V.F. Corp. Q1 Earnings: A Little Early To Be Optimistic

Core Viewpoint - V.F. Corporation's recent quarterly earnings report showed slight improvements in revenue and loss per share, but the overall performance remains concerning, particularly for its core brands [3][13]. Financial Performance - For Q1 FY2025, V.F. Corp. reported an adjusted loss per share of $0.33, slightly better than expectations, with revenues of $1.91 billion, down 8.5% year-over-year [3][4]. - The Americas region experienced a 12% decline in revenues, while the APAC region saw modest growth of 2% year-over-year [3][4]. - GAAP EPS was negative $0.67, primarily due to a $0.30 impairment charge and restructuring costs [4][6]. Brand Performance - Vans brand sales fell by 21%, indicating ongoing internal issues despite a challenging macroeconomic environment [7]. - The North Face recorded its weakest quarterly revenues in three years but still managed a 12.7% CAGR over the last four years, with only a 3% year-over-year decline [8]. - Timberland and Dickies saw revenue declines of 14% and 10%, respectively, indicating persistent brand weaknesses [8]. Supreme Sale Impact - V.F. Corp. sold Supreme for $1.5 billion, a decision aimed at generating cash to pay off upcoming debt, with the sale expected to close by the end of Q3 FY2025 [11][12]. - The sale is anticipated to reduce total revenues by approximately 5% to 6% in FY2026, but it is viewed as a necessary move given the brand's underperformance [11][12]. - The transaction resulted in a positive market reaction, with VFC shares rising approximately 20% post-announcement, despite the overall value destruction from the acquisition [11][12]. Debt Management - The sale of Supreme is expected to help V.F. Corp. manage its debt, with a projected reduction of net debt by about $1.75 billion by the end of FY2025 [12]. - Management aims to use proceeds from the sale to pay down significant debt maturities, which could improve the company's credit rating outlook [12][13]. - Free cash flow guidance for FY2025 is set at $600 million, allowing for potential repayment of maturing notes [12].