Altra's 40% Surge Offsets Vans Decline as VF Corp Revenue Edges Up 1%

Running brand Altra grew 40% in Q2, growth Needham analyst Tom Nikic said is expected to "full offset declines in Vans footwear" this year. The figure anchored a quarter in which VF Corp. revenue rose 1% year on year to $2.7 billion, excluding the Dickies workwear brand sold about a year ago.

The brand-level picture split sharply. The North Face grew 4% to $1.2 billion. Timberland grew 4% to nearly $526 million. Vans tumbled nearly 10% to about $548 million, marking its second straight disappointing quarter. "Other brands" rose 6% to over $414 million without Dickies, led by Altra's active footwear line.

What do the channel numbers show?

Direct-to-consumer inched up 1% company-wide to $915 million. Wholesale fell 6% to $1.8 billion. Vans' global direct-to-consumer sales grew, and the company expects wholesale improvement next year, according to a press release.

Nikic described an "excruciatingly long Vans turnaround" in a Wednesday client note. "While there are still green shoots at Vans, and guidance is for trends to improve significantly in [the second half of the fiscal year], the glacial pace of the turnaround continues to be frustrating," he said. "That said, we believe brighter days are ahead for Vans (eventually) and the rest of the portfolio is strong."

How does management explain the Vans numbers?

On a Wednesday call with analysts, VF Corp. CEO Bracken Darrell said retailers spent Q2 working through their Vans inventory and that orders for the next two quarters are picking up. Those orders will include new styles, with "a pile of new things sitting next to me, and there's a bigger pile coming," Darrell said. He cited apparel and women's footwear as open opportunities for the brand.

Darrell framed the pipeline as durable rather than temporary. "We are super, super excited about Vans. I think we're really on a roll," he said. "I don't expect that level of innovation and renovation to stop. It's going to keep going. Probably it might even accelerate, but it'll keep going right through the end of this year, on into next year, and the year after that."

What else moved in the quarter?

Two financial indicators strengthened alongside the mixed sales results. Lower product costs and favorable currency exchanges boosted gross margin, which expanded 290 basis points to 55.4%, excluding Dickies. Net debt fell more than $1 billion, a 20% drop from last year.

VF also built inventory ahead of expected second-half demand, raising net inventories 7% compared with a year ago, the company said in its press release.

Altra carries weight beyond its size. The brand notched $300 million in revenue last year and posted robust Q2 growth "despite a challenging marketplace," Nikic said. For practitioners tracking the VF portfolio, the calculation is simple: a $300 million running brand growing at 40% now covers the dollar erosion at a $548 million Vans, buying management time until the turnaround's promised second-half acceleration materializes.