Vans and Supreme Power VF Corp. Gains in Quarter
VF Corp. is charging back from the first rush of the pandemic — with its fiscal first-quarter sales and profits as well as its annual outlook all rising — but now it’s working through “isolated product delays” given an increasingly tangled global supply chain.
The parent to Vans, The North Face, Timberland and Supreme said the majority of its supply chain is operational, but pointed to some disruptions. “Suppliers are complying with local public health advisories and governmental restrictions, which has resulted in isolated product delays,” the company said. “The resurgence of COVID-19 lockdowns in key sourcing countries has resulted in additional manufacturing capacity constraints during the first quarter. Additionally, port delays, equipment availability and other logistics challenges have contributed to product delays. VF is working with its suppliers to minimize disruption and is employing expedited freight as needed.”
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The company expects to spend more than $35 million more this year for quick freight shipments.
Costs from the supply chain troubles are being outweighed by the consumer resurgence that began in the U.S. and Europe — although shoppers now face the prospect of continued COVID-19 worries even with higher vaccination rates.
VF’s net income for the quarter ended July 3 totaled $324.2 million, or 82 cents a share, reversing year-ago losses of $285.6 million, or 73 cents. Adjusted earnings per share from continuing operations rose to 27 cents — well ahead of the 10 cents analysts were looking for on average.
Revenues doubled to $2.2 billion from $1.1 billion.
Steve Rendle, chairman, president and chief executive officer, told analysts on a conference call Friday that VF had powered back to “pre-pandemic revenue levels while driving an earnings recovery well ahead of our initial expectations.”
“While the near-term environment remains somewhat clouded by virus surges in Southeast Asia, uncertainties in other regions brought on by the impact of new variants and further pressures on the global supply chain, our teams are executing,” Rendle said. “We remain focused on the things that we can control, in winning in the parts of our business, with the consumers coming back strong.”
The CEO singled out the U.S. shopper.
“That’s playing out across our businesses,” he said. “That’s a broad-based comment across all of our big businesses and really across our portfolio as we see the U.S. consumer coming back strong.”
And VF is looking to take advantage of its supply chain savvy and financial strength to keep goods flowing and grab more shoppers.
“As we look at strategically using airfreight and other expedited forms of moving our goods, we see an opportunity to capture share,” Rendle said. “Because of our factory partners, their current operational capabilities — certainly not operating at full capacity, but at sufficient capacity — we think we have the opportunity to be in a position to grab share with some of our large brands.”
During the quarter, Vans led the way with sales growth of 110 percent while The North Face was up 93 percent, Timberland gained 70 percent and Dickies rose 61 percent.
VF’s quarterly results also broke out the contribution of Supreme, which the company bought for $2.1 billion-plus in December.
Supreme’s contribution to VF’s total results for the quarter included $145.7 million in sales, $88.8 million in gross profit, operating income of $31.7 million and 7 cents a diluted share.
For the full year, VF is looking for Supreme to contribute revenues of $600 million with 25 cents of earnings per share.
VF boosted its outlook for the year and is now expecting revenues of at least $12 billion, including $600 million from Supreme and reflecting growth of 30 percent. Previously, the company anticipated revenue growth of 28 percent, to $11.8 billion.
And the company — an active deal maker — has its eyes on the horizon.
Matt Puckett, executive vice president and chief financial officer, said the company raised an additional $615 million in liquidity with the sale of its occupational work business in June. In all, VF expects its liquidity to top $4 billion this fiscal year.
Puckett said that would provide VF with “meaningful near-term optionality to deploy excess capital moving forward.”
That’s corporate speak for: VF has a big chunk of change burning a hole in its pocket.
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