VF Corporation, parent of the Vans, The North Face, Timberland, Jansport and Dickies brands, reported this week in an SEC filing the impact the Supreme brand has had on VF Corp. results on a quarterly basis for fiscal 2024 and the first quarter of fiscal 2025.

VF Corp. has entered into a definitive stock and purchase agreement with Oakley parent EssilorLuxottica to acquire the Supreme brand from VF for $1.5 billion in cash. EssilorLuxottica is the parent company for the Oakley, Native Eyewear, Ray-Ban and Costa sunglass brands.

VF Corp. closed on its acquisition of Supreme in December 2020 for an aggregate base purchase price of $2.1 billion.

Fiscal Full Year 2024 Ended March 30, 2024
For the fiscal 2024 year-end, the Supreme discontinued operations accounted for $538.9 million of revenue, $324.9 million in gross profit, and $109.9 million in operating income, and 13 cents per diluted share during VF’s 2024 fiscal year.

The resulting VF Corp. figures, excluding the Supreme contribution, now stated as VF Corp. Continuing Operations, equate to $9.916 billion in revenues for fiscal 2024, compared to $10.455 billion as previously stated. Gross margin was reduced to 51.6 percent of sales, excluding Supreme, compared to 52.0 percent with Supreme. Operating loss for the fiscal year is restated as $143.9 million, or negative 1.5 percent of net sales, compared to the previously reported loss of $34.1 million, or negative 0.3 percent of net sales, for the year. The VFC diluted loss per share excluding Supreme is restated as a loss of $2.62 per diluted shares, compared to a $2.49 loss per share as previously reported.

The company also published “Adjustments” information to include certain expenses related to Project Reinvent, impairment charges, certain tax and legal items, transaction and deal-related activities and other costs to derive total VF Continuing Operations financial information on a non-GAAP basis.

  • For fiscal 2024, costs related to Reinvent, VF’s transformation program, including exit costs and project-related costs, which totaled $105.4 million. These costs reportedly related primarily to severance and employee-related benefits and the net impact of asset disposals and write-downs.
  • Non-cash goodwill impairment charges related to the Timberland, Dickies and Icebreaker reporting units of $407.0 million, $61.8 million and $38.8 million, respectively.
  • Transaction and deal related activities associated with the review of strategic alternatives for the Global Packs business, consisting of the Kipling, Eastpak and Jansport brands, which totaled $2.5 million.
  • The adjustments to operating income of $615.4 million resulted in a net tax benefit of $32.0 million for the year.

Fiscal 2025 First Quarter Ended June 29, 2024
For the fiscal 2025 first quarter ended June 29, the Supreme discontinued operations accounted for $138.2 million of revenue, $86.0 million in gross profit, a $116.9 million operating loss, and a loss of 27 cents per diluted share.

Fiscal Q1 revenue was reported down approximately 10 percent year-over-year on a pro forma basis, excluding the Supreme business.

The resulting VF Corp. figures, excluding the Supreme impact, now stated as VF Corp. Continuing Operations, equate to $1.769 billion in revenues for the fiscal first quarter, compared to $1.907 billion as previously stated. Gross margin in fiscal Q1 was reduced to 51.2 percent of sales, excluding Supreme, compared to 52.0 percent with Supreme. The operating loss for the fiscal quarter was restated as $123.0 million, or negative 7.0 percent of net sales, compared to the previously reported loss of $239.9 million, or negative 12.6 percent of net sales, for the quarter. The VFC diluted loss per share excluding Supreme is restated as a loss of 39 cents per diluted shares, compared to a 67 cents loss per share as previously reported for the first quarter.

The description of the Adjustments line to derive the VF Continuing Operations Adjusted gross profit and operating loss non-GAAP measures for the three months ended June 29, 2024 is as follows:

  • Costs related to Reinvent, VF’s transformation program, including exit costs and project-related costs, which totaled $17.8 million. These costs related primarily to severance and employee-related benefits.
  • Transaction and deal related activities associated with the review of strategic alternatives for the Global Packs business, consisting of the Kipling, Eastpak, and Jansport, which totaled $0.5 million.
  • The adjustments to operating loss of $18.3 million resulted in a net tax benefit of $4.3 million for the quarter.

Reaffirming Fiscal Q2 Outlook
Excluding the impact from Supreme in fiscal 2025, there are no changes to VF’s expectations for fiscal Q2 2025 as provided on its Q1 earnings call on August 6. All comparisons to the prior year exclude Supreme from both years.

The company reaffirmed its fiscal 2025 Q2 outlook, with more specific SG&A detail, including:

  • The rate of revenue decline in Q2 2025 is expected to improve sequentially relative to the Q1 2025 trend.
  • Gross margin is expected to be up slightly in the second quarter vs. 51.0 percent pro forma level in fiscal 2024 second quarter.
  • SG&A expenses in Q2 2025 are expected to be slightly up versus the fiscal 2024 Q2 period, which are expected to increase in the range of $25 million to $35 million, excluding Supreme, or up 2 percent to 3 percent year-over-year, compared to pro forma SG&A of $1.14 billion in in fiscal Q2 2024.

VF said in its filing that this is expected to result in a higher rate of SG&A deleverage in fiscal 2025 Q2 sequentially relative to fiscal Q1 2025.

Image courtesy Supreme