VF Corp. provided a revenue outlook for its year ended March 31 that was slightly below Wall Street expectations in conjunction with a debt offering. Earnings guidance likewise was slightly below average estimates.
VF said it expects to report revenue for the year ended March 28, 2020 in the range of $11.3 billion to $11.4 billion, which compares to Wall Street’s consensus estimate of $11.5 billion.
Operating income from continuing operations on a reported basis is expected in the range of approximately $1.0 billion to $1.1 billion, including the contribution of the company’s Occupational Workwear business. On an adjusted basis, the company expects operating income from continuing operations of approximately $1.4 billion to $1.5 billion, including the company’s Occupational Workwear business, which compares to Wall Street’s consensus estimate of $1.5 billion.
The new full-year guidance puts fourth-quarter revenue in the range of $2.27 billion to $2.37 billion against Street’s consensus estimate of $2.52 billion. Adjusted EBIT for Q4 is now seen in the range of $67 to $107 million, down from Street’s consensus estimate of $155 million.
VF noted that the adjusted amounts exclude fourth-quarter estimates of a noncash goodwill impairment charge related to the Timberland reporting unit of approximately $320 million and noncash goodwill and intangible asset impairment charges related to the Occupational Workwear business of approximately $11 million.
Other non-recurring items in the latest year include transaction and deal-related expenses tied to the acquisition of Icebreaker and Altra brand as well as the spin-off of the Jeans business; costs tied to the relocation of VF’s global headquarters and certain brands to Denver; and optimization activities indirectly related to the strategic review of the Occupational Workwear business.
VF said it intends to proceed with the divestiture of its Occupational Workwear business as announced on January 21, 2020 and is actively engaged with prospective buyers.
In a separate statement, VF announced a proposed offering of senior notes. The company intends to use the net proceeds from the debt offering to repay the borrowings under its senior unsecured revolving credit facility. The company intends to use any remaining net proceeds for general corporate purposes.
On April 7, VF announced it had drawn an additional $1 billion on the senior unsecured credit facility to bring cash on hand to $2.4 billion.
In a note, Jim Duffy, at Stifel, said the updated guidance implies that fourth-quarter results will come in “better than feared” versus his recent update addressing the impact of COVID-19. Duffy wrote, “While segment, region, and margin details won’t likely be available until the F4Q earnings call in May, provided EBIT suggests proactive expense management. Considering the challenging backdrop, we are encouraged by implied FY4Q results, optimistic commentary about Occupational Workwear divesture, and efforts to reduce interest expense.”
Photo courtesy VF Corp./The North Face