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VF Corp. slashes full-year outlook, stock falls

Yahoo Finance Live anchors discuss VF Corp. slashing its full-year outlook on weak demand.

Video Transcript

BRIAN SOZZI: Yeah, well, another story that is not all wine and roses, as Julie would say, we're also watching shares of VF Corp. That is the maker, of course, of Timberland and North Face after the company revised its full year outlook for 2023 due to lower than expected results in the second quarter. And I made a joke off camera, but to me, it holds true. Whenever you see a company come out, I think, with a five-year growth target inside of a stock market that is completely melting down, it just usually suggests that near-term is going to be a lot of pressure in this business.

Now, VF Corp has some incredibly strong brands, but look, that guidance was taken down, what, close to $0.40, Julie, compared to prior estimates. Challenging quarter, and not a good look, I think, ahead of those Nike earnings that come later in the week because these companies, by and large, if I'm going to buy a North Face black, just hoodie, next to it is probably something from Nike.

BRAD SMITH: Look, well, for Nike, they've been trying to move out of some of those partnerships where they're in the same space as a Vans, North Face, Timberland, and Dickies brands. And what it does signal, though, is even with a Nike exit from some of those retail partnerships on the wholesale side of their business, for what VF Corporation is now talking about, for Vans, North Face, Timberland, Dickies, they're also still trying to go to direct to consumer.

And so if you're seeing both a hit on the wholesale side and a hit on the direct to consumer side, it's essentially going to shape up to exactly what VF Corporation is pointing out here across those brands, saying that they see the economic uncertainties persist, actively addressing challenges within their business. And I think that this is just going to be more of that investment story in their existing customer base, while they're not sure exactly where the marketing spend is going to be able to continue to go forward to acquire new customers.

What does that mean for partnerships? I've seen Dickies in everything from Walmart growing up, to Target now, too. And if you're looking at the type of consumer you're going after and also thinking about where they're pulling back in some of their discretionary spendings, did they lean in to a North Face or a Timberland? Or did they say, you know what? Target's got some of the same stuff, too. Perhaps VF Corporation can capitalize on that. But really be hard pressed to believe that right now, with the five-year growth plan, there's anything to really be optimistic about.

BRIAN SOZZI: Yeah, I'll just mention, too, it's a very good point. And something to, I think, look out for this earnings season, VF Corp noting their guidance that they just lowered for fiscal year 2023 doesn't account for no-- doesn't-- no significant worsening in global inflation rates and consumer sentiment. So theoretically, if we get a next leg lower in this economy-- we do enter a full blown recession-- our companies like a VF Corp and even industrial companies-- you name it-- are they prepared to lower again? And I think that's what you're seeing in the markets just that--

JULIE HYMAN: Well--

BRIAN SOZZI: --macro, just that economic and profit uncertainty for companies.

JULIE HYMAN: Except you're not seeing it in VF Corp today. The shares are not down very much at all. They're already down 52% this year. And if you look at the longer term targets, they're actually not too bad in terms of the growth they're expecting in the various brands. Maybe that's cushioning the blow. I'll have to look more at the commentary around.

BRAD SMITH: I just remain skeptical, when the company says in its long-term strategic growth brand, that it's going to find and amplify consumer trends. Some of the companies that have been able to do this well have already created those consumer trends themselves and based on some of the tailwinds that they've seen either in culture or something that they've been able to home grow themselves and build out fanfare around. And so if a company is telling me, yeah, we're just going to go out there and find it, it's not going to just fall on the doorstep.