VF Corporation (together with its subsidiaries, collectively known as "VF" or
the "Company") uses a 52/53 week fiscal year ending on the Saturday closest to
March 31 of each year. The Company's current fiscal year runs from March 29,
2020 through April 3, 2021 ("Fiscal 2021"). Accordingly, this Form 10-Q presents
our second quarter of Fiscal 2021. For presentation purposes herein, all
references to periods ended September 2020 and September 2019 relate to the
fiscal periods ended on September 26, 2020 and September 28, 2019, respectively.
References to March 2020 relate to information as of March 28, 2020.
All per share amounts are presented on a diluted basis and all percentages shown
in the tables below and the following discussion have been calculated using
unrounded numbers. All references to foreign currency amounts below reflect the
changes in foreign currency exchange rates from the same period in 2019 and
their impact on translating foreign currencies into U.S. dollars. VF's most
significant foreign currency exposure relates to business conducted in
euro-based countries. Additionally, VF conducts business in other developed and
emerging markets around the world with exposure to foreign currencies other than
the euro.
On May 22, 2019, VF completed the spin-off of its Jeans business, which included
the Wrangler®, Lee® and Rock & Republic® brands, as well as the VF OutletTM
business, into an independent, publicly traded company now operating under the
name Kontoor Brands, Inc. ("Kontoor Brands"). As a result, VF reported the
results for the Jeans business and the related cash flows as discontinued
operations in the Consolidated Statements of Operations and Consolidated
Statements of Cash Flows,
respectively. These changes have been applied to all periods presented.
On January 21, 2020, VF announced its decision to explore the divestiture of its
Occupational Workwear business. The Occupational Workwear business is comprised
primarily of the following brands and businesses: Red Kap®, VF Solutions®,
Bulwark®, Workrite®, Walls®, Terra®, Kodiak®, Work Authority® and Horace Small®.
The business also includes certain Dickies® occupational workwear products that
have historically been sold through the business-to-business channel. During the
three months ended March 2020, the Company determined that the Occupational
Workwear business met the held-for-sale and discontinued operations accounting
criteria and expects to divest this business during Fiscal 2021. Accordingly,
the Company has reported the results of the Occupational Workwear business and
the related cash flows as discontinued operations in the Consolidated Statements
of Operations and Consolidated Statements of Cash Flows, respectively. The
related held-for-sale assets and liabilities have been reported as assets and
liabilities of discontinued operations in the Consolidated Balance Sheets. These
changes have been applied to all periods presented.
Unless otherwise noted, amounts, percentages and discussion for all periods
included below reflect the results of operations and financial condition from
VF's continuing operations.
Refer to Note 4 to VF's consolidated financial statements for additional
information on discontinued operations.
RECENT DEVELOPMENTS


Impact of COVID-19


As the global impact of the novel coronavirus ("COVID-19") continues, VF remains
first and foremost focused on a people-first approach that prioritizes the
health and well-being of its employees, customers, trade partners and consumers
around the world. To help mitigate the spread of COVID-19 and in response to
health advisories and governmental actions and regulations, VF 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. VF has also implemented
measures that are designed to ensure the health, safety and well-being of
associates employed in its distribution, fulfillment and manufacturing centers
around the world.
During the second quarter, nearly all of the VF-operated retail stores in the
Asia-Pacific region and Europe remained open. In North America, VF continued its
phased reopening of retail stores in accordance with guidance from government
entities and public health authorities, to allow proper training and preparation
of the retail environment. In North America, approximately 75 percent of the
VF-operated retail stores were open at the end of the first quarter and over 95
percent were open at the end of the second quarter. Subsequent to the end of the
second quarter, additional retail stores reopened and currently all of the
VF-operated retail stores in North America are open. VF's wholesale customers in
all regions have reopened
almost all of their retail stores. VF 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, retail store reclosures may occur.
Consistent with VF's long-term strategy, the Company's digital platform remains
a high priority through which its brands stay connected with consumer
communities while providing experiential content. Prior to the COVID-19
pandemic, consumer spending had started shifting to brand e-commerce sites and
other digital platforms, which has accelerated due to changes in the retail
landscape resulting from the COVID-19 pandemic.
COVID-19 has also impacted some of VF's suppliers, including third-party
manufacturers, logistics providers and other vendors. At this time, the majority
of VF's supply chain is operational. Suppliers are complying with local health
advisories and governmental restrictions which has resulted in isolated product
delays; however, VF is actively working with its suppliers to minimize
disruption. VF's distribution centers are operational in accordance with local
government guidelines while maintaining enhanced health and safety protocols.
In response to COVID-19, various government programs have been announced to
provide financial relief to affected businesses
27 VF Corporation Q2 FY21 Form 10-Q
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including the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act").
The CARES Act, among other things, provides employer payroll tax credits for
wages paid to employees unable to work during the COVID-19 pandemic and options
to defer payroll tax payments. Other foreign government programs available to VF
also provide certain payroll tax credits and wage subsidies. The Company
recognized $17.3 million and $67.7 million during the three and six months ended
September 2020, respectively, as a result of relief from the CARES Act and other
governmental packages, which were recorded as a reduction in selling, general
and administrative expenses. The Company also intends to defer qualified payroll
and other tax payments as permitted by the CARES Act and other governmental
packages.
The COVID-19 pandemic is ongoing and dynamic in nature, and has driven global
uncertainty and disruption. As a result, COVID-19 had a significant negative
impact on the Company's
business, including the consolidated financial condition, results of operations
and cash flows during the three and six months ended September 2020. While we
are not able to determine the ultimate length and severity of the COVID-19
pandemic, we expect ongoing disruption to our business. Given our current
business operations, assuming no material deterioration as a result of COVID-19,
governmental actions and regulations, we expect improvement in our financial
performance during the second half of Fiscal 2021 when compared to the first
half of Fiscal 2021. Full-year Fiscal 2021 revenue is expected to be at least
$9.0 billion, which reflects a decrease of approximately 14% when compared to
full-year Fiscal 2020. Additionally, we expect COVID-19 will have a significant
negative impact on full-year Fiscal 2021 net income when compared to full-year
Fiscal 2020.
Enterprise Protection Strategy


VF has taken a number of actions to advance its Enterprise Protection Strategy
in response to the COVID-19 pandemic.
On April 23, 2020, VF closed its sale of senior unsecured notes, which provided
net proceeds to the Company of approximately $2.97 billion. A portion of the net
proceeds was used to repay borrowings under the Company's senior unsecured
revolving credit facility (the "Global Credit Facility") and the remaining net
proceeds will be used for general corporate purposes. At September 2020, VF had
approximately $2.7 billion of cash and equivalents and short-term investments
and approximately $2.2 billion available for borrowing against the Global Credit
Facility, subject to certain restrictions including a $750.0 million minimum
liquidity requirement.
Other actions VF has taken to support its business in response to the COVID-19
pandemic include the Company's decision to temporarily pause its share
repurchase program. The Company currently has $2.8 billion remaining under its
current share repurchase authorization. The Company paid a cash dividend of
$0.48 per share and $0.96 per share during the three and six months ended
September 2020, respectively, and has declared a cash dividend of $0.49 per
share that is payable in the third quarter of Fiscal 2021. Subject to approval
by its Board of Directors, VF intends to continue to pay its regularly scheduled
dividend and is not contemplating the suspension of its dividend at this time.
VF's planned divestiture of the Occupational Workwear business would provide an
additional source of cash.
VF has implemented cost controls to reduce discretionary spending to help
mitigate the loss of sales and to conserve cash while continuing to support
employees. The Company has also commenced a multi-year initiative designed to
enable our ability to accelerate and advance VF's business model transformation.
One of the key objectives of this initiative is to deliver global cost savings
over a three-year period that will be used to support the transformation agenda
and highest-priority growth drivers. Additionally, VF has assessed its forward
inventory purchase commitments to ensure proper matching of supply and demand,
which has resulted in an overall reduction in future commitments from comparable
periods in the prior year. As VF continues to actively monitor the situation and
advance our business model transformation, we may take further actions that
affect our operations.
We believe the Company has sufficient liquidity and flexibility to operate and
continue to execute our strategy during the disruptions caused by the COVID-19
pandemic and related governmental actions and regulations and health authority
advisories and meet its obligations as they become due. However, due to the
uncertainty of the duration and severity of the COVID-19 pandemic, governmental
actions in response to the pandemic, and the impact on us and our consumers,
customers and suppliers, there is no certainty that the measures we take will be
sufficient to mitigate the risks posed by COVID-19. See Part II, "Item 1A. Risk
Factors." below for additional discussion.

                                             VF Corporation Q2 FY21 Form 10-Q 28

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                HIGHLIGHTS OF THE SECOND QUARTER OF FISCAL 2021



•Revenues were down 18% to $2.6 billion compared to the three months ended
September 2019, primarily due to the negative impact of COVID-19, and included a
1% favorable impact from foreign currency.
•Active segment revenues decreased 15% to $1.2 billion compared to the three
months ended September 2019, including a 1% favorable impact from foreign
currency.
•Outdoor segment revenues decreased 24% to $1.2 billion compared to the three
months ended September 2019, including a 2% favorable impact from foreign
currency.
•Direct-to-consumer revenues were down 17% over the 2019 period, including a 1%
favorable impact from foreign currency. E-commerce revenues increased 44% in the
current period, including a 2% favorable impact from foreign currency.
Direct-to-consumer revenues accounted for 35% of net revenues for the three
months ended September 2020.
•International revenues decreased 15% compared to the three months ended
September 2019, including a 3% favorable impact from foreign currency. Greater
China revenues were up 16%, including a 2% favorable impact from foreign
currency. International revenues represented 51% of net revenues for the three
months ended September 2020.
•Gross margin decreased 340 basis points to 50.8% compared to the three months
ended September 2019, primarily driven by elevated promotional activity and the
timing of net foreign currency transaction activity.
•Earnings per share was $0.62 compared to $1.55 in the 2019 period. The decrease
was primarily driven by the negative impact of COVID-19 on the three months
ended September 2020. In addition, the 2019 period included a $0.41 benefit from
the enactment of Switzerland's Federal Act of Tax Reform and AHV Financing
("Swiss Tax Act").

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