VF Corp (VFC; Baa3 Neg/BBB- Neg) 8K filing updates

Re-affirms 2Q Guidance but importantly releases supplemental info that has figures ex. Supreme. Reminder this was one of the highest performing brands (was actually growing and running strong 20% EBIT margin) and was sold for $1.5b so it could delever. 2Q guidance it gave is EXCLUDING Supreme in both years - which we can now reconcile;

• "RATE of revenue decline to improve modestly relative to Q1". Including Supreme it reported constant currency fall of -8% and net -9% in Q1. Ex. Supreme the net fall was -10% (Supreme was +17% in Q1) so the improvement will be off that figure.
• Gross margin to improve slightly. It reported 51.3% last yr for group and ex. Supreme is similar at 51%.
• SG&A expenses to be up slightly in the range of $25-35m (+2-3% yoy).
• SG&A increase combined with revenue decrease expected to result in higher RATE of deleverage in Q2 relative to Q1.

Last point is the key guidance for us. The Q1 adj. EBIT margin was -4% down -360bps yoy. Removing a €117m loss in Supreme (has generally been positive, looks linked to co anticipating the sale) moves the group operating loss up to -€123m or adj. -€105m at a adj. -5.9% margin. That is a sharper -440bp yoy fall (again to ex. Supreme and adj. figures from last year) - which is what guidance will be based off.

Last years 2Q adj. EBIT margin ex. supreme was still a firm 12% though (group also 12%). A sharper than -440bp deleverage in margin points to a lower than 7.6% EBIT margin in 2Q. Consensus (x7) is tad higher at 9% on a expected -7% fall in sales - unclear if it is adj. out Supreme.

We are impressed with VFC today - we are tracing $IG's moves wider but it is holding firm. Seems post-earnings bid was from loyalist.€26 is the effective front maturity ($ ahead of that has been prefunded). We still see timing as still a premature and co's fundamentals highly exposed to macro in the interim.

Filing hereand supplemental figures ex. supreme here