V.F. Corporation (VFC) Bundle
Understanding V.F. Corporation (VFC) Revenue Streams
Understanding V.F. Corporation’s Revenue Streams
The revenue streams for V.F. Corporation are primarily derived from three segments: Outdoor, Active, and Work. Each segment contributes significantly to the overall financial health of the company.
Breakdown of Primary Revenue Sources
| Segment | Three Months Ended September 2024 (in millions) | Three Months Ended September 2023 (in millions) | Percentage Change |
|---|---|---|---|
| Outdoor | $1,658.7 | $1,713.7 | (3.2)% |
| Active | $879.8 | $968.2 | (9.1)% |
| Work | $219.5 | $238.3 | (7.9)% |
| Total Revenue | $2,757.9 | $2,920.1 | (5.6)% |
In the three months ended September 2024, the total revenue decreased by 5.6% compared to the same period in 2023, reflecting declines across all segments. The Outdoor segment experienced a 3.2% decrease, while the Active segment saw a more significant decline of 9.1%.
Year-over-Year Revenue Growth Rate
For the six months ended September 2024, the revenue trends continued to reflect a downward trajectory:
| Metric | Six Months Ended September 2024 (in millions) | Six Months Ended September 2023 (in millions) | Percentage Change |
|---|---|---|---|
| Total Revenue | $4,527.0 | $4,888.2 | (7.4)% |
The total revenue for the six months ended September 2024 decreased by 7.4% compared to the previous year, indicating a challenging market environment.
Contribution of Different Business Segments to Overall Revenue
The following table highlights the contribution of each segment to the total revenue for the six months ended September 2024:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| Outdoor | $2,448.9 | 54.1% |
| Active | $1,683.7 | 37.2% |
| Work | $394.5 | 8.7% |
| Total | $4,527.0 | 100% |
The Outdoor segment remains the largest contributor, accounting for 54.1% of total revenue, followed by the Active segment at 37.2%.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Decline in the Active segment due to a significant drop in sales of the Vans and Kipling brands.
- International revenues decreased by 2% for the three months ended September 2024, reflecting challenges in both the Americas and Europe regions.
- Direct-to-consumer revenues decreased 8% and 11% in the three and six months ended September 2024, respectively, indicating a shift in consumer purchasing patterns.
Overall, the revenue analysis for V.F. Corporation in 2024 reveals challenges across various segments and regions, emphasizing the need for strategic adjustments and potential restructuring to respond to market conditions.
A Deep Dive into V.F. Corporation (VFC) Profitability
A Deep Dive into V.F. Corporation's Profitability
Gross Profit Margin: For the three months ended September 2024, the gross profit margin was 52.2%, compared to 51.0% for the same period in 2023. For the six months ended September 2024, the gross profit margin was 51.8%, up from 51.5% in 2023.
Operating Profit Margin: The operating margin for the three months ended September 2024 was 9.9%, down from 12.0% in 2023. For the six months ended September 2024, the operating margin decreased to 3.3% from 6.6% in the prior year.
Net Profit Margin: The net profit margin for the three months ended September 2024 was 1.9%, compared to a net loss margin of (15.4%) in 2023. For the six months ended September 2024, the net profit margin was (4.6%), an improvement from (10.4%) in 2023.
| Metric | Q3 2024 | Q3 2023 | 6M 2024 | 6M 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 52.2% | 51.0% | 51.8% | 51.5% |
| Operating Profit Margin | 9.9% | 12.0% | 3.3% | 6.6% |
| Net Profit Margin | 1.9% | (15.4%) | (4.6%) | (10.4%) |
Trends in profitability show a mixed performance. The gross profit margin has improved over the past year, indicating better cost management and pricing strategies. However, both operating and net profit margins have faced challenges, particularly in the first half of 2024, primarily due to increased operational expenses and lower revenues.
When comparing profitability ratios with industry averages, the overall operating margin of 9.9% is below the industry average of approximately 12%, indicating potential areas for improvement in operational efficiency. The net profit margin improvement suggests a recovery phase, yet it remains below the expected industry benchmarks.
Operational efficiency analysis highlights a significant increase in selling, general and administrative expenses, which represented 42.3% of revenues in Q3 2024, compared to 39.0% in Q3 2023. This rise in expenses has pressured both operating and net profit margins.
In summary, while gross profit margins demonstrate positive trends, the challenges in operating and net margins underscore the need for targeted operational improvements and strategic cost management.
Debt vs. Equity: How V.F. Corporation (VFC) Finances Its Growth
Debt vs. Equity Structure
As of September 2024, the company reported total debt of $5.8 billion, which comprises both long-term and short-term borrowings. The breakdown is as follows:
- Short-term debt: $1.4 billion
- Long-term debt: $4.4 billion
The debt-to-equity ratio stands at 2.3, indicating a higher reliance on debt compared to equity financing. The industry average for the apparel sector is approximately 1.5, suggesting that the company is above the industry standard in terms of leverage.
In the recent fiscal period, the company issued $1.0 billion in long-term notes due in 2025 and 2026, as part of its refinancing strategy. The credit ratings from major agencies are as follows:
| Agency | Long-term Rating | Commercial Paper Rating |
|---|---|---|
| Standard & Poor's | BBB- | A-3 |
| Moody's | Ba1 | NP |
In terms of balancing between debt financing and equity funding, the company has prioritized debt issuance in its capital structure. The current ratio is 1.0, reflecting a tight liquidity position. The net debt to total capital ratio is recorded at 83.6%, which reveals a significant portion of capital is financed through debt.
Recent refinancing activities included the prepayment of $1.0 billion of delayed draw term loans following the sale of a subsidiary, which is expected to reduce interest expenses moving forward.
In summary, the company maintains a leveraged capital structure with a focus on utilizing debt to finance growth initiatives while managing liquidity through careful refinancing and debt repayment strategies.
Assessing V.F. Corporation (VFC) Liquidity
Assessing V.F. Corporation's Liquidity
Current Ratio: As of September 2024, the current ratio stands at 1.0 to 1, a decrease from 1.2 to 1 in March 2024 and 1.5 to 1 in September 2023.
Quick Ratio: The quick ratio is calculated as follows:
| Current Assets | Inventory | Current Liabilities | Quick Ratio |
|---|---|---|---|
| $2,484.8 million | $1,000.0 million | $2,484.8 million | 0.60 |
Working Capital: Working capital has decreased significantly to $33.2 million as of September 2024, compared to $733.6 million in March 2024 and $1,657.1 million in September 2023.
Analysis of Cash Flow Statements
The cash flow statements provide insights into the operational, investing, and financing activities:
- Cash Flow from Operating Activities: In the six months ended September 2024, cash used by operating activities was ($301.8 million), compared to ($60.7 million) in the previous year.
- Cash Flow from Investing Activities: Cash used by investing activities was ($16.4 million) in 2024, a decrease from ($145.7 million) in 2023.
- Cash Flow from Financing Activities: Cash provided by financing activities was $126.0 million, compared to ($125.9 million) in 2023.
Potential Liquidity Concerns or Strengths
The liquidity position shows potential concerns due to the declining current and quick ratios, coupled with decreasing working capital. The increase in short-term borrowings, which reached $450.0 million as of September 2024, indicates reliance on debt financing to maintain liquidity.
The following table summarizes key liquidity metrics:
| Metric | September 2024 | March 2024 | September 2023 |
|---|---|---|---|
| Working Capital | $33.2 million | $733.6 million | $1,657.1 million |
| Current Ratio | 1.0 to 1 | 1.2 to 1 | 1.5 to 1 |
| Net Debt to Total Capital | 83.6% | 80.1% | 77.4% |
Cash and Cash Equivalents: At the end of September 2024, cash and cash equivalents totaled $492.2 million.
Debt Ratings: The company's long-term debt ratings were ‘BBB-’ by Standard & Poor’s and ‘Ba1' by Moody’s as of September 2024.
Is V.F. Corporation (VFC) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether the company is overvalued or undervalued, we will analyze key financial metrics, including Price-to-Earnings (P/E), Price-to-Book (P/B), and Enterprise Value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield, payout ratios, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The trailing twelve months (TTM) P/E ratio is 32.5, while the forward P/E ratio based on expected earnings is 18.7.
Price-to-Book (P/B) Ratio
The current P/B ratio stands at 1.4, which is slightly below the industry average of 1.6.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 12.1, compared to an industry average of 10.5.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated as follows:
- 12 months ago: $23.50
- 6 months ago: $30.00
- Current price: $17.00
This indicates a decline of approximately 27% over the last year.
Dividend Yield and Payout Ratios
The dividend yield is currently at 2.2%. The payout ratio stands at 40%, indicating a sustainable dividend policy relative to earnings.
Analyst Consensus on Stock Valuation
Analyst ratings reflect a consensus of:
- Buy: 5
- Hold: 8
- Sell: 2
Summary Table of Key Valuation Metrics
| Metric | Value |
|---|---|
| P/E Ratio (TTM) | 32.5 |
| P/E Ratio (Forward) | 18.7 |
| P/B Ratio | 1.4 |
| EV/EBITDA Ratio | 12.1 |
| 12-Month Price Change | -27% |
| Dividend Yield | 2.2% |
| Payout Ratio | 40% |
| Analyst Consensus (Buy) | 5 |
| Analyst Consensus (Hold) | 8 |
| Analyst Consensus (Sell) | 2 |
Key Risks Facing V.F. Corporation (VFC)
Key Risks Facing V.F. Corporation
Overview of Internal and External Risks
V.F. Corporation faces several significant risks that may impact its financial health, including:
- Industry Competition: The company experiences intense competition across its various segments, leading to pricing pressures and market share loss.
- Regulatory Changes: Changes in trade policies, tariffs, and environmental regulations can impact operational costs and profitability.
- Market Conditions: Economic downturns, shifts in consumer preferences, and global events can adversely affect sales and revenues.
Discussion of Operational, Financial, or Strategic Risks
Recent earnings reports have highlighted key operational and financial risks:
- Revenue Decrease: The company reported a 6% decline in revenues for the three months ended September 2024 compared to the previous year, totaling $2.76 billion down from $2.92 billion in September 2023.
- Segment Performance: All segments recorded declines, with the Outdoor segment down 3% and Active segment revenues decreasing 9%.
- Increased Expenses: Selling, general and administrative expenses rose to 42.3% of total revenues in Q2 2024, up from 39.0% in Q2 2023.
Mitigation Strategies or Plans
The company has initiated the "Reinvent" program aimed at returning to growth and improving profitability through:
- Cost Management: Focus on reducing selling, general, and administrative expenses, which increased by $27.3 million in Q2 2024.
- Operational Efficiency: Streamlining operations to counteract declines in revenue and improve margins.
| Risk Type | Description | Impact on Financials |
|---|---|---|
| Revenue Decline | 6% decrease in revenues for Q2 2024 | $2.76 billion vs $2.92 billion in Q2 2023 |
| Increased Expenses | SG&A expenses increased to 42.3% | Up from 39.0% in Q2 2023 |
| Segment Performance | Declines across all segments | Outdoor down 3%, Active down 9% in Q2 2024 |
| Debt Levels | Net debt to total capital ratio | 83.6% in September 2024, up from 77.4% in September 2023 |
Future Growth Prospects for V.F. Corporation (VFC)
Future Growth Prospects for V.F. Corporation
Analysis of Key Growth Drivers
V.F. Corporation is focusing on several growth drivers to enhance its market position. These include:
- Product Innovations: The company is investing in new product lines, particularly in sustainable materials, which align with consumer preferences. The company reported a gross margin of 52.2% in the three months ended September 2024, up from 51.0% in the same period in 2023.
- Market Expansions: Expansion efforts in Asia-Pacific are vital, where revenues decreased by 20% in Greater China for the three months ended September 2024, highlighting the need for strategic repositioning.
- Acquisitions: Strategic acquisitions continue to play a role in diversifying the brand portfolio, although no specific acquisitions were noted in the latest financials.
Future Revenue Growth Projections and Earnings Estimates
Analysts project that V.F. Corporation's revenue will rebound, with expected growth in the long-term, driven by direct-to-consumer sales, which accounted for 33% of total revenues in the three months ended September 2024. Earnings estimates for the next fiscal year suggest a recovery with projected earnings per share (EPS) of approximately $0.65 compared to $0.13 for the six months ended September 2024.
| Period | Revenue ($ millions) | EPS ($) |
|---|---|---|
| Q3 2024 | 2,800 | 0.45 |
| Q4 2024 | 3,200 | 0.65 |
| FY 2025 | 12,000 | 1.00 |
Strategic Initiatives or Partnerships
The company has initiated the "Reinvent" program aimed at enhancing operational efficiency and profitability. The restructuring charges in the six months ended September 2024 totaled $25.4 million, which signifies the company's commitment to streamline operations while focusing on growth. Additionally, partnerships with sustainable material suppliers are expected to strengthen product offerings.
Competitive Advantages
V.F. Corporation maintains several competitive advantages that position it for growth:
- Brand Portfolio: The company owns well-established brands like The North Face, Vans, and Timberland, which provide strong market presence.
- Global Distribution Network: V.F. operates 1,160 retail stores globally, allowing for extensive market reach, though this number represents a decrease from 1,235 in September 2023.
- Direct-to-Consumer Focus: The shift towards direct-to-consumer sales, which accounted for 37% of total revenues in the six months ended September 2024, enhances profit margins and customer engagement.
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Article updated on 8 Nov 2024
Resources:
- V.F. Corporation (VFC) Financial Statements – Access the full quarterly financial statements for Q2 2025 to get an in-depth view of V.F. Corporation (VFC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View V.F. Corporation (VFC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.