VF Corporation Reports In-Line Fourth Quarter Revenue and Earnings, Declares Dividend of $0.30 Per Share, and Issues Fiscal 2024 Outlook

DENVER–(BUSINESS WIRE)–VF Corporation (NYSE: VFC) today announced financial results for its fourth quarter (Q4’FY23) and fiscal year ended April 1, 2023 (FY23) in line with guidance.

Q4’FY23 Financial Highlights

• Revenue $2.7 billion, down 3% (flat in constant dollars)
• Earnings (loss) per share (EPS) $(0.55) vs. Q4’FY22 $0.21; Adjusted EPS $0.17 vs. Q4’FY22 $0.45

FY23 Financial Highlights

• Revenue $11.6 billion, down 2% (up 3% in constant dollars)
• EPS $0.31 vs. FY22 $3.10; Adjusted EPS $2.10 vs. FY22 $3.18

Benno Dorer, Interim President and CEO, said:

“We delivered quarterly results in line with our guidance, led by ongoing strength in The North Face^® and our International business, with accelerating momentum in Greater China. As a result, we were able to close the fiscal year with 10 out of 12 brands flat or growing revenue, and five up double digits, despite the challenging consumer environment. At the same time, we significantly improved our supply chain performance while the work to turn around Vans^® is progressing according to plan, as we navigate the known near-term challenges. Looking ahead to FY24, I am confident that we have the right plan to deliver improved operating performance and financial results, while we thoughtfully invest to deliver strong and consistent shareholder returns over the long term.”

Q4’FY23 Operating Highlights

• Continued broad-based strength in The North Face^®, up 12% (up 16% in constant dollars)
• Vans^® down 14% (down 12% in constant dollars), illustrating the beginning of growth in APAC in constant dollars while the Americas remained negative
• International business up 2% (up 8% in constant dollars)
  • EMEA region delivered its eighth consecutive quarter of growth in constant dollars
  • Greater China up 3% (up 10% in constant dollars) led further sequential improvement in the APAC region
• Americas region down 7%, primarily driven by reductions in the US Wholesale business
• Supply chain performance improving behind better execution, with increased on-time performance and a reduction in inventory of $299 million during Q4’FY23, as anticipated
• The Company recorded a non-cash impairment charge of $313 million related to the Supreme^® brand
• Recognized as one of the World’s Most Ethical Companies by Ethisphere for 2023, the seventh consecutive year for VF

FY24 Financial Outlook

• Total VF revenue flat to up slightly in constant dollars, including Q1’FY24 revenue down high-single digits in constant dollars reflecting a challenging US Wholesale environment
• Gross margin up at least 100 basis points, benefiting from a lower promotional environment across the marketplace
• Operating margin expansion, driven by the higher gross margins supporting modest increases in SG&A
• EPS of $2.05 to $2.25, including more than $(0.30) from the adverse effect of higher interest, unfavorable foreign currency, assumed normalized incentive compensation and a higher tax rate
• Free cash flow of about $900 million

Matt Puckett, CFO, said: “FY24 will be a year of progress as initiatives underway begin to drive results. We will be laser-focused on execution amidst an increasingly difficult near-term environment, particularly in US wholesale. We expect to improve our operating performance and financial results, highlighted by increasing gross margins, EBITDA growth, and strong cash generation, all of which supports our plan to de-lever. I remain confident VF is well positioned to return to sustainable and profitable growth beginning in FY24.”

All per share amounts are presented on a diluted basis. This release refers to “reported” and “constant dollar” amounts, terms that are described under the heading below “Constant Currency – Excluding the Impact of Foreign Currency.” Unless otherwise noted, “reported” and “constant dollar” amounts are the same. This release also refers to “continuing” and “discontinued” operations amounts, which are concepts described under the heading below “Discontinued Operations – Occupational Workwear Business.” Unless otherwise noted, results presented are based on continuing operations. This release also refers to “adjusted” amounts, a term that is described under the heading below “Adjusted Amounts – Excluding Transaction and Deal Related Activities, Costs Related to Specified Strategic Business Decisions, Noncash Impairment Charges, Pension Settlement Charge and a Tax Item.” Unless otherwise noted, “reported” and “adjusted” amounts are the same.

Fourth Quarter Fiscal 2023 Income Statement Review

• Revenue decreased 3% (flat in constant dollars) to $2.7 billion driven by a decline in the Americas region primarily due to a challenging wholesale environment, partially offset by increases in the EMEA and APAC regions.
  • The North Face^® revenue $0.9 billion, up 12% (up 16% in constant dollars)
  • Vans^® revenue $0.9 billion, down 14% (down 12% in constant dollars)
• Gross margin decreased 230 basis points to 49.6%, primarily driven by elevated promotional activity and increased product costs, partially offset by pricing actions. On an adjusted basis, gross margin decreased 260 basis points to 49.6%.
• Operating income (loss) on a reported basis was $(161) million. On an adjusted basis, operating income decreased 32% (down 25% in constant dollars) to $152 million. Operating margin on a reported basis was (5.9)%. Adjusted operating margin decreased 230 basis points to 5.6%.
• Earnings (loss) per share was $(0.55) on a reported basis. On an adjusted basis, earnings per share decreased 62% (down 55% in constant dollars) to $0.17.

Full Year Fiscal 2023 Income Statement Review

• Revenue decreased 2% (up 3% in constant dollars) to $11.6 billion, driven by performance at The North Face^® and strength in EMEA, partially offset by declines in Vans^® and Dickies^®.
• Gross margin decreased 200 basis points to 52.5%, primarily driven by elevated promotional activity and increased product costs, partially offset by pricing actions and lower freight. On an adjusted basis, gross margin decreased 220 basis points to 52.6%.
• Operating income on a reported basis was $328 million. On an adjusted basis, operating income decreased 27% (down 20% in constant dollars) to $1.1 billion. Operating margin on a reported basis was 2.8%. Adjusted operating margin decreased 330 basis points to 9.8%.
• Earnings per share was $0.31 on a reported basis. On an adjusted basis, earnings per share decreased 34% (down 26% in constant dollars) to $2.10.

Balance Sheet and Cash Flow Highlights

Inventories were up 62% compared with the same period last year, with on-hand inventories up 46% excluding in-transit inventory which increased approximately $254 million, primarily driven by core and excess replenishment inventory. VF returned approximately $117 million of cash to shareholders through dividends during the quarter and $703 million of cash to shareholders through dividends during the fiscal year.

Dividend Declared

VF’s Board of Directors declared a quarterly dividend of $0.30 per share, payable on June 20, 2023, to shareholders of record on June 12, 2023. Subject to approval by its Board of Directors, VF intends to continue to pay quarterly dividends.

Webcast Information

VF will host its fourth quarter fiscal 2023 conference call beginning at 4:30 p.m. Eastern Time today. The conference call will be broadcast live via the Internet, accessible at ir.vfc.com. For those unable to listen to the live broadcast, an archived version will be available at the same location.

Presentation

A presentation on fourth quarter fiscal 2023 results will be available at ir.vfc.com today before the conference call and will be archived at the same location.

About VF

Founded in 1899, VF Corporation is one of the world’s largest apparel, footwear and accessories companies connecting people to the lifestyles, activities and experiences they cherish most through a family of iconic outdoor, active and workwear brands including Vans^®, The North Face^®, Timberland^® and Dickies^®. Our purpose is to power movements of sustainable and active lifestyles for the betterment of people and our planet. We connect this purpose with a relentless drive to succeed to create value for all stakeholders and use our company as a force for good. For more information, please visit vfc.com.

Constant Currency – Excluding the Impact of Foreign Currency

This release refers to “reported” amounts in accordance with U.S. generally accepted accounting principles (“GAAP”), which include translation and transactional impacts from foreign currency exchange rates. This release also refers to “constant dollar” amounts, which exclude the impact of translating foreign currencies into U.S. dollars. Reconciliations of GAAP measures to constant currency amounts are presented in the supplemental financial information included with this release, which identifies and quantifies all excluded items, and provides management’s view of why this information is useful to investors.

Discontinued Operations – Occupational Workwear Business

On June 28, 2021, VF completed the sale of its Occupational Workwear business. The Occupational Workwear business was comprised primarily of the following brands and businesses: Red Kap^®, VF Solutions^®, Bulwark^®, Workrite^®, Walls^®, Terra^®, Kodiak^®, Work Authority^® and Horace Small^®. The business also included a license for certain Dickies^® occupational workwear products that were historically sold through the business-to-business channel. Accordingly, the company has reported the operating results and cash flows of the business in discontinued operations for all periods through the date of sale.

Adjusted Amounts – Excluding Transaction and Deal Related Activities, Costs Related to Specified Strategic Business Decisions, Noncash Impairment Charges, Pension Settlement Charge and a Tax Item

The adjusted amounts in this release exclude transaction and deal related activities associated with the acquisition of the Supreme^® brand. Total transaction and deal related activities include integration costs of approximately $0.3 million in fiscal 2023.

The adjusted amounts in this release exclude costs related to VF’s business model transformation primarily driven by Corporate actions and resulting restructuring costs, and a transformation initiative for our Asia-Pacific regional operations. Total costs were approximately $72 million in fiscal 2023.

The adjusted amounts in this release exclude noncash impairment charges related to the Supreme^® reporting unit goodwill and indefinite-lived trademark intangible asset of approximately $313 million in the fourth quarter of fiscal 2023 and $735 million in fiscal 2023. The impairment charges in the second quarter of fiscal 2023 were driven by non-operating factors including higher interest rates and foreign currency fluctuations. The impairment charges in the fourth quarter of fiscal 2023 related to lower financial projections and increased risk of achieving management’s forecasts.

The adjusted amounts in this release exclude a noncash pension settlement charge. The pension settlement charge resulted from the purchase of a group annuity contract, which was an action taken to streamline administration, manage financial risk associated with pension plans, and to transfer a portion of the liability associated with VF’s U.S. pension plan to an insurance company. Total expense was approximately $92 million in fiscal 2023.

The adjusted amounts in this release exclude a discrete tax benefit of approximately $95 million in fiscal 2023 related to a favorable adjustment to VF’s transition tax liability pursuant to the Tax Cuts and Jobs Act based on examinations by the IRS.

Combined, the above items negatively impacted earnings per share by $0.72 during the fourth quarter of fiscal 2023 and $1.79 during fiscal 2023. All adjusted amounts referenced herein exclude the effects of these amounts.

Reconciliations of measures calculated in accordance with GAAP to adjusted amounts are presented in the supplemental financial information included with this release, which identifies and quantifies all excluded items, and provides management’s view of why this information is useful to investors. The company also provides guidance on a non-GAAP basis as we cannot predict certain elements which are included in reported GAAP results.

Forward-looking Statements

Certain statements included in this release are “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting VF and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as “will,” “anticipate,” “estimate,” “expect,” “should,” and “may” and other words and terms of similar meaning or use of future dates, however, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding VF’s plans, objectives, projections and expectations relating to VF’s operations or financial performance, and assumptions related thereto are forward-looking statements. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. VF undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Potential risks and uncertainties that could cause the actual results of operations or financial condition of VF to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: the level of consumer demand for apparel and footwear; disruption to VF’s distribution system; changes in global economic conditions and the financial strength of VF’s customers, including as a result of current inflationary pressures; fluctuations in the price, availability and quality of raw materials and finished products; disruption and volatility in the global capital and credit markets; VF’s response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; VF’s ability to maintain the image, health and equity of its brands; intense competition from online retailers and other direct-to-consumer business risks; third-party manufacturing and product innovation; increasing pressure on margins; VF’s ability to implement its business strategy; VF’s ability to grow its international, direct-to-consumer and digital businesses; VF’s ability to find and amplify consumer tailwinds, build brands on multiple growth horizons and leverage platforms for speed to scale and efficiency; retail industry changes and challenges; VF’s ability to create and maintain an agile and efficient operating model and organizational structure; VF’s and its vendors’ ability to maintain the strength and security of information technology systems; the risk that VF’s facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data or information security breaches and data or financial loss; VF’s ability to properly collect, use, manage and secure business, consumer and employee data and comply with privacy and security regulations; foreign currency fluctuations; stability of VF’s vendors’ manufacturing facilities and VF’s ability to establish and maintain effective supply chain capabilities; continued use by VF’s suppliers of ethical business practices; VF’s ability to accurately forecast demand for products; VF’s ability to recruit, develop or retain key executive or employee talent or successfully transition executives; continuity of members of VF’s management; changes in the availability and cost of labor; VF’s ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment such as the impairment charges related to the Supreme^® reporting unit goodwill and indefinite-lived trademark intangible asset; maintenance by VF’s licensees and distributors of the value of VF’s brands; VF’s ability to execute acquisitions and dispositions, integrate acquisitions and manage its brand portfolio; business resiliency in response to natural or man-made economic, public health, political or environmental disruptions; changes in tax laws and additional tax liabilities, including for the timing of income inclusion associated with our acquisition of the Timberland^® brand in 2011; legal, regulatory, political, economic, and geopolitical risks, including those related to the current conflict in Ukraine; changes to laws and regulations; adverse or unexpected weather conditions, including any potential effects from climate change; VF’s indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent VF from fulfilling its financial obligations; VF’s ability to pay and declare dividends or repurchase its stock in the future; climate change and increased focus on environmental, social and governance issues; risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; and tax risks associated with the spin-off of our Jeanswear business completed in 2019. More information on potential factors that could affect VF’s financial results is included from time to time in VF’s public reports filed with the SEC, including VF’s Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished with the SEC.

Contacts

Investor Contact:
Allegra Perry

ir@vfc.com

Media Contact:

Colin Wheeler

corporate_communications@vfc.com

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