• Revenue Growth: Up 2% in Q3.
• Gross Margin: Increased by 150 basis points to 56.3%.
• Operating Margin: Improved by 360 basis points to 11.4%.
• Net Debt Reduction: Down nearly $2 billion compared to last year.
• SG&A Savings: $55 million in Q3, contributing to a $300 million run rate in cost savings.
• Adjusted Operating Income: Up 49% to $324 million.
• Adjusted Diluted EPS: $0.62, up from $0.45 last year.
• Inventory Reduction: Down 14% versus last year.
• North Face Revenue: Up 5% in Q3.
• Timberland Revenue: Up 12% in Q3.
• Vans Revenue: Down 8%, showing improvement from the previous quarter.
• Free Cash Flow Guidance: Raised to $440 million for the full year.

• Warning! GuruFocus has detected 13 Warning Signs with VFC.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• VF Corp (NYSE:VFC) reported a 2% revenue growth in Q3, exceeding expectations and showing significant improvement in profitability.
• The North Face and Timberland brands experienced growth, with The North Face up 5% and Timberland up 12% year-over-year.
• The company achieved a gross margin increase of 150 basis points and an operating margin increase of 360 basis points to over 11%.
• Net debt was reduced by nearly $2 billion, demonstrating strong progress in strengthening the balance sheet.
• VF Corp (NYSE:VFC) is on track to deliver $300 million in gross cost savings, with an additional $500 million to $600 million in operating income expansion targeted by fiscal year 2028.

Negative Points

• Vans brand performance was down 8% in Q3, although this was an improvement from the previous quarter.
• The company anticipates a deceleration in Q4 revenue growth due to a shift in wholesale performance and DTC outperformance in Q3.
• The Dickies brand continues to face challenges, described as a 'deep turnaround' with significant potential yet to be realized.
• The APAC region saw a significant decline in Vans sales, down 31%, indicating regional challenges.
• The company expects Q4 revenue to be down 4% to 6% on a reported dollar basis, with FX headwinds contributing to this outlook.

Q & A Highlights

Q: How material was the shift in revenue from Q4 to Q3, and what are the expectations for Vans' turnaround? A: Paul Vogel, CFO, explained that the outperformance in Q3 was split between wholesale and DTC, with wholesale seeing a larger impact due to pull-forward related to the Lunar New Year and stronger holiday reorders. Bracken Darrell, CEO, added that Vans is undergoing significant restructuring, including store closures, and new product initiatives will start to show results by back-to-school and holiday periods.

Q: Can you discuss recent wins at Timberland and The North Face, and the outlook for fiscal '26? A: Bracken Darrell highlighted Timberland's momentum from brand-building activities and collaborations, while The North Face continues to perform well under strong leadership. He noted that the first half of fiscal '26 might resemble the back half of fiscal '25, emphasizing a focus on profitability improvement rather than immediate growth.

Q: Do you have the inventory to meet demand, and what are the forward order expectations? A: Bracken Darrell stated that while inventory levels are down and fresh, there are always areas for improvement. Paul Vogel added that integrated planning initiatives will help optimize inventory placement. The spring order book is light, reflecting past sentiment, but the product portfolio for upcoming seasons is strong.

Q: What is the mix of Vans' value channel, and how does it fit into future plans? A: Bracken Darrell explained that the value channel is about a third of Vans' business and will remain important. The focus is on serving a broad consumer base, and while the non-value channel is expected to grow faster, the value channel remains profitable and integral to Vans' strategy.

Q: How are you managing SG&A and gross margin improvements, and what are the plans for reinvestment? A: Paul Vogel noted that SG&A improvements are due to strong execution of cost-saving initiatives. The company is on track to achieve $300 million in cost savings, with additional benefits expected from further initiatives. The focus remains on balancing reinvestment in marketing and talent with delivering savings to the bottom line.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.