What V.F. (VFC) Said on Its Q2 Earnings Call

Key Points

• V.F. exceeded Q2 expectations: Revenue rose 1%, operating income reached $364 million, and adjusted EPS increased to $0.70 from $0.49. Gross margin expanded 290 basis points to 55.4%, supported by lower product costs, pricing and favorable foreign exchange.
• Key brands delivered mixed results: The North Face and Timberland each grew 4%, while Altra surged more than 40%. Vans revenue declined 9.8%, although global direct-to-consumer sales grew for the first time in nearly five years.
• Full-year guidance and deleveraging plans were reaffirmed: V.F. expects revenue growth of at least 2%, operating margin near 8% and free cash flow of approximately $515 million or more. The company plans to prepay its April 2027 debt maturity and targets leverage of 2.5 times or lower by fiscal 2028.

V.F. NYSE: VFC reported second-quarter fiscal 2027 revenue growth of 1%, exceeding its guidance for flat sales, as gross-margin expansion and lower interest expense helped drive a more than 40% increase in adjusted earnings per share.

President and CEO Bracken Darrell said the company generated operating income of $364 million, about $50 million above its prior outlook of $315 million. Adjusted EPS was $0.70, compared with $0.49 a year earlier. The company reaffirmed its full-year outlook, including revenue growth of 2% or better and an operating margin of about 8%.

Margins and earnings improve

Chief Financial Officer and Chief Operating Officer Abhishek Dalmia said gross margin expanded 290 basis points year over year to 55.4%. About 180 basis points of the improvement was structural, driven by lower product costs, integrated business planning and selective price increases, while 110 basis points came from foreign-exchange tailwinds.

SG&A expense rose about 4% from a year earlier as the company increased investment in direct-to-consumer operations, marketing, product design and innovation. Dalmia said approximately $25 million of spending shifted from the second quarter into the third quarter.

The company’s effective tax rate was about 18% during the quarter, aided by the resolution of historical tax matters. For the full year, V.F. now expects its effective tax rate in the high-20% range, versus its earlier expectation for the low 30% range.

Dalmia said net interest expense totaled $24 million, below the approximately $30 million previously anticipated. He attributed the lower expense in part to balance-sheet progress over the past three years.

V.F. ended the quarter with net inventory up 7% year over year, which management described as a deliberate investment to support the second half. Free cash flow through the first half was negative $323 million. On a normalized basis excluding tariff refunds, first-half free cash flow was roughly in line with the prior year, the company said.

North Face, Timberland and Altra posted growth

The North Face revenue rose 4% in the quarter, with broad-based category growth. Apparel benefited from bottoms and transitional jackets, while footwear increased at a double-digit rate globally, led by Clyffe, ThermoBall and Altamesa. Bags also performed strongly, led by Hot Shot and the Base Camp family.

Dalmia said The North Face grew 8% in the Americas and 3% in EMEA, while revenue in APAC fell 4%. The company also highlighted the launch of its U.S. Ski & Snowboard partnership and plans to introduce a reversible Nuptse jacket.

Timberland also grew 4%, including 15% growth in the Americas and 1% growth in EMEA. APAC revenue declined roughly 20%, or about $12 million, which management said was anticipated as it works with its regional partner.

Darrell said Timberland’s growth was broadening beyond its 6-Inch boot, with shoes and other boots growing faster than the flagship franchise. The company cited momentum in Field Boot, Stone Street, Euro Hiker, Boat Shoes and Timberland PRO products. V.F. opened five additional full-price Timberland stores in the Americas during the quarter, bringing the regional total to 19.

Altra revenue increased more than 40%, with growth across every region and channel. Management cited strength in road and trail running, including the Torin 9 launch and new Vanish Carbon 3 and Tempo 2 products.

Vans turnaround remains centered on product and DTC

Vans revenue declined 9.8% in the second quarter, modestly below management’s expectations, primarily because of wholesale softness and continued inventory destocking. However, global direct-to-consumer sales rose year over year for the first time in nearly five years, according to Darrell.

The company said Vans’ turnaround has followed a sequence beginning with U.S. e-commerce, followed by Americas DTC and then global DTC. Darrell pointed to growth in icons including Old Skool and Authentic, along with new styles such as Super Lowpro, mules and loafers. He said the Pearlized Old Skool Yacht Club achieved 100% sell-through in the Americas in less than 24 hours.

Management expects wholesale recovery to follow DTC improvement on a six- to nine-month lag. Dalmia said confirmed orders for fall/winter 2026 and spring/summer 2027 provide confidence in the outlook. V.F. expects Vans revenue to decline 2% or better in the second half and decline by a mid-single-digit percentage for the full fiscal year.

During the question-and-answer session, Darrell said the improved wholesale outlook is primarily tied to existing partners expanding shelf space and adding new products, rather than to a large number of new retail partners.

Guidance and debt-reduction plans reaffirmed

For the third quarter, V.F. expects revenue growth of approximately 3% or better and operating income of about $390 million or better, representing at least $50 million of year-over-year improvement. The North Face and Timberland are each expected to grow 4% or better, while Vans is expected to decline 4% or better.

For the full fiscal year, the company expects mid-single-digit growth at both The North Face and Timberland. It forecast total free cash flow of approximately $515 million or better, including about $110 million of net tariff-refund cash. On a normalized basis, it expects free cash flow to be flat to higher than the prior year’s $405 million.

V.F. expects its year-end leverage ratio to be between 2.6 times and 2.9 times and plans to prepay its April 2027 debt maturity in March. The company reiterated medium-term goals of a leverage ratio of 2.5 times or better by fiscal 2028 and an operating margin of 10% or better in fiscal 2029.

About V.F. (NYSE:VFC)

V.F. Corporation, commonly known as VF Corporation, is a global apparel, footwear and accessories company. Its brand portfolio includes The North Face, Vans, Timberland, Dickies, JanSport, Smartwool, Icebreaker, Kipling, Eastpak and Napapijri. These brands serve outdoor, active, workwear, lifestyle and youth-oriented markets.

VF sells products through wholesale partners, company-operated retail stores, brand websites and other digital channels. Its offerings include jackets, outdoor and performance apparel, footwear, backpacks, luggage and workwear.

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