VF Corp Exceeds Q4 Estimates On Broad-Based Strength In The North Face Brand

VF Corp VFC reported a Q4 FY23 sales decline of 3% Y/Y to $2.74 billion, marginally beating the consensus of $2.73 billion.
By brands, revenues declined in Vans (-14% Y/Y), Timberland (-9% Y/Y) and Dickies (-3% Y/Y), while revenues rose in The North Face (+12% Y/Y).
By geographies, revenues fell in the Americas (-7% Y/Y) on weak US Wholesale business. Meanwhile, revenues were up 2% Y/Y in the International region, mainly led by EMEA and Greater China.
The gross margin contracted 230 basis points Y/Y to 49.6% owing to increased promotional activity and product costs.
The company reported an operating loss of $(161) million vs operating profit of $192 million a year ago.
Adjusted EPS of $0.17 beat the analyst consensus of $0.14.
Inventories increased 62% Y/Y, with on-hand inventory (excluding in-transit) rising 46% Y/Y in the quarter.
As of end-FY23, VF Corp held $816 million in cash and cash equivalents.
Dividend: VFC's Board declared a quarterly dividend of $0.30 per share, payable on June 20, 2023, to shareholders of record on June 12, 2023. VFC intends to continue to pay its regularly scheduled dividends.
FY24 Outlook: VFC sees total revenue growth of flat to up slightly in FY24, with expected revenue decline in high-single digits in constant dollars in Q1 FY24 on the challenging Wholesale environment in the US.
The company expects EPS of $2.05-$2.25 (consensus: $2.17), including adverse effects of over $(0.30) from higher interest and tax rates, unfavorable foreign currency, and assumed normalized incentive compensation.
VFC expects a gross margin expansion of at least 100 basis points and a higher operating margin in FY24.
"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," stated Matt Puckett, CFO.
Price Action: VFC shares are trading higher by 4.38% at $19.80 premarket on the last check Wednesday.

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