VF(US:VFC)2024-05-23 18:00Part I Item 1. Business V.F. Corporation, a global apparel and footwear company, initiated the 'Reinvent' program in Fiscal 2024 to streamline operations and strengthen its balance sheet, operating across Outdoor, Active, and Work segments - The 'Reinvent' turnaround program was introduced in Fiscal 2024, focusing on cost streamlining, business model improvement, and balance sheet strengthening, establishing new global commercial and Americas regional platforms21 Fiscal 2024 Revenue Distribution | Category | Percentage of Total Revenue | | :--- | :--- | | Direct-to-Consumer (DTC) | 47% | | E-commerce (as % of DTC) | 42% | | E-commerce (as % of Total VF) | 20% | | Americas Region | 52% | | Europe Region | 33% | | Asia-Pacific Region | 15% | - The company's business is structured into three reportable segments: Outdoor, Active, and Work, featuring major brands like The North Face®, Vans®, Timberland®, and Dickies®2224 - VF's global supply chain sourced approximately 266 million units from around 320 independent contractor facilities in 35 countries during Fiscal 2024, with no single supplier exceeding 6% of total cost of goods sold4852 - The company operates 1,185 owned retail stores and utilizes approximately 2,400 independently-owned partnership stores, primarily in Europe and Asia3943 Item 1A. Risk Factors The company faces significant economic, operational, regulatory, and financial risks, including consumer spending sensitivity, intense competition, supply chain disruptions, cybersecurity threats, and the success of its 'Reinvent' program - Economic risks include dependence on consumer spending, sensitive to global economic conditions, inflation, and geopolitical instability, alongside intense competition and pricing pressure in the apparel industry105106115 - The success of the 'Reinvent' turnaround program is a key business risk, with no assurance its objectives of cost-saving, balance sheet strengthening, and growth reinvestment will be achieved119121 - Significant operational risks exist related to information technology and cybersecurity, highlighted by a December 2023 data security breach involving system encryption and data theft, leading to business disruptions124129133 - The company faces risks from Artificial Intelligence (AI) development and use, including potential biases, system failures, intellectual property challenges, and evolving legal regulations134137141 - Financial risks include potential impairment charges on significant intangible assets and goodwill, with charges recorded in Fiscal 2024 for the Timberland®, Dickies®, and Icebreaker® reporting units181185187 - As of March 30, 2024, VF had approximately $6.0 billion of debt outstanding, with recent credit rating downgrades and debt covenants limiting annual cash dividends and share repurchases to $500.0 million198199200 Item 1B. Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - No unresolved staff comments are reported210 Item 1C. Cybersecurity VF Corporation outlines its cybersecurity risk management program, overseen by the Board and management, which includes threat identification, third-party assessments, and an incident response plan, with the December 2023 incident deemed not material - Cybersecurity oversight is shared by the Board of Directors, the Audit Committee, and management, including the CISO and General Counsel214215 - The company maintains a program to protect information and systems, including a cyber incident response plan, and engages third-party assessors and consultants to augment capabilities216217 - The December 2023 cybersecurity incident's impacts were deemed not material to VF's financial condition or results, with the company seeking reimbursement through its cybersecurity insurance218 Item 2. Properties VF Corporation's principal properties include global and regional headquarters, 21 distribution centers, and 1,185 generally leased retail stores worldwide - Global headquarters are leased in Denver, Colorado, with European and Asia-Pacific headquarters in Stabio, Switzerland, and Shanghai, China, respectively219 - The company operates 21 owned or leased distribution centers, with major facilities in Ontario, California; Prague, Czech Republic; and Kunshan, China221 - As of March 30, 2024, VF operates 1,185 generally leased retail stores across the Americas, Europe, and Asia-Pacific222 Item 3. Legal Proceedings The company reports no pending material legal proceedings beyond ordinary, routine litigation incidental to its business - There are no pending material legal proceedings to which VF or its subsidiaries are a party223 Item 4. Mine Safety Disclosures This section is not applicable to the company - Not applicable225 Part II Item 5. Market for VF's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities VF's Common Stock trades on the NYSE, with its five-year cumulative total shareholder return significantly underperforming market indices, and no shares repurchased in Q4 Fiscal 2024 - VF Common Stock (VFC) is listed on the New York Stock Exchange, with 2,607 shareholders of record as of April 27, 2024228 Five-Year Cumulative Total Return Comparison | Company / Index | 3/30/19 | 3/30/24 | | :--- | :--- | :--- | | VF Corporation | $100.00 | $22.28 | | S&P 500 Index | $100.00 | $201.57 | | S&P 1500 Apparel, Accessories & Luxury Goods | $100.00 | $67.69 | - No shares of VF's Common Stock were repurchased during the fiscal quarter ended March 30, 2024, with approximately $2.49 billion remaining under the share repurchase program authorization230231 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In Fiscal 2024, VF's revenue decreased 10% to $10.5 billion, resulting in a significant net loss of $(968.9) million due to impairment charges and tax expenses, prompting a 70% dividend reduction and the 'Reinvent' program Fiscal 2024 vs. Fiscal 2023 Key Financials | Metric | Fiscal 2024 | Fiscal 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Revenues | $10,454.7M | $11,612.5M | -10% | | Gross Margin | 52.0% | 52.5% | -50 bps | | Operating Margin | (0.3)% | 2.8% | -310 bps | | Net Income (Loss) | $(968.9)M | $118.6M | N/A | | Diluted EPS | $(2.49) | $0.31 | N/A | - The 'Reinvent' transformation program was introduced, resulting in $105.4 million in Fiscal 2024 charges, primarily for severance and asset write-downs243244 - The quarterly dividend was reduced by 70% from $0.30 to $0.09 per share to reduce debt and strengthen the company's financial position245 FY2024 Goodwill & Intangible Asset Impairment Charges | Reporting Unit | Impairment Charge (Goodwill) | | :--- | :--- | | Timberland | $407.0M ($195.3M + $211.7M) | | Dickies | $61.8M | | Icebreaker | $38.8M | | Total | $507.6M | - A net discrete tax expense of $704.6 million was recorded, primarily due to an unfavorable court decision in the Timberland tax case, resulting in a write-off of a related tax receivable261319 - Cash from operations improved significantly to $1,014.6 million from a use of $(655.8) million in the prior year, mainly due to a decrease in working capital, particularly lower inventory levels300301 Information by Reportable Segment In Fiscal 2024, all three segments experienced revenue declines, with Outdoor down 3%, Active down 17% (Vans® -24%), and Work down 16% (Dickies® -15%), leading to contracted operating margins Segment Revenue Performance (FY2024 vs. FY2023) | Segment | FY2024 Revenue (M) | FY2023 Revenue (M) | % Change | | :--- | :--- | :--- | :--- | | Outdoor | $5,501.4 | $5,647.5 | -3% | | Active | $4,061.7 | $4,904.6 | -17% | | Work | $891.5 | $1,060.2 | -16% | Segment Profit Performance (FY2024 vs. FY2023) | Segment | FY2024 Profit (M) | FY2023 Profit (M) | % Change | | :--- | :--- | :--- | :--- | | Outdoor | $602.7 | $785.4 | -23% | | Active | $352.2 | $654.7 | -46% | | Work | $17.6 | $121.2 | -85% | - Outdoor Segment: Revenue decreased 3%, with The North Face® growing 2% offset by an 11% decline in Timberland®, including a 32% decrease in the Americas270271272 - Active Segment: Revenue decreased 17%, with Vans® global revenues down 24%, including a 28% drop in the Americas, reflecting strategic wholesale channel resets274275 - Work Segment: Revenue decreased 16%, with Dickies® global revenues down 15%, primarily due to a 15% decrease in the Americas and a 35% decrease in Asia-Pacific279280 Critical Accounting Policies and Estimates The company highlights critical accounting policies requiring significant judgment, including business combinations, impairment testing of assets and goodwill, and income taxes, with Fiscal 2024 seeing impairment charges for Timberland®, Dickies®, and Icebreaker®, and a narrow margin for Supreme® - Significant management estimates are required for valuing assets in business combinations, assessing impairment of long-lived assets and goodwill, and determining income tax liabilities336342 - Goodwill Impairment Testing (FY2024): Triggering events led to quantitative tests and subsequent impairment charges for Timberland® ($407.0 million total), Dickies® ($61.8 million), and Icebreaker® ($38.8 million)361363364365 - Supreme® Impairment Test (FY2024): The annual quantitative test for the Supreme® reporting unit resulted in no impairment, but its estimated fair value exceeded carrying value by a narrow margin of 8% for goodwill and 3% for the indefinite-lived trademark364705 - Income Taxes: The company highlights uncertainties in applying complex tax laws; in FY2024, an unfavorable court ruling on the Timberland acquisition tax dispute led to a $690.0 million income tax expense, and an EU ruling on Belgium's excess profit tax regime resulted in a $26.1 million net income expense374375377 Item 7A. Quantitative and Qualitative Disclosures about Market Risk This section details the company's exposure to market risks, including interest rate risk on variable-rate debt, foreign currency exchange rate risk from significant international operations, and commodity price risk - The company is exposed to interest rate risk, primarily on variable-rate borrowings, where a hypothetical 1% change in interest rates would impact net income by approximately $6.9 million329 - Foreign currency exchange rate risk is significant, as 54% of Fiscal 2024 revenues were generated internationally, with the company using derivative contracts to hedge a portion of this exposure330332 - VF is exposed to commodity price risks for materials like cotton, leather, and rubber, managed by negotiating prices in advance rather than using derivative instruments339 Item 8. Financial Statements and Supplementary Data This item directs the reader to the full consolidated financial statements and supplementary data, beginning on page F-1 of the report - Refers to the Index to Consolidated Financial Statements and Financial Statement Schedule on page F-1381 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures This section is not applicable as there were no changes in or disagreements with accountants - Not applicable382 Item 9A. Controls and Procedures Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of March 30, 2024, with no material changes to internal control over financial reporting during the last fiscal quarter - The CEO and CFO concluded that VF's disclosure controls and procedures were effective as of the fiscal year-end, March 30, 2024383 - No material changes in internal control over financial reporting occurred during the fourth fiscal quarter384 Item 9B. Other Information The company reports no director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the fourth quarter of Fiscal 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended March 30, 2024385 Part III Item 10. Directors, Executive Officers and Corporate Governance Information regarding executive officers, directors, corporate governance, and audit committee is incorporated by reference from the company's definitive 2024 Proxy Statement - Information required by this item is incorporated by reference from the forthcoming 2024 Proxy Statement389390391 Item 11. Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive 2024 Proxy Statement - Information required by this item is incorporated by reference from the forthcoming 2024 Proxy Statement394 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters Information regarding security ownership is incorporated by reference from the company's definitive 2024 Proxy Statement - Information required by this item is incorporated by reference from the forthcoming 2024 Proxy Statement395 Item 13. Certain Relationships and Related Transactions, and Director Independence Information regarding related transactions and director independence is incorporated by reference from the company's definitive 2024 Proxy Statement - Information required by this item is incorporated by reference from the forthcoming 2024 Proxy Statement396 Item 14. Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the company's definitive 2024 Proxy Statement - Information required by this item is incorporated by reference from the forthcoming 2024 Proxy Statement397 Part IV Item 15. Exhibits and Financial Statement Schedules This section lists the financial statements, schedules, and exhibits filed as part of the Form 10-K report, including the independent auditor's report and various corporate agreements - Lists all financial statements, schedules, and exhibits filed with the report, including the Report of Independent Registered Public Accounting Firm and various indentures and credit agreements399400 Item 16. 10-K Summary The company indicates that no Form 10-K summary is provided - None403