Joe Preston

What do VF Corporation's recent results tell us about the health of the company, its brands like The North Face (TNF) and Timberland and the overall outdoor industry? 𝐒𝐚𝐥𝐞𝐬 𝐁𝐨𝐮𝐧𝐜𝐞 Most coverage tends to focus on top line sales -- they're the easiest to digest. The big takeaway? VF returned to growth, with sales up 2% overall, lead by... ✅ Timberland: +12% ✅ The North Face: +5% ✅ Other brands: +5% (Smartwool, icebreaker, Altra Running, etc.) Unfortunately these results were dragged down by continued struggles of... 🚩 Dickies®: -10% 🚩 Vans: -8% (though that actually marked an improved trend). Interestingly, VF reported that wholesale was +8% while DTC was -3%. This further bolsters the impression that outdoor retailers have moved through the inventory glut that had plagued the industry for the last 2 years. 𝐓𝐡𝐞 𝐑𝐞𝐚𝐥 𝐒𝐭𝐨𝐫𝐲 While sales make for good headlines, the real story here is debt. Voracious acquisitions combined with dwindling cashflows put VF in a precarious debt position. So much so, that in November 2024, S&P downgraded VF Corp's credit rating from 'BBB-' to 'BB', moving it from investment-grade to "junk" status due to concerns over potential challenges in maintaining cash flow sufficient to service its debt obligations. Not good. 𝐊𝐞𝐲 𝐑𝐚𝐭𝐢𝐨𝐬 𝐈𝐦𝐩𝐫𝐨𝐯𝐞 Thanks to the sale of Supreme for $1.5B (at a $600M loss) and improved cashflow, VF was able to cut net debt by $1.9B year-over-year. This improved VF's debt-to-equity ratio to 2.77 -- still not great ("healthy" is 1.0 or lower) but a major improvement from its peak of 5.25 in Sept. 2024. 𝐌𝐨𝐫𝐞 𝐂𝐮𝐭𝐬 𝐭𝐨 𝐂𝐨𝐦𝐞 VF is on track to deliver $300M in savings, partially due to layoffs of over 700 people since 2023. Now they are promising another $600M in savings, half of which will come from SG&A... meaning we're likely to see another significant round of layoffs. 𝐌𝐚𝐫𝐤𝐞𝐭 𝐑𝐞𝐚𝐜𝐭𝐢𝐨𝐧 The markets have reacted well to all of the cutting combined with improved sales and margins, rewarding shareholders with a over a 100% return since May of last year. 𝐋𝐨𝐨𝐤𝐢𝐧𝐠 𝐀𝐡𝐞𝐚𝐝 A healthy VF Corp is critical for the outdoor industry. If the worst is truly behind them, VF and its brands can refocus on growth and innovation -- something the industry desperately needs. Follow me for #OutdoorIndustry news and analysis: Eoin Comerford

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Dick’s Sporting Goods is acquiring Foot Locker for $2.4 Billion.  Foot Locker was undergoing an ambitious turnaround, but recent market conditions weighed the sneaker giant down.  Thus making them an acquisition target.  The move helps Dick’s expand internationally, as Foot Locker has stores in more than 20 countries.  Dick’s share price was down 15% following the announcement, but Foot Locker’s share price skyrocketed +85.70%.

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V.F. Corporation, the owner of brands like Timberland, The North Face, Dickies, Vans, and more just reported earnings Timberland saw revenues rise 7% YoY, along with the North Face posting +6% growth. The rest of the VF Corporation portfolio saw +2% growth - including Dickies, which VFC is currently selling off to Bluestar Alliance for $600m (18x earnings, 1.06x sales) It's definitely possible that we will see VFC shed a few more of these non-core assets, especially if Timberland and The North Face continue to perform.

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