What Happened:
Shares of lifestyle clothing conglomerate VF Corp (NYSE:VFC) fell 15.8% in the pre-market session after the company reported first-quarter earnings results with revenue, operating margin, and EPS falling short of Wall Street's estimates. The topline miss was driven by weaknesses in the US wholesale market, which affected The North Face® (revenue down 5% y/y) brand. The Vans® brand also recorded a 26% sales decline, in line with the weaknesses observed in recent quarters and also partly due to efforts to right-size its inventories. Its full-year free cash flow guidance also missed analysts' expectations. Guidance wasn't encouraging as the company expects revenue to remain challenged in the near term. Overall, this was a bad quarter for VF Corp.
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What is the market telling us:
VF Corp's shares are somewhat volatile and over the last year have had 28 moves greater than 5%. But moves this big are very rare even for VF Corp and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 4 months ago, when the stock dropped 14.3% on the news that the company reported third-quarter results with revenue, operating margin, and EPS, missing analysts' expectations. This underperformance was driven by declines at The North Face ($1.2 billion of revenue vs estimates of $1.3 billion) and Vans ($668 million of revenue vs estimates of $720 million). Management attributed the weakness to multiple factors, including warm weather, tough comps compared to the previous year, underperformance in the Americas, adjustments made to clean up Vans channels, and the impact of a cyber incident at the end of the quarter. Overall, this was a weaker quarter for the company.
VF Corp is down 35.6% since the beginning of the year, and at $12.02 per share it is trading 41.7% below its 52-week high of $20.61 from August 2023. Investors who bought $1,000 worth of VF Corp's shares 5 years ago would now be looking at an investment worth $142.88.
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