VF Corp., whose current portfolio includes The North Face, Vans, Timberland and Dickies, has initiated a strategic review of its brand assets after reporting disappointing Q3 results “across the board,” with double-digit declines in total sales, wholesale revenues and for three of its main brands. The group, led by CEO Bracken Darrell, said the results “marked the beginning of the next phase” of VF’s transformation plan to reset Vans’ marketplace, review its brand portfolio and build its organization for the future.
The operating loss was $32.2 million against a profit of $516.0 million for the period ended Dec. 31, as total revenues fell by 17 percent in constant currency to $2.96 billion from $3.53 billion. The net loss was $42.5 million against a profit of $507.9 million. But adjusted gross margin improved by 40 basis points to 55.3 percent, helped by a favorable mix, and year-over-year inventories declined by 17 percent to $2.15 billion.
Excited about “underlying growth opportunities”
Despite unseasonable weather during the period and a promotion environment in the Americas that impacted sales, Darrell said the group remains excited about “underlying growth opportunities” for The North Face going forward. In Q3, the brand’s revenues fell by 11 percent in constant currency to $1.19 billion, hurt by a decline in wholesale orders and the promotional market in North America. The North Face sales were down by 5 percent in EMEA but up by 6 percent in the DTC channel. The brand’s period sales in APAC rose by 28 percent and included a 31 percent increase in Greater China.
VF described The North Face merchandise assortment as “really well positioned” in the EU, where quarterly sell-throughs were “a little stronger than the financial numbers suggest.” The company intends to open more stores across the region, where DTC results are forecast to grow in Q4 and beyond, while the brand’s wholesale business remains “choppy” for the next few quarters.
Timberland tumbled and Dickies slipped
Companywide, VF’s EMEA sales in Q3 fell by 12 percent in constant currency to $912.3 million, as revenues rose by 3 percent to $461.6 million in APAC and slid by 25 percent to $1.59 billion in the Americas, where the marketplace is promotional and a clean-up of Vans’ inventory took place.
Elsewhere, Timberland sales tumbled by 22 percent to $473 million and Dickies revenues slipped by 17 percent to $147.9 million. Vans sales sunk by 29 percent to $668.2 million, as work was done to remove unproductive inventory from the wholesale channel in the Americas.
The group is moving steadily forward with the execution of its “Reinvent” transformation program under Darrell, which is forecast to deliver approximately $60 million in gross savings in FY24 and the majority of a targeted $300 million by H2/FY25. VF’s current outlook for FY24 doesn’t offer any revenue or profit targets. Instead, it anticipates approximately $600 million in free cash flow, a year-over-year inventory decline of 10 percent, and liquidity of about $2.3 billion. VF’s primary objectives over the next several years are to become a “leaner, faster and stronger organization under a more cohesive set of brands where innovation will be at the center of the transformation,” Darrell said.
