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V.F. Corp (VFC) Dips on Q4 Earnings Miss, Outlines FY22 View

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V.F. Corporation VFC has reported fourth-quarter fiscal 2021 results, wherein earnings missed the Zacks Consensus Estimate, while revenues surpassed the same. However, the company’s top and bottom lines witnessed growth on a year-over-year basis, as results were significantly impacted by the pandemic-led closures in the year-ago quarter. Further, the company provided a detailed outlook for fiscal 2022.

Shares of the company dipped 6.4% in pre-market trading, owing to the lower-than-expected earnings reported in fourth-quarter fiscal 2021. The Zacks Rank #3 (Hold) company has gained 4.9% in the past three months compared with the industry’s growth of 4.1%.

 


 

It continued to witness mixed impacts of the COVID-led closures and restrictions. In North America, about 15% of company-owned stores were closed at the end of the fiscal third quarter. Of these, the majority were Vans stores in California. Meanwhile, other stores operated with reduced capacity. Since then, the company has reopened most of the stores in the region, including all stores in California, with less than 5% of stores remaining closed at the end of the fiscal fourth quarter.

In EMEA, nearly 60% of stores re-closed by the end of the fiscal fourth quarter. While some stores have reopened in the EMEA region since the end of the fiscal fourth quarter, nearly 20% of stores remain closed. However, in APAC, including Mainland China, all stores are open.

Q4 Highlights

V.F. Corp’s adjusted earnings per share of 27 cents witnessed a robust 169% surge from the year-ago quarter. However, the bottom line lagged the Zacks Consensus Estimate of 30 cents. On a constant-currency basis, adjusted earnings per share were up 150%. Earnings per share included a cents contribution from acquisitions.

Net revenues of $2,582.7 million rose 23% year over year and surpassed the Zacks Consensus Estimate of $2,506 million. Constant-currency revenues were up 19%. Without the impact of acquisitions, revenues improved 16% (up 12% in constant dollars) on gains from VF's largest brands, e-commerce and an increase in the APAC region. Notably, the APAC region witnessed favorable year-over-year comparisons in the reported quarter, owing to the significant impacts of COVID-19 in the year-ago quarter. Additionally, revenues for the fiscal fourth quarter were aided by an extra week compared with fiscal 2021, which had 53 weeks.

V.F. Corporation Price, Consensus and EPS Surprise
V.F. Corporation Price, Consensus and EPS Surprise

V.F. Corporation Price, Consensus and EPS Surprise
V.F. Corporation price-consensus-eps-surprise-chart | V.F. Corporation Quote

Revenues in North America were up 25% year over year on both reported and a constant-currency basis, while EMEA revenues rose 11% (up 2% in constant currency). Meanwhile, APAC revenues improved 71% on a reported basis (up 62% in constant currency) and that in Greater China improved 81% (up 70% in constant dollars). The company’s International revenues were up 21% year over year on a reported basis (up 13% in constant dollars).

Channel-wise, wholesale revenues were up 14% year over year (up 10% in constant currency). Revenues at the company’s direct-to-consumer business improved 36% (up 32% in constant dollars) in the fiscal fourth quarter, while digital revenues advanced 106% (up 99% in constant dollars).

Adjusted gross margin contracted 120 basis points (bps) year over year to 52.7%, owing to increased promotional activity to clear excess inventory and the timing of foreign-currency transactions. However, adjusted gross margin included 60-bps gains from acquisitions.

Adjusted operating income increased 98% year over year to $173 million, while adjusted operating margin expanded 260 bps to 6.7%. Adjusted operating income included acquisition-related contributions of $34 million, resulting in a 100-bps positive impact as a percentage of sales.

Segmental Details

Revenues at the Active segment rose 22% to $1,262.2 million (up 19% in constant currency).

The Outdoor segment reported revenues of $1,060.9 million, up 25% year over year (20% growth in constant currency).

Revenues at the Work segment improved 23% year over year (up 20% in constant currency) to $259.5 million.

Other revenues were $15 compared with $8.3 million reported in the year-ago quarter.

Financial Details

V.F. Corp ended fiscal 2021 with cash and cash equivalents of $815.8 million, long-term debt of $5,709.1 million, and shareholders’ equity of $3,056.2 million. Inventories were down 17.9% at the end of fiscal 2021.

In fiscal 2021, the company generated operating cash flow (continuing operations) of $1.2 billion and a free cash flow of $1 billion. Moreover, it returned $756.8 million to shareholders through dividend payouts.

Additionally, the company declared a quarterly cash dividend of 49 cents per share, payable Jun 21, 2021, to shareholders with record as on Jun 10.

As part of its liquidity-preservation actions amid the coronavirus outbreak, V.F. Corp previously suspended its share-repurchase program on a temporary basis. Currently, it has $2.8 billion remaining under its current share-repurchase authorization.

Outlook

The company outlined a detailed outlook for fiscal 2022. It expects revenues of $11.8 billion for fiscal 2022, suggesting year-over-year growth of 28%. The outlook includes $600 million of revenue contribution from the Supreme brand.

On a segmental basis, the company expects revenue growth of 23-25% for Outdoor, 34-36% for Active and 10-12% for Work segments. Meanwhile, international revenues are anticipated to rise 25-27% in fiscal 2022. Region-wise, revenues are expected to increase 29-31% in EMEA, 18-20% in APAC and 28-30% in the Americas (non-U.S.) regions. Moreover, the company predicts direct-to-consumer revenue growth of 38-40%, including 29-31% growth in digital revenues.

The company anticipates adjusted gross margin of more than 56%, suggesting growth of more than 270 bps. It expects adjusted operating margin of 12.8%, suggesting growth of 480 bps.

V.F. Corp anticipates adjusted earnings per share of $3.50, including nearly 25 cents earnings contribution from the Supreme brand. The company expects to generate adjusted operating cash flow of more than $1 billion in fiscal 2022. Moreover, it expects an effective tax rate of 15% and a capital expenditure of $350 million.

3 Better-Ranked Stocks to Watch

Columbia Sportswear Company COLM has a long-term earnings growth rate of 31.95% and it sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Crocs, Inc. CROX has a long-term earnings growth rate of 15%. The company currently flaunts a Zacks Rank #1.

Gildan Activewear, Inc. GIL has a long-term earnings growth rate of 28.57% and it presently sports a Zacks Rank #1.

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