Wall Street is still waiting for VF Corp. to pull itself out of its rut.
Bracken Darrell, who just stepped in as president and chief executive officer two weeks ago, is settling in and optimistic.
A little optimism is required.
VF’s first-quarter results on Tuesday brought continued losses, a 39 percent drop in Vans’ wholesale business in the Americas and a lower revenue outlook — tempered only somewhat by continued strength at The North Face.
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Wedbush analyst Tom Nikic summed it up with some wordplay on the Vans Knu Skool line: “Knu quarter, knu CEO, old problems; Waiting for signs of a Vans turnaround.”
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Shares of VF slipped in response to the quarter and were down 1.8 percent to $19.05 in trading on Wednesday — a far cry from the company’s 52-week high of $48.20.
“While the stock seems to have found a ‘floor’ in the high-teens, it still feels too early to call for a turnaround here,” Nikic said. “Vans clearly still has brand-heat issues — considering the d-to-c [direct-to-consumer] declines — with Q1 representing the sixth consecutive quarter of sequential deceleration, despite some buzz around the Knu Skool product.”
Ike Boruchow, the equity analyst following VF at Wells Fargo, said while there had been some hopes that the company would start to get its mojo back, weakness continued at Vans as well as Dickies.
Boruchow said the “bears” had taken back the narrative on VF’s stock.
“While a tough wholesale outlook isn’t a surprise, the fact is that there was a great deal of excitement around new launches and green shoots at Vans earlier this year — and unfortunately, the classics business is simply coming in worse than expected,” he said.
VF came into 2023 viewing it as a “transition” year and that is bearing out.
While Vans works on its turnaround, the company is looking to rebuild other areas of traditional strength, including its supply chain and its balance sheet.
Chief financial officer Matt Puckett reassured analysts on a conference call: “We will use any excess free cash flow to reduce debt, and you can be sure that any strategic decision we are making is through this lens. We expect to end this fiscal year with gross leverage of about 4-times and will continue to make progress on the path to moving toward our target of 2.5-times.”
What got almost no air play during the conference call and in the first-quarter release was Supreme, which VF bought for $2.1 billion in 2020 under CEO Steve Rendle.
The brand remains a streetwear powerhouse, but tripped up VF last year with $735 million in impairment charges tied to “non-operating factors including higher interest rates and foreign currency fluctuations.”
Supreme ran into some supply chain problems due to the pandemic and has been slowly reaching out and tapping into new markets under VF.
Just how the brand develops, like so many things at VF now, is a question mark.
And it’s Darrell as the new CEO who’s going to have to come up with answers.