VF Corp.’s stock was down nearly 10% at market close on Thursday after the company lowered its outlook for the fiscal year and posted mixed results for the third quarter.
Although top-line improvement was driven by leading banners Vans and The North Face, the Denver-based firm noted that its performance was dragged down by outdoor boot brand Timberland. During the conference call following the release of its earnings report, VF president and CEO Steve Rendle said revenues for the label decreased 5% in Q3, which included the all-important holiday shopping season.
“We are not pleased with our performance; we’re disappointed,” Rendle noted. “We are not where we’d like to be. But I think we are very, very [convinced] that this brand is one that our skills can absolutely unlock, and the diversification strategy that we have in place absolutely gives us confidence that it can be done.”
According to the firm, Timberland’s momentum in apparel, outdoor footwear and its business in China was unable to offset challenges in the men’s footwear category — particularly in its Classic range — in the United States and Europe. It also reported “relatively better” performance in the men’s and women’s department as well as non-Classic footwear.
The weakness led VF to lower its full-year revenue outlook for the brand, now expecting a decline between 1% and 2%, compared with the previous guidance of a 1% to 2% gain.
“We remain very [convinced], but don’t let me leave you thinking that we’re at all pleased,” Rendle reiterated. “We’re disappointed and continue to work very hard with the leadership teams there at Timberland to put this business in the right place.”
Over the past couple years, Timberland has been working toward diversifying its product offerings, specifically in its men’s business, while maintaining the growth in its women’s apparel and PRO lines.
“What we have to do is not only diversify the product, but we have to elevate the product,” Rendle added. “And we need to really think about the aesthetic; we need to think about the finish. We’re opening up some new sourcing avenues [and] accessing better manufacturing, which will put an elevated offer from both the materials and aesthetic into the consumer frame. The samples that we’re seeing right now give us confidence.”
Timberland recently underwent a major leadership change with the departure of global brand president Jim Pisani. A search for his successor is underway. In an exclusive interview with FN in June, Pisani said Timberland was on track to achieve its 2020 objectives, which include lofty sustainability initiatives under the banner of Timberland Environmental Product Standards.
Elsewhere in the VF portfolio, Vans in Q3 continued to deliver strong performances, with revenues increasing 12%. Meanwhile, sales at The North Face advanced 8%.
For the period ended Dec. 28, VF’s Q3 earnings per share were $1.13 on a reported basis, while adjusted EPS rose 14% to $1.23, topping Wall Street’s expected $1.21 per share. Revenues, on the other hand, improved 5% to $3.38 billion, missing analysts bets of $3.43 billion.
The company now expects full-year revenues of roughly $11.75 billion, compared with previous expectations of $11.8 billion, and anticipates adjusted EPS to be approximately $3.30, versus earlier forecasts in the range of $3.32 to $3.37.
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