While Vans disappointed, VF Corp. saw a robust revenue performance in the fourth quarter by The North Face and Timberland, while profits came in better than expected due to payback from its Reinvent transformation program.
In the quarter, revenue was down 3 percent on a currency-neutral (c-n) basis (5 percent reported) to $2.1 billion, in line with guidance of negative 2 percent to negative 4 percent on a c-n basis. Revenue overall was flat in the second half of the year, versus last year, after being down 7 percent in the first half.
By region, APAC grew 2 percent on a c-n basis, while the Americas and EMEA were down 5 percent and 2 percent respectively, as VF intentionally reduced promotional activity. The Americas are performing in line with expectations, and, excluding Vans, grew approximately in line with Q3 trends.
VF's operating loss came to $73 million; however, excluding special items, adjusted operating income was $22 million, exceeding guidance in the range of an operating loss of $30 million to $0 million.
"The Reinvent program and efforts to improve our operating profitability are working well and significantly overperformed," said Bracken Darrell, VF's president and CEO, on an analyst call.
Gross margin was 53.3 percent, up 550 basis points versus the prior year, while adjusted gross margin was 53.4 percent, up 560 basis points. The margin improvement reflected lower material costs, less distressed sales, less discounting, and higher quality inventory. SG&A declined 2 percent, benefiting from faster-than-expected Reinvent savings.
Earnings per share in the quarter were a loss of 39 cents against a loss of $1.06 a year ago. On an adjusted basis, the loss was 13 percent against a loss of 30 cents the prior year.
VF reduced its debt by over 25 percent compared to last year, ending FY25 with leverage of 4.1x, down one full turn versus the prior year. VF is on track to deliver its medium-term goal of 2.5 times leverage.
Brand Performance
Among major brands, The North Face sales grew 4 percent on a c-n basis, led by its DTC performance, which rose 9 percent, with positive growth in all regions, including double-digit increases in the Americas and the EMEA.
By region on a c-n basis, TNF sales were flat in the Americas, up 4 percent in EMEA, and jumped 14 percent in the APAC region. Net sales on a reported basis for TNF grew 2.5 percent to $834.5 million.
From a product standpoint, outerwear "was a standout, and footwear continued to grow nicely in all regions," said Darrell.
"I feel really good about TNF," said Darrell. "You saw we had very strong sell direct-to-consumer sales this quarter, which is terrific. It continues to be a good signal. And that's without what I know is coming. So, I'm excited about the whole approach."
Regarding spring, Darrell highlighted the strength in footwear for The North Face. He said, "I think it just shows that this brand has a role to play outside of the winter period. And we will get more and more over time, you'll see more and more products come through."
Vans' sales were down 20 percent on a c-n basis (22 percent reported) to $492.6 million, impacted by steps to rationalize distribution in China, exit "unproductive" third-party value retailers, and close unprofitable owned stores. By region on a c-n basis, Vans' sales in the quarter slumped 23 percent in the Americas, 22 percent in APAC, and 15 percent in EMEA.
For SGB Executive's analysis on Vans' Q4 performance, go here.
Timberland's sales advanced 13 percent on a c-n basis (10 percent reported) to $376 million, building on a gain of 12 percent in the third quarter. The gains were led regionally by the Americas, up 34 percent on a c-n basis. EMEA was flat while APAC dipped 2 percent.
Darrell said of Timberland, "Wholesale and DTC were both up globally with lower discounts driving higher margins. Momentum in the 6-inch premium boot continued, while other styles also performed well, including Stone Street and Mt Maddsen. U.S. search interest growth remained strong in the quarter."
Dickies' sales declined 13 percent on a c-n basis (14 percent reported) to $139.3 million with continued traffic and wholesale softness. By region, sales on a c-n basis were down 14 percent in the Americas, declining 13 percent in EMEA and 9 percent in APAC. Healthier inventory positions resulted in significant margin improvement.
VF's Other Brands segment grew 3 percent on a c-n basis (1 percent reported) to $301.5 million. The segment includes Altra, Eastpak, Icebreaker, JanSport, Kipling, and Napapijri.
VF did not offer further comment on its smaller brands. Asked by an analyst whether the company was exploring additional moves to realign VF's brand portfolio, Darrell said, "We are happy with the portfolio. I think it lines up with the strategy we laid out in October. Now that said, there are always things around the edges that we're going to keep raising, and we do a firm review with our board every year. So, we're going to go through that. If something doesn't belong in the portfolio, you can bet that we'll exit it, but there's nothing significant that we talk about."
Tariff Update
Regarding tariffs, VF said it has reduced its U.S. finished goods sourced from China to less than 2 percent over the past several years and has improved its capacity to make supply chain adjustments. Said Darrell on the call, "At a high level, we are well-positioned to manage the impact. We have an asset-light model, which gives us great flexibility to move things and adjust quickly."
Should VF not take any mitigation steps to account for the current 10 percent incremental tariff for all goods coming into the U.S., the impact on an annualized basis would be approximately $150 million in costs. Given the timing of when the tariffs land, that would represent an impact of 65 percent of the annualized cost in FY26, with most of the effects in the second half of the year.
Paul Vogel, CFO, said VF believes it will be able to offset the impact from the tariffs and has activated plans to do so. He said, "This entails cost management, selecting sourcing relocations and pricing actions. We are leveraging our deep and long-standing relationships with our partners and working with them to ensure we have the right cost structure. And on pricing, our approach is strategic and thoughtful. We have strong brands, which are always an advantage in pricing. In cost and supply chain locations, remember we have an asset-light model, as Bracken mentioned; this provides us great flexibility to move things and adjust quickly. We have every confidence we will fully offset these costs and emerge stronger as a business."
Outlook
VF no longer provides full-year guidance. It expects Q1 sales to fall 3 percent to 5 percent, while analysts had been banking on slight growth.
Vans in Q1 is expected to show similarly weak sales trends in the first quarter due to the additional actions executed on stores and wholesale value channels. Vogel noted that Vans has an "outsized impact on the consolidated growth relative to other quarters." Revenue trends in the first half of fiscal 2026 are expected to be slightly below the second half of fiscal 2025.