VF Corp’s (NYSE:VFC) Q4 Sales Beat Estimates

Lifestyle clothing conglomerate VF Corp (NYSE:VFC) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, with sales up 1.9% year on year to $2.83 billion. Its non-GAAP profit of $0.62 per share was 83.1% above analysts’ consensus estimates.

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Company Overview

Owner of The North Face, Vans, and Supreme, VF Corp (NYSE:VFC) is a clothing conglomerate specializing in branded lifestyle apparel, footwear, and accessories.

Apparel and Accessories

Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Sales Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. VF Corp’s demand was weak over the last five years as its sales fell at a 2.2% annual rate. This fell short of our benchmarks and signals it’s a low quality business.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. VF Corp’s recent history shows its demand has stayed suppressed as its revenue has declined by 9.4% annually over the last two years.

We can better understand the company’s sales dynamics by analyzing its constant currency revenue, which excludes currency movements that are outside their control and not indicative of demand. Over the last two years, its constant currency sales averaged 6.8% year-on-year declines. Because this number is better than its normal revenue growth, we can see that foreign exchange rates have been a headwind for VF Corp.

This quarter, VF Corp reported modest year-on-year revenue growth of 1.9% but beat Wall Street’s estimates by 2.8%.

Looking ahead, sell-side analysts expect revenue to grow 1.7% over the next 12 months. While this projection implies its newer products and services will fuel better top-line performance, it is still below average for the sector.

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Cash Is King

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

VF Corp has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7.8%, subpar for a consumer discretionary business.

VF Corp’s free cash flow clocked in at $870.5 million in Q4, equivalent to a 30.7% margin. The company’s cash profitability regressed as it was 8.9 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

Over the next year, analysts predict VF Corp’s cash conversion will improve. Their consensus estimates imply its free cash flow margin of 4.4% for the last 12 months will increase to 8.6%, it options for capital deployment (investments, share buybacks, etc.).

Key Takeaways from VF Corp’s Q4 Results

We were impressed by how significantly VF Corp blew past analysts’ constant currency revenue expectations this quarter. We were also excited its EPS outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid quarter. The stock traded up 3.1% to $27.39 immediately after reporting.

Sure, VF Corp had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.