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VF Corp Q3 revenues increase but lowers earnings outlook

By Prachi Singh

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Business

Third quarter revenues at VF Corporation increased 5 percent or 6 percent in constant dollars to 3.4 billion dollars, driven by VF’s largest brands, and its international and direct-to-consumer platforms. Excluding the occupational Work business, the company said in a statement, revenue increased 6 percent or 7 percent in constant dollars. Earnings per share were 1.13 dollars on a reported basis, while on an adjusted basis, earnings per share increased 14 percent to 1.23 dollars.

“Our third quarter performance was strong and our year-to-date results are at the high end of our long-term growth objectives. Despite a mixed holiday season in the US, we’re on track to deliver solid performance and are well positioned for continued growth and value creation in fiscal year 2021,” said Steve Rendle, VF’s Chairman, President and CEO.

VF adjusts full year outlook

The company added that gross margin for the quarter increased 110 basis points to 55.7 percent, driven by favourable mix shift toward higher margin businesses and timing of net foreign currency transaction gains. On an adjusted basis, gross margin increased 100 basis points to 55.7 percent. Operating income on a reported basis was 579 million dollars, while on an adjusted basis, operating income increased 11 percent or 12 percent in constant dollars to 595 million dollars. Excluding the occupational Work business, operating income increased 14 percent or 15 percent in constant dollars). Operating margin on a reported basis increased 100 basis points to 17.1 percent, while adjusted operating margin increased 100 basis points to 17.6 percent.

VF further said that revenue is now expected to be approximately 11.75 billion dollars, an increase of approximately 5 percent to 7 percent on a constant dollar basis compared to a previous expectation of approximately 11.8 billion dollars, reflecting an increase of approximately 6 percent or 8 percent on a constant dollar. Excluding the occupational Work business, revenue is expected to increase approximately 6 percent or 8 percent on a constant dollar basis.

By segment, revenue for outdoor is now expected to increase approximately 4 percent or 5 percent on a constant dollar basis compared to the previous expectation of an increase in revenue of approximately 5 percent or 6 percent to 7 percent on a constant dollar basis. Revenue for Active is now expected to increase approximately 8 percent or 12 percent on a constant dollar basis compared to the previous expectation of an increase in revenue of approximately 8 percent to 9 percent or 11 percent to 12 percent on a constant dollar basis. Revenue for Work is now expected to increase approximately 1 percent or 2 percent to 3 percent on a constant dollar basis compared to the previous expectation of an increase in revenue of approximately 2 percent to 3 percent or 4 percent to 5 percent on a constant dollar basis. Excluding the occupational Work business, Work revenue is expected to increase approximately 3 percent or 6 percent to 7 percent on a constant dollar basis.

The company expects international revenue to increase approximately 6 percent, or approximately 9 percent on a constant dollar basis, excluding the impact of acquisitions and divestitures compared to the previous expectation of an increase in revenue of approximately 4 percent to 5 percent, or approximately 8 percent to 9 percent on a constant dollar basis. Direct-to-consumer revenue is now expected to increase approximately 9 percent to 10 percent or 10 percent to 11 percent on a constant dollar basis, including about 20 percent growth in digital on a constant dollar basis compared to the previous expectation of an increase in revenue of approximately 11 percent to 12 percent or12 percent to 13 percent on a constant dollar basis, including about 25 percent growth in digital on a constant dollar basis.

VF lowers earnings expectations

The company added that adjusted gross margin is still expected to be 54.1 percent, which represents an estimated increase of 80 basis points, adjusted operating margin is still expected to be 13.8 percent, which represents an estimated increase of approximately 90 basis points. Adjusted operating income is expected to increase approximately 12 percent or 14 percent on a constant dollar basis. Excluding the occupational Work business, adjusted operating income is expected to increase approximately 15 percent or 18 percent on a constant dollar basis. Adjusted earnings per share is now expected to be approximately 3.30 dollars, reflecting growth of approximately 15 percent or approximately 18 percent on a constant dollar basis compared to the previous expectation of in the range of 3.32 dollars to 3.37 dollars, reflecting growth of 16 percent to 18 percent or 19 percent to 21 percent on a constant dollar basis.

Picture:Facebook/The North Face

VF’s board of directors declared a quarterly dividend of 48 cents per share, payable on March 20, 2020, to shareholders of record on March 10, 2020.

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VF Corporation