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VF Stock Tanks 10.7% despite Robust Q2 2019 Results

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Oct. 22 2018, Published 1:29 p.m. ET

Why the stock tanked

On October 19, VF Corporation (VFC) stock shed 10.7% of its value after it reported results for the second quarter of fiscal 2019. The quarter ended on September 30. The company beat revenue and adjusted EPS estimates and also registered strong year-over-year growth.

However, the performance of Timberland was subdued in the second quarter. Timberland is one of the three leading brands for VF Corporation after Vans and The North Face. VFC is looking to expand the brand’s collection beyond the boots Classics collection. It’s also focused on generating revenue from the Timberland PRO category.

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Also, the jeans business performance remains disappointing, and the impact on the business from a recent customer bankruptcy filing (Sears Holdings) prompted VFC to cut the outlook for the segment. For fiscal 2019, the jeans business is now projected to witness a revenue decline of 1% to 2%. Earlier, VFC estimated the segment’s revenue to remain flat on a year-over-year basis.

During the second-quarter conference call, CFO Scott Roe stated that the customer bankruptcies would affect the short-term outlook. The long-term outlook for 2021 will remain unaffected, as these have already been factored into its five-year strategic roadmap. The company aims to drive the revenues at a compound annual growth rate of 5%–7% from 2016 to 2021 driven by the strategic initiatives.

Nonetheless, driven by strength in the outdoor, work, and activewear category, management now expects fiscal 2019 revenue to be at least $13.70 billion. For fiscal 2019, VFC had guided revenue to be in the range of $13.60 billion to $13.70 billion. The revenue guidance includes over $100 million of negative impact from the bankruptcy and sale of Reef and Van Moer brands.

A look at YTD movement

As of October 19, VF Corporation stock has increased 5.1% YTD (year-to-date) to $77.76. Meanwhile, Hanesbrands (HBI) and PVH Corp (PVH) have fallen 22.0% and 11.7%, respectively. Michael Kors Holdings (KORS) stock has also decreased by 7.8%. However, Under Armour (UAA) is up 26.1% YTD.

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