VF Corporation reported fourth quarter net sales declined 13 percent to $2.4 billion in the three-month period ended March 30. The North Face was down 5 percent in Q4, with brand DTC up 6 percent in reported terms or up 7 percent in constant-currency (CC) terms. The decline was attributed to ongoing U.S. wholesale weakness. Vans was reportedly down 26 percent (-27 percent CC) year-over-year (YoY) for the period, said to be largely consistent with the prior quarter and includes the additional impact from deliberate actions to further right-size inventories in the wholesale channel.
Reported and adjusted gross margin came in at 48.4 percent of net sales in Q1, down 120 basis points YoY. Adjusted gross margin benefits of 180 basis points from favorable mix were more than offset by 300 basis points of unfavorable rate, largely from the impact of reset actions and ongoing promotional activity as well as negative transactional foreign currency impacts
Operating margin was negative 15.0 percent for the quarter, down 910 basis points YoY. Adjusted operating margin was negative 2.1 percent, down 770 basis points YoY. Adjusted operating margin reflects 650 basis points of deleverage and 120 basis points of unfavorable adjusted gross margin
VFC generated gross cost savings through its Reinvent transformation program, equaling approximately $40 million and incurred approximately $55 million of related charges in Q4.
Earnings (loss) per share was a loss of $1.08 per share in Q4, compared to a loss of 55 cents in fiscal Q4 2023.
Adjusted EPS was a loss of 32 cents per share in Q4, compared to EPS of 17 cents in Q4 2023.
“In Q4, we made progress advancing our Reinvent transformation program. We closed the fiscal year with further inventory reductions helping us deliver $1 billion in operating cash flow and over $800 million in free cash flow, exceeding our guidance. As we move into fiscal year 2025, we will continue to execute our broader turnaround plans, including driving continued momentum on our key priorities, namely fixing the Americas, turning around Vans®, reducing costs and paying down debt, while progressing on the actions resulting from our strategic portfolio review. We have been rebuilding the leadership team, including the announcement of the CFO appointment, and I feel energized that we are positioning VF to return to sustainable and profitable growth.”
Fiscal Year Financial Review
- Revenue $10.5 billion, down 10 percent (-11 percent CC) YoY.
- Gross margin 52.0 percent, down 50 basis points; adjusted gross margin 52.1 percent, down 50 basis points.
- Adjusted gross margin benefits of 90 basis points from favorable mix were more than offset by 140 basis points of unfavorable rate, which included 100 basis points of negative transactional foreign currency impacts.
- Operating margin (0.3) percent, down 310 basis points; adjusted operating margin 5.6 percent, down 420 basis points.
- Adjusted operating margin reflects 370 basis points of deleverage and 50 basis points of unfavorable adjusted gross margin.
- Generated gross cost savings through Reinvent of approximately $80 million and incurred approximately $105 million of related charges in FY24.
- Earnings (loss) per share was a loss of $2.49 per share in fiscal 2024, compared to EPS of 31 cents in the prior year. Adjusted EPS 74 cents per diluted share in Q4, compared to $2.10 per share in the prior year.
Balance Sheet and Cash Flow Review
- Inventories decreased by $382 million during Q4, down 23 percent versus the prior year-end
- VFC generated operating cash flow of $1.015 billion for the fiscal year, with free cash flow of $804 million
- Net debt at the end of Q4’FY24 was $5.3 billion, down by approximately $540 million relative to last year
FY25 Outlook - Free cash flow plus the benefit of non-core asset sales is expected to generate approximately $600 million
Image courtesy VF Corp./Vans