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VF Corp. is forecasting a $600 million revenue contribution from the Supreme brand for the current fiscal year, according to the latest guidance released during the company’s fourth-quarter earnings.
That would represent about 5.1% of the company’s guidance for full-year revenue of $11.80 billion.
Supreme is also expected to contribute 25 cents per share to full-year adjusted earnings, compared with the company’s EPS guidance of $3.05.
VF Corp.
VFC,
acquired the in-demand skate brand in November 2020, and analysts say the label is already showing its value.
For VF’s fourth quarter, which ended in March, Supreme contributed more than $140 million in revenue, according to Matt Puckett, VF Corp.’s chief financial officer, who spoke during the earnings call last week.
“Supreme seeing momentum,” wrote Wells Fargo analysts in a note.
“Importantly, growth prospects for the brand remain robust, with the new Milan store achieving productivity targets out of the gate (despite reduced tourism) and China stores likely on the horizon into FY 2023 to 2024,” analysts wrote.
Wells Fargo rates VF Corp. stock overweight with a price target of $100.
Supreme is known as much for the loyal fans willing to stand in line and maneuver for the latest “drops” as it is for the block logo that appears on its gear.
The label joins VF Corp.’s lineup, which also includes Vans, The North Face and Timberland.
The company reported last week fourth-quarter earnings that missed estimates, but revenue that beat forecasts. The company guided for total fiscal 2022 revenue of $11.8 billion, up from full-year net revenue of $9.2 billion the previous year, and adjusted EPS of $3.05, up from $1.31 year-over-year.
CFRA’s Camilla Yanushevsky says the Supreme acquisition is an “underappreciated long-term growth opportunity.” She rates VF Corp. shares buy with a $90 12-month target.
“We see the acquisition accelerating VF Corp.’s retail-centric, hyper-digital transformation and multi-year margin expansion story (underscoring Supreme’s industry-leading margin profile with strong full-price sell through and brand generating 100% of sales via direct-to-consumer),” Yanushevsky said.
Analysts also noted the positive inflection of the Vans brand in the fourth quarter, which VF CFO Pluckett said grew 10% globally as strength in North America and APAC offset headwinds from European store closures due to COVID-19. The Vans Family loyalty program also grew by 1.2 million members in the U.S. over the last four months.
With that inflection, Baird says VF Corp.’s guidance now looks conservative.
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“Given the FQ4 inflection in heritage styles (first positive mention since FQ3-20), digital (FQ4 +52%), and shift to a new weekly new product drop cadence starting June (Supreme playbook), we think a return toward the low-double-digit growth algorithm (vs. F2020) is possible, especially considering the return of social activities and in-person schooling,” analysts said.
Baird rates VF Corp. stock outperform with a $95 price target.
VF Corp. stock has fallen 10% for the year to date while the benchmark S&P 500 index
SPX,
is up 12% for the period.
