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VFC Sinks 5% on Disappointing Q2 Results

Shares of one of the world’s largest apparel, footwear, and accessories retailers, VF Corporation (VFC), sank 4.7% after the company reported weaker-than-expected second-quarter results. The results were impacted by COVID-19-related supply-chain problems, labor challenges, as well as port congestion, and logistic difficulties. Shares closed at $70.74 on October 22.

The company reported adjusted earnings of $1.11 per share, up 66% year-over-year, but missed analyst estimates of $1.15 per share.

Moreover, net revenue came in at $3.2 billion, an increase of 23% compared to the prior-year period, but also missed the consensus estimates of $3.52 billion. VFC’s direct-to-consumer channel grew 32%, while the wholesale channel increased 17% compared to the year-ago period.

During the quarter, VFC completed the sale of its Occupational Workwear business, which has been reported as ‘held for sale’ and ‘discontinued operations’ in its financial statements.

Additionally, VFC’s Board declared a quarterly common dividend of $0.50 per share payable on December 20 to shareholders of record on December 10. To add to that, the Board also reinstated its share buyback program of $2.8 billion, which was suspended on April 7, 2020. (See Insiders’ Hot Stocks on TipRanks)

Commenting on the results, Steve Rendle, VF’s Chairman, President, and CEO said, “While the recovery has been impacted by further pandemic-related disruptions, we continue to see accelerating demand signals across our business, and our ability to reaffirm our Fiscal 2022 revenue and earnings outlook is a clear testament to the resiliency and optionality of our model.”

Based on the current economic environment and business momentum, VFC guided for full-year Fiscal 2022 revenue to be around $12 billion versus the consensus of $11.96 billion, and adjusted earnings are forecast to be around $3.20 per share compared to the consensus estimate of $3.17 per share.

In response to VFC’s financial performance, Guggenheim analyst Robert Drbul maintained a Buy rating on the stock with a price target of $100, implying 41.4% upside potential to current levels.

Drbul said, “Despite a quarter hindered by ongoing supply chain challenges leading to a shift wholesale timing shipments and an incremental headwind of $0.09 per share from expedited freight costs, weaker performance in China, and a disappointing Vans BTS performance, we remain mindful of the power of the total VFC brand portfolio.”

Commenting on VFC’s strong brand portfolio, the analyst noted that he is encouraged by the performance of The North Face, Dickies, and Timberland, while he is optimistic about the addition of the Supreme brand. Drbul also believes that a turnaround of Vans is critical for the company’s performance and believes that cost structure realignments will bode well for the company in the long run.  

Overall, the stock has a Moderate Buy consensus rating based on 10 Buys, 2 Holds, and 1 Sell. The average VF Corp price target of $89.31 implies 26.3% upside potential to current levels. Shares have lost 4.1% over the past year.

Further, according to TipRanks’ Smart Score system, VFC gets a 7 out of 10, which indicates that the stock is likely to perform in line with market averages.

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