VF Corporation (NYSE: VFC)
Q4 2025 Financial Analysis | May 21, 2025
Executive Summary
VF Corporation reported challenging Q4 2025 results with revenue declining 5% year-over-year to $2.1 billion (3% decline in constant currency), aligned with company guidance. Despite the revenue decline, VF demonstrated progress on its transformation program, achieving significant gross margin expansion of 550 basis points to 53.3% and reducing net debt by $1.8 billion compared to the prior year. While operating loss was $73 million, adjusted operating income reached $22 million, exceeding guidance and reflecting the initial benefits from the company's Reinvent transformation initiatives.
Q4 2025 Highlights
Financial Performance
VF Corporation's Q4 2025 revenue came in at $2.1 billion, representing a 5% decrease from the prior year period, or a 3% decline on a constant currency basis. This performance was in line with the company's guidance and reflects ongoing challenges in the Vans® brand, partially offset by growth at The North Face® and Timberland®.
Despite the revenue decline, gross margin saw significant improvement, expanding 550 basis points year-over-year to 53.3%. The adjusted gross margin was even stronger at 53.4%, up 560 basis points, driven by lower promotional activity, cost tailwinds, and higher quality of inventory in the current period. This substantial margin expansion demonstrates the company's effective execution of its Reinvent transformation program.
The company reported an operating loss of $73 million for the quarter, compared to a loss of $373 million in the same period last year, representing a 1,320 basis point improvement in operating margin. On an adjusted basis, operating income was $22 million, exceeding guidance of $(30) million to $0 million. This performance was supported by a 2% decrease in adjusted SG&A expenses, reflecting faster-than-expected realization of cost savings through the Reinvent program.
Diluted loss per share was $0.39, compared to a loss of $1.06 in Q4 2024. After adjusting for restructuring and impairment charges, adjusted diluted loss per share was $0.13, an improvement from the adjusted loss of $0.30 in the prior year period.
VF's balance sheet improved substantially, with net debt reduced by $1.8 billion or 26% compared to last year, including prepayment of the $750 million April 2025 maturity in March 2025. The company ended fiscal 2025 with a leverage ratio of 4.1x, down one full turn from the prior year, marking significant progress toward its medium-term target of 2.5x by fiscal 2028.
Brand & Regional Performance
| Brand | Revenue Change | Constant Currency | Key Highlights |
|---|---|---|---|
| The North Face® | +2% | +4% | Global DTC up 8%; outerwear a standout; Mountain Jacket 40th anniversary campaign drove eComm traffic |
| Vans® | -22% | -20% | Deliberate rationalization of channel distribution; strengthened brand foundation; significantly expanded gross margin |
| Timberland® | +10% | +13% | Wholesale and DTC up globally; lower discounts drove higher margins; 6" Premium momentum continued |
| Dickies® | -14% | -13% | Continued traffic and wholesale softness; healthier inventory positions; successful Pro Series launch |
| Region | Revenue Change | Constant Currency | Key Drivers |
|---|---|---|---|
| Americas | -6% | -5% | Excluding Vans, revenue grew approximately in-line with Q3'25 trend |
| EMEA | -4% | -2% | Challenging market conditions; profitability improved vs. prior year |
| APAC | 0% | +2% | Strongest regional performance; positive growth in constant currency |
The North Face® delivered 2% growth (4% in constant currency) during the quarter. Global direct-to-consumer (DTC) increased 8% (9% in constant currency), with growth across all regions including double-digit increases in the Americas and EMEA. Outerwear was particularly strong, and footwear continued to show growth in all regions. The Mountain Jacket 40th anniversary campaign successfully drove increased e-commerce traffic in the Americas.
Vans® continued to face challenges with revenue declining 22% (20% in constant currency). However, management emphasized that this performance reflects deliberate strategic actions to establish a stronger foundation for future growth and improved profitability, including the rationalization of channel distribution. Adjusting for these strategic actions, the underlying trend remained consistent with Q3'25. While traffic in global DTC remained challenging, the brand saw positive momentum from new products, although this was more than offset by declines in its iconic styles. Notably, U.S. non-value positive sell-out was sustained from Holiday 2024 through Q4'25.
Timberland® delivered strong performance with 10% growth (13% in constant currency). Both wholesale and DTC channels grew globally, with lower discounts contributing to higher margins. The 6" Premium boot continued its momentum, with other styles including Stone Street and Mt. Maddsen also performing well. U.S. search interest for the brand remained strong throughout the quarter.
Dickies® revenue declined 14% (13% in constant currency) due to continued traffic and wholesale softness. Despite this, the brand achieved significant margin improvement from healthier inventory positions. Notable developments included the successful launch of the Pro Series work collection and the Harley-Davidson® X Dickies® collaboration. The company is also progressing with headquarters transition plans to Costa Mesa.
Reinvent Transformation Program
VF Corporation continues to make significant progress on its Reinvent transformation program, which focuses on four key priorities:
Lower Cost Base
- Successfully delivered on initial target of $300 million in gross cost savings by the end of fiscal 2025
- Continued to realize cost savings from the next phase of Reinvent, contributing to the medium-term target of $500 to $600 million in net operating income expansion by fiscal 2028
- Adjusted SG&A dollars decreased 2% year-over-year, benefiting from faster-than-expected Reinvent savings
Strengthen Balance Sheet
- Inventories down $71 million (4%) compared to the prior year, reflecting normalized levels across the business
- Net debt reduced by $1.8 billion year-over-year, including prepayment of the $750 million April 2025 maturity in March 2025
- Ended fiscal 2025 with leverage of 4.1x, down one full turn from 5.1x in the prior year
- Making progress toward medium-term target of 2.5x leverage by fiscal 2028
Fix the US Business
- Excluding Vans, Americas revenue grew approximately in-line with the Q3 trend
- Profitability significantly improved compared to the prior year due to lower promotional activity and disciplined SG&A spending
- Implemented more strategic approach to distribution and inventory management
Deliver the Vans Turnaround
- Deliberate rationalization of channel distribution to strengthen the brand's foundation
- Significant gross margin expansion despite revenue declines
- Sales from new products growing, though still more than offset by declines in the icons
- U.S. non-value positive sell-out sustained from Holiday 2024 through Q4'25
The company also highlighted its advantageous sourcing position in light of evolving global trade conditions. With less than 2% of products sourced from China for the U.S. market, VF is well-positioned to navigate potential tariff impacts. Approximately 85% of U.S.-bound products are sourced from Southeast Asia, Central and South America, providing structural advantages in the current trade environment.
Outlook
VF Corporation provided guidance for both Q1 fiscal 2026 and the full fiscal year:
Q1 Fiscal 2026 Guidance
- Revenue expected to decline 5% to 3% in constant currency compared to the prior year period
- Adjusted operating loss projected between $125 million and $110 million
- Adjusted gross margin anticipated to increase year-over-year, benefiting from fewer discounts and promotions, and favorable foreign exchange impacts
- Adjusted SG&A dollars expected to be flat to down slightly compared to the prior year
Fiscal 2026 Guidance
- Free cash flow projected to increase compared to fiscal 2025 free cash flow of $313 million
- Adjusted operating income expected to improve versus the prior year
- Continued focus on debt reduction and strengthening the balance sheet
Management emphasized that VF is "well-positioned to navigate increased volatility in the macro environment" and remains confident that the actions being taken will enable its brands to return to growth and the company to deliver "strong, sustainable value creation" over the medium term.
Risks & Opportunities
Opportunities
Risks
Conclusion
Strengths
- Significant gross margin expansion of 550 basis points
- Strong growth in The North Face® and Timberland® brands
- Successful cost reduction with $300 million in gross savings achieved
- Substantial net debt reduction of $1.8 billion year-over-year
- Diversified sourcing base with minimal exposure to potential tariff impacts
Focus Areas
- Returning to overall revenue growth
- Continuing the Vans® brand turnaround
- Further leverage reduction toward 2.5x medium-term target
- Navigating uncertain macroeconomic conditions
- Executing on the next phase of the Reinvent transformation program
Investment Summary
VF Corporation's Q4 2025 results demonstrate meaningful progress on its transformation journey despite ongoing revenue challenges. The company successfully exceeded adjusted operating income guidance and delivered substantial gross margin expansion of 550 basis points to 53.3%, reflecting the initial benefits from its Reinvent program.
While overall revenue declined 5% to $2.1 billion, bright spots emerged with The North Face® growing 2% and Timberland® increasing 10%, partially offsetting the continuing decline in Vans®. Importantly, the company made significant progress in strengthening its balance sheet, reducing net debt by $1.8 billion year-over-year and lowering its leverage ratio by a full turn to 4.1x.
Management achieved its initial target of $300 million in gross cost savings and is making progress toward medium-term targets of $500-$600 million in net operating income expansion and a leverage ratio of 2.5x by fiscal 2028. The company's diversified sourcing base, with less than 2% of U.S.-bound products coming from China, positions it well to navigate potential tariff impacts.
While challenges remain, particularly regarding the Vans® turnaround and overall revenue growth, VF's transformation appears to be gaining traction. Investors should monitor the company's ability to sustain margin improvements while returning to revenue growth in the coming quarters, particularly as it navigates an uncertain macroeconomic environment.
