The US clothing group VF Corporation also had to accept losses in sales and earnings in the third quarter of the 2022/23 financial year. However, the current figures that the company presented on Tuesday evening were better than the analysts had expected in advance.
At the same time, the parent company of brands like The North Face, Vans and Timberland announced major reforms and confirmed its full-year sales guidance. The news was well received by investors: VF’s share price immediately rose by seven percent.
Sales are shrinking in all regions
For the October-December period, consolidated revenue was $3.53 billion, down 3 percent from the same quarter last year. However, the company suffered from unfavorable exchange rate fluctuations. Adjusted for currency effects, sales grew by three percent.
In all market regions, sales fell short of the corresponding prior-year level. In the Americas, it fell 2 percent (-1 percent at constant currency) to $2.09 billion. In the EMEA region, which includes Europe, the Middle East and Africa, revenue decreased 2% to $983.3 million but increased 10% on a constant currency basis. Asia-Pacific sales were $453.4 million (-7 percent, +4 percent in constant currency).
The Vans brand continues to cause concern
A key factor in the modest sales development was the continued weakness of the Vans brand, whose global sales shrank by 13 percent (-9 percent at constant currency) compared to the same quarter last year to US$926.9 million. Dickies sales were down 16 percent (-13 percent at constant currency) to $177.0 million.
On the other hand, the outdoor label The North Face experienced a strong upward trend, which was able to achieve a sales increase of seven percent (currency-adjusted +13 percent) to 1.32 billion US dollars. Timberland revenues were $595.5 million, up 0.4 percent (+6 percent at constant currency) compared to the prior year. The other brands of the group came together to 510.1 million US dollars (-2 percent, currency-adjusted +5 percent).
Price reductions and cost increases burden the result
Earnings were impacted by higher discounts and cost increases. The operating profit fell by 24 percent to 516.0 million US dollars. Thanks to a tax credit, net income reached $507.9 (€472.2 million), down just 2 percent from the prior-year quarter.
In the first nine months of the current financial year, group sales amounted to 8.87 billion US dollars, which corresponded to a decrease of two percent (currency-adjusted +4 percent) compared to the same period last year. Net income fell 74 percent to $333.5 million.
The sales forecast for the current year remains unchanged
In view of the figures available, the group stuck to its sales forecast for the full year. So he still expects a currency-adjusted increase of three percent. Although management now expects lower margins than recently, the target corridor for adjusted earnings per share was only narrowed from US$2.00 to US$2.20 to US$2.05 to US$2.15.
The company now wants to counter the recent difficulties with extensive reforms. The aim is to focus more on the areas with the greatest response from customers and to improve the operating results, announced interim CEO Benno Dorer, who has been in charge of the group on an interim basis since Steve Rendle’s resignation. In addition, the “priorities in the distribution of resources within the group would now be shifted,” he explained in a statement.
The group is considering the sale of the Kipling, Eastpak and Jansport brands
Specifically, the company announced that it would initially cap the quarterly dividend from $0.51 to $0.30 per share. In addition, the portfolio is to be streamlined further. VF announced that “strategic alternatives” for the backpack division with the brands Kipling, Eastpak and Jansport are now being examined.
The measures also include a sale and leaseback agreement for the European headquarters building in Stabio, Switzerland, and further cost reductions. According to the company, the current program is to be fully implemented in the coming financial year and will then lead to annual savings of around 225 million US dollars.