VF Corp has downgraded its earnings outlook for fiscal year 2023 once again.
The maker of brands such as Vans, The North Face and Timberland announced the downgrade as it reported its results for the second quarter. Revenues were $3.1 billion, marking a 4% decline. Adjusted earnings per share were $0.73, down 34% and in line with analysts expectations, according to Yahoo.
VF said that the downgraded outlook reflects foreign exchange headwinds, higher-than-usual inventory levels and more promotional activity in the marketplace. VF said its inventories were up 88% compared with Q2 last year, partially due to in-transit inventory worth about $510 million that VF decided to take ownership of from the point of shipment rather than destination.
Shares of VF were down less than 2% in after-hours trading on Wednesday.
VF Corp. chairman, president and CEO Steve Rendle said in statement that despite the “challenging environment,” the company is “protecting profitability by tightly controlling all non-strategic spend.“
In September, VF outlined a long-term plan to grow its business by 2027, which hinges on innovating within an existing brand portfolio, building and developing new brands, leveraging a DTC focused supply chain, and becoming a more agile organization.
Over the next five years, VF expects to see a compounded annual growth rate for revenue up in the mid to high single digits. By fiscal year 2027, the company expects to see an operating margin of about 15% and earnings per share growth of high single to low double-digits. Between fiscal years 2023 and 2027, VF plans to return about $7 billion in cash to shareholders through dividends and share repurchases.
In discussing the results for Q2, Rendle also noted “near-term challenges” for Vans, which include COVID-related disruptions in China and broader headwinds in the shopping environment. In Q2, Vans revenue was $1 billion, down 13% from the same time last year. The North Face revenue was $1 billion, up 8%.
VF said that the majority of its supply chain is functional, though China lockdowns in Q1 are still impacting certain product delays. The company said it is working to “minimize disruption” and is using expedited freight methods when needed and possible.
