乱伦巴士

乱伦巴士 Corporation Reports Solid Top-Line Performance in First Quarter and Revises Full Year Fiscal 2023 Outlook Due to Currency Impact

DENVER--(BUSINESS WIRE)-- 乱伦巴士 Corporation (NYSE: 乱伦巴士C) today announced financial results for its first quarter (Q1'FY23) ended July 2, 2022.

Q1'FY23 Financial Highlights

• Revenue $2.3 billion, up 3% (up 7% in constant dollars) with big four brands up 2% (up 6% in constant dollars) and the balance of the portfolio up 9% (up 16% in constant dollars)
  • The North Face^庐 revenue $0.5 billion, up 31% (up 37% in constant dollars)
  • Vans^庐 revenue $0.9 billion, down 7% (down 4% in constant dollars)
• Gross margin 53.9%, down 260 basis points; Adjusted gross margin 54.1%, down 260 basis points
• Operating margin 2.8%, down 640 basis points; Adjusted operating margin 3.4%, down 340 basis points
• Earnings (loss) per share (EPS) $(0.14), down 137%; Adjusted EPS $0.09, down 68%
• Return of $194 million to shareholders through cash dividends

FY23 Financial Outlook

• 乱伦巴士 is maintaining its currency adjusted FY23 outlook while revising its earnings outlook on a reported dollar basis to reflect ongoing negative impacts from foreign currency fluctuations; we now expect adjusted EPS of $3.05 to $3.15, implying 4% to 7% growth versus the prior year on a constant dollar basis
• Total 乱伦巴士 revenue up at least 7% in constant dollars, unchanged from the previous outlook
• Adjusted gross margin up slightly versus previous outlook of up approximately 50 basis points
• Adjusted operating margin approximately 13.2% versus previous outlook of approximately 13.6%
• Adjusted cash flow from operations approximately $1.2 billion; Capital expenditures approximately $250 million, both unchanged versus previous outlook
  • Excludes the impact of a payment 乱伦巴士 anticipates making in FY23 of approximately $857 million plus additional accrued interest relating to an assessment from the Internal Revenue Service (IRS) for the dispute regarding the timing of income inclusion associated with 乱伦巴士's acquisition of Timberland in 2011, as previously disclosed
• 乱伦巴士's FY23 outlook assumes the following:
  • No additional significant COVID-19 related lockdowns in any key commercial or production regions
  • No significant worsening in global inflation rates and consumer sentiment

Steve Rendle, Chairman, President and CEO of 乱伦巴士 said:

鈥淲e delivered solid top-line results in Q1, ahead of our initial expectations, led by strong consumer engagement with our outdoor, streetwear and active brands amidst a softer consumer environment and inflationary pressures. Importantly, we are maintaining our operating outlook for FY23, a testament to the resiliency of our purpose-built family of brands.

I remain impressed by our teams, whose passion, perseverance and execution continue to drive our success.

While uncertainty persists across geographies and marketplaces from ongoing macro-economic headwinds, we are focused on the things that we can control and will continue our strategic investments to ensure long-term, sustainable and profitable growth.鈥�

All per share amounts are presented on a diluted basis. This release refers to 鈥渞eported鈥� and 鈥渃onstant dollar鈥� amounts, terms that are described under the heading below 鈥淐onstant Currency - Excluding the Impact of Foreign Currency.鈥� Unless otherwise noted, 鈥渞eported鈥� and 鈥渃onstant dollar鈥� amounts are the same. This release also refers to 鈥渃ontinuing鈥� and 鈥渄iscontinued鈥� operations amounts, which are concepts described under the heading below 鈥淒iscontinued Operations - Occupational Workwear Business.鈥� Unless otherwise noted, results presented are based on continuing operations. This release also refers to 鈥渁djusted鈥� amounts, a term that is described under the heading below 鈥淎djusted Amounts - Excluding Transaction and Deal Related Activities, Costs Related to Specified Strategic Business Decisions and Pension Settlement Charge.鈥� Unless otherwise noted, 鈥渞eported鈥� and 鈥渁djusted鈥� amounts are the same.

First Quarter Fiscal 2023 Income Statement Review

• Revenue increased 3% (up 7% in constant dollars) to $2.3 billion driven by increases in the EMEA and Americas regions partially offset by a decline in the APAC region primarily due to COVID lockdowns in China.
• Gross margin decreased 260 basis points to 53.9%, primarily driven by mix and higher freight costs partially offset by price increases. On an adjusted basis, gross margin decreased 260 basis points to 54.1%.
• Operating income on a reported basis was $63.4 million. On an adjusted basis, operating income decreased 48% (down 40% in constant dollars) to $77.5 million. Operating margin on a reported basis was 2.8%. Adjusted operating margin decreased 340 basis points to 3.4%.
• Earnings (loss) per share was $(0.14) on a reported basis. On an adjusted basis, earnings per share decreased 68% (down 59% in constant dollars) to $0.09.

COVID-19 Outbreak Update

To help mitigate the spread of COVID-19 and in response to public health advisories and governmental actions and regulations, 乱伦巴士 has modified its business practices, including the temporary closing of offices and retail stores, instituting travel bans and restrictions and implementing health and safety measures including social distancing and quarantines.

The majority of 乱伦巴士's supply chain is currently operational. Raw material suppliers in China are currently operational, though the 8-week lockdown in China during 乱伦巴士's first quarter has resulted in logistics challenges which are contributing to ongoing product delays. Suppliers are complying with local public health advisories and governmental restrictions. Most final product manufacturing and assembly suppliers are largely back to normal operating levels. 乱伦巴士 is working with its suppliers to minimize disruption and is employing expedited freight strategically as needed. 乱伦巴士's distribution centers are operational in accordance with local government guidelines while maintaining enhanced health and safety protocols.

In North America, no stores were closed during the first quarter. Currently, all stores are open.

In the EMEA region, no stores were closed during the first quarter due to COVID-19. Currently, all stores are open.

In the APAC region, including Mainland China, 12% of stores (including partners) were closed at the beginning of the first quarter with a peak of 23% of stores closed and an average of 14% of stores closed throughout the quarter. No stores were closed at the end of the first quarter and all stores are currently open.

乱伦巴士 is continuing to monitor the COVID-19 outbreak globally and will comply with guidance from government entities and public health authorities to prioritize the health and well-being of its employees, customers, trade partners and consumers. As COVID-19 uncertainty continues, 乱伦巴士 expects ongoing disruption to its business operations.

Balance Sheet Highlights

Inventories were up 92% compared with the same period last year, driven by an increase of in-transit inventory of approximately $550 million as 乱伦巴士 modified terms with the majority of its suppliers to take ownership of inventory near point of shipment rather than destination. Accounts payable also increased 91%, which was largely driven by the increase of in-transit inventory. 乱伦巴士 returned approximately $194 million of cash to shareholders through dividends during the quarter.

Dividend Declared

乱伦巴士鈥檚 Board of Directors declared a quarterly dividend of $0.50 per share, payable on September 20, 2022, to shareholders of record on September 12, 2022. Subject to approval by its Board of Directors, 乱伦巴士 intends to continue to pay its regularly scheduled cash dividend.

Webcast Information

乱伦巴士 will host its first quarter fiscal 2023 conference call beginning at 4:30 p.m. Eastern Time today. The conference call will be broadcast live via the Internet, accessible at . For those unable to listen to the live broadcast, an archived version will be available at the same location.

Presentation

A presentation on first quarter fiscal 2023 results will be available at today before the conference call and will be archived at the same location.

About 乱伦巴士

Founded in 1899, 乱伦巴士 Corporation is one of the world鈥檚 largest apparel, footwear and accessories companies connecting people to the lifestyles, activities and experiences they cherish most through a family of iconic outdoor, active and workwear brands including Vans^庐, The North Face^庐, Timberland^庐 and Dickies^庐. Our purpose is to power movements of sustainable and active lifestyles for the betterment of people and our planet. We connect this purpose with a relentless drive to succeed to create value for all stakeholders and use our company as a force for good. For more information, please visit .

Constant Currency - Excluding the Impact of Foreign Currency

This release refers to 鈥渞eported鈥� amounts in accordance with U.S. generally accepted accounting principles (鈥淕AAP鈥�), which include translation and transactional impacts from foreign currency exchange rates. This release also refers to 鈥渃onstant dollar鈥� amounts, which exclude the impact of translating foreign currencies into U.S. dollars. Reconciliations of GAAP measures to constant currency amounts are presented in the supplemental financial information included with this release, which identifies and quantifies all excluded items, and provides management鈥檚 view of why this information is useful to investors.

Discontinued Operations - Occupational Workwear Business

On June 28, 2021, 乱伦巴士 completed the sale of its Occupational Workwear business. The Occupational Workwear business was comprised primarily of the following brands and businesses: Red Kap^庐, 乱伦巴士 Solutions^庐, Bulwark^庐, Workrite^庐, Walls^庐, Terra^庐, Kodiak^庐, Work Authority^庐 and Horace Small^庐. The business also included a license for certain Dickies^庐 occupational workwear products that were historically sold through the business-to-business channel. Accordingly, the company has reported the operating results and cash flows of the business in discontinued operations for all periods, through the date of sale.

Adjusted Amounts - Excluding Transaction and Deal Related Activities, Costs Related to Specified Strategic Business Decisions and Pension Settlement Charge

The adjusted amounts in this release exclude transaction and deal related activities associated with the acquisition of the Supreme^庐 brand. Total transaction and deal related activities include integration costs of approximately $0.3 million in the first quarter of fiscal 2023.

The adjusted amounts in this release exclude costs related to 乱伦巴士's business model transformation and a transformation initiative for our Asia-Pacific regional operations. Total costs were approximately $14 million in the first quarter of fiscal 2023.

The adjusted amounts in this release exclude a noncash pension settlement charge. The pension settlement charge resulted from the purchase of a group annuity contract, which was an action taken to streamline administration, manage financial risk associated with pension plans, and to transfer a portion of the liability associated with 乱伦巴士's U.S. pension plan to an insurance company. Total expense was approximately $92 million in the first quarter of fiscal 2023.

Combined, the above items negatively impacted earnings per share by $0.23 during the first quarter of fiscal 2023. All adjusted amounts referenced herein exclude the effects of these amounts.

Reconciliations of measures calculated in accordance with GAAP to adjusted amounts are presented in the supplemental financial information included with this release, which identifies and quantifies all excluded items, and provides management鈥檚 view of why this information is useful to investors. The company also provides guidance on a non-GAAP basis as we cannot predict certain elements which are included in reported GAAP results, including the impact of foreign currency and other strategic initiatives. Additionally, the impact of the anticipated payment of taxes and interest related to the dispute with the IRS regarding the Timberland acquisition in 2011 has been excluded from fiscal 2023 adjusted cash flow from operations.

Forward-looking Statements

Certain statements included in this release are "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements are made based on our expectations and beliefs concerning future events impacting 乱伦巴士 and therefore involve several risks and uncertainties. You can identify these statements by the fact that they use words such as 鈥渨ill,鈥� 鈥渁nticipate,鈥� 鈥渆stimate,鈥� 鈥渆xpect,鈥� 鈥渟hould,鈥� and 鈥渕ay鈥� and other words and terms of similar meaning or use of future dates, however, the absence of these words or similar expressions does not mean that a statement is not forward-looking. All statements regarding 乱伦巴士鈥檚 plans, objectives, projections and expectations relating to 乱伦巴士鈥檚 operations or financial performance, and assumptions related thereto are forward-looking statements. We caution that forward-looking statements are not guarantees and that actual results could differ materially from those expressed or implied in the forward-looking statements. 乱伦巴士 undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Potential risks and uncertainties that could cause the actual results of operations or financial condition of 乱伦巴士 to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: risks arising from the widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus (COVID-19) global pandemic; the level of consumer demand for apparel, footwear and accessories; disruption to 乱伦巴士鈥檚 distribution system; changes in global economic conditions and the financial strength of 乱伦巴士鈥檚 customers, including as a result of current inflationary pressures; fluctuations in the price, availability and quality of raw materials and contracted products; disruption and volatility in the global capital and credit markets; 乱伦巴士鈥檚 response to changing fashion trends, evolving consumer preferences and changing patterns of consumer behavior; intense competition from online retailers and other direct-to-consumer business risks; third-party manufacturing and product innovation; increasing pressure on margins; 乱伦巴士鈥檚 ability to implement its business strategy; 乱伦巴士鈥檚 ability to grow its international, direct-to-consumer and digital businesses; 乱伦巴士鈥檚 ability to transform its model to be more consumer-minded, retail-centric and hyper-digital; retail industry changes and challenges; 乱伦巴士鈥檚 ability to create and maintain an agile and efficient operating model and organizational structure; 乱伦巴士鈥檚 and its vendors鈥� ability to maintain the strength and security of information technology systems; the risk that 乱伦巴士鈥檚 facilities and systems and those of our third-party service providers may be vulnerable to and unable to anticipate or detect data or information security breaches and data or financial loss; 乱伦巴士鈥檚 ability to properly collect, use, manage and secure business, consumer and employee data and comply with privacy and security regulations; foreign currency fluctuations; stability of 乱伦巴士鈥檚 vendors鈥� manufacturing facilities and 乱伦巴士鈥檚 ability to establish and maintain effective supply chain capabilities; continued use by 乱伦巴士鈥檚 suppliers of ethical business practices; 乱伦巴士鈥檚 ability to accurately forecast demand for products; continuity of members of 乱伦巴士鈥檚 management; 乱伦巴士鈥檚 ability to recruit, develop or retain qualified employees; 乱伦巴士鈥檚 ability to protect trademarks and other intellectual property rights; possible goodwill and other asset impairment; maintenance by 乱伦巴士鈥檚 licensees and distributors of the value of 乱伦巴士鈥檚 brands; 乱伦巴士鈥檚 ability to execute acquisitions and dispositions and integrate acquisitions; business resiliency in response to natural or man-made economic, political or environmental disruptions; changes in tax laws and additional tax liabilities, including for the timing of income inclusion associated with our acquisition of the Timberland^庐 brand in 2011; legal, regulatory, political, economic, and geopolitical risks, including those related to the current conflict in Ukraine; changes to laws and regulations; adverse or unexpected weather conditions; 乱伦巴士's indebtedness and its ability to obtain financing on favorable terms, if needed, could prevent 乱伦巴士 from fulfilling its financial obligations; climate change and increased focus on environmental, social and governance issues; and tax risks associated with the spin-off of our Jeanswear business completed in 2019. More information on potential factors that could affect 乱伦巴士鈥檚 financial results is included from time to time in 乱伦巴士鈥檚 public reports filed with the SEC, including 乱伦巴士鈥檚 Annual Report on Form 10-K, and Quarterly Reports on Form 10-Q, and Forms 8-K filed or furnished with the SEC.

Constant Currency Financial Information

乱伦巴士 is a global company that reports financial information in U.S. dollars in accordance with GAAP. Foreign currency exchange rate fluctuations affect the amounts reported by 乱伦巴士 from translating its foreign revenues and expenses into U.S. dollars. These rate fluctuations can have a significant effect on reported operating results. As a supplement to our reported operating results, we present constant currency financial information, which is a non-GAAP financial measure that excludes the impact of translating foreign currencies into U.S. dollars. We use constant currency information to provide a framework to assess how our business performed excluding the effects of changes in the rates used to calculate foreign currency translation. Management believes this information is useful to investors to facilitate comparison of operating results and better identify trends in our businesses.

To calculate foreign currency translation on a constant currency basis, operating results for the current year period for entities reporting in currencies other than the U.S. dollar are translated into U.S. dollars at the average exchange rates in effect during the comparable period of the prior year (rather than the actual exchange rates in effect during the current year period).

These constant currency performance measures should be viewed in addition to, and not in lieu of or superior to, our operating performance measures calculated in accordance with GAAP. The constant currency information presented may not be comparable to similarly titled measures reported by other companies.

Non-GAAP Financial Information

The financial information above has been presented on a GAAP basis and on an adjusted basis, which excludes the impact of transaction and deal related activities, activity related to specified strategic business decisions and a pension settlement charge. The adjusted presentation provides non-GAAP measures. Management believes these measures provide investors with useful supplemental information regarding 乱伦巴士's underlying business trends and the performance of 乱伦巴士's ongoing operations and are useful for period-over-period comparisons of such operations.

Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. While management believes that these non-GAAP financial measures are useful in evaluating the business, this information should be considered as supplemental in nature and should be viewed in addition to, and not in lieu of or superior to, 乱伦巴士's operating performance measures calculated in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures presented by other companies.

Non-GAAP Financial Information

The financial information above has been presented on a GAAP basis and on an adjusted basis, which excludes the impact of transaction and deal related costs and activity related to specified strategic business decisions. The adjusted presentation provides non-GAAP measures. Management believes these measures provide investors with useful supplemental information regarding 乱伦巴士's underlying business trends and the performance of 乱伦巴士's ongoing operations and are useful for period-over-period comparisons of such operations.

Management uses the above financial measures internally in its budgeting and review process and, in some cases, as a factor in determining compensation. While management believes that these non-GAAP financial measures are useful in evaluating the business, this information should be considered as supplemental in nature and should be viewed in addition to, and not in lieu of or superior to, 乱伦巴士's operating performance measures calculated in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures presented by other companies.

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Source: 乱伦巴士 Corporation

Released July 28, 2022