VF Corp's Challenges: Rising Costs, Slower Sales, Higher Taxes

Shares of VF Corp. (NYSE:VFC), a leading apparel and footwear company, were trading lower on Thursday following the announcement of disappointing results for its fiscal fourth quarter. This comes amid an intriguing earnings season, with several key takeaways from analysts. 
 
Lorraine Hutchinson from BofA Securities maintained her underperform rating on VF Corp. shares while reducing the price target from $13 to $11. The company reported an adjusted loss of 32 cents per share, falling short of expectations, which predicted adjusted earnings of 2 cents per share. According to Hutchinson, this was due to "higher costs, softer sales, and a higher tax rate." Management anticipates similar declines in sales and gross margin contractions in the current quarter as reported for Q4. 
 
VF Corp. refrained from providing detailed F25 guidance except to forecast gradual sales improvement throughout the year. "It's time for them to turn around key brands (Vans, TNF) and get leverage back to a more acceptable level," said Hutchinson. 
 
Brooke Roach also reiterated a neutral rating but reduced his price target from $12.50 down to $11.00. He highlighted that VF Corp. faced significant margin pressure during Q4, resulting in lowered full-year free cash flow guidance, dropping approximately one-third from around $900 million down to about $600 million, inclusive of select non-core asset sales. 
 
The company has updated investors regarding their Reinvent Transformation Program progress, including new CFO Paul Vogel’s appointment and the completion of a strategic portfolio review, among other things, such as projections indicating sequential improvement in sales momentum each quarter (outside F1Q). However, despite these updates, Roach noted that “while management indicated the turnaround was progressing as expected, trends remain challenging for the business overall.” 
 
Matthew Boss at JPMorgan reaffirmed his neutral rating with a price target standing at $12, citing operating margins missing consensus by approximately 460 basis points, driven primarily by gross margin contraction, adjusted SG&A deleverage, and a 13.4% decline in revenues. He acknowledged the company's uphill struggle towards fiscal year 2025. 
 
Boss provided an analysis of VF Corp’s fiscal 2025 free cash flow guidance, which implies net income between $330 million and $340 million, translating into earnings of approximately 85 cents per share—around 35% below consensus estimates of $1.29 per share. As a result, he revised downward his forecast for adjusted earnings for FY2025 from initially predicted $1.02 per share to now anticipated just 85 cents per share. 
 
By publication time on Thursday, shares of VF Corp. were trading down by about 4.3%, bringing the price down to $11.79 each, marking quite a drop amidst challenging circumstances within the industry as well as internally.