VF Corp missed Wall Street estimates for quarterly results on Friday, as the Vans owner grappled with a resurgence of COVID-19 infections in Vietnam and China and disruptions to its supply chain that led to product delays.
The Delta variant-driven spike in coronavirus cases has shut factories in Vietnam, a key manufacturing hub for several brands including VF, Nike Inc and Adidas AG, forcing them to halt production or operate with drastically fewer workers.
“Virtually all of our brands are experiencing delayed collections, styles and, in some cases, insufficient size assortment,” VF’s Chief Financial Officer Matt Puckett said on an earnings call.
The Denver-based company’s shares were down 3.3% at $71.62 on Friday, as the company said demand for its sneakers and clothing in China also softened due to rising COVID-19 cases.
Revenue from Greater China in the quarter grew only 9%, compared with a 16% rise last year, mainly due to lower demand for the Vans brand.
Results at VF’s largest and highest-margin brand Vans were “underwhelming” and “particularly disappointing since the brand should have had a strong back-to-school season”, Wedbush analyst Tom Nikic said.
Adding to the company’s woes, soaring freight costs, labor shortages and higher prices for raw materials such as cotton and oil have also been pinching the margins of clothing labels.
Last month, Nike flagged product delays for the crucial holiday season due to the supply chain crunch, while Crocs Inc said on Thursday it plans to shift some of its production from Vietnam to China, Indonesia and Bosnia.
Still, VF, which owns Timberland and The North Face brands, maintained its revenue and profit outlook for fiscal 2022, saying the factory closures were chiefly concentrated in southern Vietnam, which accounts for about 10% of its sourcing.
The company reported an adjusted profit of $1.11 per share and revenue of $3.20 billion, both missing Refinitiv IBES estimates.