VF Corporation (NYSE: VFC) today announced financial results for
its second quarter (Q2'FY23) ended October 1, 2022.
Q2'FY23 Financial Highlights
- Revenue $3.1 billion, declined 4% (up 2% in constant dollars)
with big four brands down 5% (up 1% in constant dollars) and the
balance of the portfolio up 4% (up 13% in constant dollars)
- The North Face® revenue $1.0 billion, up 8% (up 14% in constant
dollars)
- Vans® revenue $1.0 billion, down 13% (down 8% in constant
dollars)
- Gross margin 51.4%, down 230 basis points; Adjusted gross
margin 51.5%, down 240 basis points
- Operating margin (2.9)%, down 2,040 basis points; Adjusted
operating margin 12.3%, down 440 basis points
- Earnings (loss) per share (EPS) $(0.31), down 126%; Adjusted
EPS $0.73, down 34%
- Return of $194 million to shareholders through cash
dividends
H1'FY23 Financial Highlights
- Revenue $5.3 billion, down 1% (up 4% in constant dollars) with
big four brands down 2% (up 3% in constant dollars) and the balance
of the portfolio increasing 6% (up 14% in constant dollars)
- The North Face® revenue $1.4 billion, up 15% (up 21% in
constant dollars)
- Vans® revenue $1.9 billion, down 10% (down 6% in constant
dollars)
- Gross margin 52.4%, down 240 basis points; Adjusted gross
margin 52.6%, down 250 basis points
- Operating margin (0.5)%, down 1,460 basis points; Adjusted
operating margin 8.5%, down 420 basis points
- Earnings (loss) per share $(0.45), down 129%; Adjusted EPS
$0.81, down 41%
- Return of $388 million to shareholders through cash
dividends
FY23 Financial Outlook
- VF is maintaining its constant dollar revenue outlook but
revising its earnings outlook to reflect increased negative impacts
from foreign currency fluctuations as well as heightened inventory
levels and increased promotional activity in the marketplace
- Total VF revenue up 5% to 6% in constant dollars, unchanged
from the previous outlook
- Adjusted gross margin down 100 to 150 basis points, compared to
the previous outlook of down 50 basis points
- Adjusted operating margin 11.0%, compared to the previous
outlook of approximately 12.0%
- Adjusted EPS is now expected to be in the range of $2.40 to
$2.50, versus $3.18 in the prior year and compared to the previous
outlook of $2.60 to $2.70
- Adjusted cash flow from operations at least $0.9 billion,
compared to the previous outlook of $1.0 billion; Capital
expenditures approximately $230 million versus the previous outlook
of $240 million
- Excludes the impact of an $876 million payment VF made on
October 19, 2022 to the Internal Revenue Service (IRS) for the
dispute regarding the timing of income inclusion associated with
VF's acquisition of Timberland in 2011, as previously
disclosed
- VF's FY23 outlook assumes the following:
- No additional significant COVID-19 related lockdowns in any key
commercial or production regions
- No significant worsening in global inflation rates and consumer
sentiment
Steve Rendle, Chairman, President and CEO of VF said:
"VF’s balanced performance in Q2 demonstrates the resiliency of
our brand portfolio against a more disrupted global marketplace.
Our purpose built portfolio of iconic, deeply-loved brands
continues to benefit from tailwinds in the outdoor, active,
streetwear and workwear spaces while we also actively address the
near-term challenges at Vans, the ongoing COVID-related disruption
in China, and the broader macro-economic and geopolitical
headwinds, which have created tremendous uncertainty for all
businesses and consumers.
In the near term, in light of the challenging environment, we
are acting proactively to generate increased revenue through the
balance of the year while protecting profitability by tightly
controlling all non-strategic spend. I am confident in our ability
to deliver on our targets and to maximize the potential of all our
brands when the environment improves. We will remain focused on the
things we can control and will continue leveraging VF’s unique
business model and competitive strengths to drive consistent,
sustainable and profitable growth."
Summary Revenue
Information
(Unaudited)
Three Months Ended
September
Six Months Ended
September
(Dollars in millions)
2022
2021
% Change
% Change (constant currency)
2022
2021
% Change
% Change (constant currency)
Brand:
Vans®
$
952.1
$
1,090.3
(13
)%
(8
)%
$
1,899.0
$
2,110.2
(10
)%
(6
)%
The North Face®
950.8
883.7
8
%
14
%
1,431.9
1,249.9
15
%
21
%
Timberland®
524.2
545.4
(4
)%
3
%
793.6
794.8
—
%
7
%
Dickies®
186.4
230.0
(19
)%
(15
)%
356.8
429.3
(17
)%
(14
)%
Other Brands
467.1
448.7
4
%
13
%
860.9
808.5
6
%
14
%
VF Revenue
$
3,080.6
$
3,198.2
(4
)%
2
%
$
5,342.2
$
5,392.8
(1
)%
4
%
Region:
Americas
$
1,754.1
$
1,807.1
(3
)%
(3
)%
$
3,139.2
$
3,109.0
1
%
1
%
EMEA
932.4
972.6
(4
)%
12
%
1,527.0
1,512.6
1
%
16
%
APAC
394.0
418.5
(6
)%
2
%
676.0
771.2
(12
)%
(6
)%
VF Revenue
$
3,080.6
$
3,198.2
(4
)%
2
%
$
5,342.2
$
5,392.8
(1
)%
4
%
International
$
1,511.4
$
1,583.0
(5
)%
8
%
$
2,503.4
$
2,581.0
(3
)%
8
%
Channel:
DTC
$
1,146.1
$
1,192.1
(4
)%
1
%
$
2,145.2
$
2,265.8
(5
)%
(1
)%
Wholesale (a)
1,934.5
2,006.2
(4
)%
3
%
3,197.0
3,127.0
2
%
8
%
VF Revenue
$
3,080.6
$
3,198.2
(4
)%
2
%
$
5,342.2
$
5,392.8
(1
)%
4
%
All references to periods ended September
2022 relate to the 13-week and 26-week fiscal periods ended October
1, 2022 and all references to periods ended September 2021 relate
to the 13-week and 26-week fiscal periods ended October 2,
2021.
Note: Amounts may not sum due to
rounding
(a) Royalty revenues are included in the
wholesale channel for all periods.
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 and Pension
Settlement Charge.” Unless otherwise noted, “reported” and
“adjusted” amounts are the same.
Second Quarter Fiscal 2023 Income Statement Review
- Revenue decreased 4% (up 2% in constant dollars) to $3.1
billion driven by increases in the EMEA and APAC regions partially
offset by lower sales in the Americas region.
- Gross margin decreased 230 basis points to 51.4%,
primarily driven by higher costs and promotional activity partially
offset by price increases. On an adjusted basis, gross margin
decreased 240 basis points to 51.5%.
- Operating income (loss) on a reported basis was $(90.8)
million. Operating margin on a reported basis was (2.9)%. On
an adjusted basis, operating income decreased 29% (down 22% in
constant dollars) to $378.7 million. Adjusted operating margin
decreased 440 basis points to 12.3%.
- Earnings (loss) per share was $(0.31) on a reported
basis. On an adjusted basis, earnings per share decreased 34% (down
27% in constant dollars) to $0.73.
COVID-19 Update
To help mitigate the spread of COVID-19 and in response to
public health advisories and governmental actions and regulations,
VF has modified its business practices in certain locations,
including the temporary closing of offices and retail stores,
instituting travel bans and restrictions and implementing health
and safety measures including social distancing and
quarantines.
The majority of VF's supply chain is currently operational. Raw
material suppliers in China are currently operational, though the
8-week lockdown in China during VF's first quarter resulted in
logistics challenges which continue to contribute to ongoing
product delays. Suppliers are complying with local public health
advisories and governmental restrictions. Most final product
manufacturing and assembly suppliers are largely back to normal
operating levels. VF is working with its suppliers to minimize
disruption and is employing expedited freight strategically as
needed. VF's distribution centers are operational in accordance
with local government guidelines while maintaining enhanced health
and safety protocols.
In North America, no stores were closed during the second
quarter. Currently, all stores are open.
In the EMEA region, no stores were closed during the second
quarter due to COVID-19. Currently, all stores are open.
In the APAC region, including Mainland China, no stores were
closed at the beginning of the second quarter with a peak of 7% of
stores (including partner doors) closed and an average of 3% of
stores closed throughout the quarter. At the end of the second
quarter, 4% of stores were closed and, as of today, 7% of stores
are closed.
VF is continuing to monitor the evolution of COVID-19 globally
and will comply with guidance from government entities and public
health authorities to prioritize the health and well-being of its
employees, customers, trade partners and consumers.
Balance Sheet Highlights
Inventories were up 88% compared with the same period last year,
partially driven by an increase of in-transit inventory of
approximately $510 million as VF modified terms with the majority
of its suppliers in the first quarter of fiscal 2023 to take
ownership of inventory at point of shipment rather than
destination. Accounts payable increased 91%, which was largely
driven by the increase of in-transit inventory. VF returned
approximately $194 million of cash to shareholders through
dividends during the quarter.
Dividend Declared
VF’s Board of Directors declared a quarterly dividend of $0.51
per share, reflecting a 2% increase over the previous quarter’s
dividend. This dividend will be payable on December 20, 2022, to
shareholders of record at the close of business on December 12,
2022. Subject to approval by its Board of Directors, VF intends to
continue to pay its regularly scheduled cash dividend.
Webcast Information
VF will host its second 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 second 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 and Pension Settlement
Charge
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 the
first six months of 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 $48 million in the second quarter of fiscal 2023
and $61 million in the first six months of 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 $422
million in the second quarter and first six months of fiscal 2023.
The impairment charges were driven by non-operating factors
including higher interest rates and foreign currency
fluctuations.
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 the first six months
of fiscal 2023.
Combined, the above items negatively impacted earnings per share
by $1.04 during the second quarter of fiscal 2023 and $1.26 during
the first six months of 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. Additionally,
the impact of the payment of taxes and interest related to the
dispute with the IRS regarding the Timberland acquisition in 2011
has been excluded from fiscal 2023 adjusted cash flow from
operations.
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: 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; the level of consumer
demand for apparel, footwear and accessories; 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 contracted 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; 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
transform its model to be more consumer-minded, retail-centric and
hyper-digital; 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; continuity of
members of VF’s management; VF’s ability to recruit, develop or
retain qualified employees; VF’s ability to protect trademarks and
other intellectual property rights; possible goodwill and other
asset impairment such as the recent 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 and integrate acquisitions; business resiliency in
response to natural or man-made economic, 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;
VF's indebtedness and its ability to obtain financing on favorable
terms, if needed, could prevent VF from fulfilling its financial
obligations; climate change and increased focus on environmental,
social and governance issues; 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.
VF CORPORATION
Condensed Consolidated
Statements of Operations
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
September
Six Months Ended
September
2022
2021
2022
2021
Net revenues
$
3,080,600
$
3,198,235
$
5,342,195
$
5,392,792
Costs and operating expenses
Cost of goods sold
1,498,177
1,479,446
2,541,159
2,434,997
Selling, general and administrative
expenses
1,251,320
1,160,303
2,406,571
2,196,425
Impairment of goodwill and intangible
assets
421,922
—
421,922
—
Total costs and operating expenses
3,171,419
2,639,749
5,369,652
4,631,422
Operating income (loss)
(90,819
)
558,486
(27,457
)
761,370
Interest expense, net
(33,903
)
(34,370
)
(65,165
)
(67,145
)
Other income (expense), net
(9,280
)
7,549
(103,994
)
16,590
Income (loss) from continuing
operations before income taxes
(134,002
)
531,665
(196,616
)
710,815
Income tax expense (benefit)
(15,570
)
67,612
(22,224
)
92,790
Income (loss) from continuing
operations
(118,432
)
464,053
(174,392
)
618,025
Income from discontinued operations,
net of tax
—
—
—
170,273
Net income (loss)
$
(118,432
)
$
464,053
$
(174,392
)
$
788,298
Earnings (loss) per common share -
basic (a)
Continuing operations
$
(0.31
)
$
1.18
$
(0.45
)
$
1.58
Discontinued operations
—
—
—
0.43
Total earnings (loss) per common share
- basic
$
(0.31
)
$
1.18
$
(0.45
)
$
2.01
Earnings (loss) per common share -
diluted (a)
Continuing operations
$
(0.31
)
$
1.18
$
(0.45
)
$
1.57
Discontinued operations
—
—
—
0.43
Total earnings (loss) per common share
- diluted
$
(0.31
)
$
1.18
$
(0.45
)
$
2.00
Weighted average shares
outstanding
Basic
387,688
391,779
387,625
391,565
Diluted
387,688
394,017
387,625
394,072
Cash dividends per common share
$
0.50
$
0.49
$
1.00
$
0.98
Basis of presentation of condensed
consolidated financial statements: VF operates and reports
using a 52/53 week fiscal year ending on the Saturday closest to
March 31 of each year. For presentation purposes herein, all
references to periods ended September 2022 relate to the 13-week
and 26-week fiscal periods ended October 1, 2022 and all references
to periods ended September 2021 relate to the 13-week and 26-week
fiscal periods ended October 2, 2021. References to March 2022
relate to information as of April 2, 2022.
(a) Amounts have been calculated using
unrounded numbers.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
September
March
September
2022
2022
2021
ASSETS
Current assets
Cash and equivalents
$
552,811
$
1,275,943
$
1,360,138
Accounts receivable, net
1,834,598
1,467,842
1,787,331
Inventories
2,749,894
1,418,673
1,464,714
Other current assets
550,940
425,622
357,687
Total current assets
5,688,243
4,588,080
4,969,870
Property, plant and equipment,
net
984,115
1,041,777
1,011,415
Goodwill and intangible assets,
net
4,878,722
5,394,158
5,434,009
Operating lease right-of-use
assets
1,217,172
1,247,056
1,380,106
Other assets
1,015,890
1,071,137
1,093,687
Total assets
$
13,784,142
$
13,342,208
$
13,889,087
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
$
1,692,745
$
335,462
$
10,173
Current portion of long-term debt
832,136
501,051
1,001,037
Accounts payable
1,022,408
562,992
534,365
Accrued liabilities
1,798,702
1,915,892
1,838,790
Total current liabilities
5,345,991
3,315,397
3,384,365
Long-term debt
3,526,101
4,584,261
4,682,751
Operating lease liabilities
1,022,451
1,023,759
1,146,944
Other liabilities
803,963
888,436
1,076,546
Total liabilities
10,698,506
9,811,853
10,290,606
Stockholders' equity
3,085,636
3,530,355
3,598,481
Total liabilities and stockholders'
equity
$
13,784,142
$
13,342,208
$
13,889,087
VF CORPORATION
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended
September
2022
2021
Operating activities
Net income (loss)
$
(174,392
)
$
788,298
Income from discontinued operations, net
of tax
—
170,273
Income (loss) from continuing operations,
net of tax
(174,392
)
618,025
Impairment of goodwill and intangible
assets
421,922
—
Depreciation and amortization
130,623
134,553
Reduction in the carrying amount of
right-of-use assets
185,880
208,687
Other adjustments
(1,477,990
)
(1,138,492
)
Cash used by operating activities -
continuing operations
(913,957
)
(177,227
)
Cash provided by operating activities -
discontinued operations
—
6,090
Cash used by operating activities
(913,957
)
(171,137
)
Investing activities
Business acquisitions, net of cash
received
—
3,760
Proceeds from sale of businesses, net of
cash sold
—
616,529
Proceeds from sale of short-term
investments
—
598,806
Capital expenditures
(89,958
)
(144,582
)
Software purchases
(47,858
)
(42,119
)
Other, net
6,112
20,491
Cash provided (used) by investing
activities - continuing operations
(131,704
)
1,052,885
Cash used by investing activities -
discontinued operations
—
(525
)
Cash provided (used) by investing
activities
(131,704
)
1,052,360
Financing activities
Contingent consideration payment
(56,976
)
—
Net increase (decrease) from short-term
borrowings and long-term debt
855,955
(1,397
)
Cash dividends paid
(388,284
)
(384,427
)
Proceeds from issuance of Common Stock,
net of (payments) for tax withholdings
(1,931
)
25,971
Cash provided (used) by financing
activities
408,764
(359,853
)
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
(85,888
)
(10,958
)
Net change in cash, cash equivalents
and restricted cash
(722,785
)
510,412
Cash, cash equivalents and restricted
cash – beginning of year
1,277,082
851,205
Cash, cash equivalents and restricted
cash – end of period
$
554,297
$
1,361,617
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Three Months Ended
September
% Change
Constant
2022
2021
% Change Currency (a)
Segment revenues
Outdoor
$
1,555,328
$
1,506,621
3%
10%
Active
1,260,110
1,392,173
(9)%
(4)%
Work
265,162
299,163
(11)%
(9)%
Other (b)
—
278
*
*
Total segment revenues
$
3,080,600
$
3,198,235
(4)%
2%
Segment profit (loss)
Outdoor
$
260,439
$
284,076
Active
180,255
284,349
Work
39,500
61,973
Other (b)
(157
)
(370
)
Total segment profit
480,037
630,028
Impairment of goodwill and intangible
assets
(421,922
)
—
Corporate and other expenses
(158,214
)
(63,993
)
Interest expense, net
(33,903
)
(34,370
)
Income (loss) from continuing
operations before income taxes
$
(134,002
)
$
531,665
(a) Refer to constant currency definition
on the following pages.
(b) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Includes results primarily related to the sale
of non-VF products and sourcing activities related to transition
services.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Six Months Ended
September
% Change
Constant
2022
2021
% Change
Currency (a)
Segment revenues
Outdoor
$
2,323,952
$
2,124,375
9%
16%
Active
2,514,055
2,694,241
(7)%
(2)%
Work
504,040
573,898
(12)%
(10)%
Other (b)
148
278
*
*
Total segment revenues
$
5,342,195
$
5,392,792
(1)%
4%
Segment profit (loss)
Outdoor
$
213,588
$
212,329
Active
394,286
555,211
Work
74,502
102,977
Other (b)
(382
)
(652
)
Total segment profit
681,994
869,865
Impairment of goodwill and intangible
assets
(421,922
)
—
Corporate and other expenses
(391,523
)
(91,905
)
Interest expense, net
(65,165
)
(67,145
)
Income (loss) from continuing
operations before income taxes
$
(196,616
)
$
710,815
(a) Refer to constant currency definition
on the following pages.
(b) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Includes results primarily related to the sale
of non-VF products and sourcing activities related to transition
services.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Three Months Ended September
2022
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
1,555,328
$
106,555
$
1,661,883
Active
1,260,110
79,943
1,340,053
Work
265,162
8,454
273,616
Other
—
—
—
Total segment revenues
$
3,080,600
$
194,952
$
3,275,552
Segment profit (loss)
Outdoor
$
260,439
$
19,152
$
279,591
Active
180,255
18,337
198,592
Work
39,500
1,187
40,687
Other
(157
)
(16
)
(173
)
Total segment profit
480,037
38,660
518,697
Impairment of goodwill and intangible
assets
(421,922
)
—
(421,922
)
Corporate and other expenses
(158,214
)
(1,429
)
(159,643
)
Interest expense, net
(33,903
)
—
(33,903
)
Income (loss) from continuing
operations before income taxes
$
(134,002
)
$
37,231
$
(96,771
)
Diluted earnings per share
growth
(126
)%
7
%
(119
)%
Constant Currency Financial
Information
VF is a global company that reports
financial information in U.S. dollars in accordance with GAAP.
Foreign currency exchange rate fluctuations affect the amounts
reported by VF from translating its foreign revenues and expenses
into U.S. dollars. These rate fluctuations can have a significant
effect on reported operating results. As a supplement to our
reported operating results, we present constant currency financial
information, which is a non-GAAP financial measure that excludes
the impact of translating foreign currencies into U.S. dollars. We
use constant currency information to provide a framework to assess
how our business performed excluding the effects of changes in the
rates used to calculate foreign currency translation. Management
believes this information is useful to investors to facilitate
comparison of operating results and better identify trends in our
businesses.
To calculate foreign currency translation
on a constant currency basis, operating results for the current
year period for entities reporting in currencies other than the
U.S. dollar are translated into U.S. dollars at the average
exchange rates in effect during the comparable period of the prior
year (rather than the actual exchange rates in effect during the
current year period).
These constant currency performance
measures should be viewed in addition to, and not in lieu of or
superior to, our operating performance measures calculated in
accordance with GAAP. The constant currency information presented
may not be comparable to similarly titled measures reported by
other companies.
VF CORPORATION
Supplemental Financial
Information
Reportable Segment Information
– Constant Currency Basis
(Unaudited)
(In thousands)
Six Months Ended September
2022
As Reported
Adjust for Foreign
under GAAP
Currency Exchange
Constant Currency
Segment revenues
Outdoor
$
2,323,952
$
145,764
$
2,469,716
Active
2,514,055
132,017
2,646,072
Work
504,040
12,938
516,978
Other
148
—
148
Total segment revenues
$
5,342,195
$
290,719
$
5,632,914
Segment profit (loss)
Outdoor
$
213,588
$
19,036
$
232,624
Active
394,286
30,379
424,665
Work
74,502
1,736
76,238
Other
(382
)
(26
)
(408
)
Total segment profit
681,994
51,125
733,119
Impairment of goodwill and intangible
assets
(421,922
)
—
(421,922
)
Corporate and other expenses
(391,523
)
(2,321
)
(393,844
)
Interest expense, net
(65,165
)
—
(65,165
)
Income (loss) from continuing
operations before income taxes
$
(196,616
)
$
48,804
$
(147,812
)
Diluted earnings per share
growth
(129
)%
7
%
(122
)%
Constant Currency Financial
Information
VF is a global company that reports
financial information in U.S. dollars in accordance with GAAP.
Foreign currency exchange rate fluctuations affect the amounts
reported by VF from translating its foreign revenues and expenses
into U.S. dollars. These rate fluctuations can have a significant
effect on reported operating results. As a supplement to our
reported operating results, we present constant currency financial
information, which is a non-GAAP financial measure that excludes
the impact of translating foreign currencies into U.S. dollars. We
use constant currency information to provide a framework to assess
how our business performed excluding the effects of changes in the
rates used to calculate foreign currency translation. Management
believes this information is useful to investors to facilitate
comparison of operating results and better identify trends in our
businesses.
To calculate foreign currency translation
on a constant currency basis, operating results for the current
year period for entities reporting in currencies other than the
U.S. dollar are translated into U.S. dollars at the average
exchange rates in effect during the comparable period of the prior
year (rather than the actual exchange rates in effect during the
current year period).
These constant currency performance
measures should be viewed in addition to, and not in lieu of or
superior to, our operating performance measures calculated in
accordance with GAAP. The constant currency information presented
may not be comparable to similarly titled measures reported by
other companies.
VF CORPORATION
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three and Six Months Ended
September 2022
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended September
2022
As Reported
under GAAP
Transaction
and Deal
Related
Activities (a)
Specified
Strategic
Business
Decisions (b)
Impairment
and Pension
Settlement
Charge (c)
Adjusted
Revenues
$
3,080,600
$
—
$
—
$
—
$
3,080,600
Gross profit
1,582,423
—
3,283
—
1,585,706
Percent
51.4
%
51.5
%
Operating income (loss)
(90,819
)
—
47,644
421,922
378,747
Percent
(2.9
)%
12.3
%
Diluted earnings (loss) per share from
continuing operations (d)
(0.31
)
—
0.10
0.94
0.73
Six Months Ended September 2022
As Reported
under GAAP
Transaction
and Deal
Related
Activities (a)
Specified
Strategic
Business
Decisions (b)
Impairment
and Pension
Settlement
Charge (c)
Adjusted
Revenues
$
5,342,195
$
—
$
—
$
—
$
5,342,195
Gross profit
2,801,036
—
8,364
—
2,809,400
Percent
52.4
%
52.6
%
Operating income (loss)
(27,457
)
331
61,422
421,922
456,218
Percent
(0.5
)%
8.5
%
Diluted earnings (loss) per share from
continuing operations (d)
(0.45
)
—
0.13
1.14
0.81
(a) Transaction and deal related
activities reflect activities associated with the acquisition of
Supreme Holdings, Inc. and include integration costs of $0.3
million for the six months ended September 2022. The transaction
and deal related activities resulted in a net tax benefit of $0.1
million in the six months ended September 2022.
(b) Specified strategic business decisions
include costs related to VF's business model transformation of
$45.2 million and $51.2 million during the three and six months
ended September 2022, respectively, related primarily to Corporate
actions and resulting restructuring costs. Specified strategic
business decisions also include costs related to a transformation
initiative for our Asia-Pacific regional operations of $2.4 million
and $10.2 million in the three and six months ended September 2022,
respectively. The specified strategic business decisions resulted
in a net tax benefit of $10.1 million and $12.3 million in the
three and six months ended September 2022, respectively.
(c) VF recognized noncash impairment
charges related to the Supreme reporting unit goodwill and
indefinite-lived trademark intangible asset of $421.9 million
during the three and six months ended September 2022. The
impairment charges were driven by non-operating factors including
higher interest rates and foreign currency fluctuations.
A noncash pension settlement charge of
$91.8 million was recorded in the Other income (expense), net line
item during the six months ended September 2022. 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.
The impairment and pension settlement
charges resulted in a net tax benefit of $58.6 million and $72.4
million in the three and six months ended September 2022,
respectively.
(d) Amounts shown in the table have been
calculated using unrounded numbers. The GAAP diluted earnings per
share was calculated using 387,688,000 and 387,625,000 weighted
average common shares for the three and six months ended September
2022, respectively. The adjusted diluted earnings per share impacts
were calculated using 388,483,000 and 388,439,000 weighted average
common shares for the three and six months ended September 2022,
respectively.
Non-GAAP Financial Information
The financial information above has been
presented on a GAAP basis and on an adjusted basis, which excludes
the impact of transaction and deal related activities, activity
related to specified strategic business decisions, impairment and a
pension settlement charge. The adjusted presentation provides
non-GAAP measures. Management believes these measures provide
investors with useful supplemental information regarding VF's
underlying business trends and the performance of VF's ongoing
operations and are useful for period-over-period comparisons of
such operations.
Management uses the above financial
measures internally in its budgeting and review process and, in
some cases, as a factor in determining compensation. While
management believes that these non-GAAP financial measures are
useful in evaluating the business, this information should be
considered as supplemental in nature and should be viewed in
addition to, and not in lieu of or superior to, VF's operating
performance measures calculated in accordance with GAAP. In
addition, these non-GAAP financial measures may not be the same as
similarly titled measures presented by other companies.
VF CORPORATION
Supplemental Financial
Information
Reconciliation of Select GAAP
Measures to Non-GAAP Measures - Three and Six Months Ended
September 2021
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended September
2021
As Reported
under GAAP
Transaction
and Deal
Related
Costs (a)
Specified
Strategic
Business
Decisions (b)
Adjusted
Revenues
$
3,198,235
$
—
$
—
$
3,198,235
Gross profit
1,718,789
—
5,868
1,724,657
Percent
53.7
%
53.9
%
Operating income
558,486
(33,886
)
9,738
534,338
Percent
17.5
%
16.7
%
Diluted earnings per share from
continuing operations (c)
1.18
(0.09
)
0.02
1.11
Six Months Ended September 2021
As Reported
under GAAP
Transaction
and Deal
Related
Costs(a)
Specified
Strategic
Business
Decisions (b)
Adjusted
Revenues
$
5,392,792
$
—
$
—
$
5,392,792
Gross profit
2,957,795
—
12,069
2,969,864
Percent
54.8
%
55.1
%
Operating income
761,370
(102,482
)
23,862
682,750
Percent
14.1
%
12.7
%
Diluted earnings per share from
continuing operations (c)
1.57
(0.24
)
0.05
1.38
(a) Transaction and deal related
activities include activities associated with the acquisition of
Supreme Holdings, Inc. for the three and six months ended September
2021. Transaction and deal related activities include a decrease in
the estimated fair value of the contingent consideration liability
of $35.0 million and $108.0 million for the three and six months
ended September 2021, respectively, and integration costs of $1.1
million and $5.5 million for the three and six months ended
September 2021, respectively. The transaction and deal related
activities resulted in a net tax benefit of $1.2 million and net
tax expense of $8.3 million in the three and six months ended
September 2021, respectively, primarily related to the impact of
the decreases in the estimated fair value of the contingent
consideration liability on the interim tax rate calculations.
(b) Specified strategic business decisions
for the three and six months ended September 2021 include costs
related to VF's business model transformation of $0.2 million and
$1.7 million in the three and six months ended September 2021,
respectively, related primarily to restructuring and other costs.
Specified strategic business decisions also include costs related
to a transformation initiative for our Asia-Pacific regional
operations of $13.3 million and $21.8 million in the three and six
months ended September 2021, respectively. Specified strategic
business decisions also include cost optimization charges and other
activities, including the sale of certain assets, indirectly
related to the divestiture of the Occupational Workwear business,
which totaled income of $3.8 million and costs of $0.4 million
during the three and six months ended September 2021, respectively.
The specified strategic business decisions also include
non-operating income of $1.7 million during the three and six
months ended September 2021 associated with VF's transformation
initiatives. The specified strategic business decisions resulted in
a net tax benefit of $1.0 million and $3.2 million in the three and
six months ended September 2021, respectively.
(c) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impacts were calculated using 394,017,000 and 394,072,000 weighted
average common shares for the three and six months ended September
2021, respectively.
Non-GAAP Financial Information
The financial information above has been
presented on a GAAP basis and on an adjusted basis, which excludes
the impact of transaction and deal related costs and activity
related to specified strategic business decisions. The adjusted
presentation provides non-GAAP measures. Management believes these
measures provide investors with useful supplemental information
regarding VF's underlying business trends and the performance of
VF's ongoing operations and are useful for period-over-period
comparisons of such operations.
Management uses the above financial
measures internally in its budgeting and review process and, in
some cases, as a factor in determining compensation. While
management believes that these non-GAAP financial measures are
useful in evaluating the business, this information should be
considered as supplemental in nature and should be viewed in
addition to, and not in lieu of or superior to, VF's operating
performance measures calculated in accordance with GAAP. In
addition, these non-GAAP financial measures may not be the same as
similarly titled measures presented by other companies.
VF CORPORATION
Supplemental Financial
Information
Top 4 Brand Revenue
Information
(Unaudited)
Three Months Ended September
2022
Six Months Ended September
2022
Top 4 Brand Revenue Growth
Americas
EMEA
APAC
Global
Americas
EMEA
APAC
Global
Vans®
% change
(11
)%
(12
)%
(20
)%
(13
)%
(4
)%
(11
)%
(30
)%
(10
)%
% change constant currency*
(11
)%
2
%
(14
)%
(8
)%
(4
)%
2
%
(26
)%
(6
)%
The North Face®
% change
11
%
(5
)%
31
%
8
%
19
%
4
%
25
%
15
%
% change constant currency*
11
%
11
%
37
%
14
%
19
%
20
%
30
%
21
%
Timberland®
% change
(6
)%
2
%
(11
)%
(4
)%
(5
)%
9
%
(1
)%
0
%
% change constant currency*
(5
)%
19
%
(4
)%
3
%
(5
)%
26
%
5
%
7
%
Dickies®
% change
(17
)%
(1
)%
(35
)%
(19
)%
(17
)%
5
%
(27
)%
(17
)%
% change constant currency*
(17
)%
16
%
(27
)%
(15
)%
(17
)%
21
%
(20
)%
(14
)%
*Refer to constant currency definition on
previous pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended September
2022
% Change
% Change Constant
Currency*
Geographic
Revenue Growth
Americas
(3)%
(3)%
EMEA
(4)%
12%
APAC
(6)%
2%
Greater China
(15)%
(10)%
International
(5)%
8%
Global
(4)%
2%
Six Months Ended September
2022
% Change
% Change Constant
Currency*
Geographic
Revenue Growth
Americas
1%
1%
EMEA
1%
16%
APAC
(12)%
(6)%
Greater China
(23)%
(19)%
International
(3)%
8%
Global
(1)%
4%
Three Months Ended September
2022
% Change
% Change Constant
Currency*
Channel Revenue
Growth
Wholesale (a)
(4)%
3%
Direct-to-consumer
(4)%
1%
Digital
(7)%
(1)%
Six Months Ended September
2022
% Change
% Change Constant
Currency*
Channel Revenue
Growth
Wholesale (a)
2%
8%
Direct-to-consumer
(5)%
(1)%
Digital
(13)%
(8)%
As of September
2022
2021
DTC Store
Count
Total
1,283
1,358
*Refer to constant currency definition on
previous pages.
(a) Royalty revenues are included in the
wholesale channel for all periods.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221026005150/en/
Investor Contact: Allegra
Perry ir@vfc.com
Media Contact: Colin Wheeler
corporate_communications@vfc.com
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