VF Corporation Q2 Fiscal Year 2025 Earnings Report

VF Corporation (NYSE: VFC), a global leader in branded lifestyle apparel, footwear, and accessories, reported its second quarter earnings for fiscal year 2025. The results showed a year-over-year revenue decline; however, there were signs of recovery from previous quarters. CEO Bracken Darrell highlighted the company’s transformation efforts, leading to a reduced revenue decline rate, cost savings, and debt reduction. The company provided guidance for upcoming quarters, expecting continued improvements.

Key Takeaways

• Q2 revenue decreased by 6% year-over-year, an improvement from the 10% decline in Q1.
• Gross margin increased to 52.2%, with operating income at $315 million.
• Diluted earnings per share were $0.60, down slightly from the previous fiscal year.
• The Vans brand experienced an 11% revenue drop, improved from a 21% decline in Q1.
• $65 million in cost savings in Q2 totaled $300 million for the fiscal year.
• Inventories reduced by 13%, and net debt decreased by $450 million.
• Divestiture: Supreme sale generated net proceeds of about $1.5 billion; $1 billion repaid in term loans.
• Q3 revenue projected between $2.7 billion and $2.75 billion, with a decline of 1% to 3% year-over-year.
• Expected free cash flow for the fiscal year is around $425 million, adjusted for non-core asset sales.

Company Outlook

• Q3 operating income expected between $170 million and $200 million.
• Gross margin projected to improve due to lower product costs.
• Anticipated Q3 tax rate in the low-20s.
• Continued trend of revenue improvement and gross margin rise expected in Q4.
• $50 million to be reinvested for additional savings in fiscal '26.

Bearish Highlights

• All major brands faced revenue declines, with Vans and Dickies down 11%.
• Operating margin decreased by 60 basis points to 11.4%.
• SG&A deleverage of 180 basis points led to SG&A at 40.8% of sales.

Bullish Highlights

• Vans wholesale outperformed direct-to-consumer sales, positive feedback received on new products.
• The North Face brand shows optimism for the winter season.
• Timberland's premium boots, especially the yellow boot franchise, revealed positive global trends.

Misses

• Diluted earnings per share decreased by $0.03 from fiscal '24.
• Revenue continues to show year-over-year decline despite improvements.

Q&A Highlights

• Management focused on executing business strategy, no immediate plans for divestitures.
• Enthusiasm expressed about initial savings and future growth reengineering.
• North Face remains strong in China despite softer macroeconomic conditions.
• Vans in a turnaround phase with significant growth potential internationally and in the U.S.

Summary

VF Corporation's Q2 2025 earnings indicate ongoing transformation with signs of recovery, despite revenue declines and challenges across major brands. Guidance suggests cautious optimism for future growth.