V.F. Corporation VFC reported better-than-expected second-quarter fiscal 2027 results, with both earnings and revenues surpassing the Zacks Consensus Estimate. Adjusted earnings of 70 cents per share exceeded the consensus estimate of 54 cents. Earnings increased 42.9% from the year-ago quarter's 49 cents.
Revenues totaled $2.695 billion, beating the consensus estimate of $2.693 billion. Adjusted revenues, excluding Dickies and currency fluctuations, grew 1% year over year. Strength at The North Face, Timberland and Altra, along with gross margin expansion, supported the quarterly performance. Vans remained pressured by wholesale weakness.
This Zacks Rank #3 (Hold) stock has rallied 10.1% in the past three months against the industry's 5.5% decline.
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VFC's Q2 Brand Performance Highlights
The North Face delivered 4% year-over-year revenue growth, supported by broad-based category strength. Apparel benefited from demand for bottoms and transitional jackets, while footwear registered double-digit growth globally and across all regions. Bags also performed well, led by the Hot Shot and Base Camp franchises.
Timberland revenues increased 4% year over year, driven by continued momentum in core footwear and growing product diversification. The iconic six-inch boot maintained growth, while other footwear categories expanded faster. Altra delivered growth exceeding 40%, with gains across every region and channel, supported by strong demand for its road and trail running products.
Vans revenues declined 10% year over year, slightly below management's expectations. Wholesale weakness continued to weigh on performance. However, global direct-to-consumer (DTC) sales turned positive for the first time in nearly five years, supported by improving demand in the Americas, EMEA and APAC.
Our model had expected constant-currency revenue growth of 2.7% year over year at North Face, 6.5% at Timberland, while a decline of 8.9% at Vans.
V.F. Corporation Price, Consensus and EPS Surprise
V.F. Corporation price-consensus-eps-surprise-chart | V.F. Corporation Quote
VF Corp.'s Regional Revenue Trends
On a regional basis, adjusted revenues in the Americas increased 5% year over year, supported by strong DTC performance across most brands. EMEA adjusted revenues declined approximately 1%, primarily reflecting weakness at Vans. APAC adjusted revenues fell 7%, with Timberland accounting for nearly half of the regional decline.
The North Face registered 8% growth in the Americas and 3% growth in EMEA, partially offset by a 4% decline in APAC. Timberland revenues advanced 15% in the Americas and 1% in EMEA, while APAC sales declined 21%, or $12 million, reflecting challenges in the region.
VFC's Gross Margin and Operating Income Improve
Adjusted gross margin expanded 290 basis points year over year to 55.4%. Approximately 180 basis points of the improvement came from structural initiatives, including lower product costs, integrated business planning and selective price increases. Favorable foreign currency movements contributed the remaining 110 basis points. We had expected adjusted gross margin expansion of 170 basis points for the fiscal second quarter.
Adjusted operating income reached $364 million, exceeding management's guidance of $315 million. Roughly half of the upside reflected stronger revenue and gross margin delivery, while the remainder resulted from spending shifting into the third quarter.
Adjusted selling, general and administrative expenses increased approximately 4% year over year. Investments focused on DTC experiences, marketing, product design and innovation.
VF Corp.'s Inventory and Cash Flow Position
Net inventory increased 7% year over year at the end of the second quarter. Management attributed the increase to deliberate investments to support anticipated business requirements in the second half of fiscal 2027. Inventory management remains a priority for fiscal 2028 and beyond.
Free cash flow for the first half of fiscal 2027 was negative $323 million, including tariff refunds received during the period. Excluding these refunds, management said normalized free cash flow was roughly consistent with the year-ago period.
VFC Reaffirms Fiscal 2027 Outlook
VFC maintained its fiscal 2027 revenue growth forecast of 2% or better on an adjusted, constant-currency basis. The company now expects both The North Face and Timberland to deliver mid-single-digit revenue growth for the fiscal year.
Vans revenues are expected to decline mid-single digits for fiscal 2027, with second-half revenues projected to decrease 2% or less. Management expects wholesale performance to improve as new products reach retail partners.
The company reaffirmed its adjusted operating margin outlook of approximately 8%. Normalized free cash flow is likely to be flat to up year over year of $405 million. Its effective tax rate is now expected to be in the high-20% range compared with the earlier projection of the low-30% range.
VF Corp.'s Q3 Expectations and Longer-Term Targets
For the third quarter of fiscal 2027, VFC expects adjusted, constant-currency revenue growth of approximately 3% or better. Adjusted operating income is projected to reach $390 million or more, including approximately $25 million of expenses shifted from the second quarter.
The North Face and Timberland are each expected to record revenue growth of at least 4%, while Vans revenues are projected to decline 4% or less.
The company maintained its year-end leverage ratio target of 2.6-2.9 times, alongside its longer-term goals of 2.5 times or better leverage by fiscal 2028 and an operating margin of at least 10% by fiscal 2029.
Key Picks in the Consumer Discretionary Space
Duluth Holdings Inc. DLTH, which deals in casual wear, workwear and accessories for men and women, currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Duluth Holdings delivered a trailing four-quarter earnings surprise of 122.5%, on average. The Zacks Consensus Estimate for DLTH’s current financial-year EPS indicates a rise of 18.6% from the year-ago reported number.
Columbia Sportswear COLM, which engages in marketing and distribution of outdoor and active lifestyle apparel, footwear and accessories, currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for COLM’s current financial-year sales is expected to rise 1.7% from the year-ago reported figure. COLM delivered a trailing four-quarter earnings surprise of 36%, on average.
Gildan Activewear Inc. GIL, which is a manufacturer and marketer of premium quality branded basic activewear, currently carries a Zacks Rank of 2.
GIL delivered a trailing four-quarter earnings surprise of 2.5%, on average. The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales indicates growth of 66.3% from the year-ago recorded number.
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V.F. Corporation (VFC): Free Stock Analysis Report
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