VF Corporation Announces Divestiture and Cost Savings in Q1 FY2025

VF Corporation, a global leader in branded lifestyle apparel, footwear, and accessories, has made notable announcements during its first-quarter earnings call for fiscal year 2025.

The company revealed an additional $50 million in cost savings and plans to divest its Supreme brand for $1.5 billion, with a focus on reinforcing its core business and improving leverage. Despite facing challenges, including declines in its Americas platform and key brands like Vans and The North Face, VF Corporation anticipates modest revenue growth in the second quarter, prioritizing cost reductions and enhanced profitability.

### Key Takeaways
– VF Corporation achieved $50 million in cost savings during the quarter.
– The Supreme divestiture was announced for $1.5 billion, allowing a refocus on core operations.
– The decline in the Americas platform improved to 12% in Q1 from 23% in the previous quarter.
– Vans’ decline slowed to 21% in Q1 from a 27% drop in Q4, while The North Face fell by 2%.
– Direct-to-consumer sales for The North Face grew by 8% globally.
– Gross margin and operating margin decreased due to Vans reset activities.
– The company expects modest revenue growth and a slight increase in gross margin in Q2.
– A two-part investor event is scheduled in October to discuss long-term strategy.

### Company Outlook
– VF Corporation is on target to achieve $300 million in cost savings.
– The company is evaluating its portfolio for potential additional asset sales.
– Management is optimistic about returning to top-line growth, with plans to share detailed strategies in October’s investor event.

### Bearish Highlights
– Gross and operating margins decreased, primarily due to inventory clear-out strategies.
– The loss per share for Q1 met expectations, with no specific timeline indicated for a return to top-line growth.

### Bullish Highlights
– Ongoing cost reductions and balance sheet strengthening are priorities.
– Projected free cash flow and non-core asset sales are estimated at about $600 million for FY25.
– Management expressed strong confidence in the company’s future direction.

### Misses
– Revenue declined for key brands like Vans and The North Face.
– Production disruptions in Bangladesh affected around 15% of total production.

### Q&A Highlights
During the Q&A, CEO Bracken Darrell shared insights on cost savings, market performance, and expectations for brand improvements. He noted that while apparel presents significant opportunities, it is not the most urgent focus. The company plans to segment and tier product offerings, although immediate efforts will not prioritize lead time improvements.

Looking ahead, the investor event in October is expected to provide greater clarity regarding long-term strategy, alongside initiatives for further cost savings as VF Corporation navigates current market challenges while preparing for future growth opportunities.

Overall, VF Corporation demonstrates resilience and strategic agility in addressing market headwinds. The company’s commitment to cost management and profitability enhancement is aimed at positioning it for sustainable growth in the apparel and footwear industry.