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VFC’s Earnings Likely to Drop 20% in 2Q17

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Jul. 13 2017, Updated 9:08 a.m. ET

Earnings to contract further in 2Q17

VFC’s (VFC) earnings per share (or EPS) could contract a whopping 20% YoY in 2Q17. The management projects EPS to be in the range of $0.27 to $0.30, while Wall Street is predicting $0.28 in EPS. This massive decline is likely to be a result of the ongoing channel headwinds in North America and the company’s inventory destocking actions in the Jeanswear business.

The fall in the company’s earnings is also a result of ongoing currency headwinds that have been depressing the company’s top line as well as its margins for some time. Growth, however, is likely to return in the third quarter as the Jeanswear business starts to stabilize. For full fiscal 2017, the management has guided a low-single-digit decline in EPS. However, on a neutral currency basis, EPS could rise at a mid-single-digit rate.

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Comparing VFC’s earnings potential with peers

Looking at the near-term horizon, analysts expect VFC’s earnings to fall around 1% in the next four quarters. In comparison, competitor PVH (PVH) is expected to report a solid 11% increase in earnings per share. The company recently lifted its full fiscal 2017 earnings guidance by ten cents driven by better overall business prospects and favorable currency movements. The company now expects $7.40 to $7.50 in fiscal 2017 earnings.

However, Ralph Lauren (RL) and Michael Kors (KORS) are expected to post 16.5% and 15.3% declines in EPS over the next one year, respectively. Both the companies are working on improving their quality of sales by closing unproductive stores and reducing promotional sales.

Investors who want exposure to VFC could consider the Morningstar Wide Moat ETF (MOAT), which invests 2.6% of its portfolio in VFC. Move on to the next section for analysis on the company’s stock market performance and dividend payments.

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