Benno Dorer hasn’t wasted any time rolling up his sleeves as interim chief executive officer of VF Corp.
Dorer, who moved into the corner office after Steve Rendle abruptly left the company in December, said VF would cut its dividend, explore the sale of its “non-core” backpack business, cut costs and eliminate “non-strategic” spending, while continuing to focus on the consumer with targeted investments.
“I have uncovered areas of strength and promise but also gained a deeper understanding of where we must improve,” Dorer said of his first two months on a conference call with analysts.
What’s not clear is just how long he intends to stay in the role.
“I do plan to use my time to make a positive difference to VF’s business and organization,” he said. “My overall theme for today is that VF will sharpen its near-term focus on the biggest consumer opportunities within our existing brand portfolio and on enhanced operational performance.”
VF — which is parent to Vans, Supreme, The North Face, Timberland and more — also cut its quarterly dividend to 30 cents a share, a 41 percent decline from the previous quarter. It’s a redirection of funds that comes in the wake of continued struggles at the once white-hot Vans business and the $2.1 billion-plus acquisition of Supreme, which gave VF cache and also $422 million writedowns.
But the former Clorox Co. CEO reaffirmed VF’s annual outlook — narrowing the range some to earnings per share of $2.05 to $2.15 from the $2 to $2.20 previously projected.
Investors, who were vexed by four cuts to the outlook last year and worried about a dividend cut, seemed to breathe a mini sigh of relief now that the next shoe had dropped. Shares of VF increased 2.4 percent to $29.20 following the after-market earnings release.
“We are clear-eyed about VF’s performance barriers, which are predominantly operational in nature, and our near-term priority is to put aggressive plans in place to improve our execution,” Dorer said. “We are not reaching our full potential as a company. The good news though is that doing so is largely within our control.”
In addition to being more consistent with its brands, particularly Vans, VF intends to live up to its reputation as a savvy supply chain giant.
Dorer said the company must “return to delivering products to our consumers and customers on time and at lower cost to VF. Supply chain has long been a core competitive advantage of VF, but recent performance also requires focus.”
VF’s third-quarter net income fell 1.9 percent to $507.9 million, or $1.31 a diluted share, down from $517.8 million, or $1.32, a year earlier.
Adjusted earnings per share declined 17 percent to $1.12, but were better than the 98 cents analysts had penciled in after some tough sledding earlier in the year.
Revenues for the three months ended Dec. 31 decreased 2.6 percent to $3.5 billion from $3.6 billion. In constant currencies, revenues increased 3 percent. The outdoor brands proved strongest, with The North Face revenues up 13 percent in constant dollars, while Timberland was ahead 6 percent.
Vans, which is already in the midst of a turnaround after falling out of step with its core customers, saw revenues drop 9 percent in constant currencies.
Dorer noted that Vans rose 7 percent in constant currencies in Europe, the Middle East and Asia, while most of the weakness was in North America. “We must do better with Vans in its home market and we will,” he said.
With VF tweaking its biggest brand, getting back into its supply chain groove and costs being managed closely, the company seems to be on the dealmaking sidelines for now.
“Smart acquisitions will remain part of the VF playbook, but near term we believe we are best served to return to strong shareholder value creation by taking advantage of the many opportunities offered by our portfolio of beloved brands, including those acquired in the recent years,” said Dorer.
That seems to be a vote of confidence for Supreme, which was acquired in 2022 and was hardly mentioned on the conference call.
On the way out is the backpack business, which includes Jansport, Kipling and Eastpak. Analysts estimate the brands generate combined revenues of more than $500 million. VF is also raising at least $100 million through other asset sales, including real estate.
Proceeds from those sales could help VF refinance some debt coming due and get its dividend back on track as operations are tightened up.