V.F. Corporation (NYSE:VFC) recently unveiled its first-quarter fiscal year 2026 earnings, signaling a pivotal period of strategic transformation and operational resilience. The global apparel and footwear giant reported a robust performance, surpassing market expectations with a reported EPS of $-0.24 against a $-0.34 forecast, indicating a stronger-than-anticipated start to the fiscal year for the diverse portfolio of brands.
Under the leadership of CEO Bracken Darrell, who recently marked his second year at the helm, V.F. Corporation is undergoing a significant internal overhaul. This extensive transformation spans processes, team structures, product development engines, and marketing approaches, with a clear focus on igniting sustainable growth. Early successes are evident in the improved top-line trend, which saw a negative 2% decline in constant dollars, flattening on a reported basis, and a substantially stronger bottom line, posting a $56 million loss in a seasonally low Q1—approximately $50 million better than anticipated.
A core pillar of V.F. Corporation’s strategic revamp involves aggressive cost structure improvements, with over $300 million already realized and an ambitious target of $500-$600 million in net operating income improvement still in sight. These financial maneuvers are complemented by the establishment of a unified product and marketing engine across its global brands, leveraging standardized processes to drive efficiency and capitalize on the inherent potential within its brand culture.
The company highlighted impressive individual brand performances that contribute to the overall corporate turnaround. Altra, for instance, showcased remarkable growth, increasing by over 20% and is on track to exceed $250 million in revenue for the year, solidifying its position as a top trail running shoe brand and a rapidly expanding force in road running. Meanwhile, the iconic Vans brand is undergoing a targeted turnaround, with efforts concentrated on increasing supply and variety for popular products and exciting collaborations like the upcoming Valentino shoe hitting the market.
Financial metrics from Q1 2026 underscore the company’s strategic progress. Total revenue stood at $1.8 billion, flat on a reported basis, despite a 2% year-over-year decline in constant dollars, outperforming guidance. Excluding Vans, revenue saw a healthy 5% increase. The North Face brand grew by 5%, while Timberland continued its momentum with a 9% increase. Adjusted gross margin significantly improved by 200 basis points to 54.1%, driven by higher quality inventory and reduced discounts, reflecting the success of the transformation efforts.
Looking ahead, V.F. Corporation anticipates Q2 revenues to be down 2-4% on a constant-dollar basis, with operating income projected between $260 million and $290 million. The company is actively mitigating tariff impacts, expecting a total annualized impact of $250-$270 million, with a net negative impact to gross profit of $60-$70 million in fiscal year 2026. However, management remains confident in fully offsetting these tariffs by fiscal year 2027 and expects both operating income and free cash flow to increase year-over-year in fiscal 2026.
Further optimizing its financial structure, V.F. Corporation is executing a $1.5 billion asset-backed revolving loan to enhance flexibility and reduce covenants, aligning with its goal to decrease leverage to 2.5x by fiscal year 2028. Recent changes in segment reporting aim to offer greater transparency for investors, with Timberland and The North Face forming the Outdoor segment, Vans and Packs comprising the Active segment, and other brands consolidated into an ‘All Other’ category.
Despite prevailing macroeconomic uncertainties and a cautious approach by wholesalers, V.F. Corporation maintains an optimistic outlook. The continued investment in marketing, product innovation, and strategic execution positions the company to overcome potential headwinds. The leadership team is enthusiastic about accelerating the growth trajectory, transforming V.F. Corporation into a more robust and profitable entity in the coming years, underscoring a commitment to sustained brand transformation and financial performance.
