VF jumped a low hurdle with its second quarter financial report.
VF (VFC 23.99%) stock has finally broken out of its slide after the beleaguered apparel company reported better-than-expected results in its second quarter earnings report.
Thanks to cost cuts, Vans and The North Face’s parent company exceeded expectations in both sales and bottom line profits.
As a result, the stock was up 25.9% as of 10:18 a.m. ET.
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VF brings you a fun surprise
VF has struggled in recent quarters due to a combination of weak consumer demand for apparel and the company’s challenges at Vans, but last night showed investors that the company is in recovery mode.
Revenue for the quarter fell 6% to $2.76 billion, but continued to improve from the 10% decline in the first quarter and beat investors’ expectations of $2.7 billion.
Sales for its four core brands – Vans, The North Face, Timberland and Dickies – remained down, but numbers improved in the first quarter. Also on October 1, the sale of Supreme to Ray-Ban’s parent company EssilorLuxottica was completed for $1.5 billion, bringing in cash, but less than the $2.1 billion it received when it acquired the brand three years ago. . The company used the cash to repay a $1 billion term loan due in December 2024.
VF’s bottom line also showed signs of recovery, with gross margins improving 120 basis points to 52.2% while inventory decreased 13%.
Overall, adjusted operating margin decreased 60 basis points to 11.4%, and adjusted earnings per share decreased from $0.63 to $0.60, well above expectations of $0.37.
Will VF be able to remain profitable?
The results surprised Wall Street, which had been pessimistic going into VF’s report.
VF’s guidance calls for revenue of $2.7 billion to $2.75 billion, down 1% to 3% year over year and below consensus of $2.77 billion, indicating continued stabilization. It was done. However, this shows that the company is moving in the right direction.
The company also expects adjusted operating income to be between $170 million and $200 million, compared to $218 million in the same period last year.
Overall, the company is moving in the right direction, although today’s earnings likely reflect the fact that VF stock has fallen significantly rather than the strength of the business. There is still plenty of room for recovery, especially if sales and profit growth turn positive.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.
