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The North Face Drives VF Corp. as Vans Struggles

by News Desk

The North Face powered VF Corp. to fiscal fourth-quarter sales gains, but the apparel giant still has work to do at Vans — and a big tax bill looming.

The company’s fourth-quarter net income slipped 9.7 percent to $80.9 million, or 21 cents a share, from $89.5 million, or 23 cents, a year ago.

Adjusted earnings per share tallied 45 cents and were 1 cent behind the 46 cents analysts had penciled in.

But total company revenues remained solid and increased 9 percent to $2.8 billion for the three months ended April 2. 

Vans revenues were flat at $991.2 million, while The North Face shot up 24 percent to $769.5 million, Timberland rose 9 percent to $434.9 million and Dickies rose 7 percent to $197 million. The company’s “other brands” segment, which includes Supreme, rose 11 percent to $432.1 million.

Investors have been watching fashion companies closely for any sign of weakness with inflation at 40-year highs and continued supply chain back-ups, but gave VF the thumbs up. Shares of the company rose 4.2 percent to $46.50 in after-hours trading on Thursday.

Steve Rendle, chairman, president and chief executive officer, said: “I am pleased with the progress we have made advancing our strategic priorities while successfully navigating another eventful year. We largely delivered on the commitments we made at the outset of fiscal 2022 by achieving broad-based growth across our family of brands. A portion of our active segment did not achieve its potential. We understand the issues, we have the right people in place and we know we will do better.”

In March, the company appointed Kevin Bailey to the post of global brand president at Vans, marking his return. He previously was vice president of retail at the business when VF bought Vans in 2004, and later served as president from 2009 to 2016. 

Bailey told analysts on a conference call that it was good to be back in his old chair and underscored his confidence in the business.

“I know this brand, understand the consumer and competition and have a clear point of view on our challenges and the opportunities that lay ahead of us,” he said. 

Bailey zeroed in on three areas at Vans:

  • The brand’s core classics, which represent about two-thirds of the business, had lost ground as Vans focused on more forward-leaning styles.
  • The business also lost some brand heat coming out of the worst of the pandemic as the collaboration market grew more competitive.
  • And China, where COVID-19 lockdowns have hurt fashion brands across the spectrum. 

This year, VF is looking for adjusted EPS of $3.30 to $3.40, up from $3.10 this past year. Revenues are slated to increase at least 7 percent in constant dollars with a low double-digit gain from The North Face and a midsingle-digit increase from Vans. 

The guidance assumes no big new COVID-19 lockdowns, an easing of restrictions in China beginning next month and “no significant worsening in global inflation rates and consumer sentiment.”

It also factors out the fallout from a tax dispute in connection with “the timing of income inclusion” associated with the 2011 Timberland acquisition.

The Internal Revenue Service said all such income should have been included immediately and not over several years. VF disputed the call, but a court sided with the IRS.

The company is still fighting its case, but said: “It is anticipated that during fiscal 2023, the IRS will assess, and VF will pay, the 2011 taxes and interest, which would be recorded as a tax receivable based on VF’s expected probability of a successful appeal. The gross amount of taxes and interest as of April 2, 2022 was estimated at approximately $845 million and will continue to accrue interest until paid.”



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