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    VF Corp (VFC)

    Q4 2024 Earnings Summary

    Reported on Apr 2, 2025 (After Market Close)
    Pre-Earnings Price$12.33Last close (May 22, 2024)
    Post-Earnings Price$11.48Open (May 23, 2024)
    Price Change
    $-0.85(-6.89%)

    What went well

    • Leadership Changes and Strong Team Positioning for Turnaround: VF Corporation has made significant leadership changes, including the appointment of a new CFO, Paul Vogel, who brings a wide range of financial, operational, and capital markets experience. Additionally, key internal promotions and strategic hires strengthen the leadership team, positioning the company for a successful turnaround.
    • Positive Signs of Brand Turnaround at Vans and The North Face: Vans is showing early signs of recovery, with successful new product launches like New School and AV 2.0, and positive Direct-to-Consumer (DTC) sales growth in Europe, indicating the brand's turnaround is progressing. Similarly, The North Face continues to have strong underlying sell-through, with management expressing confidence in future growth through strengthened wholesale partnerships.
    • Aggressive Debt Reduction and Financial Discipline: The company is taking aggressive actions to reduce debt without refinancing, planning to pay down the $1 billion tranche due in December and has no intention to refinance the $750 million due in April, possibly through asset sales. This demonstrates strong financial discipline and focus on strengthening the balance sheet.

    What went wrong

    • VF Corporation is facing ongoing revenue challenges and wholesale weakness, particularly in the U.S., with key brands like Vans and The North Face experiencing declines in wholesale orders. For instance, The North Face is encountering "ongoing wholesale weakness... especially in the U.S. and in the kind of winter apparel products."
    • Gross margins are expected to remain under pressure due to inventory cleanup actions leading to elevated promotions and clearance activity. The company anticipates gross margin erosion in Q1, with margins down similarly to Q4, as they work through residual excess inventory, impacting profitability.
    • The company may face challenges in meeting upcoming debt obligations without asset sales, indicating potential financial strain. CFO Matt Puckett noted, "it gets pretty difficult to see the $750 million not needing to be refinanced barring other actions," and CEO Bracken Darrell added, "we have no intention to refinance."

    Q&A Summary

    1. Debt Repayment and Potential Asset Sales
      Q: Will you need to refinance debt or sell assets?
      A: We plan to pay down the $1 billion term loan due in December. We have no intention to refinance the $750 million maturity due in April. Asset sales may occur before the April maturity.

    2. Vans Performance and Turnaround Efforts
      Q: How is the Vans brand progressing?
      A: We are starting to see early signs of improvement at Vans. DTC in Europe was positive in the quarter , and new products like UltraRange Neo and New School are performing well. Inventory reset actions are largely complete by end of Q1.

    3. Portfolio Restructuring Decisions
      Q: What is the status of the portfolio review?
      A: The portfolio review is complete, and we are acting on it. We have decided not to publicly disclose our actions yet, but we have optionality and are moving forward.

    4. Inventory Reduction Impact on Margins
      Q: How is inventory reduction affecting gross margins?
      A: Inventory declined by 23% in the quarter , ahead of expectations. The inventory cleanup will impact gross margins through Q1, with margins down similar to Q4. After Q1, we expect margins to improve as we complete the sell-through of excess inventory.

    5. The North Face Wholesale Weakness in U.S.
      Q: What's causing weakness at The North Face in U.S. wholesale?
      A: The North Face is affected by intentional reductions in wholesale order books in the Americas. Sell-out remains strong, especially in DTC channels , and we continue to invest in product and brand building.

    6. Reinstating Financial Guidance
      Q: When will you provide financial targets again?
      A: While we are not ready to reinstate guidance now, we are improving forecasting accuracy and may provide targets in the near future.

    7. Appointment of New CFO
      Q: Why did you bring in Paul Vogel as CFO?
      A: Paul Vogel brings a range of financial, operational, and capital markets experience. He has strong personal skills and has been trained by respected CFOs.

    8. Cash Flow Guidance and Composition
      Q: What's included in the $600 million cash flow target?
      A: The $600 million cash available for financing activities includes free cash flow and proceeds from non-core asset sales, like the sale of aircraft and buildings. It does not include brand sales.

    9. Supreme Performance Update
      Q: How is the Supreme brand performing?
      A: Supreme delivered a strong quarter with sales up low double digits in Q4. We opened stores in Shanghai and Seoul, and the brand continues to perform very well.

    10. CapEx and D&A Guidance
      Q: What's the outlook for CapEx and D&A expenses?
      A: CapEx will be similar to historical levels, with more focus on consumer-facing investments. Depreciation and amortization (D&A) will be lower than last year due to prior one-time write-offs.

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