VF Corporation President and CEO Bracken Darrell said the fiscal third quarter for the company was “particularly disappointing” as total revenue fell 16 percent, or down 17 percent in constant-currency (CC), to $3.0 billion in the period ended December 31, compared to down 2 percent (-4 percent CC) in the fiscal 2024 second quarter.
Darrell had the tough conversation first during the company’s quarterly conference call with analysts as he focused on its struggling Americas business, down 24 percent (-25 percent CC) to $1.59 billion in the third quarter for all brands. He said the decline was primarily due to continued struggles at Vans, but sister brands The North Face, Dickies and Timberland did not shine either. Supreme was the only brand he called out for its strong global performance in the quarter.
“We now have our new commercial organization and [the] Americas platform in place and are confident this will translate to improved results for the brand and across the rest of our brands,” Darrel emphasized.
Global revenue for The North Face was down 10 percent (-11 percent CC) to $1.19 billion in the quarter and up 4 percent (+3 percent CC) to $2.86 million in the nine-month year-to-date period. Excluding the wholesale shipment timing shift, The North Face’s revenue would have reportedly decreased in mid-single-digits.
Darrell said management expected a weaker fiscal Q3 quarter for The North Face, but results were “worse than expectations,” impacted largely by the Americas region.
“After a slow start to the Fall/Winter season, momentum remained subdued, and performance was choppy throughout the quarter,” added CFO Matt Puckett. “While core bestselling lines continued to deliver strong sell-through, we saw softness in cold weather items and some seasonal product offerings.”
Darrell said the weather was a factor, as temperatures were substantially warmer than usual during the quarter. “Of note, in January, the weather got cold, and The North Face returned to growth across all three regions. We believe our performance was strongly held back by the operating model that we are now transitioning away from,” he noted.
Puckett said TNF remained “relatively stronger” in international markets.
In the APAC region, momentum reportedly continued in the quarter, with the brand growing 26 percent (+28 percent CC) and up 31 percent (+32 percent CC) in Greater China. The VF business in the APAC region was said to be led by strength in the TNF business.
In the EMEA region, revenue was down 5 percent CC in the quarter; however, Puckett also said DTC growth continued and was up 6 percent CC for the quarter. Overall, in EMEA, when looking across Q2 and Q3 combined to neutralize the impact of shipment timing across the quarters, the brand was up high by single digits.
Darrell said The North Face had a great DTC business that could be bigger. The North Face DTC business was said to be up in mid-single-digits in the quarter, primarily from e-commerce.
“It’s mostly e-comm in the U.S. We have very little of our own stores, relatively speaking, in the U.S. And that’s kind of true in Europe. But in that case, we’re adding more stores in Europe, probably in the U.S. [as well]. He said the company is not focused on the APAC region for now.
Inventories at The North Face at quarter-end were “right on the number” with the total corporate inventory reduction, which stood at a 17 percent year-over-year decline for the period.
While the company no longer provides look-ahead guidance until the business is right-sized, Puckett did offer a cautionary note for a few brands, stating that The North Face’s business in the wholesale channel, particularly in the U.S., is expected to remain challenged over the next few quarters.
What we’re seeing [now] is we knew coming into the season it would be a little more difficult,” Puckett said, responding to a question on the call. “Order books were down; we’ve said that all along, and part of that is our own issue from the last year where we didn’t really service the business. So we [were] behind the eight ball coming in, and then the weather didn’t help. The marketplace remains pretty dynamic and pretty promotional, particularly in the outdoor segment.”
Puckett continued, “I think that’s what you see and what we see and understand across the market. And I think we’re going to see that play out over the next couple of seasons as wholesale partners continue to plan very cautiously. We’re seeing that, and that’s how we’re thinking about planning our business.
“All that said, the strength of the brand remains really good. All the metrics we look at from a consumer standpoint continue to be good. Our DTC business generally is good when the weather has gotten better here in January. Our DTC business is up in all three regions. And, in fact, the brand is up in all three regions, but particularly in DTC. So, I think, the underlying drivers of opportunity and the underlying drivers of the business are really strong. The wholesale channel, particularly here in the U.S., is difficult in the near term, and we expect it to continue to be.”
In response to another question, Puckett said, “We expect DTC to grow, and we expect DTC to grow in the fourth quarter, and we expect the DTC to continue to grow. It’s good to see the business bounce back in January, particularly the early part of January, really strong as the weather turned here and to some degree in Europe as well. So, but what we’ve said, wholesale is going to be pretty choppy. We’ve got order book visibility obviously for spring and how that will shape play out and pretty good understanding of what fall is going to look like. So we’d expect that to be more difficult over the next few quarters.”
Image courtesy The North Face
See below for SGB Media coverage of the total VF Corp. results and the Vans brand details.