V.F. Corp (VFC) Beats Q3 Earnings & Revenues Estimates

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V.F. Corporation VFC has reported robust third-quarter fiscal 2022 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate and grew year over year. Despite the tough economic environment, results gained from broad-based momentum across the company’s brands.

Despite the solid quarterly results, shares of VFC fell more than 3% before the market trading session on Jan 28. This might be due to a lowered sales view for fiscal 2022. We also note that the Zacks Rank #4 (Sell) stock has lost 10.1% in the past year compared with the industry’s decline of 0.6%.

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– Zacks

Q3 Highlights

V.F. Corp’s adjusted earnings per share of $1.35 jumped 45% year over year, beating the Zacks Consensus Estimate of $1.21. On a constant-currency (cc) basis, adjusted earnings per share were up 44%. Earnings per share included an 11 cent-contribution from acquisitions.

Net revenues of $3,624.4 million rose 22% year over year and beat the Zacks Consensus Estimate of $3,613 million. At cc, revenues were up 22%. Without the impacts of acquisitions, revenues rallied 15% (up 16% at cc) on gains from VF’s largest brands. The top line also gained from growth in the EMEA and North America regions, which experienced the pandemic-led negative impacts in the prior-year quarter.

Revenues in the United States were up 24% year over year on a reported basis and at cc. Revenues in the Americas (non-U.S.) grew 27% (up 24% at cc). In the EMEA region, revenues rose 26% (up 28% at cc). APAC revenues increased 5% on a reported basis (up 3% at cc), whereas the same in Greater China fell 6% (down 9% at cc). The company’s international revenues were up 19% year over year on a reported basis (up 20% at cc).

Channel-wise, wholesale, direct-to-consumer and digital revenues were up 14%, 30% and 21% year over year on a reported basis and at cc, respectively.

The adjusted gross margin expanded 60 basis points (bps) to 56.3%, including a 20-bps gain from acquisitions.

The adjusted operating income increased 40% year over year to $643 million on a reported basis and at cc. The adjusted operating margin expanded 230 bps to 17.7%. The adjusted operating income included acquisition-related contributions of 50 bps.

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Segmental Details

Revenues in the Active segment rose 25% to $1,410.6 million (up 26% at cc). The Outdoor segment reported revenues of $1,928.4 million, up 23% year over year on a reported basis and at cc. Revenues in the Work segment grew 6% year over year (up 5% at cc) to $285.1 million.

Financial Details

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V.F. Corp ended the fiscal third quarter with cash and cash equivalents of $1,333.8 million, long-term debt of $4,646.4 million, and shareholders’ equity of $3,653.4 million. Inventories were up 19.6% year over year, amounting to $1,287.2 million.

For the nine months ended December 2021, the company generated an operating cash flow of $797.4 million. It returned $195 million to shareholders through dividend payouts in the fiscal third quarter. VFC also bought back shares worth roughly $300 million, with $2.5 billion remaining under its existing share repurchase program.

The company declared a quarterly cash dividend of 50 cents per share, payable Mar 21, 2022, to shareholders of record as of Mar 10.

Other Updates

V.F. Corp continues to adjust its business operations per the government guidelines associated with the COVID-19 pandemic. Although the majority of the company’s supply chains are currently operational, it has witnessed manufacturing capacity constraints in the fiscal third quarter due to the resurgence of lockdowns in certain countries. Port delays, equipment availability and other logistics challenges have been dragging.

The company is working with its suppliers to minimize disruptions. Its distribution centers are operating in accordance with the government guidelines to maintain safety and health protocols. All stores in North America and the APAC region, including Mainland China, were open in the fiscal third quarter, while only 6% of stores in EMEA regions were closed. Currently, all stores in North America and the APAC regions are operating, while only 1% of stores in EMEA are closed. However, management expects business disruptions to persist in the near term.

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V.F. Corporation Price, Consensus and EPS Surprise

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V.F. Corporation price-consensus-eps-surprise-chart | V.F. Corporation Quote

Outlook

Despite the ongoing disruptions, management retained its fiscal 2022 view. It expects revenues of $11.85 billion, which suggests year-over-year growth of 28%. The guidance includes $600 million of revenue contribution from the Supreme brand. The view compares unfavorably with the earlier mentioned 12% growth. The Zacks Consensus Estimate for fiscal 2022 revenues is pegged at $12 billion.

On a segmental basis, the company lifted its revenue expectation to growth of 26-28% for Outdoor, up from the prior mentioned 25-27% growth. The Work segment’s revenues are still anticipated to be 19-21%. Meanwhile, revenues in the Active segment are now likely to grow 31-33%, down from the earlier mentioned 35-37% rise.

International revenues are predicted to rise 22-24%, down from the prior mentioned 24-26% growth. Region-wise, revenues in EMEA are expected to increase 28-30%, down from the earlier stated 30-32% growth, and the APAC region is expected to rise 7-9%, down from the previously stated 12-14% growth. However, revenues in the Americas (non-U.S.) region are likely to witness 33-35% growth, up from the previously mentioned 30-32% rise. The company predicts direct-to-consumer revenue growth of 32-34%, down from a 34-36% rise mentioned earlier. This includes more than 15% growth in digital revenues, down from the earlier stated 20% rise.

The company anticipates an adjusted gross margin of 55%, suggesting year-over-year growth of 170 bps. This compares unfavorably with the previously mentioned 56%, suggesting year-over-year growth of 270 bps. It still expects an adjusted operating margin of 13%, suggesting growth of 500 bps.

V.F. Corp continues to envision adjusted earnings per share of $3.20, including contributions from the Supreme brand of 25 cents. The Zacks Consensus Estimate for fiscal 2022 earnings is pegged at $3.17.

The company expects an adjusted operating cash flow of $1 billion for fiscal 2022. It expects an effective tax rate of 14% and a capital expenditure of $350 million for the fiscal year.

Stocks to Consider

Some better-ranked stocks from the Consumer Discretionary sector are Delta Apparel DLA, Oxford Industries OXM and Steven Madden SHOO.

Oxford Industries currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 96.7%, on average. Shares of OXM have gained 37.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 51.9% and 523.8%, respectively, from the year-ago period’s reported numbers.

Delta Apparel currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 95.5% on average. The DLA stock has gained 45.9% in the past year.

The Zacks Consensus Estimate for Delta Apparel’s current financial year’s sales and earnings per share suggests growth of 11.9% and 10.1%, respectively, from the year-ago period’s reported numbers.

Steven Madden presently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 41.9%, on average. Shares of SHOO have rallied 20.9% in a year.

The Zacks Consensus Estimate for Steven Madden’s current financial-year sales and earnings suggests growth of 50.8% and 267.2% from the year-ago period’s reported numbers, respectively.


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V.F. Corporation (VFC): Free Stock Analysis Report

 

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