Shares of VF Corp. (VFC) soared over 23% in Monday’s after-hours trading yesterday after the company reported a solid Q2 FY25 beat. Adjusted earnings per share (EPS) declined 4.8% year-over-year to $0.60, but easily exceeded the consensus of $0.38. Also, sales fell 6% year-over-year to $2.76 billion but topped analysts’ estimates of $2.71 billion.
VF Corp. is a global apparel, footwear, and accessories retailer. The company owns renowned brands such as Vans, North Face, and Timberland. Investors seem impressed by the surprise profit in Q2 after two consecutive quarters of losses. The company sold its Supreme brand on October 1 and paid down $1 billion of its term loan, due December 2024.
VFC’s Strategic Turnaround Delivers Desired Outcome
VF Corp. is undergoing a strategic turnaround to return to profitability. The company’s results also improved due to promotions and inventory clearance mechanisms employed during the prior quarters. Importantly, the company’s segmental revenues showed significant improvement over Q1 FY25 figures. For instance, Vans brand sales fell 11% year-over-year compared to the 21% decline seen in the first quarter.
The company is also happy with the remarkable growth trajectory in the Americas region. Moreover, sales in China grew 9% year-over-year in Q2 FY25 compared to a 4% growth registered last year.
Additionally, gross margin rose 120 basis points to 52.2% compared to the last year. However, operating margin fell 210 basis points to 9.9%.
For Q3 FY25, VFC expects sales between $2.7 billion and $2.75 billion. For the full-year Fiscal 2025, VFC projected a free cash flow of roughly $425 million. The board of directors even announced a quarterly dividend of $0.09 per share, in line with VFC’s regular quarterly cash dividends.
Is VFC Stock a Buy?
Analysts prefer to remain on the sidelines on VFC stock owing to the ongoing challenges. On TipRanks, VFC stock has a Hold consensus rating based on one Buy, 12 Holds, and two Sell ratings. The average VF Corp. price target of $11.85 implies 30.4% downside potential from current levels.
