VF Corporation Grows only 3% in the First Quarter But Maintains Forecasts

VF Corporation grows only 3% in the first quarter,
The US group has seen the evolution of its income affected, above all, by the closure of trade in China and by the context of general inflation.

VF Corporation moderates its escalation. The American group, owner of Vans, Supreme or The North Face, has exceeded its billing expectations for the first quarter of the year despite having only grown by 3% compared to the same period of the previous year. The company has been penalized during the period by inflation (which has partially passed through to prices) and the impact of the lockdowns in China, in addition to disruptions in the value chain.

In the presentation of results, the company has highlighted that it will maintain its forecasts at constant exchange rates for the end of 2022, but that it will revise its income outlook to reflect the negative impact of the currency effect. In organic terms, the company’s forecast is to raise its turnover between 3% and 7%.

In the first quarter, ended June 30, the group has registered sales of 2,261 million dollars, which has meant an increase in its turnover of only 3% compared to the same quarter of 2021. Compared to the same period of 2019, the company’s income has been 0.46% below.

“The results obtained have exceeded our expectations for the quarter, which has made us maintain our expectations for the end of the year,” said Steve Rendle, president and CEO of VF Corporation.

VF Corporation expects to register a year-on-year increase of between 4% and 7% in 2022

“Even so, geopolitical uncertainty and macroeconomic headwinds continue, but we will continue to make strategic investments to ensure long-term profitable and sustainable growth,” Rendle added.

At the beginning of the quarter, the company was affected by the restrictions related to the pandemic in China, which led to the closure of up to 23% of its establishments in the country.

VF’s sales in the Asian giant dragged down business throughout Asia Pacific, which shrank revenue by 20%. The rest of the group’s markets continued to rise, with increases of 10% in Europe, the Middle East and Africa (Emea) and 6% in America, affected by the high comparable base due to the stimulus measures implemented in the first quarter of 2021.

Restrictions in China also caused changes in production. Now, raw material suppliers located in the country are operational, but “the eight-week blockade in the region has caused logistical challenges and consequent delays in product shipments,” the group said.

For now, VF Corporation is working with its network of local suppliers in the region to minimize disruptions in the supply chain and to be able to normalize its distribution in the coming months.

The group’s net profit fell in the first quarter by 15.8%

Another of the main headwinds of the period has been inflation, which has eroded VF’s margin in the first quarter despite the fact that the company has partially transferred the increase in costs to the final consumer.

The company has closed the quarter with a gross margin of 53.9%, which represents a decrease of 260 basis points. “The increase in the cost of transport and logistics has been offset by an increase in the prices of our products,” said VF Corporation.

Operating profit contracted by 15.8%, going from 239.8 million euros registered in the first quarter of 2021, to 201.9 million euros this year. In addition, the group entered the red in the period, going from an operating profit of 324.2 million dollars, to a loss of 55.9 million dollars.

By brands, Vans and Dickies have shrunk their turnover for the quarter by 7% and 15%, respectively. The firm that has evolved the most has been The North Face, with an increase in sales of 31%, followed by Timberland, which registered an 8% increase in turnover.

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VF Corporation Grows only 3% in the First Quarter - /10

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