VF Corporation (together with its subsidiaries, collectively known as "VF" or the "Company") uses a 52/53 week fiscal year ending on the Saturday closest toMarch 31 of each year. The Company's current fiscal year runs fromMarch 29, 2020 throughApril 3, 2021 ("Fiscal 2021"). Accordingly, this Form 10-Q presents our second quarter of Fiscal 2021. For presentation purposes herein, all references to periods endedSeptember 2020 andSeptember 2019 relate to the fiscal periods ended onSeptember 26, 2020 andSeptember 28, 2019 , respectively. References toMarch 2020 relate to information as ofMarch 28, 2020 . All per share amounts are presented on a diluted basis and all percentages shown in the tables below and the following discussion have been calculated using unrounded numbers. All references to foreign currency amounts below reflect the changes in foreign currency exchange rates from the same period in 2019 and their impact on translating foreign currencies intoU.S. dollars. VF's most significant foreign currency exposure relates to business conducted in euro-based countries. Additionally, VF conducts business in other developed and emerging markets around the world with exposure to foreign currencies other than the euro. OnMay 22, 2019 , VF completed the spin-off of its Jeans business, which included the Wrangler®, Lee® and Rock & Republic® brands, as well as the VF OutletTM business, into an independent, publicly traded company now operating under the name Kontoor Brands, Inc. ("Kontoor Brands"). As a result, VF reported the results for the Jeans business and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively. These changes have been applied to all periods presented. OnJanuary 21, 2020 , VF announced its decision to explore the divestiture of its Occupational Workwear business. The Occupational Workwear business is comprised primarily of the following brands and businesses: Red Kap®, VF Solutions®, Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®. The business also includes certain Dickies® occupational workwear products that have historically been sold through the business-to-business channel. During the three months endedMarch 2020 , the Company determined that the Occupational Workwear business met the held-for-sale and discontinued operations accounting criteria and expects to divest this business during Fiscal 2021. Accordingly, the Company has reported the results of the Occupational Workwear business and the related cash flows as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows, respectively. The related held-for-sale assets and liabilities have been reported as assets and liabilities of discontinued operations in the Consolidated Balance Sheets. These changes have been applied to all periods presented. Unless otherwise noted, amounts, percentages and discussion for all periods included below reflect the results of operations and financial condition from VF's continuing operations. Refer to Note 4 to VF's consolidated financial statements for additional information on discontinued operations. RECENT DEVELOPMENTS Impact of COVID-19 As the global impact of the novel coronavirus ("COVID-19") continues, VF remains first and foremost focused on a people-first approach that prioritizes the health and well-being of its employees, customers, trade partners and consumers around the world. To help mitigate the spread of COVID-19 and in response to health advisories and governmental actions and regulations, VF has modified its business practices including the temporary closing of offices and retail stores, instituting travel bans and restrictions and implementing health and safety measures including social distancing and quarantines. VF has also implemented measures that are designed to ensure the health, safety and well-being of associates employed in its distribution, fulfillment and manufacturing centers around the world. During the second quarter, nearly all of the VF-operated retail stores in theAsia-Pacific region andEurope remained open. InNorth America , VF continued its phased reopening of retail stores in accordance with guidance from government entities and public health authorities, to allow proper training and preparation of the retail environment. InNorth America , approximately 75 percent of the VF-operated retail stores were open at the end of the first quarter and over 95 percent were open at the end of the second quarter. Subsequent to the end of the second quarter, additional retail stores reopened and currently all of the VF-operated retail stores inNorth America are open. VF's wholesale customers in all regions have reopened almost all of their retail stores. VF is continuing to monitor the COVID-19 outbreak globally and will comply with guidance from government entities and public health authorities to prioritize the health and well-being of its employees, customers, trade partners and consumers. As COVID-19 uncertainty continues, retail store reclosures may occur. Consistent with VF's long-term strategy, the Company's digital platform remains a high priority through which its brands stay connected with consumer communities while providing experiential content. Prior to the COVID-19 pandemic, consumer spending had started shifting to brand e-commerce sites and other digital platforms, which has accelerated due to changes in the retail landscape resulting from the COVID-19 pandemic. COVID-19 has also impacted some of VF's suppliers, including third-party manufacturers, logistics providers and other vendors. At this time, the majority of VF's supply chain is operational. Suppliers are complying with local health advisories and governmental restrictions which has resulted in isolated product delays; however, VF is actively working with its suppliers to minimize disruption. VF's distribution centers are operational in accordance with local government guidelines while maintaining enhanced health and safety protocols. In response to COVID-19, various government programs have been announced to provide financial relief to affected businesses 27VF Corporation Q2 FY21 Form 10-Q -------------------------------------------------------------------------------- Table of Contents including the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"). The CARES Act, among other things, provides employer payroll tax credits for wages paid to employees unable to work during the COVID-19 pandemic and options to defer payroll tax payments. Other foreign government programs available to VF also provide certain payroll tax credits and wage subsidies. The Company recognized$17.3 million and$67.7 million during the three and six months endedSeptember 2020 , respectively, as a result of relief from the CARES Act and other governmental packages, which were recorded as a reduction in selling, general and administrative expenses. The Company also intends to defer qualified payroll and other tax payments as permitted by the CARES Act and other governmental packages. The COVID-19 pandemic is ongoing and dynamic in nature, and has driven global uncertainty and disruption. As a result, COVID-19 had a significant negative impact on the Company's business, including the consolidated financial condition, results of operations and cash flows during the three and six months endedSeptember 2020 . While we are not able to determine the ultimate length and severity of the COVID-19 pandemic, we expect ongoing disruption to our business. Given our current business operations, assuming no material deterioration as a result of COVID-19, governmental actions and regulations, we expect improvement in our financial performance during the second half of Fiscal 2021 when compared to the first half of Fiscal 2021. Full-year Fiscal 2021 revenue is expected to be at least$9.0 billion , which reflects a decrease of approximately 14% when compared to full-year Fiscal 2020. Additionally, we expect COVID-19 will have a significant negative impact on full-year Fiscal 2021 net income when compared to full-year Fiscal 2020. Enterprise Protection Strategy VF has taken a number of actions to advance its Enterprise Protection Strategy in response to the COVID-19 pandemic. OnApril 23, 2020 , VF closed its sale of senior unsecured notes, which provided net proceeds to the Company of approximately$2.97 billion . A portion of the net proceeds was used to repay borrowings under the Company's senior unsecured revolving credit facility (the "Global Credit Facility") and the remaining net proceeds will be used for general corporate purposes. AtSeptember 2020 , VF had approximately$2.7 billion of cash and equivalents and short-term investments and approximately$2.2 billion available for borrowing against the Global Credit Facility, subject to certain restrictions including a$750.0 million minimum liquidity requirement. Other actions VF has taken to support its business in response to the COVID-19 pandemic include the Company's decision to temporarily pause its share repurchase program. The Company currently has$2.8 billion remaining under its current share repurchase authorization. The Company paid a cash dividend of$0.48 per share and$0.96 per share during the three and six months endedSeptember 2020 , respectively, and has declared a cash dividend of$0.49 per share that is payable in the third quarter of Fiscal 2021. Subject to approval by its Board of Directors, VF intends to continue to pay its regularly scheduled dividend and is not contemplating the suspension of its dividend at this time. VF's planned divestiture of the Occupational Workwear business would provide an additional source of cash. VF has implemented cost controls to reduce discretionary spending to help mitigate the loss of sales and to conserve cash while continuing to support employees. The Company has also commenced a multi-year initiative designed to enable our ability to accelerate and advance VF's business model transformation. One of the key objectives of this initiative is to deliver global cost savings over a three-year period that will be used to support the transformation agenda and highest-priority growth drivers. Additionally, VF has assessed its forward inventory purchase commitments to ensure proper matching of supply and demand, which has resulted in an overall reduction in future commitments from comparable periods in the prior year. As VF continues to actively monitor the situation and advance our business model transformation, we may take further actions that affect our operations. We believe the Company has sufficient liquidity and flexibility to operate and continue to execute our strategy during the disruptions caused by the COVID-19 pandemic and related governmental actions and regulations and health authority advisories and meet its obligations as they become due. However, due to the uncertainty of the duration and severity of the COVID-19 pandemic, governmental actions in response to the pandemic, and the impact on us and our consumers, customers and suppliers, there is no certainty that the measures we take will be sufficient to mitigate the risks posed by COVID-19. See Part II, "Item 1A. Risk Factors." below for additional discussion.VF Corporation Q2 FY21 Form 10-Q 28
--------------------------------------------------------------------------------
Table of Contents HIGHLIGHTS OF THE SECOND QUARTER OF FISCAL 2021 •Revenues were down 18% to$2.6 billion compared to the three months endedSeptember 2019 , primarily due to the negative impact of COVID-19, and included a 1% favorable impact from foreign currency. •Active segment revenues decreased 15% to$1.2 billion compared to the three months endedSeptember 2019 , including a 1% favorable impact from foreign currency. •Outdoor segment revenues decreased 24% to$1.2 billion compared to the three months endedSeptember 2019 , including a 2% favorable impact from foreign currency. •Direct-to-consumer revenues were down 17% over the 2019 period, including a 1% favorable impact from foreign currency. E-commerce revenues increased 44% in the current period, including a 2% favorable impact from foreign currency. Direct-to-consumer revenues accounted for 35% of net revenues for the three months endedSeptember 2020 . •International revenues decreased 15% compared to the three months endedSeptember 2019 , including a 3% favorable impact from foreign currency.Greater China revenues were up 16%, including a 2% favorable impact from foreign currency. International revenues represented 51% of net revenues for the three months endedSeptember 2020 . •Gross margin decreased 340 basis points to 50.8% compared to the three months endedSeptember 2019 , primarily driven by elevated promotional activity and the timing of net foreign currency transaction activity. •Earnings per share was$0.62 compared to$1.55 in the 2019 period. The decrease was primarily driven by the negative impact of COVID-19 on the three months endedSeptember 2020 . In addition, the 2019 period included a$0.41 benefit from the enactment ofSwitzerland's Federal Act of Tax Reform and AHV Financing ("Swiss Tax Act").
© Edgar Online, source