Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VF Corp (VFC, Financial) achieved $65 million in cost savings during Q2, contributing to a cumulative total of $200 million since the Reinvent program's inception.
- The company successfully reduced inventories by 13% compared to the previous year, indicating improved inventory management.
- Net debt was reduced by almost $450 million year-over-year, and the company paid down a $1 billion term loan post-quarter, strengthening the balance sheet.
- Vans showed a significant improvement with a decline of 11% in Q2 compared to a 21% decline in Q1, indicating progress in the brand's turnaround.
- The North Face brand continued to perform well, particularly in APAC, and was recognized by Time Magazine as the world's best brand in the outdoor apparel category.
Negative Points
- Overall Q2 revenue was down 6% year-over-year, reflecting ongoing challenges in the business.
- The North Face experienced a 4% revenue decline due to strong prior-year comparisons, particularly in the Americas.
- Timberland's revenue was down 3% in Q2, despite improvements from Q1, indicating ongoing challenges in the brand's performance.
- Dickies brand revenue declined by 11% in Q2, although it showed sequential improvement from Q1.
- The company is still facing challenges in the US market, with the Americas region down 9% in Q2, despite sequential improvements.
Q & A Highlights
Q: Bracken, you talked about increasingly being able to predict the business. What are the drivers that are becoming more predictable, particularly for Vans?
A: (Bracken Darrell, CEO) We have achieved 10 consecutive months of accurate forecasting in the Americas, focusing on revenue, gross margins, and SG&A. This predictability extends across all regions, including EMEA and APAC, allowing us to roll up a reliable forecast.
Q: How is the health of your overall wholesale business, and what do inventory levels look like going into the holidays?
A: (Bracken Darrell, CEO) The wholesale business is on a positive trajectory, especially in the Americas. Channel inventories are generally healthy, though there are some regional variances, such as being slightly high in China. Overall, we feel good about the inventory levels.
Q: Can you discuss the fixed versus variable costs and the ongoing deleverage impact as you work through cost savings?
A: (Bracken Darrell, CEO) We will address this in more detail at our upcoming Investor Day. We are seeing improvements across the P&L and are focused on maintaining momentum.
Q: How is Vans performing in the Americas, and what are the evolving conversations with wholesale partners?
A: (Bracken Darrell, CEO) Wholesale is currently outperforming DTC for Vans, which is expected due to traffic issues. Feedback from wholesalers is positive, and we are seeing improvement in the path we are on with Vans.
Q: What are your expectations for gross margin improvements going forward?
A: (Paul Vogel, CFO) We expect gross margin to be up in Q3 and Q4, benefiting from actions taken last year and improved product costs. More details will be shared at the Investor Day.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
