Dive Brief:
- The North Face and Timberland came through for owner VF Corp., posting year-on-year growth in Q1 that made up for an 8% drop at Vans — adding to a string of quarterly declines at the skate-shoe brand.
- The North Face revenue rose 6%, with strength in the Americas and direct-to-consumer, and Timberland rose 4%, with strength in the Americas. Vans’ wholesale declines outpaced its strong DTC growth in the Americas.
- Overall Q1 revenue, excluding the divested Dickies workwear brand, rose 1%, and VF Corp. raised its outlook for the year despite Vans’ troubles. Gross margin expanded by 10 basis points, but missed expectations, and net loss narrowed by over 16% to $97.2 million.
Dive Insight:
The momentum at Vans that VF Corp CEO Bracken Darrell touted a few months ago appears to have stalled, making back-to-school season — already important for the brand — that much more critical.
Speaking to analysts on a call Wednesday, Darrell said the brand’s wholesale orders in the Americas and worldwide have been strong, which “indicate that we're going to have a strong turn in wholesale in the back half.”
In the absence of many specifics from the company around the near term at Vans, various analysts worked to parse its prospects. BNP Paribas Equity Research Senior Analyst Laurent Vasilescu said the report implies Vans will decline by high-single digits in Q2, low-single digits in the second half and mid-single digits for the year. Evercore ISI analysts led by Michael Binetti said Vans could decline as much as 11% in Q2.
The performance made for “another frustrating quarter from VFC, as the turnaround at Vans continues to be uneven,” Needham analysts led by Tom Nikic said in a Wednesday client note.
Also on Wednesday, VF Corp. announced that, as of Saturday, Chief Operating Officer Abhishek Dalmia will replace Paul Vogel as chief financial officer, keeping the duties and titles of both roles. Vogel arrived two years ago from Spotify as Darrell shaped his team.
The CFO transition “further reduces visibility to the outlook,” according to Evercore’s Binetti.
On Wednesday’s call, though, Darrell highlighted the expectations beat and said that moderate growth at VF Corp. is building. The company now expects revenue for the year to grow 2% or more, currency neutral, up from its previous guidance of a 1% to 2% increase.
“We're not going to pretend that this quarter was great — it wasn't,” he said. “But it really sets us up for a year of accelerated growth, which is great. Very modest, I'll say that, but that accelerated growth story is going to get stronger and stronger over the following year.”
