Shares of VF (VFC 0.43%) were moving higher today after the diversified footwear and apparel company posted better-than-expected results on the bottom line, showing that its turnaround efforts are starting to pay off.
As of 12:27 p.m. ET, the stock was up 12.6% on the news.
Image source: Getty Images.
VF shows signs of life
The parent company of brands like Vans and The North Face has struggled due to weakness in Vans and a broader slowdown in the consumer discretionary category.
The company's fiscal first-quarter results showed the business starting to stabilize after declining for several quarters. VF reported flat revenue at $1.77 billion, ahead of the consensus at $1.7 billion, and excluding Vans, revenue was up 6%, showing it's executing across the rest of its business.
Vans sales, meanwhile, were down 15%, due in part to channel rationalization, or cutting some points of distribution. Timberland was up 11%, and The North Face grew 6%.
Gross margins improved from 51.2% to 53.9%, showing the impact of the company's cost control efforts, but selling, general, and administrative expenses remained elevated, and the company reported an adjusted loss per share of $0.24. That was an improvement from $0.35 in the quarter a year ago, and beat the consensus at a per-share loss of $0.34.
CEO Bracken Darrell said, "As I pass the two-year mark in my role as CEO, we are on track with VF's transformation. We are lowering costs, improving margins, reducing debt, and transforming the organization."
Key Data Points
What's next for VF?
VF's guidance makes it clear that the company is still facing challenges. It expects a 4% decline in revenue for the second quarter, but management forecast adjusted operating income and free cash flow to be up for the year, including the impact of tariffs.
Ultimately, the company needs to refocus and rightsize the Vans business before aiming for top-line growth, so it's not a surprise to see the stock being rewarded for bottom-line improvements, especially given the sharp sell-off in recent years.
There's a lot of upside potential if the business can return to its earlier levels of strength.
