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.”
Summary Revenue
Information
(Unaudited)
Three Months Ended
March
Twelve Months Ended
March
(Dollars in millions)
2023
2022
% Change
% Change (constant currency)
2023
2022
% Change
% Change (constant currency)
Brand:
Vans®
$
857.0
$
991.2
(14
)%
(12
)%
$
3,682.9
$
4,161.9
(12
)%
(8
)%
The North Face®
859.5
769.5
12
%
16
%
3,612.7
3,259.7
11
%
17
%
Timberland®
395.6
434.9
(9
)%
(6
)%
1,784.7
1,823.1
(2
)%
4
%
Dickies®
191.5
197.0
(3
)%
0
%
725.2
837.7
(13
)%
(11
)%
Other Brands
436.0
432.1
1
%
5
%
1,807.0
1,759.4
3
%
9
%
VF Revenue
$
2,739.6
$
2,824.7
(3
)%
0
%
$
11,612.5
$
11,841.8
(2
)%
3
%
Region:
Americas
$
1,449.6
$
1,563.6
(7
)%
(7
)%
$
6,682.7
$
6,805.3
(2
)%
(1
)%
EMEA
901.3
883.4
2
%
8
%
3,411.7
3,399.3
0
%
12
%
APAC
388.7
377.7
3
%
10
%
1,518.1
1,637.2
(7
)%
1
%
VF Revenue
$
2,739.6
$
2,824.7
(3
)%
0
%
$
11,612.5
$
11,841.8
(2
)%
3
%
International
1,436.4
1,406.0
2
%
8
%
5,569.1
5,663.5
(2
)%
8
%
Channel:
DTC
$
1,148.8
$
1,156.8
(1
)%
3
%
$
5,231.4
$
5,404.1
(3
)%
1
%
Wholesale (a)
1,590.8
1,667.9
(5
)%
(2
)%
6,381.1
6,437.8
(1
)%
4
%
VF Revenue
$
2,739.6
$
2,824.7
(3
)%
0
%
$
11,612.5
$
11,841.8
(2
)%
3
%
All references to periods ended March 2023
relate to the 13-week and 52-week fiscal periods ended April 1,
2023 and all references to periods ended March 2022 relate to the
13-week and 52-week fiscal periods ended April 2, 2022.
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, 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.
VF CORPORATION
Condensed Consolidated
Statements of Operations
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended
March
Twelve Months Ended
March
2023
2022
2023
2022
Net revenues
$
2,739,613
$
2,824,664
$
11,612,475
$
11,841,840
Costs and operating expenses
Cost of goods sold
1,381,589
1,358,792
5,515,796
5,386,393
Selling, general and administrative
expenses
1,205,820
1,273,480
5,033,977
4,823,243
Impairment of goodwill and intangible
assets
313,087
—
735,009
—
Total costs and operating expenses
2,900,496
2,632,272
11,284,782
10,209,636
Operating income (loss)
(160,883
)
192,392
327,693
1,632,204
Interest expense, net
(49,237
)
(30,930
)
(164,632
)
(131,463
)
Loss on debt extinguishment
—
—
—
(3,645
)
Other income (expense), net
(5,879
)
9,659
(119,774
)
26,154
Income (loss) from continuing
operations before income taxes
(215,999
)
171,121
43,287
1,523,250
Income tax expense (benefit)
(1,107
)
90,678
(75,297
)
306,981
Income (loss) from continuing
operations
(214,892
)
80,443
118,584
1,216,269
Income from discontinued operations,
net of tax
—
399
—
170,672
Net income (loss)
$
(214,892
)
$
80,842
$
118,584
$
1,386,941
Earnings (loss) per common share -
basic (a)
Continuing operations
$
(0.55
)
$
0.21
$
0.31
$
3.12
Discontinued operations
—
—
—
0.44
Total earnings (loss) per common share
- basic
$
(0.55
)
$
0.21
$
0.31
$
3.55
Earnings (loss) per common share -
diluted (a)
Continuing operations
$
(0.55
)
$
0.21
$
0.31
$
3.10
Discontinued operations
—
—
—
0.43
Total earnings (loss) per common share
- diluted
$
(0.55
)
$
0.21
$
0.31
$
3.53
Weighted average shares
outstanding
Basic
388,062
387,604
387,763
390,291
Diluted
388,062
389,002
388,370
392,411
Cash dividends per common share
$
0.30
$
0.50
$
1.81
$
1.98
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 March 2023 relate to the 13-week and
52-week fiscal periods ended April 1, 2023 and all references to
periods ended March 2022 relate to the 13-week and 52-week fiscal
periods ended April 2, 2022.
(a) Amounts have been calculated using
unrounded numbers.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
March
March
2023
2022
ASSETS
Current assets
Cash and equivalents
$
814,887
$
1,275,943
Accounts receivable, net
1,610,295
1,467,842
Inventories
2,292,790
1,418,673
Other current assets
434,737
425,622
Total current assets
5,152,709
4,588,080
Property, plant and equipment,
net
942,440
1,041,777
Goodwill and intangible assets,
net
4,621,234
5,394,158
Operating lease right-of-use
assets
1,372,182
1,247,056
Other assets
1,901,923
1,071,137
Total assets
$
13,990,488
$
13,342,208
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities
Short-term borrowings
$
11,491
$
335,462
Current portion of long-term debt
924,305
501,051
Accounts payable
936,319
562,992
Accrued liabilities
1,673,651
1,915,892
Total current liabilities
3,545,766
3,315,397
Long-term debt
5,711,014
4,584,261
Operating lease liabilities
1,171,941
1,023,759
Other liabilities
651,054
888,436
Total liabilities
11,079,775
9,811,853
Stockholders' equity
2,910,713
3,530,355
Total liabilities and stockholders'
equity
$
13,990,488
$
13,342,208
VF CORPORATION
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
(In thousands)
Twelve Months Ended
March
2023
2022
Operating activities
Net income
$
118,584
$
1,386,941
Income from discontinued operations, net
of tax
—
170,672
Income from continuing operations, net of
tax
118,584
1,216,269
Impairment of goodwill and intangible
assets
735,009
—
Depreciation and amortization
262,324
266,935
Reduction in the carrying amount of
right-of-use assets
383,199
410,132
Other adjustments
(2,154,911
)
(1,035,138
)
Cash provided (used) by operating
activities - continuing operations
(655,795
)
858,198
Cash provided by operating activities -
discontinued operations
—
6,090
Cash provided (used) by operating
activities
(655,795
)
864,288
Investing activities
Business acquisitions, net of cash
received
—
3,760
Proceeds from sale of businesses, net of
cash sold
—
616,928
Proceeds from sale of assets
99,499
32,542
Proceeds from sale and maturities of
short-term investments
—
598,806
Capital expenditures
(165,925
)
(245,449
)
Software purchases
(95,326
)
(82,871
)
Other, net
(26,301
)
(19,456
)
Cash provided (used) by investing
activities - continuing operations
(188,053
)
904,260
Cash used by investing activities -
discontinued operations
—
(525
)
Cash provided (used) by investing
activities
(188,053
)
903,735
Financing activities
Contingent consideration payment
(56,976
)
—
Net increase (decrease) from short-term
borrowings and long-term debt
1,226,522
(182,292
)
Share repurchases
—
(350,004
)
Cash dividends paid
(702,846
)
(773,205
)
Proceeds from issuance of Common Stock,
net of payments for tax withholdings
(2,794
)
36,654
Cash provided (used) by financing
activities
463,906
(1,268,847
)
Effect of foreign currency rate changes
on cash, cash equivalents and restricted cash
(80,822
)
(73,299
)
Net change in cash, cash equivalents
and restricted cash
(460,764
)
425,877
Cash, cash equivalents and restricted
cash – beginning of year
1,277,082
851,205
Cash, cash equivalents and restricted
cash – end of period
$
816,318
$
1,277,082
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Three Months Ended
March
% Change
% Change Constant Currency
(a)
2023
2022
Segment revenues
Outdoor
$
1,320,529
$
1,274,766
4%
7%
Active
1,131,885
1,275,520
(11)%
(9)%
Work
287,199
274,150
5%
7%
Other (b)
—
228
*
*
Total segment revenues
$
2,739,613
$
2,824,664
(3)%
0%
Segment profit (loss)
Outdoor
$
114,816
$
132,762
Active
113,520
170,038
Work
28,168
42,843
Other (b)
(20
)
110
Total segment profit
256,484
345,753
Impairment of goodwill and intangible
assets
(313,087
)
—
Corporate and other expenses
(110,159
)
(143,702
)
Interest expense, net
(49,237
)
(30,930
)
Income (loss) from continuing
operations before income taxes
$
(215,999
)
$
171,121
(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. Other primarily includes sourcing activities
related to transition services.
* Calculation not meaningful
VF CORPORATION
Supplemental Financial
Information
Reportable Segment
Information
(Unaudited)
(In thousands)
Twelve Months Ended
March
% Change
% Change Constant Currency
(a)
2023
2022
Segment revenues
Outdoor
$
5,647,526
$
5,327,568
6%
12%
Active
4,904,622
5,380,338
(9)%
(5)%
Work
1,060,179
1,133,149
(6)%
(4)%
Other (b)
148
785
*
*
Total segment revenues
$
11,612,475
$
11,841,840
(2)%
3%
Segment profit (loss)
Outdoor
$
785,431
$
795,523
Active
654,691
979,746
Work
121,157
193,492
Other (b)
(536
)
(586
)
Total segment profit
1,560,743
1,968,175
Impairment of goodwill and intangible
assets
(735,009
)
—
Corporate and other expenses
(617,815
)
(309,817
)
Interest expense, net
(164,632
)
(131,463
)
Loss on debt extinguishment
—
(3,645
)
Income from continuing operations
before income taxes
$
43,287
$
1,523,250
(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. Other primarily includes 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 March
2023
As Reported under GAAP
Adjust for Foreign Currency
Exchange
Constant Currency
Segment revenues
Outdoor
$
1,320,529
$
47,670
$
1,368,199
Active
1,131,885
29,317
1,161,202
Work
287,199
5,974
293,173
Other (a)
—
—
—
Total segment revenues
$
2,739,613
$
82,961
$
2,822,574
Segment profit (loss)
Outdoor
$
114,816
$
8,911
$
123,727
Active
113,520
5,891
119,411
Work
28,168
444
28,612
Other (a)
(20
)
(14
)
(34
)
Total segment profit
256,484
15,232
271,716
Impairment of goodwill and intangible
assets
(313,087
)
—
(313,087
)
Corporate and other expenses
(110,159
)
(626
)
(110,785
)
Interest expense, net
(49,237
)
—
(49,237
)
Income (loss) from continuing
operations before income taxes
$
(215,999
)
$
14,606
$
(201,393
)
Diluted earnings per share
growth
(368
)%
16
%
(352
)%
(a) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Other primarily includes sourcing activities
related to transition services.
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)
Twelve Months Ended March
2023
As Reported under GAAP
Adjust for Foreign Currency
Exchange
Constant Currency
Segment revenues
Outdoor
$
5,647,526
$
309,225
$
5,956,751
Active
4,904,622
224,495
5,129,117
Work
1,060,179
27,205
1,087,384
Other (a)
148
—
148
Total segment revenues
$
11,612,475
$
560,925
$
12,173,400
Segment profit (loss)
Outdoor
$
785,431
$
60,555
$
845,986
Active
654,691
50,419
705,110
Work
121,157
2,856
124,013
Other (a)
(536
)
(112
)
(648
)
Total segment profit
1,560,743
113,718
1,674,461
Impairment of goodwill and intangible
assets
(735,009
)
—
(735,009
)
Corporate and other expenses
(617,815
)
(4,415
)
(622,230
)
Interest expense, net
(164,632
)
—
(164,632
)
Income from continuing operations
before income taxes
$
43,287
$
109,303
$
152,590
Diluted earnings per share
growth
(90
)%
8
%
(82
)%
(a) Other is included for purposes of
reconciliation of revenues and profit, but it is not considered a
reportable segment. Other primarily includes sourcing activities
related to transition services.
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 Twelve Months Ended March
2023
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended March 2023
As Reported under
GAAP
Transaction and Deal Related
Activities (a)
Specified Strategic Business
Decisions (b)
Impairments and Pension
Settlement Charge (c)
Tax Item (d)
Adjusted
Revenues
$
2,739,613
$
—
$
—
$
—
$
—
$
2,739,613
Gross profit
1,358,024
—
—
—
—
1,358,024
Percent
49.6
%
49.6
%
Operating income (loss)
(160,883
)
—
—
313,087
—
152,204
Percent
(5.9
)%
5.6
%
Diluted earnings (loss) per share from
continuing operations (e)
(0.55
)
—
—
0.72
—
0.17
Twelve Months Ended March 2023
As Reported under
GAAP
Transaction and Deal Related
Activities (a)
Specified Strategic Business
Decisions (b)
Impairments and Pension
Settlement Charge (c)
Tax Item (d)
Adjusted
Revenues
$
11,612,475
$
—
$
—
$
—
$
—
$
11,612,475
Gross profit
6,096,679
—
9,946
—
—
6,106,625
Percent
52.5
%
52.6
%
Operating income
327,693
331
72,031
735,009
—
1,135,064
Percent
2.8
%
9.8
%
Diluted earnings per share from
continuing operations (e)
0.31
—
0.15
1.89
(0.24
)
2.10
(a) Transaction and deal related
activities include activities associated with the acquisition of
Supreme Holdings, Inc. and include integration costs of $0.3
million for the twelve months ended March 2023. The transaction and
deal related activities resulted in a net tax benefit of $0.1
million in the twelve months ended March 2023.
(b) Specified strategic business decisions
include costs related to VF's business model transformation of
$59.5 million during the twelve months ended March 2023, 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 $12.5 million in the twelve months ended March 2023.
The specified strategic business decisions resulted in a net tax
benefit of $15.0 million in the twelve months ended March 2023.
(c) VF recognized noncash impairment
charges related to the Supreme reporting unit goodwill and
indefinite-lived trademark intangible asset of $313.1 million and
$735.0 million during the three and twelve months ended March 2023,
respectively. The second quarter impairment charges were driven by
non-operating factors including higher interest rates and foreign
currency fluctuations. The fourth quarter impairment charges were
related to lower financial projections and increased risk of
achieving management's forecasts.
A noncash pension settlement charge of
$91.8 million was recorded in the Other income (expense), net line
item during the twelve months ended March 2023. 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 $32.0 million and $92.2
million in the three and twelve months ended March 2023,
respectively.
(d) Tax item includes a $94.9 million
discrete tax benefit recognized during the twelve months ended
March 2023 related to the Internal Revenue Service examinations for
tax year 2017 and short-tax year 2018 resulting in a favorable
adjustment to VF's transition tax liability under the Tax Cuts and
Jobs Act.
(e) Amounts shown in the table have been
calculated using unrounded numbers. The GAAP diluted earnings per
share was calculated using 388,062,000 and 388,370,000 weighted
average common shares for the three and twelve months ended March
2023, respectively. The adjusted diluted earnings per share was
calculated using 388,409,000 and 388,370,000 weighted average
common shares for the three and twelve months ended March 2023,
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, impairments, a
pension settlement charge and a tax item. 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 Twelve Months Ended March
2022
(Unaudited)
(In thousands, except per
share amounts)
Three Months Ended March 2022
As Reported under
GAAP
Transaction and Deal Related
Activities (a)
Specified Strategic Business
Decisions (b)
Tax Items (c)
Adjusted
Revenues
$
2,824,664
$
—
$
—
$
—
$
2,824,664
Gross profit
1,465,872
—
7,376
—
1,473,248
Percent
51.9
%
52.2
%
Operating income
192,392
8,613
22,736
—
223,741
Percent
6.8
%
7.9
%
Diluted earnings per share from
continuing operations (d)
0.21
0.01
0.06
0.17
0.45
Twelve Months Ended March 2022
As Reported under
GAAP
Transaction and Deal Related
Activities (a)
Specified Strategic Business
Decisions (b)
Tax Items (c)
Adjusted
Revenues
$
11,841,840
$
—
$
—
$
—
$
11,841,840
Gross profit
6,455,447
—
29,320
—
6,484,767
Percent
54.5
%
54.8
%
Operating income
1,632,204
(143,267
)
60,407
—
1,549,344
Percent
13.8
%
13.1
%
Diluted earnings per share from
continuing operations (d)
3.10
(0.36
)
0.13
0.30
3.18
(a) Transaction and deal related
activities include activities associated with the acquisition of
Supreme Holdings, Inc. for the three and twelve months ended March
2022. Transaction and deal related activities include an increase
in the estimated fair value of the contingent consideration
liability of $8.0 million and a decrease of $150.0 million for the
three and twelve months ended March 2022, respectively, and
integration costs of $0.6 million and $6.7 million for the three
and twelve months ended March 2022, respectively. The transaction
and deal related activities resulted in a net tax benefit of $2.9
million and net tax expense of $2.2 million in the three and twelve
months ended March 2022, respectively, primarily related to the
impact of the changes in the estimated fair value of the contingent
consideration liability on the income tax calculations.
(b) Specified strategic business decisions
include costs related to VF's business model transformation of $8.2
million and $10.4 million in the three and twelve months ended
March 2022, 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 $5.8 million and $41.3 million in the three
and twelve months ended March 2022, respectively. Also included in
the adjustments are specific charges related to certain assets
impacted by the conflict in Ukraine of $8.7 million in the three
and twelve months ended March 2022. The specified strategic
business decisions also include non-operating income of $1.5
million during the twelve months ended March 2022, associated with
VF's transformation initiatives. The specified strategic business
decisions resulted in a net tax benefit of $1.3 million and $6.5
million in the three and twelve months ended March 2022,
respectively.
(c) Tax items include $67.3 million and
$119.2 million net tax expense associated with certain discrete tax
adjustments recognized during the three and twelve months ended
March 2022, respectively. This is comprised of $67.3 million tax
expense during the three and twelve months ended March 2022 related
to changes to deferred tax benefits previously recognized under
Swiss Tax Reform, and $87.1 million tax expense for unrecognized
tax benefits resulting from updated estimates related to
intellectual property transfers completed in a prior period and
$35.2 million tax benefit related to the reorganization of certain
foreign operations recognized during the twelve months ended March
2022.
(d) Amounts shown in the table have been
calculated using unrounded numbers. The diluted earnings per share
impacts were calculated using 389,002,000 and 392,411,000 weighted
average common shares for the three and twelve months ended March
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 and certain tax
items. 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 March
2023
Twelve Months Ended March
2023
Top 4 Brand Revenue Growth
Americas
EMEA
APAC
Global
Americas
EMEA
APAC
Global
Vans®
% change
(18
)%
(7
)%
(4
)%
(14
)%
(10
)%
(9
)%
(23
)%
(12
)%
% change constant currency*
(18
)%
(2
)%
2
%
(12
)%
(10
)%
2
%
(18
)%
(8
)%
The North Face®
% change
3
%
17
%
26
%
12
%
11
%
6
%
23
%
11
%
% change constant currency*
4
%
24
%
35
%
16
%
12
%
19
%
31
%
17
%
Timberland®
% change
(7
)%
(6
)%
(23
)%
(9
)%
(1
)%
1
%
(13
)%
(2
)%
% change constant currency*
(6
)%
(1
)%
(18
)%
(6
)%
(1
)%
13
%
(5
)%
4
%
Dickies®
% change
(5
)%
25
%
(22
)%
(3
)%
(15
)%
20
%
(28
)%
(13
)%
% change constant currency*
(4
)%
33
%
(16
)%
0
%
(15
)%
34
%
(20
)%
(11
)%
*Refer to constant currency definition on
previous pages.
VF CORPORATION
Supplemental Financial
Information
Geographic and Channel Revenue
Information
(Unaudited)
Three Months Ended March
2023
% Change
% Change Constant
Currency*
Geographic
Revenue Growth
Americas
(7)%
(7)%
EMEA
2%
8%
APAC
3%
10%
Greater China
3%
10%
International
2%
8%
Global
(3)%
0%
Twelve Months Ended March
2023
% Change
% Change Constant
Currency*
Geographic
Revenue Growth
Americas
(2)%
(1)%
EMEA
0%
12%
APAC
(7)%
1%
Greater China
(14)%
(7)%
International
(2)%
8%
Global
(2)%
3%
Three Months Ended March
2023
% Change
% Change Constant
Currency*
Channel Revenue
Growth
Wholesale (a)
(5)%
(2)%
Direct-to-consumer
(1)%
3%
Digital
(4)%
0%
Twelve Months Ended March
2023
% Change
% Change Constant
Currency*
Channel Revenue
Growth
Wholesale (a)
(1)%
4%
Direct-to-consumer
(3)%
1%
Digital
(6)%
(1)%
As of March
2023
2022
DTC Store
Count
Total
1,265
1,322
*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/20230523005314/en/
Investor Contact: Allegra
Perry ir@vfc.com
Media Contact: Colin Wheeler
corporate_communications@vfc.com
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