It has been about a month since the last earnings report for V.F. (VFC Quick QuoteVFC - Free Report) . Shares have added about 14.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is V.F. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

V.F. Corp Lags Q2 Earnings Estimates, Withdraws View

V.F. Corp reported second-quarter fiscal 2024, wherein the bottom line lagged the Zacks Consensus Estimate, while the top line beat the same. Both metrics declined year over year.

Q2 Highlights

V.F. Corp’s adjusted earnings of 63 cents dropped 13.7% year over year and missed the Zacks Consensus Estimate of 65 cents per share.

Net revenues of $3,034 million fell 2% year over year but beat the consensus estimate of $2,995 million. At constant currency (cc), revenues also dipped 4% year over year.

Revenues in the Americas declined 11% year over year on a reported basis and at cc. In the EMEA region, revenues grew 14% (down 6% at cc). Revenues in the APAC region increased 2% on a reported basis (up 6% at cc). The company’s international revenues were up 10% year over year on a reported basis (up 5% at cc).

Channel-wise, wholesale and direct-to-consumer revenues were down 1% and 3% year over year on a reported basis, respectively. Meanwhile, our model estimated wholesale revenues to decline 5.4% and direct-to-consumer revenues to grow 3%.  At cc, wholesale revenues fell 3%, while the same for the direct-to-consumer channel dropped 5%. Excluding Vans, direct-to-consumer revenues were up 9% in cc. Meanwhile, the digital channel witnessed a revenue decline of 3% on a reported basis and 5% on a cc basis.

The adjusted gross margin contracted 20 basis points (bps) to 51.3%. The metric reflected 50 bps of adverse rate impacts (including promotions), partly offset by a favorable mix of 20 bps and benefits of 10 bps of positive foreign currency exchange rates.

Adjusted operating income declined 4.1% year over year to $363.3 million. The adjusted operating margin of 12% was down 30 bps due to 30 bps of an adverse gross margin impact and 30 bps of deleverage, partly offset by 30 basis points of an adverse foreign currency exchange rate.

Segmental Details

Revenues in the Outdoor segment rose 10% to $1,713.7 million (up 8% at cc) beating our estimate of 8.2% growth. The Active segment reported revenues of $1,082.3 million, down 14% year over year on a reported basis and 16% at cc. Our model predicted Active revenue to decline 12%. Revenues in the Work segment fell 10% year over year (down 11% at cc) to $238.3 million and came ahead of our estimate of 18% decline.

Financial Details

V.F. Corp ended the fiscal second quarter with cash and cash equivalents of $498.9 million, long-term debt of $5,656.7 million, and shareholders’ equity of $2,210 million. Inventories were up 10% year over year, amounting to $2,481.1 million.

In the six months ending Sep 30, 2023, the company used an operating cash flow of $19.3 million. It returned $117 million to shareholders through dividend payouts in the fiscal second quarter. The company declared a quarterly cash dividend of 9 cents per share, to be paid out on Dec 20, 2023, to shareholders of record as of Dec 11.

Outlook

Management noted lower-than-expected progress at Vans or in the United States. As a result, it withdrew its previous fiscal 2024 revenue and earnings guidance. The free cash flow is likely to be $600 million, down from the prior mentioned $900 million. It anticipates a liquidity of $2.2 billion by the end of fiscal 2024.

The company does not expect any improvement in Vans' performance in the second half of fiscal 2024. Also, it foresees a tougher US wholesale environment.

That said, VFC introduced a transformation program, Reinvent, to enhance focus on brand-building and improve operating performance. The new plan focuses on four objectives, including improving North America performance, Vans’ turnaround, reducing costs and strengthening the balance sheet.

This large-scale cost-reduction program is expected to deliver $300 million in fixed cost savings by reducing spend in non-strategic areas, and simplifying and right-sizing its structure.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -28.42% due to these changes.

VGM Scores

Currently, V.F. has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, V.F. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

V.F. belongs to the Zacks Textile - Apparel industry. Another stock from the same industry, Columbia Sportswear (COLM Quick QuoteCOLM - Free Report) , has gained 3.6% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Columbia Sportswear reported revenues of $985.68 million in the last reported quarter, representing a year-over-year change of +3.2%. EPS of $1.70 for the same period compares with $1.80 a year ago.

For the current quarter, Columbia Sportswear is expected to post earnings of $2 per share, indicating a change of -18.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -1% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Columbia Sportswear. Also, the stock has a VGM Score of F.