Release Date: May 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VF Corp (VFC, Financial) reported a significant improvement in operating income, up by 400 basis points year-over-year, exceeding guidance.
- Gross margin improved by 560 basis points compared to the previous year, driven by lower material costs and less discounting.
- The Reinvent program led to a 2% decline in SG&A expenses, contributing to improved operating profitability.
- Net debt was reduced by over a quarter compared to last year, with leverage reduced by a full turn, aligning with the medium-term goal of 2.5x leverage.
- The North Face brand showed positive performance with a 4% revenue increase in Q4, driven by strong direct-to-consumer sales.
Negative Points
- Overall revenue declined by 3% in the fourth quarter, in line with guidance of negative 2% to negative 4%.
- Vans brand revenue was down 20% in the quarter, with a significant portion of the decline due to strategic actions to eliminate unprofitable business.
- The APAC region's turnaround has been slower, impacting overall performance.
- Direct-to-consumer (DTC) sales were down 3%, primarily due to soft traffic.
- The company is facing potential impacts from newly implemented tariffs, with an unmitigated annualized cost impact of approximately $150 million.
Q & A Highlights
Q: How are you thinking about gross margin improvements for the year and structurally longer term? Does the $313 million free cash flow include anything from Supreme?
A: Paul Vogel, CFO: We expect continued improvement in margins for fiscal '26 and are on track to meet our goals from the Investor Day. The $313 million free cash flow does not include Supreme. We aim for operating cash flow and free cash flow to increase next year, with the magnitude depending on CapEx.
Q: Can you elaborate on the strategic reset actions at Vans and when they might be completed?
A: Bracken Darrell, CEO: Actions in China and other strategic resets will continue to impact Q1 and Q2, with effects diminishing in Q3 and gone by Q4. These include reducing channel availability in China, closing unprofitable stores, and reducing distressed sales.
Q: How are you planning to handle the EUR 500 million note due in March 2026? Are you considering any changes to the portfolio?
A: Paul Vogel, CFO: We plan to pay down the note using free cash flow and our $2 billion revolver. Bracken Darrell, CEO: We are happy with the current portfolio but will review it annually with the board to ensure alignment with our strategy.
Q: What is the strategy for Vans during the back-to-school season, and how is the team preparing for it?
A: Bracken Darrell, CEO: Sun is focusing on leadership and product development, with new products like Super LowPro showing promising results. We are also enhancing our marketing efforts to drive brand heat and consumer engagement.
Q: Could you discuss the health of The North Face brand and any changes in direct-to-consumer momentum?
A: Bracken Darrell, CEO: The North Face is performing well, with strong DTC sales and growth in footwear globally. We are moving to a four-season development cycle to enhance product offerings outside the winter period.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
