VF Reports Solid Q2 Growth But Investors Worry About Vans Sales

VF Corporation’s second-quarter performance exceeded Wall Street expectations, driven by growth across its brands, including The North Face, Vans, and Timberland. Despite posting a net income of $189.8 million, or 48 cents per diluted share for the three months ended September 27, 2023, investors reacted negatively, leading to a 12.2 percent drop in shares to $14.58 at market close on Tuesday.

Revenue for the quarter increased by 1.6 percent to $2.80 billion, up from $2.76 billion in the same period last year. Analysts had anticipated adjusted diluted earnings per share of 42 cents on revenue of $2.73 billion. The growth was bolstered by a 7 percent rise in Timberland sales, totaling $506.4 million, and a 2 percent increase for other brands, including Altra and Smartwool, amounting to $532.3 million.

Investors’ concerns primarily stemmed from VF’s third-quarter guidance, which forecasts revenues to decline between 1 to 3 percent. The consensus for the quarter anticipates adjusted diluted EPS of 55 cents on revenue of $2.87 billion. In contrast, VF had reported adjusted diluted EPS of 62 cents on revenue of $2.80 billion for the same period last year.

Challenges Facing Vans and Strategic Growth

Management highlighted some encouraging trends, including a strong back-to-school performance. Yet, questions remain about the duration needed for the company’s turnaround strategy to take effect. According to Stichter, who commented on the guidance, projected profits are lower than expected due to tariff headwinds costing between $60 million to $70 million in the second half of the fiscal year.

“Even in light of recent challenges at Vans, we believe VF Corporation’s stable of brands is solid,” Stichter noted. “We like the diversification efforts afforded by a portfolio strategy.” While he views Vans as a brand in need of revitalization rather than a complete overhaul, he anticipates a lengthy process due to product lead times and macroeconomic challenges.

Chief Investment Officer at Telsey Advisory Group, Dana Telsey, characterized VF’s second-quarter results as “solid.” She reported a 4 percent growth in the outdoor segment, although the active business segment continues to face pressure as the “Vans turnaround remains a work-in-progress.”

During a recent conference call, VF President and CEO Bracken P. Darrell provided insights into the company’s performance. He noted that all three regions—Americas, EMEA, and APAC—experienced growth compared to the previous year, alongside increases in both wholesale and direct-to-consumer channels. Performance apparel drove momentum in core styles, while footwear sales grew by double digits across all regions.

Darrell mentioned that demand for the 6-inch premium boot constitutes about 20 percent of global revenue, indicating significant potential for future growth. “We are looking to diversify the product lineup and enhance brand versatility during warmer seasons,” he added, emphasizing plans to expand offerings in footwear and apparel categories.

As for Vans, Darrell acknowledged the impact of Michelle “Sun” Choe, who became the global brand president in July 2024. He noted that product innovations are attracting new consumers, particularly among women and younger audiences. “Newness in the Old Skool franchise has driven higher sales of women’s styles,” he stated, with more product launches planned for the holiday and spring seasons.

In a strategic move, VF announced in September that it would sell its Dickies brand to Blue Star Alliance for $600 million. The proceeds from this sale will be utilized to reduce debt, further solidifying VF’s financial position.

As VF navigates these challenges and opportunities, the company remains focused on reinforcing its brand portfolio and addressing investor concerns regarding its future growth trajectory.