V.F. (VFC) Q1 2025 earnings summary

Executive summary

• Q1 FY25 revenue declined 9% year-over-year to $1.9 billion, with all segments and regions experiencing decreases, most notably in the Americas, though the rate of decline moderated versus Q4.

• Net loss widened to $259 million ($0.67 per share), driven by impairment charges and lower profitability.

• Leadership overhaul included 8 of 11 direct reports changed, new CFO, and new brand presidents for Vans and The North Face.

• Reinvent transformation program continued, focused on cost reduction, debt reduction, and revitalizing core brands, with $18 million in Q1 costs and $122.3 million cumulatively.

• Supreme sale for $1.5 billion announced to sharpen focus on core business and improve leverage; results to be reclassified as discontinued operations from Q2.

Financial highlights

• Gross margin was 52.0%, down 80 basis points year-over-year, mainly due to unfavorable rates, mix, and higher promotional activity.

• Operating margin was (12.6)%, down 1,220 basis points; adjusted operating margin was (4.0)%, down 360 basis points.

• Operating loss was $239.9 million, compared to $9.0 million in the prior year.

• Q1 loss per share was $(0.67); adjusted loss per share was $(0.33), in line with expectations.

• Inventories down 24% year-over-year ($676 million); net debt down $587 million year-over-year to $5.3 billion.

Outlook and guidance

• FY25 free cash flow guidance reiterated at $600 million, excluding Supreme; proceeds from Supreme sale to be used for debt paydown.

• Supreme divestiture expected to close by end of calendar 2024/Q3 FY25; results to be reported as discontinued operations from Q2.

• Q2 revenue trend expected to show modest improvement versus Q1, excluding Supreme.

• Gross margin expected to be up slightly in Q2 year-over-year as inventory quality improves.

• SG&A expenses in Q2 expected to be up slightly year-over-year due to reinvestment and normalized incentive compensation.