VFC Posts Narrower-Than-Expected Q4 Loss, Stock Down on Revenue Miss

V.F. Corporation VFC reported narrower-than-expected loss per share in fourth-quarter fiscal 2025 results with a sales miss. While earnings improved year over year, revenues dipped. Nevertheless, VFC is on track with its Reinvent program and expects to deliver on its cost-saving target. The Reinvent program and the company’s actions to boost operating profitability appear encouraging.

The company reported an adjusted loss per share of 13 cents compared with the Zacks Consensus Estimate of a loss of 15 cents. It posted a loss of 30 cents a share in the year-earlier quarter. (See the Zacks Earnings Calendar to stay ahead of market-making news.)

Net revenues of $2.14 billion dipped 5% year over year and lagged the consensus estimate of $2.18 billion.

The adjusted gross margin expanded 560 basis points (bps) to 53.4% due to lower material costs, fewer distressed sales, discounting and increased quality inventory. The adjusted operating margin was up 400 bps from the year-ago period.

Despite the company reporting narrower-than-expected loss per share in the fiscal fourth quarter, its shares lost above 15% yesterday in the trading session on soft revenue results and bleak Q1 view. The Zacks Rank #3 (Hold) company's shares have lost 51.6% in the past three months compared with the industry’s 13.7% decline.

V.F. Corp’s Revenue Details

On a regional basis, revenues in the Americas fell 6% year over year on a reported basis and 5% on a constant-currency basis. In the EMEA region, revenues were down 4% on a reported basis and 2% on a constant-currency basis. Revenues in the APAC region were flat on a reported basis and up 2% on a constant-currency basis. The company’s international revenues grew 3% year over year on a reported basis and were flat on a constant-currency basis.

V.F. Corporation Price, Consensus and EPS Surprise

V.F. Corporation price-consensus-eps-surprise-chart | V.F. Corporation Quote

Channel-wise, wholesale revenues fell 4% on a reported basis and 2% on a constant-currency basis. Direct-to-consumer revenues were down 5% year over year on a reported basis and 3% on a constant-currency basis. Our model estimated the wholesale and direct-to-consumer revenues to fall 9.8% and 22.5%, respectively, year over year.

Based on reporting segments, revenues in the Outdoor segment improved 5% year over year on a reported basis and 7% on a constant-currency basis to $1.28 billion. In the Active segment, revenues of $645.3 million declined 18% year over year on a reported basis and 16% on a constant-currency basis. Revenues in the Work segment dropped 8% year over year on a reported basis and 7% on a constant-currency basis to $222.2 million.

Our model predicted fiscal fourth-quarter revenues to decline 29%, 5.2% and 8.3% year over year, respectively, for the Outdoor, Active and Work segments. In constant-currency, revenues were expected to be down 3.1%, 3.2% and 6.3%, respectively, for the Outdoor, Active and Work segments.

Financial Details of VFC

V.F. Corp ended the fiscal fourth quarter with cash and cash equivalents of $429.4 million, long-term debt of $3.43 billion and shareholders’ equity of $1.49 billion. Inventories declined 4% year over year.

Net debt was down $1.8 billion from the year-ago period, with the prepayment in March of the $750 million April 2025 maturity.

The company’s board has announced a quarterly dividend of nine cents a share, payable June 18, 2025, to shareholders of record as of June 10, 2025.

The company has delivered the initial target of $300 million in gross cost savings by fiscal 2025-end. It expects to realize cost savings from the next phase of Reinvent, which forms part of its medium-term goal of $500-$600 million in net operating income expansion.

What to Expect From VFC in FY26?

Management projects Vans in Q1 to be similar to the trends in Q4, backed by the efforts executed on stores and wholesale value channels. The revenue trends in the first half of fiscal 2026 are likely to be a little below the second half of fiscal 2025. Revenues are likely to decline 3-5% on a constant dollar basis. Q1 is considered to be the company’s smallest quarter in the fiscal year.

VFC expects an operating loss of $110-$125 million for the first quarter. The gross margin is likely to rise year over year, benefiting from a few discounts and promotions, and FX, while SG&A dollars are likely to remain flat to decrease slightly year over year. It projects Q1 interest of roughly $40 million and an effective tax rate of 13-14%, which is above last year's reported tax rate. 

Based on the changes in global tax rates and VFC’s geographic mix, management envisions reported tax rate to rise in the next one-two years and fluctuate quarter to quarter. This is likely to have a minimal impact on cash taxes.

Management expects adjusted operating income expansion year over year in fiscal 2026. It forecasts higher free cash flow from fiscal 2025’s $313 million. This excludes the sale of non-core physical assets.

Eye These Solid Picks

We have highlighted three better-ranked stocks, namely, Kontoor Brands KTB, Gildan Activewear GIL and Gap GAP.
 
Kontoor Brands carries a Zacks Rank #2 (Buy) at present. KTB has a trailing four-quarter earnings surprise of 8.1%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  
 
The Zacks Consensus Estimate for KTB’s 2025 sales and EPS indicates an increase of 1.1% and 9.6%, respectively, from the year-ago levels. 

Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank of 2 at present. GIL has a trailing four-quarter earnings surprise of 2.8%, on average.  
 
The consensus estimate for Gildan Activewear’s current financial-year sales indicates growth of 4.3% from the year-ago figure. 

Gap, a specialty retailer of clothing and accessories, currently carries a Zacks Rank of 2. GAP delivered an average earnings surprise of 77.5% in the trailing four quarters. 
 
The Zacks Consensus Estimate for Gap’s current financial-year sales indicates growth of 1.4% from the year-ago figure.  

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This article originally published on Zacks Investment Research (zacks.com).

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