VF Corp withdraws annual forecasts on slowing demand for higher-priced apparel

(Reuters) – VF Corp (NYSE:) withdrew its full-year revenue and profit forecasts on Monday, with demand for its higher-priced apparel and footwear easing as customers turn more cost conscious, especially in the United States.

Shares were down 4% in extended trading after VF Corp also reported a lower-than-expected second-quarter profit.

High borrowing costs and still-high inflation have forced shoppers to move away from pricier products and spend their dollars mainly on essentials.

An uncertain consumer spending environment has also forced several retailers including Foot Locker (NYSE:) and Macy’s (NYSE:) to take a cautious stance going into the holiday season.

VF Corp’s margins have taken a hit from excessive discounts and promotions it has offered to attract shoppers as well as clear surplus inventory.

The company’s adjusted gross margins declined 20 basis points to 51.3% in the quarter.

Sales in Americas, its biggest market, fell 11% in the reported quarter, but rose 8% in Greater China helped by a rebound in demand after the COVID-19 pandemic.

The company reported 21% fall in sales at its Vans brands, while The North Face brand saw a 19% increase.

VF Corp, which has come under pressure from activist investor firms Engaged Capital and Legion Partners Asset Management, said it does not expect Vans brands’ performance to improve in the second half, and also expects a difficult U.S. wholesale environment.

It also said it was undertaking a large-scale cost reduction program, which it expects to deliver $300 million in fixed cost savings.

The company posted quarterly adjusted earnings per share of 63 cents, below analysts’ expectations of a profit of 65 cents.

Its second-quarter revenue fell 2% to $3.03 billion in the quarter ended September, compared with analysts’ estimate of $3 billion, according to LSEG data.