Shares of VF Corp. $(VFC)$ rocketed 21.2% higher in premarket trading after the parent company of Vans and the North Face reported second-quarter results that beat expectations, as it looks to tighten up operations and get out from under billions in debt following losses and weaker sneaker demand.
VF Corp. reported adjusted earnings per share of 60 cents, above FactSet forecasts for 38 cents a share. Revenue still fell 6% year over year, to $2.76 billion, but that was a tad above estimates for $2.72 billion.
The company cut its inventories by 13% during the quarter, as it tries to lean down its stockpiles of unsold or unwanted sneakers and clothing. Its net debt stood at $5.7 billion, down by around $446 million when compared with last year.
But after the quarter ended, the company said it was able to cut its debt further, after this month's $1.5 billion sale of the Supreme clothing brand to EssilorLuxottica, an eyewear maker in Europe that owns brands like Ray-Ban and Oakley. And executives on Monday said they paid down a $1 billion term loan due in December.
"Looking ahead, we feel good about where we're heading in Q3," Chief Executive Bracken Darrell said on VF Corp.'s earnings call. "We expect to drive further sequential improvement that builds on the progress we've made in the last few quarters."
Still, the company forecast fiscal third-quarter revenue of $2.7 billion to $2.75 billion, which would mark another decline. The figures were also lower than FactSet estimates for $2.78 billion.
The company is trying to restore relevance to its Vans sneakers. Executives have said that it had turned away from its core younger consumer and overreached for everyone else.
It is also trying to cut $300 million in costs by the end of its fiscal 2025, which ends in March. VF Corp. on Monday said it was "on track" to hit that savings target by end of that fiscal period.
Other sneaker makers, such as Nike Inc. $(NKE)$, have also struggled to win over shareholders, after that company leaned too heavily on Jordan 1, Air Force 1 and Dunk sneakers. Inflation overall has played a role, forcing many people to choose to only pay for the things they have to pay for, rather than the things they might want to pay for.
VF Corp. on Monday said that during the second quarter, North Face sales slipped 3% year over year, due in part to bigger gains a year earlier. Vans sales fell 11%. But that wasn't as bad as the 21% drop in the prior quarter.
"Our Americas regional platform is fully operational and showing promising signs, while the performance at Vans is improving," Darrell said in a statement. "In summary, we advanced our turnaround plan toward a return to growth and strong, sustainable value creation at VF."
