Pandemic batters quarterly earnings
For much of fiscal 2020, the global apparel company VF Corporation was producing results above its long-term goals for growth, “then the whole world changed” company executives said in a call Friday.
The global coronavirus pandemic’s toll on the Denver-based corporation is clear in the newly released fourth-quarter earnings. Revenue decreased 11% to $2.1 billion, which VF attributed to dropping demand and the closure of retail stores across the world.
The company’s earnings per share fell 70% to 10 cents. On an adjusted basis, operating income decreased 51% to $87 million.
For the full fiscal year, the company’s revenues rose 2% to $10.5 billion, while adjusted earnings per share increased 5% to $2.68.
The company’s brands include some of the best-known in outdoor recreation — The North Face, Timberland, Vans, Jansport. VF Corp. moved its headquarters to Denver from Greensboro, N.C., last year
Steve Rendle, VF Corp. chairman, president and CEO, said when the COVID-19 outbreak started, the company took several steps to protect its employees and the business. The company recently completed a $3 billion bond offering to create a cash buffer and ensure “near-term liquidity.” according to a statement.
In addition, Rendle’s base salary was cut by 50% and top executives’ base pay was cut by 25%. VF temporarily has suspended plans to buy back shares.
“In year one of our long-range plan, we were tracking well against the goal to generate more than $8 billion of free cash flow over the next five years. Just a handful of months later, the whole world changed,” said Scott Roe, executive vice president.
The $3 billion bond was intended to settle any questions about VF’s finances or ability to maintain dividend payments, Roe said.
“We may look back and say we were too cautious and that would be a great outcome,” he added. “But the capital markets were not super predictable early on in the pandemic.”
Because its operations stretch from Asia to Europe to North America, the company saw and felt the effects of the pandemic early on.
“The value of being in China is that we were at the very front end of when the pandemic hit there in January. We quickly began to mobilize our people-first strategy and wrapped our arms around our employees,” Rendle said.
That helped the company prepare and react as the novel coronavrius spread to Europe and the Americas.
“Now, as Asia begins to reopen
the same thing is true,” Rendle said.
The majority of VF Corp.’s retail stores in China and Korea are open. The revival of activity has been slower in Singapore, Japan and Malaysia.
“Traffic is still down quite a bit over last year, but we are seeing week-over-week improvement,” Rendle said. “What that tells us is that consumers will come back. They will come back cautiously, but those who are coming back to our stores are there to interact and make a purchase.”
About 40% of VF’s stores in Europe have reopened in accordance with local regulations. Rendle said some outlets in a handful of states that lifted most restrictions on businesses will open next week in the U.S.
Company officials stressed the growing importance of online sales and that investments it has made in the technology have helped expand its digital commerce. VF still plans to sell its occupational segment of its work apparel and said it is talking to prospective buyers.
Rendle said despite the current economic woes, he is optimistic about VF Corp.’s outdoor recreation segment. In the last recession, the company saw significant increases in sales of outdoor products as people visited public lands near their home or national parks. “The trends we see today would give us confidence,” Rendle said. “We see consumers absolutely moving toward the outdoors and really appreciating activities that are accessible and close to home.