VF Corp, which owns brands, including Vans, The North Face, Dickies and Timberland is facing a challenging period as it reported a 2% decline in sales to $3bn for the second quarter of its fiscal year 2024 ending 30 September 2023.
The North Face remained the company’s most successful player as revenues increased by 19% to $1.12bn while Vans posted a revenue decline of 21% to $0.7bn.
GlobalData apparel analyst Alice Price says: “The group’s total revenue was particularly dragged down by Vans, while Timberland and Dickies also continued to lose relevance, with sales decreasing by 6.8% and 8.0% respectively.”
According to Price, these declines can be attributed to VF Corp’s failure to align its brands with the latest trends and aesthetics, “leading it to appear outdated and unfashionable in the eyes of discerning young shoppers.”
VF Corp president and CEO Bracken Darrell is keen to emphasise that he is only 100 days into the job and believes the company’s transformation plan (Reinvent) will improve brand-building and execution while addressing with urgency his top priorities of improving North America, accelerating the Vans turnaround, significantly reducing our fixed costs and reducing leverage.
He adds: “We are excited about the long term, starting with these first major steps toward improving our near-term performance, positioning us to return to growth and generate shareholder value.”
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Key highlights from Q2 results
- Revenue down 2% (down 4% in constant dollars) to $3.0bn
- Operating income is $362.9m compared to $90.8m the previous year
- Net income was $450.7m compared to $118.4m in 2022.
In terms of regional sales, VF Corp experienced a decline of 11% in the Americas. However, its international business witnessed a sales growth of 10%, thanks to an 8% rise in Greater China and a 14% rise in Europe, the Middle East, and Africa (EMEA) during the quarter.
The company experienced a 1% decline in wholesale revenue and a 3% decline in direct-to-consumer revenue during Q2 FY24.
VF Corp pulls guidance for FY24 and plans to improve business
VF Corp CFO Matt Puckett says: “Despite pockets of continued strong performance throughout the first half and solid profit margins in the second quarter, it’s not enough and we are not making sufficient progress at Vans or in the US.”
He hopes the transformation plan (Reinvent) will boost the performance of Vans and enhance its presence in North America while also lowering its cost structure by $300m.
VF Corp plans to boost its growth in the Americas region by launching an Americas regional platform that it says has already proven successful in EMEA and APAC. With this change, Martino Scabbia Guerrini has been promoted to the newly created role of chief commercial officer, with responsibility for go-to-market execution globally.
The company has also announced its intention to appoint a new brand president who will be responsible for turning around the fortunes of the Vans brand.
Price says this initiative is a good start for steering the company’s brands back to relevance. However, she adds the person in charge of filling the new Vans brand president vacancy will have a “big task on their hands and will need to take significant action in order to improve perceptions.”
The company has updated its free cash flow projection for FY24 and now expects it to be around $600m as opposed to $900m and also expects Vans’ performance to not improve in the second half of FY24.