VF Corp’s 2020 forecast disappoints as demand for Vans sneakers slows

Apparel maker VF Corp forecast full-year revenue and profit below expectations on slowing demand for its popular outdoor wear label North Face and sneaker brand Vans, sending its shares down about 7%.

The company wants to better focus on the high-margin brands, and is, therefore, spinning off its less profitable jeans business, including Lee and Wrangler brands. The separation will be completed this week.

The company launched new collections under the brands to drives sales, kept a tight lid on inventories and sold at full price. But the efforts didn’t pay off.

The company now expects sales growth in its active segment, which includes Vans, to slowdown further.

VF Corp forecast 2020 revenue in the range of $11.7 billion to $11.8 billion, much below analysts’ estimates of $14.6 billion, according to IBES data from Refinitiv.

Full-year sales for the company’s active segment are expected at 6% to 7%, compared with a 16% growth in 2019

“The fact that Vans as the largest brand in the portfolio is likely guided to its longer term 10-12% run rate with this outlook, there likely is some conservatism embedded in that outlook coming off of 24% growth in FY19,” said RBC analyst Kate Fitzsimons.

The company also forecast 4% to 5% sales growth in outdoor segment that includes North Face, compared with a 9% increase in 2019.

VF Corp said it expects full-year adjusted profit in the range of $3.30 to $3.35 per share. Analysts were expecting a profit of $4.25.

The tepid forecast overshadowed the better-than-expected results in the fourth quarter.

Excluding items, the company earned 60 cents per share in the fourth quarter ended March 30, beating analysts’ estimate of 58 cents.

Revenue in Vans, known for its iconic Classic Slip-ons, rose 14% in the quarter, compared with a 45% increase in the year earlier. North Face saw an 8% growth in revenue, down from 11%.

Total revenue rose 5.5% to $3.21 billion, edging past analysts’ estimate of $3.20 billion, according to IBES data from Refinitiv.

Shares of the company were down about 7% at $86 in early trading. The stock had gained 29% year-to-date outperforming the broader S&P 500 index’s 14.3% gain in the same period.