VF Corp posts 25% drop in Q3 earnings
Following its recent acquisition of cult streetwear label Supreme for $2.1 billion, Denver, Colorado-based lifestyle company VF Corporation has reported net income of $347.2 million for the third quarter ended December 26, 2020, down 25% compared to $465 million in the prior-year period. Diluted earnings per share were $0.88 per share, down from $1.16.
Quarterly revenue at the company fell 6% year over year, from $3.2 billion to $3.0 billion. In constant currencies the decline was 8%.
This decrease was largely due to temporary store closures implemented as part of the response to the Covid-19 pandemic, as well as lower consumer demand related to the ongoing health crisis.
More than 95% of VF’s owned retail stores in North America were open at the start of the quarter, with all locations having reopened by mid-October. However, due to the resurgence of the coronavirus, some 15% of the company’s stores in the region had closed again by the end of December.
Similarly, having begun Q3 with almost all of its stores open in Europe, the Middle East and Africa (EMEA), the retailer was forced to close around 50% of its locations in the region by the end of the quarter. In the Asia-Pacific (APAC) region, nearly all of the company’s stores remained open throughout the quarter.
Overall, international revenue at the group was flat, as a 17% decline in non-U.S. American sales was partially offset by rises of 1% and 6%, respectively, in the EMEA and APAC regions. The company’s revenues saw an 18% increase in Greater China alone, including 22% growth in Mainland China. U.S. revenues fell 11%.
By channel, VF’s direct-to-consumer revenue decreased 2%, despite a 53% rise in digital sales. Wholesale revenues declined 10%.
Quarterly revenues in the retailer’s active segment fell 9% year over year, including a 6% decline at the Vans brand, while the company’s outdoor segment posted a 5% decrease, including flat sales at The North Face. In VF’s work segment, on the other hand, revenues rose 8%, led by a 9% increase at the Dickies brand.
In spite of the fairly consistent declines across the company’s portfolio, VF chairman, president and CEO Steve Rendle struck an optimistic note when commenting on the retailer’s progress in a release published on Wednesday. “Our third quarter results were largely ahead of expectations despite the impact of additional Covid-19-related disruption to our business,” he said.
Year to date, VF’s revenues were $6.7 billion, down 21% from $8.4 billion in the first nine months of the previous fiscal year. Net income was $318.3 million, or $0.81 per diluted share, falling from $1.2 billion, or $2.90 per diluted share.
In light of its third-quarter results, VF has also raised its full-year financial guidance, reporting that it now expects revenues to be in the range of $9.1 billion to $9.2 billion, a prevision that includes around $125 million in revenue from the newly acquired Supreme brand. Adjusted annual earnings per share are predicted to be approximately $1.30, including a contribution of around $0.05 per share from Supreme.
“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,” concluded Rendle.
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