
VF Corp, the American apparel and footwear company, withdrew its full-year revenue and profit forecasts, with demand for its higher-priced apparel and footwear easing as customers turn more cost-conscious, especially in the US.
Due to high borrowing prices and persistently high inflation, consumers are being compelled to spend their money mostly on necessities rather than on more expensive goods.
A lack of certainty in consumer purchasing has also compelled a number of companies, such as Foot Locker and Macy’s, to adopt a cautious approach ahead of the holiday season.
Overspending on discounts and promotions to draw customers and get rid of extra inventory has hurt VF Corp’s profit margins. During the quarter, the company’s adjusted gross margins dropped 20 basis points to 51.3 per cent.
Sales in its largest region, the Americas, decreased 11 per cent during the reported quarter, while Greater China saw an increase of 8 per cent due to a recovery in demand following the COVID-19 epidemic. Sales at the company’s Vans brands fell by 21 per cent, but sales at The North Face brand increased by 19 per cent.
Under pressure from activist investor groups Engaged Capital and Legion Partners Asset Management, VF Corp stated that it anticipates a challenging US wholesale environment and that the Vans brands’ performance will not improve in the second half.
It also said it was undertaking a large-scale cost reduction program, which it expects to deliver US $ 300 million in fixed cost savings.