VF Corporation Introduces Fiscal Year 2027 Long-term Strategic Plan

VF Corporation introduces the fiscal year 2027 (FY27) long-term strategic growth plan, which outlines the Company’s plan to drive value for shareholders

FY27 financial targets include:

• Revenue five-year compounded annual growth rate (CAGR) up mid- to high
  single digit % (in constant dollars).
• Operating margin of approximately 15% by FY27, reflecting both gross margin expansion and SG&A leverage.
• 3Earnings per share (EPS) to grow at a five-year CAGR of high single to low double-digit %.
• Cash available to return to shareholders through dividends and share
  repurchases of approximately $7 billion (cumulative between fiscal year 2023
  (FY23) and FY27) with Organic Total Shareholder Return (TSR) between a low
  double-digit % and low teens % CAGR.
• FY23 outlook revised; revenue expected to be up about 5% to 6% and adjusted EPS
  expected to be in the range of $2.60 to $2.70.

“Our new five-year growth plan demonstrates how we will leverage VF’s proven strengths
and distinct model to deliver superior returns to shareholders over the long term,” said VF
Chairman, President and CEO, Steve Rendle. “The global economic environment has
dramatically changed since we held our last Investor Day in late 2019. Despite significant
disruptions during the past three years, VF has successfully navigated the challenges to
become a more agile and focused enterprise that is advancing a clear vision to be the
world’s most dynamic portfolio of iconic, deeply loved, active-lifestyle brands.”

“While economic uncertainties persist, we are actively addressing challenges within our
business, and we remain confident in our ability to generate consistent, sustainable growth
across our brand portfolio over the long term. We will continue to deepen our engagement
with consumers, expand into new categories and markets, leverage our powerful business
platforms, and lean on the seasoned leaders and talented teams who are driving our
strategies. VF and our brands remain well-positioned to continue our journey of broad-based growth and success.”

Long-Term Strategic Growth Plan

At the event, members of VF’s executive leadership team will present a detailed overview of the Company’s strategies, which outline its commitment to driving consistent, sustainable, and profitable growth. The strategic choices include:

• Find and Amplify Consumer Tailwinds: The Company will innovate within its existing brand portfolio while also strategically expanding into adjacencies that complement its current brands and tap into consumer growth spaces.
• Build Brands on Multiple Growth Horizons: The Company will gain market share by
  building and managing brands at different stages of growth across the portfolio, as well
  as through M&A and business development to benefit both individual brands and the
  enterprise.
• Leverage Platforms for Speed to Scale and Efficiency: The Company will leverage
  its strategic platforms, which provide a unique set of large-scale capabilities to enable
  its brands to connect more directly with consumers and operate more efficiently,
  including consumer data and analytics, a direct-to-consumer (DTC) centric supply chain,
  digitally enabled seamless consumer experience and international platforms.
• Resource for Portfolio Agility and Performance: The Company will continue to
  manage its business with organizational agility and dynamically allocate capital and
  deploy people to drive its highest-priority strategic and growth-focused initiatives.

FY27 Financial Targets

Revenue through FY27 is expected to grow at a five-year CAGR of mid- to high single
digit % (in constant dollars) with all brands, regions and channels contributing to growth
over that time.

• • The North Face brand revenue five-year CAGR expected to be up high single to low double-digit % (in constant dollars).
  • Vans brand revenue five-year CAGR expected to be up mid-single digit % (in constant dollars).
  • Timberland brand revenue five-year CAGR expected to up mid-single digit % (in
    constant dollars).
  • Dickies brand revenue five-year CAGR expected to up high single digit % (in constant dollars).
  • Supreme brand revenue five-year CAGR expected to up high single to low double-digit % (in constant dollars).
  • Outdoor emerging brands revenue five-year CAGR expected to up mid- to high
    teens % (in constant dollars).
• The operating margin is expected to reach approximately 15% by FY27, representing a
  low double-digit 5-year operating profit CAGR (in constant dollars), driven by both
  gross margin expansion and SG&A leverage.
• Tax rate is expected to be 17% to 18% in FY27, increasing gradually from
  approximately 16% in FY23.
• EPS is expected to grow at a five-year CAGR of high-single to low double-digit % (in
  constant dollars), (vs FY22 adjusted EPS of $3.18).
• Free cash flow2 generation is projected to be approximately $5.5 billion (cumulative
  from FY23 to FY27) with a total of approximately $7 billion in cash expected to be
  available to return to shareholders through dividends and share repurchases.
• Organic TSR through FY27 is anticipated to grow at a five-year CAGR of between low
  double-digit and low teens %.

Q2’FY23 and FY23 Financial Outlook

• Q2’FY23 revenue expected to be up low single digit % (in constant dollars) and
  adjusted EPS expected to be in the range of $0.70 to $0.75.
• VF is revising its FY23 outlook due to lower-than-expected Q2’FY23 results, coupled
  with ongoing uncertainty in the current environment, weaker than anticipated back-to-school performance at Vans, and increasing inventories leading to a more promotional
  the environment in North America in the fall; the revised outlook includes the following:
  • Total VF revenue is expected to be up about +5% to 6% (in constant dollars)
    versus the previous outlook of at least +7%.
    • Vans brand revenue is expected to be down mid-single digit % (in
      constant dollars) versus the previous outlook of up mid-single digit %.
    • The North Face brand revenue is expected to deliver at least low double-digit % growth (in constant dollars) versus the previous outlook of up low double-digit %.
  • Adjusted gross margin is expected to be down approximately 50 basis points
    versus the previous outlook of up slightly.
  • The adjusted operating margin is expected to be approximately 12% versus previous
    outlook of approximately 13.2%.
  • Adjusted EPS is expected to be in the range of $2.60 to $2.70, versus $3.18 in
    the prior year and compared to the previous outlook of $3.05 to $3.15.
  • Adjusted cash flow from operations of approximately $1.0 billion (versus previous
    outlook of approximately $1.2 billion) are anticipated; Capital expenditures
    expected to be approximately $240 million (versus the previous outlook of
    approximately $250 million).
•  VF’s FY23 outlook assumes the following:
  • No additional significant COVID-19-related lockdowns in any key commercial or
    production regions.
  • No significant worsening in global inflation rates and consumer sentiment.

Supreme Impairment.

The Company is testing the Supreme Trademark and Goodwill values during the second
quarter due to a triggering event that is the result of higher interest rates and foreign
currency fluctuations, which are expected to negatively affect the estimated fair values. As a result, and driven by these non-operating factors, the company expects to record a non-cash charge during Fiscal Q2 in the range of $300 million to $450 million.