VF Corp. (VFC) Reduces Third Quarter and FY23 Outlook, Presents Long-Term Strategic Plan for FY2027


News and research before you hear about it on CNBC and others. Claim your one week free trial for StreetInsider Premium here.


(Updated – September 28, 2022 9:18 a.m. EDT)

VF Corporation (NYSE: VFC), a leading portfolio of active lifestyle brands, including Vans®, The north face®, Timberland® and Dickies®, is hosting its 2022 Investor Day today in Denver, Colorado. As part of the event, the company presents a long-term strategic growth plan for FY27 and financial goals.

“Our new five-year growth plan demonstrates how we will leverage VF’s proven strengths and distinct model to deliver superior returns to shareholders over the long term,” said Steve Rendle, President and CEO of VF. “The global economic environment has changed dramatically since we held our last Investor Day at the end of 2019. Despite significant disruption over the past three years, VF has successfully risen to the challenges to become a more agile and focused business that offers a clear vision to be the world’s most dynamic portfolio of iconic, deeply loved and active lifestyle brands.

“As economic uncertainties persist, we are actively addressing the challenges within our business and remain confident in our ability to generate consistent and sustainable growth from our brand portfolio over the long term. We will continue to deepen our engagement with consumers, expand into new categories and markets, leverage our powerful commerce platforms, and leverage the seasoned leaders and talented teams that drive our strategies. VF and our brands remain well positioned to continue our journey of growth and success at scale. »

Long-term strategic growth plan

At the event, members of VF’s leadership team will present a detailed overview of the company’s strategies, which underscore its commitment to delivering consistent, sustainable and profitable growth. Strategic choices include:

  • Find and amplify consumer tailwinds:​ The company will innovate within its existing brand portfolio while strategically expanding into adjacencies that complement its current brands and tap into consumer growth spaces.
  • Build brands on multiple growth horizons:​ The company will gain market share by building and managing brands at various stages of growth across the portfolio, as well as through mergers and acquisitions and business development to benefit individual brands and the company.
  • Leverage platforms for scaling speed and efficiency: The company will leverage its strategic platforms, which provide a unique set of capabilities at scale to enable its brands to connect more directly with consumers and operate more effectively, including consumer data and analytics, direct-to-consumer (DTC)-centric supply chain, seamless customer experience and international platforms.
  • Resource for portfolio agility and performance: The Company will continue to manage its business with organizational agility and dynamically allocate capital and deploy people to drive its highest priority strategic and growth-oriented initiatives.

Financial targets for FY27

  • Revenue through FY27 is expected to grow at a five-year CAGR of mid- to high-single-digit % (in constant dollars), with all brands, regions and channels contributing to growth during this period.
    • The North Face® Five-year CAGR of brand revenue expected to be up from high to low double-digit percentage (in constant dollars).
    • Vans® the five-year CAGR of brand revenue is expected to be up mid-single digit (in constant dollars).
    • Timberland® Five-year CAGR brand revenue is expected to grow by mid-single digit percent (in constant dollars).
    • Dickies® the five-year CAGR of brand revenue is expected to grow in the mid-single digits (in constant dollars).
    • Supreme® the five-year CAGR of brand revenue is expected to grow from a high percentage to a low double-digit percentage (in constant dollars).
    • The five-year CAGR of emerging outdoor brands1 is expected to increase in the mid- to upper-teens percentage (in constant dollars).
  • Operating margin is expected to reach approximately 15% by FY27, representing a low double-digit 5-year operating profit CAGR (in constant dollars), driven by both gross margin expansion and growth. SG&A leverage.
  • Tax rate expected to be 17% to 18% in FY27, gradually increasing to approximately 16% in FY23.
  • PES is expected to grow at a five-year high-to-low double-digit CAGR (in constant dollars) (relative to FY22 Adjusted EPS of $3.18).
  • Free movement of capitalGeneration 2 is expected to be approximately $5.5 billion (FY23 to FY27 YTD), with a total of approximately $7 billion in cash expected to be available for return to shareholders in the form of dividends and share buybacks.
  • Organic RST through FY27 is expected to grow at a five-year CAGR of between low double digits and low teens.

Financial outlook Q2’FY23 and FY23

(Consensus calls for Q3 EPS of $1.00 and FY23 EPS of $3.04)

  • Q2’FY23 revenue is expected to be up mid-single digit (in constant dollars) and adjusted EPS is expected to be between $0.70 and $0.75.
  • VF is revising its FY23 outlook due to weaker-than-expected second-quarter FY23 results, coupled with continued uncertainty in the current environment, weaker-than-expected back-to-school performance at Vans® and increased inventory leading to a more promotional environment in North America in the fall; the revised outlook includes the following:
    • Total VF revenue is expected to grow approximately +5% to 6% (in constant dollars) from the previous outlook of at least +7%.
      • Vans® brand revenue is expected to be down mid-single-digit percent (in constant dollars) from the previous outlook of mid-single-digit percent.
      • The North Face® brand revenue is expected to generate at least low double-digit growth (in constant dollars) compared to the previous outlook of low double-digit growth.
    • Adjusted gross margin is expected to be down about 50 basis points from the previous slightly higher outlook.
    • Adjusted operating margin is expected to be around 12% compared to the previous guidance of around 13.2%.
    • Adjusted EPS is expected to be in the $2.60-$2.70 range, down from $3.18 a year ago and from the previous outlook of $3.05-$3.15.
    • Adjusted cash flow from operations of approximately $1.0 billion (vs. previous guidance of approximately $1.2 billion) is expected; Capital expenditures are expected to be approximately $240 million (vs. previous forecast of approximately $250 million).
  • VF’s FY23 outlook assumes the following:
    • No other significant COVID-19 related lockdowns in major trade or production regions.
    • No significant deterioration in global inflation rates and consumer confidence.

Supreme deficiency

The Company is testing the values ​​of Supreme Trademark and Goodwill during the second quarter due to a trigger event resulting from rising interest rates and currency fluctuations, which are expected to negatively impact estimated fair values. As a result, and as a result of these non-operating factors, the company expects to record a non-cash charge in the second quarter of the fiscal year in the range of $300-450 million.

Webcast Information

The event is broadcast live on the Internet, accessible on vfc.com/investor-day-2022 from approximately 10:30 a.m. until 2:30 p.m. ET today. An archived version will be available in the same location after the event.

Presentation

All presentations will be available on vfc.com/investor-day-2022 beginning at approximately 10:15 a.m. ET today and will be archived in the same location.

About Chris McCarter

Check Also

LIFESTANCE HEALTH GROUP, INC. Management report and analysis of the financial situation and operating results. (Form 10-Q)

The following discussion and analysis of our financial condition and results of operations should be …