VF Corporation Reports Fourth Quarter and Full Year Fiscal 2019 Results; Provides Outlook for Full Year Fiscal 2020

  • Full year fiscal 2019 revenue from continuing operations increased
    12 percent (up 13 percent in constant dollars) to $13.8 billion;
    excluding acquisitions net of divestitures, revenue increased 7
    percent (up 8 percent in constant dollars);
  • Full year fiscal 2019 Active segment revenue increased 16 percent
    (up 18 percent in constant dollars) including a 24 percent (26 percent
    in constant dollars) increase in Vans
    ®
    brand revenue; Outdoor segment revenue increased 9 percent (up 10
    percent in constant dollars) including a 9 percent (10 percent in
    constant dollars) increase in The North Face
    ®
    brand revenue and a 5-percentage point revenue growth contribution
    from acquisitions;
  • Full year fiscal 2019 international revenue increased 10 percent
    (up 13 percent in constant dollars) including a 5-percentage point
    revenue growth contribution from acquisitions net of divestitures;
    China revenue increased 22 percent (up 24 percent in constant
    dollars), including a 5-percentage point revenue growth contribution
    from acquisitions;
  • Full year fiscal 2019 direct-to-consumer revenue increased 14
    percent (up 15 percent in constant dollars) including a 3-percentage
    point revenue growth contribution from acquisitions net of
    divestitures; Digital revenue increased 32 percent (up 33 percent in
    constant dollars), including an 8-percentage point revenue growth
    contribution from acquisitions net of divestitures;
  • Full year fiscal 2019 reported gross margin from continuing
    operations increased 10 basis points to 50.7 percent. On an adjusted
    basis, gross margin increased 30 basis points to 51.0 percent;
  • Full year fiscal 2019 reported earnings per share from continuing
    operations was $3.14. Adjusted earnings per share from continuing
    operations increased 20 percent to $3.78 (up 22 percent in constant
    dollars) including a $0.15 per share contribution from acquisitions
    net of divestitures. Adjusted earnings per share from continuing
    operations includes $20 million, or $0.04 per share, of incremental
    investment relative to the company’s prior adjusted earnings per share
    outlook of $3.73 provided on January 18, 2019;
  • Full year fiscal 2019 cash flow from operations reached
    approximately $1.7 billion. On an adjusted basis, cash flow from
    operations reached nearly $1.8 billion;
  • Full year fiscal 2020 revenue is expected to be in the range of
    $11.7 billion to $11.8 billion, reflecting growth of approximately 5
    percent to 6 percent compared to historical results excluding Kontoor
    Brands, or approximately 7 percent to 8 percent on a constant dollar
    basis, excluding the impact of acquisitions net of divestitures; and,
  • Full year fiscal 2020 adjusted earnings per share is expected to be
    in the range of $3.30 to $3.35, reflecting estimated growth of 15
    percent to 17 percent compared to historical results excluding Kontoor
    Brands, or approximately 17 percent to 19 percent on a constant dollar
    basis, excluding the impact of acquisitions net of divestitures.

GREENSBORO, N.C.–(BUSINESS WIRE)–VF Corporation (NYSE: VFC) today reported financial results for its
fourth quarter and full year ended March 30, 2019. All per share amounts
are presented on a diluted basis. This release refers to “reported” and
“constant dollar” amounts, terms that are described under the heading
“Constant Currency – Excluding the Impact of Foreign Currency.” Unless
otherwise noted, “reported” and “constant dollar” amounts are the same.
This release also refers to “continuing” and “discontinued” operations
amounts, which are concepts described under the heading “Discontinued
Operations – Nautica® Brand Business and
Licensing Business.” Unless otherwise noted, results presented are based
on continuing operations. This release also refers to “adjusted”
amounts, a term that is described under the heading “Adjusted Amounts –
Excluding Williamson-Dickie, Icebreaker®, Altra®,
Reef®, and Jeans Spin-Off Transaction and Deal
Related Expenses, Costs Related to Office Relocations and Other
Strategic Business Decisions, and the Provisional Impact of U.S. Tax
Legislation.” This release also refers to “Excluding Kontoor Brands”
amounts, a term that is described under the heading “Separation of
Kontoor Brands.” Unless otherwise noted, “reported” and “adjusted”
amounts are the same.

“Fiscal 2019 marked one of the most significant periods of
transformation in VF’s 120-year history, highlighted by our announcement
to spin off our Jeans business as an independent, publicly traded
company,” said Steve Rendle, Chairman, President and Chief Executive
Officer. “Despite the tremendous workload, we remained sharply focused
and delivered another year of strong financial results and top quartile
returns to our shareholders.”

Rendle continued, “As we enter fiscal 2020, our portfolio is well
positioned, and our growth and momentum are strong, fueled by the
investments we are making in support of our long-term strategy. The bold
decisions we continue to make to evolve our company underpin the
transformational journey we’re on to deliver on our commitment to be a
purpose-led, performance-driven and value-creating enterprise capable of
delivering sustainable long-term shareholder value.”

Separation of Kontoor Brands

As previously announced, on April 30, 2019, VF’s Board of Directors
approved the separation of its Jeans business (the “Separation”), which
will be achieved through the distribution of 100 percent of the shares
of Kontoor Brands, Inc. (“Kontoor Brands”) to holders of VF common stock
on the record date of May 10, 2019. VF stockholders of record will
receive one share of Kontoor Brands common stock for every seven shares
of VF common stock. The distribution is expected to be completed after
the close of the New York Stock Exchange today, May 22, 2019. Following
the Separation, Kontoor Brands will be an independent, publicly traded
company, and VF will retain no ownership interest in Kontoor Brands.
Kontoor Brands has received approval for the listing of its common stock
on the New York Stock Exchange under the symbol “KTB.”

In the context of VF’s review of historical results, this release refers
to “excluding Kontoor Brands” amounts, which exclude the historical
results of VF’s Jeans reportable segment, Wrangler®
RIGGS
brand (included in the Work reportable segment) and VF
Outlet
TM business (included in the Other category
presented in the reconciliation of reportable segment results). The
results are not indicative of the results of Kontoor Brands as a
standalone entity, and are not representative of VF’s discontinued
operations view of consolidated results after the separation of Kontoor
Brands is complete.

In addition, the release provides adjusted fiscal 2020 outlook
information reflecting management’s best estimates of the impact the
separation of Kontoor Brands may have on VF’s fiscal 2019 financial
information and fiscal 2020 outlook on a discontinued operations basis,
along with other adjustments. VF’s analysis of the separation of Kontoor
Brands has not been completed and is subject to change.

In connection with a distribution date of May 22, 2019, VF will file its
Current Report on Form 8-K, no later than May 29, 2019, which will
include supplemental financial information on VF, illustrating Kontoor
Brands on a discontinued operations basis under U.S. generally accepted
accounting principles (“GAAP”), for certain historical periods.

Constant Currency – Excluding the Impact of Foreign Currency

This release refers to “reported” amounts in accordance with U.S.
generally accepted accounting principles (“GAAP”), which include
translation and transactional impacts from foreign currency exchange
rates. This release also refers to “constant dollar” amounts, which
exclude the impact of translating foreign currencies into U.S. dollars
and on foreign currency-denominated transactions in countries with
highly inflationary economies. Reconciliations of GAAP measures to
constant currency amounts are presented in the supplemental financial
information included with this release, which identifies and quantifies
all excluded items, and provides management’s view of why this
information is useful to investors.

Discontinued Operations – Nautica® Brand
Business and Licensing Business

On April 30, 2018, the company completed the sale of its Nautica®
brand business. On April 28, 2017, the company completed the sale of its
Licensed Sports Group (“LSG”) business, including the Majestic®
brand. In conjunction with the LSG divestiture, VF executed its plan to
entirely exit the licensing business and completed the sale of the
assets of the JanSport® brand collegiate
business in the fourth quarter of 2017. Accordingly, the company has
included the operating results of these businesses in discontinued
operations through their respective dates of sale.

Adjusted Amounts – Excluding Williamson-Dickie, Icebreaker®,
Altra
®, Reef®,
and Jeans Spin-Off Transaction and Deal Related Expenses, Costs Related
to Office Relocations and Other Strategic Business Decisions, and the
Provisional Impact of U.S. Tax Legislation

This release refers to adjusted amounts that exclude transaction and
deal related expenses associated with the acquisitions and integration
of Williamson-Dickie, Icebreaker® and Altra®,
and expenses and losses on sale related to the divestitures of the Reef®
brand and the Van Moer business, which was acquired in
connection with the Williamson-Dickie acquisition. The release also
refers to transaction expenses associated with the planned spin-off of
the Jeans business. Total transaction and deal related expenses,
including the losses on sale, were approximately $57 million in the
fourth quarter of fiscal 2019 and $191 million in fiscal 2019.

This release also refers to adjusted amounts that exclude costs
primarily associated with the previously announced relocations of VF’s
global headquarters and certain brands to Denver, Colorado. The release
also refers to costs related to strategic business decisions to cease
operations in Argentina and planned business model changes in certain
other countries in South America. Total costs were approximately $61
million in the fourth quarter of fiscal 2019 and $79 million in fiscal
2019.

Adjusted amounts in this release also exclude the provisional amounts
recorded due to recent U.S. tax legislation. On December 22, 2017, the
U.S. government enacted comprehensive tax legislation commonly referred
to as the Tax Cuts and Jobs Act (“Tax Act”). Measurement period
adjustments related to the provisional net charge and subsequent
adjustments related to published Tax Act regulations resulted in a net
expense of approximately $14 million in the fourth quarter of fiscal
2019 and $37 million in fiscal 2019.

Combined, the above net charges negatively impacted earnings per share
by $0.28 during the fourth quarter of fiscal 2019 and $0.64 during
fiscal 2019. All adjusted amounts referenced herein exclude the effects
of these amounts.

Adjusted cash flow from operations reflects the impact of the
cash-related acquisition, divestiture, integration, separation,
relocation and other strategic business decision costs paid in fiscal
2019.

Reconciliations of measures calculated in accordance with GAAP to
adjusted amounts, which are considered non-GAAP measures, are presented
in the supplemental financial information included with this release
that identifies and quantifies all excluded items, and provides
management’s view of why this information is useful to investors.

Fourth Quarter Fiscal 2019 Income Statement Review

  • Revenue increased 6 percent (up 9 percent in constant dollars)
    to $3.2 billion, driven by VF’s largest brands, international and
    direct-to-consumer businesses, as well as strength from the Active,
    Outdoor and Work segments. Excluding Kontoor Brands, revenue increased
    8 percent (up 12 percent in constant dollars).
  • Gross margin declined 20 basis points to 50.3 percent on a
    reported basis. On an adjusted basis, gross margin increased 30 basis
    points, including a 70 basis point negative impact from Kontoor
    Brands, to 51.1 percent.
  • Operating income on a reported basis was $194 million. On an
    adjusted basis, operating income declined 5 percent to $313 million,
    including a $7 million contribution from acquisitions net of
    divestitures. Excluding Kontoor Brands, adjusted operating income
    increased 3 percent. Operating margin on a reported basis
    declined 420 basis points to 6.0 percent. Adjusted operating margin
    declined 110 basis points, including a 70 basis point negative impact
    from Kontoor Brands, to 9.7 percent.
  • Earnings per share was $0.32 on a reported basis. On an
    adjusted basis, earnings per share declined 10 percent (4
    percent in constant dollars) to $0.60, including a $0.01 contribution
    from acquisitions net of divestitures, and $0.04 per share ($20
    million pretax) of incremental investment relative to the company’s
    prior outlook provided on January 18, 2019.

Full Year Fiscal 2019 Income Statement Review

  • Revenue increased 12 percent (up 13 percent in constant
    dollars) to $13.8 billion. Excluding acquisitions net of
    divestitures, revenue increased 7 percent (up 8 percent in constant
    dollars), driven by VF’s largest brands, international and
    direct-to-consumer businesses, as well as strength from the Active,
    Outdoor and Work segments. Excluding Kontoor Brands, revenue increased
    16 percent (up 18 percent in constant dollars), or 10 percent (11
    percent in constant dollars), excluding acquisitions net of
    divestitures.
  • Gross margin increased 10 basis points to 50.7 percent on a
    reported basis. On an adjusted basis, gross margin increased 30 basis
    points, including a 10 basis point negative impact from Kontoor
    Brands, to 51.0 percent. Excluding acquisitions net of divestitures,
    adjusted gross margin increased 70 basis points to 51.4 percent.
  • Operating income on a reported basis increased 10 percent to
    $1.7 billion. On an adjusted basis, operating income increased 21
    percent to $1.9 billion, including a $73 million contribution from
    acquisitions net of divestitures. Excluding Kontoor Brands, adjusted
    operating income increased 32 percent. Operating margin on a
    reported basis decreased 30 basis points to 12.1 percent. Adjusted
    operating margin increased 110 basis points, including a 50 basis
    point negative impact from Kontoor Brands, to 13.8 percent.
  • Earnings per share on a reported basis increased 63 percent to
    $3.14. Adjusted earnings per share increased 20 percent (up 22 percent
    in constant dollars) to $3.78, including a $0.15 contribution from
    acquisitions net of divestitures. Relative to the company’s original
    outlook provided on May 4, 2018, full year fiscal 2019 earnings per
    share included a $0.13 (about $65 million pretax) impact from
    incremental investments.

Balance Sheet and Cash Flow Highlights

Inventories were up 4 percent compared to March 2018 levels. In fiscal
year 2019, VF’s cash flow from operations reached approximately $1.7
billion, or nearly $1.8 billion on an adjusted basis. The company also
returned more than $900 million to shareholders through dividends and
share repurchases.

Adjusted Full Year Fiscal 2020 Outlook

VF’s outlook for full year fiscal 2020 is on an adjusted continuing
operations basis unless otherwise noted, excludes Kontoor Brands and
includes the following:

  • Revenue is expected to be in the range of $11.7 billion to
    $11.8 billion, reflecting growth of approximately 5 percent to 6
    percent, or approximately 7 percent to 8 percent on a constant dollar
    basis excluding the impact of acquisitions net of divestitures. By
    segment, revenue for Outdoor is expected to increase
    approximately 4 percent to 5 percent, or approximately 5 percent to 6
    percent on a constant dollar basis, excluding the impact of
    acquisitions; revenue for Active is expected to increase
    approximately 6 percent to 7 percent, or approximately 9 percent to 10
    percent on a constant dollar basis excluding the impact of
    divestitures; and, revenue for Work is expected to increase
    approximately 3 percent to 5 percent, or approximately 4 percent to 6
    percent on a constant dollar basis, excluding the impact of
    divestitures.
  • International revenue is expected to increase approximately 4
    percent to 6 percent, or approximately 7 percent to 9 percent on a
    constant dollar basis, excluding the impact of acquisitions net of
    divestitures. By geographic region, European revenue is expected to
    increase approximately 1 percent to 3 percent, or approximately 5
    percent to 7 percent on a constant dollar basis, excluding the impact
    of acquisitions net of divestitures. In the Asia Pacific region,
    revenue is expected to increase approximately 12 percent to 14
    percent, or approximately 14 percent to 16 percent on a constant
    dollar basis. And, in the Americas (non-U.S.) region, revenue is
    expected to increase approximately 2 percent to 4 percent, or
    approximately 3 percent to 5 percent on a constant dollar basis.
    Revenue growth in the Americas (non-U.S.) region is expected to be
    negatively impacted by approximately 6 percentage points as a result
    of planned strategic business model changes.
  • Direct-to-consumer revenue is expected to increase
    approximately 9 percent to 11 percent, or approximately 10 percent to
    12 percent on a constant dollar basis, including 25 percent growth in
    digital.
  • Adjusted gross margin is expected to approach 54.0 percent,
    which represents an estimated increase of approximately 60 basis
    points.
  • Adjusted operating margin is expected to be 13.7 percent, which
    represents an estimated increase of approximately 60 basis points.
  • Adjusted earnings per share is expected to be in the range of
    $3.30 to $3.35, reflecting estimated growth of approximately 15
    percent to 17 percent, or approximately 17 percent to 19 percent on a
    constant dollar basis, excluding the impact of acquisitions net of
    divestitures.
  • Adjusted cash flow from operations is expected to be at least
    $1.3 billion.
  • Other full year assumptions include an effective tax rate in
    the range of 15 percent to 15.5 percent and capital expenditures of
    just under $400 million.

Dividend Declared

VF’s Board of Directors declared a quarterly dividend of $0.51 per
share, payable on June 20, 2019, to shareholders of record on June 10,
2019.

Webcast Information

VF will host its fourth quarter fiscal 2019 conference call beginning at
8:30 a.m. Eastern Time today. The conference call will be broadcast live
via the internet, accessible at ir.vfc.com.
For those unable to listen to the live broadcast, an archived version
will be available at the same location.

Presentation

A presentation on fourth quarter fiscal 2019 results will be available
at ir.vfc.com
beginning at approximately 7:30 a.m. Eastern Time today and will be
archived at the same location.

About VF

VF Corporation (NYSE: VFC) outfits consumers around the world with its
diverse portfolio of iconic lifestyle brands, including Vans®,
The North Face
®, Timberland®,
Wrangler
® and Lee®.
Founded in 1899, VF is one of the world’s largest apparel, footwear and
accessories companies with socially and environmentally responsible
operations spanning numerous geographies, product categories and
distribution channels. VF is committed to delivering innovative products
to consumers and creating long-term value for its customers and
shareholders. For more information, visit www.vfc.com.

Forward-looking Statements

Certain statements included in this release and attachments are
“forward-looking statements” within the meaning of the federal
securities laws. Forward-looking statements are made based on our
expectations and beliefs concerning future events impacting VF and
therefore involve several risks and uncertainties. You can identify
these statements by the fact that they use words such as “will,”
“anticipate,” “estimate,” “expect,” “should,” and “may” and other words
and terms of similar meaning or use of future dates. We caution that
forward-looking statements are not guarantees and that actual results
could differ materially from those expressed or implied in the
forward-looking statements. Potential risks and uncertainties that could
cause the actual results of operations or financial condition of VF to
differ materially from those expressed or implied by forward-looking
statements in this release include, but are not limited to: risks
associated with the proposed spin-off of our Jeanswear business,
including the risk that the spin-off will not be consummated within the
anticipated time period or at all; the risk of disruption to our
business in connection with the proposed spin-off and that we could lose
revenue as a result of such disruption; the risk that the companies
resulting from the spin-off do not realize all of the expected benefits
of the spin-off; the risk that the spin-off will not be tax-free for
U.S. federal income tax purposes; the risk that there will be a loss of
synergies from separating the businesses that could negatively impact
the balance sheet, profit margins or earnings of both businesses; and
the risk that the combined value of the common stock of the two
publicly-traded companies will not be equal to or greater than the value
of VF Corporation common stock had the spin-off not occurred. There are
also risks associated with the relocation of our global headquarters and
a number of brands to the metro Denver area, including the risk of
significant disruption to our operations, the temporary diversion of
management resources and loss of key employees who have substantial
experience and expertise in our business, the risk that we may encounter
difficulties retaining employees who elect to transfer and attracting
new talent in the Denver area to replace our employees who are unwilling
to relocate, the risk that the relocation may involve significant
additional costs to us and that the expected benefits of the move may
not be fully realized. Other risks include foreign currency
fluctuations; the level of consumer demand for apparel, footwear and
accessories; disruption to VF’s distribution system; VF’s reliance on a
small number of large customers; the financial strength of VF’s
customers; fluctuations in the price, availability and quality of raw
materials and contracted products; disruption and volatility in the
global capital and credit markets; VF’s response to changing fashion
trends, evolving consumer preferences and changing patterns of consumer
behavior, intense competition from online retailers, manufacturing and
product innovation; increasing pressure on margins; VF’s ability to
implement its business strategy; VF’s ability to grow its international
and direct-to-consumer businesses; VF’s and its vendors’ ability to
maintain the strength and security of information technology systems;
the risk that VF’s facilities and systems and those of our third-party
service providers may be vulnerable to and unable to anticipate or
detect data security breaches and data or financial loss; VF’s ability
to properly collect, use, manage and secure consumer and employee data;
stability of VF’s manufacturing facilities and foreign suppliers;
continued use by VF’s suppliers of ethical business practices; VF’s
ability to accurately forecast demand for products; continuity of
members of VF’s management; VF’s ability to protect trademarks and other
intellectual property rights; possible goodwill and other asset
impairment; maintenance by VF’s licensees and distributors of the value
of VF’s brands; VF’s ability to execute and integrate acquisitions;
changes in tax laws and liabilities; legal, regulatory, political and
economic risks; the risk of economic uncertainty associated with the
pending exit of the United Kingdom from the European Union (“Brexit”) or
any other similar referendums that may be held; and adverse or
unexpected weather conditions.

Contacts

VF Corporation
Joe Alkire,
336-424-7711
Vice President, Corporate Development, Investor
Relations and Treasury
or
Craig Hodges, 336-424-5636
Vice
President, Corporate Affairs

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