 130 basis points to 52.8 percent, primarily related to more promotions as the inventory level rose by $446 million, or 19 percent, year-over-year, driven by core and excess replenishment merchandise. VF is forecasting at least a 10 percent year-over-year inventory decline, or about $250 million, by FY end.
TNF was the only sales gainer in the period, rising by 12 percent to $538.2 million, and the company is forecasting continued momentum for the brand aided by China and strong DTC trends in the EMEA. Vans, whose turnaround is taking longer than expected, suffered a 22 percent drop in Q1 sales to $737.5 million and caused Active segment sales to slip by 15 percent to $1,066.0 million. Most of Vans’ troubles were centered on its wholesale business in the Americas region, which fell by 40 percent year-over-year as anticipated. The brand’s results in China and in the digital area were encouraging, the company said. VF is working to sharpen Vans’ focus on fewer key products, with in-store SKU reductions slated for completion this month. Timberland sales declined by 6 percent to $253.8 million, and Dickies’ sales were off by 20 percent to $136.6 million.
With the results, VF dropped its annual revenue guidance to “modestly down to flat” but maintained its FY EPS guidance of $2.05 to $2.25 a share and its free cash flow outlook of approximately $900 million. The company called its order book for the remainder of the FY “a little more muted than previously anticipated” in both Europe and the U.S. that reflects the cautious posture taken by many retailers.
Channel results in Q1 showed a 3 percent decline in d-t-c to $973.6 million and a 12 percent drop in wholesale revenues to $1,112.7 million. Regionally, EMEA sales declined by 2 percent to $584.3 million in the period but rose by 13 percent in APAC to $318.2 million. Greater China sales improved by 31 percent in constant currency compared to the year-ago period. The Americas was the worst-performing region, with period sales down by 15 percent to $1,183.8 million, impacted by the ongoing resetting of inventories by U.S. wholesalers.
