VF Reports Third Quarter Fiscal 2021 Results; Raises Full Year Fiscal 2021 Outlook
VF Corporation (NYSE: VFC) reported third-quarter financial results for fiscal 2021, with revenue declining 6% to $3.0 billion due to COVID-19 disruptions. Adjusted earnings per share fell 51% to approximately $1.30. Despite challenges, the company remains optimistic about growth in FY2022. The gross margin decreased to 54.7%, attributed to high promotional activity and currency impacts. VF declared a quarterly dividend of $0.49 per share, payable on March 22, 2021. The full-year revenue outlook is now projected at $9.1 to $9.2 billion, reflecting a 12%-13% decrease.
- VF declared a quarterly dividend of $0.49 per share.
- Inventory decreased by 14% compared to the previous year.
- The full year adjusted free cash flow is expected around $650 million.
- Revenue decreased 6% to $3.0 billion due to COVID-19 impact.
- Gross margin dropped by 250 basis points to 54.7%.
- Adjusted earnings per share forecast decreased by 51%.
VF Corporation (NYSE: VFC) today reported financial results for its third quarter ended December 26, 2020. 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 “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 “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 “Adjusted Amounts - Excluding Transaction and Deal Related Expenses and Costs Related to Specified Strategic Business Decisions.” Unless otherwise noted, “reported” and “adjusted” amounts are the same.
“Our third quarter results were largely ahead of expectations despite the impact of additional COVID-19-related disruption to our business,” said Steve Rendle, VF’s Chairman, President and CEO. “Our portfolio remains on track to return to growth in the fiscal fourth quarter and we are confident in VF’s plans to accelerate growth into fiscal 2022 and to continue advancing our business model transformation. We remain optimistic about the year ahead and look forward to improvements in our geopolitical, macroeconomic and pandemic-related situations.”
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 January 21, 2020, VF announced its decision to explore the divestiture of its Occupational Workwear business. The Occupational Workwear business is 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 includes certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel.
During the three months ended March 2020, the company determined that the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria. Accordingly, the company has reported the related held-for-sale assets and liabilities as assets and liabilities of discontinued operations and included the operating results and cash flows of the business in discontinued operations for all periods presented.
Adjusted Amounts - Excluding Transaction and Deal Related Expenses and Costs Related to Specified Strategic Business Decisions
The adjusted amounts in this release exclude transaction and deal related expenses associated primarily with the acquisition of the Supreme® brand. Total transaction and deal related expenses were approximately
The adjusted amounts in this release exclude costs related to a transformation initiative for our Asia-Pacific regional operations as well as certain cost optimization activities and other charges indirectly related to the strategic review of the Occupational Workwear business. The adjusted amounts also exclude costs related to strategic business decisions in South America and the operating results of jeanswear wind down activities in South America following the spin-off of Kontoor Brands. Total costs were approximately
Combined, the above items negatively impacted earnings per share by
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.
COVID-19 Outbreak Update
As the global impact of COVID-19 continues, VF remains first and foremost focused on a people-first approach that prioritizes the health and well-being of its employees, customers, trade partners and consumers around the world. 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, 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. Suppliers are complying with local public health advisories and governmental restrictions which has resulted in isolated product delays. VF is working with its suppliers to minimize disruption. VF's distribution centers are operational in accordance with local government guidelines while maintaining enhanced health and safety protocols.
In North America, over 95 percent of VF's owned retail stores were open at the beginning of the third quarter, with all VF-owned retail stores re-opened by mid-October. Since that time additional stores have been re-closed, with approximately 15 percent of stores closed by the end of the quarter. The majority of the closures were Vans® stores, predominantly based in California. In addition, other stores are operating with reduced capacity. Stores in North America have begun to re-open since the end of the quarter and currently less than 10 percent of stores are closed in the region.
In the EMEA region, nearly all of VF's owned retail stores were open at the beginning of the third quarter. Since that time additional stores have been re-closed, with approximately 50 percent of stores closed by the end of the quarter. Additional stores in the EMEA region have re-closed since the end of the quarter and currently over 60 percent of stores are closed.
Nearly all of VF's owned retail stores in the APAC region, including Mainland China, were open during the quarter and remain open.
VF is continuing to monitor the COVID-19 outbreak 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. As COVID-19 uncertainty continues, VF expects ongoing disruption to its business operations.
Third Quarter Fiscal 2021 Income Statement Review
-
Revenue decreased 6 percent (down 8 percent in constant dollars) to
$3.0 billion driven by store closures and lower consumer demand as a result of the COVID-19 outbreak and related government actions and regulations. - Gross margin decreased 250 basis points to 54.7 percent, primarily driven by elevated promotional activity to clear excess inventory and the timing of net foreign currency transaction activity. On an adjusted basis, gross margin decreased 150 basis points to 55.7 percent.
-
Operating income on a reported basis was
$412 million . On an adjusted basis, operating income was$458 million . Operating margin was 13.9 percent. Adjusted operating margin was 15.4 percent. -
Earnings per share was
$0.83 on a reported basis. On an adjusted basis, earnings per share was$0.93 .
Balance Sheet Highlights
Inventories were down 14 percent compared with the same period last year. During the quarter, VF returned approximately
Full Year Fiscal 2021 Outlook
VF's full year outlook assumes no material deterioration to the company's current business operations as a result of COVID-19, governmental actions and regulations. VF's full year fiscal 2021 outlook has been updated and includes the following:
-
Revenue is now expected to be in the range of
$9.1 billion to$9.2 billion , reflecting a decrease of 12 percent to 13 percent on an adjusted basis. The updated outlook includes approximately$125 million of revenue from the Supreme® brand. This compares to the previous expectation of at least$9.0 billion , reflecting a decrease of approximately 14 percent on an adjusted basis.
-
Adjusted earnings per share is expected to be approximately
$1.30 , reflecting a decrease of approximately 51 percent. The updated outlook includes approximately$0.05 of adjusted earnings per share from the Supreme® brand. This compares to the previous expectation of at least$1.20 , reflecting a decrease of approximately 55 percent.
-
Adjusted free cash flow is now expected to be approximately
$650 million . This compares to the previous expectation of greater than$600 million .
Dividend Declared
VF’s Board of Directors declared a quarterly dividend of
Webcast Information
VF will host its third quarter fiscal 2021 conference call beginning at 8:30 a.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 third quarter fiscal 2021 results will be available at ir.vfc.com beginning at approximately 7:30 a.m. Eastern Time today 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.
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; the financial strength of VF’s customers; 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; manufacturing and product innovation; increasing pressure on margins; VF’s ability to implement its business strategy; VF’s ability to grow its international and direct-to-consumer businesses; retail industry changes and challenges; 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 security breaches and data or financial loss; VF’s ability to properly collect, use, manage and secure consumer and employee data; foreign currency fluctuations; stability of VF’s manufacturing facilities and foreign suppliers; 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 protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; maintenance by VF’s licensees and distributors of the value of VF’s brands; VF’s ability to execute and integrate acquisitions, including the recently acquired Supreme® brand; changes in tax laws and liabilities; legal, regulatory, political and economic risks; the risk of economic uncertainty associated with the exit of the United Kingdom from the European Union (“Brexit”) or any other similar referendums that may be held; 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 sustainability issues; and risks associated with the spin-off of our Jeanswear business completed on May 22, 2019, including the risk that VF will not realize all of the expected benefits of the spin-off; the risk that the spin-off will not be tax-free for U.S. federal income tax purposes; and the risk that there will be a loss of synergies from separating the businesses that could negatively impact the balance sheet, profit margins or earnings of VF. 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 December |
|
% |
|
Nine Months Ended December |
|
% |
||||||||||||||||||
|
|
2020 |
|
|
2019 |
|
|
Change |
|
2020 |
|
|
2019 |
|
|
Change |
||||||||||
Net revenues |
|
$ |
2,971,541 |
|
|
|
$ |
3,155,723 |
|
|
|
(6 |
)% |
|
$ |
6,656,158 |
|
|
|
$ |
8,386,135 |
|
|
|
(21 |
)% |
Costs and operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Cost of goods sold |
|
1,345,024 |
|
|
|
1,351,653 |
|
|
|
0 |
% |
|
3,134,381 |
|
|
|
3,704,254 |
|
|
|
(15 |
)% |
||||
Selling, general and administrative expenses |
|
1,214,518 |
|
|
|
1,264,031 |
|
|
|
(4 |
)% |
|
3,036,639 |
|
|
|
3,497,315 |
|
|
|
(13 |
)% |
||||
Total costs and operating expenses |
|
2,559,542 |
|
|
|
2,615,684 |
|
|
|
(2 |
)% |
|
6,171,020 |
|
|
|
7,201,569 |
|
|
|
(14 |
)% |
||||
Operating income |
|
411,999 |
|
|
|
540,039 |
|
|
|
(24 |
)% |
|
485,138 |
|
|
|
1,184,566 |
|
|
|
(59 |
)% |
||||
Interest, net |
|
(31,776 |
) |
|
|
(17,337 |
) |
|
|
83 |
% |
|
(90,656 |
) |
|
|
(49,306 |
) |
|
|
84 |
% |
||||
Other income (expense), net |
|
6,484 |
|
|
|
(22,144 |
) |
|
|
* |
|
(27,059 |
) |
|
|
(18,361 |
) |
|
|
* |
||||||
Income from continuing operations before income taxes |
|
386,707 |
|
|
|
500,558 |
|
|
|
(23 |
)% |
|
367,423 |
|
|
|
1,116,899 |
|
|
|
(67 |
)% |
||||
Income tax expense |
|
59,048 |
|
|
|
78,976 |
|
|
|
(25 |
)% |
|
74,260 |
|
|
|
4,667 |
|
|
|
* |
|||||
Income from continuing operations |
|
327,659 |
|
|
|
421,582 |
|
|
|
(22 |
)% |
|
293,163 |
|
|
|
1,112,232 |
|
|
|
(74 |
)% |
||||
Income from discontinued operations, net of tax |
|
19,581 |
|
|
|
43,421 |
|
|
|
(55 |
)% |
|
25,186 |
|
|
|
50,993 |
|
|
|
(51 |
)% |
||||
Net income |
|
$ |
347,240 |
|
|
|
$ |
465,003 |
|
|
|
(25 |
)% |
|
$ |
318,349 |
|
|
|
$ |
1,163,225 |
|
|
|
(73 |
)% |
Earnings per common share - basic (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Continuing operations |
|
$ |
0.84 |
|
|
|
$ |
1.06 |
|
|
|
(21 |
)% |
|
$ |
0.75 |
|
|
|
$ |
2.80 |
|
|
|
(73 |
)% |
Discontinued operations |
|
0.05 |
|
|
|
0.11 |
|
|
|
(54 |
)% |
|||||||||||||||
FAQ
What were VF Corporation's third quarter fiscal 2021 earnings results?
What is VF Corporation's full year revenue outlook for fiscal 2021?
How much was VF Corporation's declared dividend for March 2021?
What factors contributed to the decline in VF Corporation's gross margin?
What were the operational impacts of COVID-19 on VF Corporation?
