Vans owner slips as production delays, China curbs hit sales forecast
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Vans shoe maker VF Corp cut its full-year revenue forecast on Friday as it struggles with material shortages, labor issues at factories, and a slump in sales in China due to COVID-related lockdowns, sending its shares down over 6 percent.
Fresh pandemic restrictions and store closures late last year in many Asian countries, including China, took a toll on many US apparel makers that for years have relied on these countries for the bulk of their production and sales growth.
VF Corp said the fast-spreading Omicron variant of the coronavirus was also impacting its sales across the world.
“The latest virus surge across Europe has contributed to declining consumer confidence, deteriorating traffic, and stretched retail staff in our stores,” VF Chief Financial Officer Matt Puckett said on an earnings call.
Despite facing labor and raw material shortages, VF said it expected manufacturing to return to near full capacity in the coming weeks.
The company cut its fiscal 2022 revenue forecast to about US$11.85 billion from US$12 billion. It expects revenue for its “Active” unit, which houses the Vans and Supreme brands, to increase between 31 percent and 33 percent, compared with a prior range of 35 percent to 37 percent gain.
The Denver, Colorado-based company’s total revenue rose 22 percent to $3.62 billion in the third quarter ended Jan 1, slightly ahead of analysts’ average estimate of US$3.60 billion, according to IBES data from Refinitiv.
Questions & Answers
Q.What factors led VF Corp to reduce its full-year revenue forecast?
What factors led VF Corp to reduce its full-year revenue forecast?
VF Corp cut its forecast due to ongoing material shortages, labor issues at factories, and a significant slump in sales within China. Fresh pandemic restrictions in Asian countries and the Omicron variant's impact on global sales also contributed to this decision.
Q.How has the Omicron variant specifically affected VF Corp's operations in Europe?
How has the Omicron variant specifically affected VF Corp's operations in Europe?
In Europe, the fast-spreading Omicron variant has caused a decline in consumer confidence, reduced store traffic, and led to stretched retail staff numbers. This directly impacted sales for the company in the region.
Q.What is the updated revenue growth expectation for VF Corp's Active unit, which includes brands like Vans and Supreme?
What is the updated revenue growth expectation for VF Corp's Active unit, which includes brands like Vans and Supreme?
The company now expects its Active unit to see revenue increase between 31 percent and 33 percent. This is a downward revision from the prior range, which predicted a 35 percent to 37 percent gain for the unit.
Q.Despite the current challenges, what is VF Corp's expectation regarding manufacturing capacity in the near future?
Despite the current challenges, what is VF Corp's expectation regarding manufacturing capacity in the near future?
Despite facing ongoing labor and raw material shortages, VF Corp anticipates that its manufacturing operations will return to near full capacity within the coming weeks. This suggests an expected improvement in production.