Steve Rendle

Steve Rendle has his eye on the horizon and is watching the storm.

“The environment has become more uncertain over the past several months,” said Rendle, chairman, president and chief executive officer of VF Corp., on a conference call with analysts going over second-quarter results Friday.

“Several factors, mainly [foreign exchange], tariffs and the ongoing disruption in Hong Kong, have largely offset the underlying operational strength of our business,” he said. “While all of the items just mentioned are small individually, collectively they’re weighing on our opportunities for upside performance for the remainder of fiscal 2020.”

VF is one of the strongest companies in fashion — powered by Vans and The North Face in particular — and is compensating.

All told, the macro weaknesses cited are expected to equal 7 cents in earnings per share for the year, but the company plans to make up for that lost ground and reaffirmed its annual EPS outlook of $3.32 to $3.37.

VF’s second-quarter net income increased 28 percent to $649 million, or $1.61 a diluted share. Adjusted earnings from continuing operations of $1.26 a share marked a 6 percent increase from a year earlier, but fell short of the $1.31 analysts were projecting.

Revenues for the three months ended Sept. 28 rose 5 percent to $3.39 billion.

The Vans business has been a powerhouse for VF and while it’s still growing, up 16 percent in constant dollars in the second quarter, it was growing at a 23 percent clip in the first quarter and a year ago was trending up 27 percent.

Even so, the company said Vans is still ahead of its long-term growth goals and analysts continue to see the brand as a powerhouse.

Kate Fitzsimons, an analyst at RBC Capital Markets, said, “At $3.8 billion in sales and estimated high-20s brand margins, Vans is VF’s biggest and most profitable brand and represents [an estimated] 70-75 percent of the company’s equity value, so certainly that brand’s double-digit momentum on top of challenging comparisons is impressive.”

Fitzsimons said the company’s portfolio of brands, which also includes Timberland, Dickies and more, was “a key asset in navigating any retail volatility given its diverse revenue bases across a variety of categories, channels, and geographies.”

There was enough to worry about in the second-quarter report that investors sent shares of the company down 7.4 percent to $84.13 Friday, but that still left VF with an outsized market capitalization of $33.5 billion.

Rendle and VF might be ready for the economic storm if it comes, but if they’re battening down the hatches, it’s a good bet that other companies in fashion that are not as big, diverse or well-capitalized are going into panic mode.

For now, at least, the American shopper seems to be holding on.

Rendle said: “The U.S. consumer and retail environment remains relatively strong. Unemployment is low and we expect a healthy fall holiday season. In contrast, the industrial and manufacturing sectors have weakened somewhat over the past few months, resulting in more tempered growth expectations across the more cyclical parts of our work portfolio…There’s a lot of rhetoric in the marketplace that could change how consumers are thinking, but I think that’s why we’re spending the time really putting our brands in a positive light in front of our consumers and really inviting them to be part of our purpose-led journey.”

In Europe, Brexit has impacted consumer confidence and lead to what the ceo described as a “slight deceleration” in the U.K.

And in China, Rendle said: “To date, we have not experienced a meaningful change in consumer behavior as a result of trade tension. Further, the situation in Hong Kong has modestly impacted our regional performance,” a reference to the protests that have disrupted shopping in the city.

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