• by Sarah Mahoney  @mahoney_sarah, October 31, 2023

While VF Corp.’s latest financial report more or less met expectations, the numbers revealed plenty of bad news for some of its brands. Results at the North Face continue to shine. But sales at Vans are still cratering, and the company says trends are getting worse, not better.

The Vans mess is bad enough that the company is rescinding previous projections for the months ahead, and announced plans to find a new chief executive officer for Vans, with current chief executive officer Kevin Bailey stepping down. (He’ll remain in an advisory role.) Wholesale results are particularly troubling, as is weakness in North American sales.

For the second quarter, VF revenue fell 4% in constant dollars to $3.03 billion, compared to $$3.08 billion in 2022. Due to losing a recent tax ruling related to Timberland, the company posted a net loss of $450.7 million for the quarter, compared to a loss of $118.4 million in the prior year's comparable period.

The company is launching Reinvent, a new transformation plan to solve multiple problems. “It will improve our brand-building and execution while addressing with urgency our top priorities of improving North America, accelerating the Vans turnaround, significantly reducing our fixed costs and reducing leverage,” says Bracken Darrell, president and chief executive officer, in the announcement. Darrell, who joined VF several months ago from Logitech, says the company is taking significant steps to improve short-term performance.

The North Face continues to be VF’s star performer, with sales of $1.13 billion, up 17% in constant dollars. Those gains, however, are due in part to on-time deliveries that had been negatively impacted the prior year. Sales at the North Face are expected to decline slightly in the coming quarter.

Sales at Vans sank 23% to $748.8 million, compared to $950.8 million, and the company says trends at the brand are getting worse, not better. The skate-shoe brand has long been a favorite with American teens, but it’s losing love, as well as sales. In its most recent “Taking Stock with Teens” survey, investment bank Piper Sandler says Vans slipped to fifth place and now has just a 3% mindshare.

Timberland sales slid 7% to $488.6 million, and at Dickie’s, VF's workwear brand, revenues dropped 8% to $171.4 million.

The company’s direct-to-consumer channels did better than wholesale, with D2C sales up 3% overall, and 9% when leaving Vans out of the calculations. Global wholesale revenues dipped by 1%, with those in America decreasing by 11%.

The company “remains a work in progress with top-line results likely to be under meaningful pressure for the remainder of the fiscal year,”  given the ongoing weakness at Vans and pressure in the U.S. wholesale channel, writes Gabriella Carbone, an analyst who follows VF for Deutsche Bank. She continues to recommend the company as a buy.

“While we are disappointed in ongoing challenges, we were pleased to see strength at the North Face and in international markets,” she writes.

At Baird, analyst Jonathan Komp maintains his “neutral” rating on VF, anticipating that the company will need at least several quarters to deliver on the “Reinvent” goals. “While VFC is taking important steps to address current issues,” he writes, “financial progress may take time given external headwinds and still-elevated inventory.”