Key Takeaways from VFC’s Q4 Results

February 20th, 2018 by Trefis Team
VFC: VF Corporation logo
VFC
VF Corporation
VF Corporation (NYSE: VFC) recently announced fourth quarter earnings. Net sales of the company rose 20% y-o-y to $3.6 billion, while sales for full year 2017 rose 7% to $11.8 billion including contributions from the Williamson-Dickie acquisition. This increase in revenue was driven by growth from the company’s international business, direct-to-consumer platform, and Outdoor & Action Sports segment. Fast paced growth from Vans brand, rising online sales and international diversification in the Workwear business also contributed to the company’s Q4 performance.
On the flip side, the company reported a net loss of $90.3 million in the fourth quarter due to the Tax Act, down from a profit of $264 million in the same period last year. This Act reduces the tax rate to 21%, however, US companies are now required to pay tax on historical earnings generated outside US and not repatriated to the US. The Tax Act resulted in a provisional net charge of $465 million on the company’s fourth quarter earnings.
The company has also decided to divest its Nautica brand business in the fourth quarter. This comes after the company divested the Licensed Sports Group (LSG) business, including the Majestic brand. VFC also exited its licensing business completing sale of JanSport brand business in the fourth quarter.
Separately, VFC has decided to change its fiscal year to end on March 31 instead of Dec 31 currently. This change will be effective March 31, 2018 with the company reporting results for the transition quarter ending March 31, 2018. So, the first 12-month fiscal year (fiscal 2019) will start from April 1, 2018 through March 31, 2019.

Looking ahead, the company has forecast sales growth of 16% y-o-y to $2.9 billion for the transition quarter ending March 31, 2018. This includes a $200 million contribution from the Williamson-Dickie acquisition. Adjusted earnings  of the company are forecast to rise by 27% to $0.65 per share in the quarter ending March 31, 2018, including contribution of $0.02 per share from the Williamson-Dickie acquisition.

Please refer to our dashboard analysis on VFC

   
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Below are key trends that enabled VFC to post top line growth.

Segment-Wise Performance – The company posted broad-based growth across all its key segments. Revenues of Outdoor & Action Sports grew 16% to $2.5 billion (up 13% on a currency-neutral basis).  Jeanswear revenues of $709.4 million rose 2% year over year (up 1% on a currency neutral basis).  Imagewear revenues also rose strongly to $406.4 million.

Growth in International sales  – Growth prospects in China and Europe remained strong for VFC. The company’s operations in these geographies have been benefiting from rising demand from millennials as well as rising disposable income in the emerging markets. In all, the company’s international sales rose by 29% y-o-y for the three months ended December 2017. Consequently, the company management plans to continue investing in these regions.

Outdoor and action sports segment fueled strong returns – The recent acquisition of Williamson-Dickie in Oct 2017 has benefited the Outdoor and action sports segment, adding to VFC’s kitty strong brands such as Dickies, Workrite, Kodiak, Terra and Walls. Combined with VFC’s popular workwear brands such as Wrangler, this acquisition has further cemented VFC’s leadership position.

Growth in direct-to-consumer channel including sales from digital platform  – Driven by the growing trend of online shopping, VFC continued strong growth in its direct-to-consumer revenue and digital sales. Looking ahead, we anticipate this trend to continue to support the company’s growth in 2018. For its part, VFC is focusing on expanding its e-commerce presence.

 

 

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