Supreme’s Parent Company Is Upbeat on Margins. The Stock Gains Despite Earnings Miss.

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VFC owns brands such as Supreme, Timberland and Vans.

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Demetrius Freeman/Bloomberg

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VF Corp.’s Quarterly earnings missed estimates and the outlook was tepid, but the stock is rising because the footwear and apparel company is still upbeat about its margins for the full year.

Margins have been a market focus this week as investors assess the degree to which retailers are able to pass along higher prices to consumers, given that inflation is the highest since the early 1980s.

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Earlier in the week, Target (ticker: TGT) stock plunged nearly 25% after management reported disappointing quarterly results and scaled back its forecast for margins for the full year. But TJX Cos. (TJX) shares rose 7.1% after the retailer increased its prediction for adjusted pretax margin.

VF stock rose 5.6% to $47.06 on Friday.

Thursday evening, the maker of Timberland boots, Vans shoes, and The North Face jackets delivered adjusted earnings of 45 cents per share for the fourth quarter of its fiscal year, a touch below the consensus call of 46 cents among companies tracked by the data provider FactSet,
Revenue was $2.82 billion for the quarter ended in March, while analysts expected $2.83 billion.

JP Morgan analyst Matthew Boss pointed to headwinds such as high freight costs, China’s covid lockdown, and tepid growth from the Vans brand. The Vans footwear brand generated a billion in revenue in the quarter, achieving 2% year-over-year growth but falling short of Boss’s expectation of over 5%. Comparatively, revenue from The North Face grew over 26% year over year versus the 16% Boss had penciled in.

In a news release detailing its results, management also said lockdowns in China to fight Covid-19 affected some raw-material suppliers within the country.

The good news was that for the full fiscal year, management said, gross margin is expected to be up by about half a percentage point, which was in line with the increase of 0.4 to 0.5 percentage point the company had told investors to expect in January this year, Boss noted.

The company is focused on refreshing and refocusing the Vans brand and sees prospects of China restrictions easing beginning this June, Cowen analyst John Kernan noted. He rates the stock at Outperform.

Aside from the call on margins, the overall outlook was tepid. Management’s forecast for earnings for the full fiscal year 2023 was $3.30 to $3.40 a share, just short of the Street’s expectation of $3.42. Revenue is expected to be up at least 7% in constant dollars in the fiscal year ending March, which is lower than the 10% growth estimated by the Street, according to Wedbush analyst Tom Nikic.

For now, some analysts are on the sidelines on the stock. Boss rates it at Neutral given big-picture headwinds such as freight costs, as well as multiple company-specific concerns like exposure to China.

Nikic also rates the stock as Neutral. He wrote that while The North Face “is a very hot brand right now, the direction of this stock is dictated by Vans, and that brand is still trying to get back on track.”

Out of 24 analysts tracking this stock, 11 are bullish, 11 rate it as Hold and one rates it as Sell, according to FactSet.

Write to Karishma Vanjani at [email protected]


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