VF Corp. ended its fiscal year on a high note, prolonging a recovery that started in the second quarter. For the fourth quarter ended March 31, the company confirmed that its momentum is accelerating, delivering revenues that increased by 23 percent to $2,582 million, or 19 percent in constant currencies. Excluding the impact of acquisitions, revenues rose by 12 percent in constant dollars, driven by VF’s largest brands, e-commerce growth and an increase in the Asia-Pacific region. The quarter included an extra week when compared to the same quarter in 2020.
The quarterly net income reached $89.5 million, against a loss last year of $483.8 million. However, the results fell below the analysts’ consensus, causing VF’s share price to fall by 8 percent as a result. The bottom line included extraordinary charges of $12.5 million compared with $383 million in the same period a year ago. The group’s gross margin declined by one full percentage point to 52.1 percent due to higher promotional activity to clear excess inventory and currency headwinds. Operating expenses rose by 15 percent.
Nevertheless, the strong growth record in the first months of 2021, partly attributed to investments made in previous years on digital marketing and sales, led the group to provide upbeat guidance for the fiscal year ending in March 2022. The management indicates a net income of around $1.2 billion for the year, despite extra marketing investments of $150 million. It is projecting a gross margin of over 56 percent on revenues that would rise by 28 percent to $11.8 billion, including $600 million from the Supreme brand acquired last December. VF’s management believes that the acquisition will spark “another layer of transformative growth” and value creation for the group.
It also anticipates a further 38 to 40 percent jump in DTC sales, representing about half of the total revenues. This should include a share in the low twenties for its own e-commerce, which is expected to grow by 29 to 31 percent. The Outdoor segment is expected to gain 23 to 25 percent, with a 25 to 27 percent jump at The North Face (TNF) and a 16 to 18 percent increase for Timberland. Active is seen jumping by 34 to 36 percent, including a 26 to 28 percent increase in Vans’ revenues. Work is forecast to grow by 10 to 12 percent, thanks to Dickies.
For the full financial year ended on March 31, VF reported a decline in net income of 40 percent to 407.9 million as sales dropped by 12 percent to $9,238 million. The gross margin declined by 2.6 percentage points to 52.7 percent, while operating expenses increased by 2.5 percentage points in relation to the top line. The group’s own online sales jumped by 55 percent, and combined with a 40 percent increase in sales to pure-play e-tailers, they led e-commerce to represent 30 percent of the total turnover for the year.
The Outdoor segment suffered a 34 percent drop in profits to $342.2 million for the year on 11 percent lower revenues of $4,127.6 million, with drops of 9 percent for TNF and 14 percent for Timberland. The Active segment generated 43 percent lower income of $648.5 million on 15 percent lower revenues of $4,160.9 million, with Vans also declining by 15 percent.
In the fourth quarter, VF’s total DTC revenues went up by 36 percent, including a jump of 106 percent in online sales, while wholesale revenues improved by 14 percent.
Geographically, the Americas, excluding the U.S., was the most affected region within the Group, with sales down 19 percent at constant exchange rates, while the U.S. was up 16 percent. Sales in the EMEA region gained 8 percent in reported terms but fell by 1 percent in constant currencies due to persistent retail lockdowns. About 20 percent of the stores in EMEA were still closed at the end of the period, compared with less than 5 percent in North America and none in the Asia-Pacific region. Sales rose by 49 percent in APAC on a constant-dollar basis during the quarter, boosted by an 81 percent gain in Greater China. This year, the company is moving its APAC headquarters from Hong Kong to Shanghai to get closer to the Chinese consumer as part of VF’s Distort to Asia strategy.
The group’s quarterly revenues in the Outdoor segment, which TNF leads, rose by 20 percent in terms of local currencies. The usually more dynamic Active segment, led by Vans, climbed by 19 percent, with Supreme contributing $142 million in revenues since its acquisition and Altra posting a 53 percent gain. With many new products and a growing international distribution, the Work segment improved by 23 percent, led by Dickies.
TNF saw its quarterly revenues rise by 12 percent in constant currencies, including a 17 percent improvement in DTC boosted by a 63 percent gain in e-commerce. There was double-digit growth for the brand in Europe, despite the resurgence of the pandemic. TNF also achieved double-digit growth across all other regions and channels. Mountain categories performed well, including outerwear led by the FutureLight offering. Footwear also stood out, led by the new Vectiv line. The TNF Gucci collaboration generated over 17 billion media impressions since its December launch.
Timberland’s sales were up by 21 percent in terms of local currencies, with e-commerce more than doubling, while Dickies advanced by 9 percent. Timberland’s growth was led by Classics, Outdoor footwear and the Timberland Pro line. The brand’s sales increased by 11 percent in EMEA and by 65 percent in APAC. Vans’ revenues went up by 13 percent worldwide during the quarter, with digital sales jumping by 52 percent.
At the end of the quarter and the financial year, the group still had $1.45 billion in cash and short-term investments and $2.2 billion available under its revolving credit facility. Its long-term debt soared to $5,709.1 million from $2,608.3 million due to liquidity measures taken early in the year, as well as the $2.0 billion spent for Supreme’s acquisition.