The US clothing group VF Corporation also suffered from weak demand in North America and ongoing problems with its Vans brand in the second quarter of the 2023/24 financial year.
On Tuesday evening, the group of companies, which also includes labels such as The North Face, Timberland and Dickies, presented not only the current results but also a comprehensive reform program and personnel changes. In view of the planned restructuring, management also withdrew its forecasts for the current financial year.
The group is relying on restructuring and cost-cutting measures
In the period from July to September, consolidated sales amounted to 3.03 million US dollars (2.85 billion euros), which represented a decrease of two percent (-4 percent at constant currency) compared to the same quarter of the previous year. The bright spot in the portfolio was once again the outdoor brand The North Face, whose sales increased by 19 percent (+17 percent adjusted for currency effects) to 1.13 billion US dollars.
Weak business in America and the crisis of the Vans brand are causing sales losses
However, the other important corporate brands experienced a downward trend. Vans’ sales slipped by 21 percent (-23 percent adjusted for currency effects) to $748.8 million. At Timberland it shrank by seven percent (-10 percent at constant currency) to $488.6 million, at Dickies by eight percent (-9 percent at constant currency) to $171.4 million. The group’s smaller labels totaled $496.6 million, exceeding the previous year’s level by six percent (+4 percent adjusted for currency effects).
The reason for the losses was weak demand in America. Group revenue there fell by eleven percent (-11 percent adjusted for currency effects) to 1.57 billion US dollars. In the EMEA region, which includes Europe, the Middle East and Africa, sales increased by 14 percent (currency-adjusted +6 percent) to $1.06 billion. In the Asia-Pacific region, VF achieved an increase of two percent (+6 percent at constant currencies) to 403.7 million US dollars.
High tax burdens increase the net loss
Operating profit reached $362.9 million in the second quarter, after posting an operating loss of $90.8 million in the same quarter last year. At that time, however, negative special effects totaling almost $422 million had a negative impact on earnings, which resulted primarily from extensive write-downs on the Supreme label.
However, higher tax burdens caused the reported net loss to rise from $118.4 million to $450.7 million (€423.6 million). Diluted loss per share increased from $0.31 to $1.16. Adjusted for special items, diluted earnings per share fell from $0.73 to $0.63, missing market expectations.
The company is restructuring its American business
In view of the once again unsatisfactory figures, management presented a comprehensive reform program called “Reinvent”. The associated measures start at different levels. A separate organizational unit is being established for the American market, which is based on the corresponding structures in the recently more successful EMEA and APAC regions. As part of this global unification, Martino Scabbia Guerrini, who already leads the business in EMEA and APAC, has been appointed to the newly created position of Chief Commercial Officer (CCO).
Vans boss Kevin Bailey is leaving his post and taking on a new role in the company
In addition to the American market, the company also set its sights on its second acute problem: Kevin Bailey, the global brand president of the troubled Vans brand, would be resigning from his position, the company said. Until the position is filled, CEO Bracken Darrell, who has been in office since mid-July, will “take on a more active role in managing the brand and implementing its turnaround strategy.” However, quick success is not to be expected. The group admitted that no improvement in business at Vans is expected in the second half of the year.
According to the group, Bailey will remain a member of the group’s management team even after his resignation from Vans. He should therefore lead the implementation of the “Reinvent” program.
In addition to the reforms in the Americas business and at Vans, VF also announced general austerity measures. By streamlining and simplifying corporate structures and eliminating spending on non-strategic business areas, fixed costs are expected to be reduced by $300 million.