VF’s Steve Rendle sees the resilience of mid-to-high-end consumers – WWD
VF Corp. could get caught up in the global web of currency shifts and COVID-19 lockdowns in China, but the company’s Chairman, President and CEO Steve Rendle said the high-end consumer was solid.
The company – home to Vans, The North Face, Supreme and more – posted a rare net loss in the first quarter and missed estimates on an adjusted basis, but maintained its currency-adjusted outlook for the year, a sign of confidence in the underlying business.
Rendle told analysts on a conference call: “Consumer health from our perspective is generally good across all markets, China is certainly lagging because…lockdowns have had an impact, but sentiment is ‘softens and there’s a lot of data out there that would support that and certainly consumer behavior is changing, consumers have more and more choice as household spending increases and in some cases de significantly.
Still, the CEO said the challenges mostly relate to market value, a reality highlighted by recent warnings from Walmart Inc. and Target Corp.
VF previously had more exposure to this market, but spun off the Lee and Wrangler jeans businesses in 2019.
“There’s a limited impact on that mid- to high-end end consumer,” Rendle said, referring to what is the VF portfolio’s sweet spot. “The outdoor macro trends, certainly health and wellness, continue for us to support strong sales, and where we are positioned with our own stores and our own digital, and our key accounts, we continue to see good sales. .
“We’re very mindful of the right product and the right environments at the right time to the best of our ability with the current supply chain, but we’re managing really tightly to make sure we have the products that sell and where they’re not. ‘let’s not move quickly to get the right products in place,’ he said.
On a net basis, VF posted losses of $56 million in the first quarter, or 14 cents per share, a big step back from a profit of $324.2 million a year ago, or 82 cents.
But on an adjusted basis, earnings came in at 9 cents a share, down from the 13 cents analysts had noted.
Investors took the shortfall in stride and were reassured as the company maintained its outlook, at least on a currency-adjusted basis. Shares of VF slid 0.5% to $48.35 in after-hours trading on Thursday, giving back some of the 3.7% gain posted earlier in the day.
Revenue for the three months ended July 2 increased 3% to $2.3 billion from $2.2 billion. Excluding the currency decline, sales increased by 7%.
Vans’ net revenue fell 7% to $946.8 million (or 4% at constant exchange rates) while The North Face’s take rose 31% to $481.1 million (up 37% at constant exchange rates).
The dichotomy between the two brands illustrates the stabilizing nature of a brand portfolio – one of the defining aspects of the VF business. While Rendle & Co. would no doubt like to see all of the company’s major brands grow at the same pace, it’s not always possible to achieve this given the realities of finicky fashion consumers.
Until the recent retrenchment, Vans was the golden child driving the group’s growth while Timberland struggled. Now Vans is changing course and Timberland is up 8% to $269.5 million for the quarter.
Rounding out the main businesses, Dickies was down 15% to $170.4 million and the “other brands” category, which includes Supreme, was up 9% to $393.9 million.
Supreme is seen as helping to drive the company’s growth in the future.
“The brand was broadly flat in the quarter and broadly in line with our plan,” Rendle said of the high fashion skate brand the company purchased in 2020. “Our European stores performed well and benefited from store openings. in Berlin and Milan in the previous year, where there was still a high level of energy and enthusiasm for the brand…we are excited to resume improving and expanding the store network in the coming months .
By region, VF sales in the Americas increased 6% to $1.4 billion, while Europe, the Middle East and Africa rose 10% to $594.6 million. The Asia-Pacific region — an area the company has set for major growth, but which has been hit by COVID-19 lockdowns — saw revenue drop 20% to $281.9 million.