Vans Freefall Continues, North Face Struggles

Between people continuing to pull back on apparel spending and fickle footwear shoppers, VF Corp. is taking its lumps. The bruising includes a 13% decline in revenues, falling to $2.37 billion in the fiscal fourth quarter, compared to $2.74 billion in the comparable period a year ago. And losses mushroomed to $418.3 million, almost doubling from $214.9 million.

Both top and bottom-line results came in below Wall Street expectations, as the Denver-based company wrestles with debt.

The biggest problems remain at Vans, a footwear brand that once mesmerized young shoppers. Sales tumbled 26% to $631.2 million from $857 million in the year-ago period. The brand has declined to fifth place among teens’ favorite footwear, generating mindshare of just 3% in Piper Sandler’s latest ranking of teen preferences.



Chief executive officer Bracken Darrell told investors he expected to announce a new president for Vans “very soon.”

He also detailed changes the company is making in how it markets Vans, shifting to “fewer, deeper campaigns. For example, we used to have 274 stories in one season,” he says. “We've simplified it to a handful of powerful key stories, concentrating our investment. We're also rebalancing our marketing mix to drive higher ROI.”

VF also had large declines at smaller brands, including a 15% drop at Dickie’s, where sales sank to $162.4 million, and a 14% drop at Timberland, with sales sliding to $341.5 million.

Results declined at the North Face, its largest brand, easing 5% to $814.3 million.

Calling the results “woeful,” David Swartz, who follows VF Corp. for Morningstar, sees some slight signs of progress for VF as it attempts to orchestrate a turnaround.

“While investor confidence is low, CEO Bracken Darrell inherited a troubled company and is making changes that we regard as necessary in VF’s products, marketing, distribution, and management,” he writes.

The nosedive at Vans is linked to the decision to clear old merchandise out of all channels, making room for new products the company hopes will resonate better with young shoppers. Companywide, year-end inventory was down 23% from the prior year, a bigger improvement than Swartz had expected.

Jonathan Komp, an analyst who tracks VF Corp. for Baird, also thinks VF is making the right changes,including hiring a new chief financial officer, and a new Vans president. However, timing for the recovery is still murky.

He continues to give the company a neutral rating. “Management expressed confidence in the progress behind strategic/transformation actions, leadership changes and balance sheet improvements,” he writes. But with a lower-than-expected forecast for the year ahead, heavy debt “seem likely to remain a drag on near-term sentiment.”

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