VF Corporation (NYSE: VFC), a global leader in branded
lifestyle apparel, today announced results for the first quarter of
2011. All per share amounts are presented on a diluted basis.
First Quarter Results Summary
Revenues rose 12% to $1,958.8 million from $1,749.9
million in 2010. All VF coalitions achieved higher revenues in the
quarter, with the strongest growth in Outdoor & Action Sports,
where revenues increased 16%. Jeanswear revenues grew 9%, Imagewear
revenues rose 12%, Sportswear revenues increased 10% and
Contemporary Brands revenues were up 8%.
Gross margin reached a record 47.2%, up from 46.7% in the
2010 period. Operating margin reached 14%. Gross and
operating margins in the current quarter both include a 40 basis
point benefit from a change in inventory accounting.
Net income rose 23% to $200.7 million from $163.5
million, while earnings per share increased 25% to $1.82 per
share from $1.46 per share. Earnings per share in the quarter
benefited by $.07 per share from a favorable tax settlement and by
$.04 per share from the aforementioned change in inventory
accounting.
“Our decision last year to increase investments in our brands to
drive organic growth is paying dividends in the form of continued
top and bottom line momentum that we expect to sustain during
2011,” said Eric Wiseman, Chairman and Chief Executive Officer.
“During the quarter we achieved higher revenues and operating
income across all businesses, with exceptionally strong
international growth as we continue to extend the reach of our
brands to consumers around the world.”
First Quarter Business Review
Outdoor & Action Sports: Our
Outdoor & Action Sports businesses achieved record revenues and
operating income in the first quarter. Total global revenues in
Outdoor & Action Sports rose 16% in the quarter, with revenues
of our Americas business rising 12% and international revenues up
21%. The two largest brands - The North Face® and Vans® - achieved
global revenue growth of 17% and 20%, respectively. Reef® brand
revenues were exceptionally strong in the quarter, with revenue
rising 18%. Our Kipling® and Napapijri® businesses also saw strong
revenue gains in the quarter, with revenues up 29% and 9%,
respectively. Total direct-to-consumer revenues for Outdoor &
Action Sports rose 12% in the quarter, with solid increases in The
North Face®, Vans® and Kipling® direct-to-consumer businesses.
Operating income for the coalition rose by
13%. Reflecting a higher percentage of advertising to revenues
versus the 2010 period, operating margin in the quarter was 18.3%
compared with last year’s 18.7%. The full year coalition operating
margin is still expected to approximate 20%.
Jeanswear: The momentum in Jeanswear
continued in the first quarter with revenues rising 9% and
operating margin expanding by nearly a full percentage point.
Domestic revenues rose 5% with growth across our Mass Market, Lee
and Western businesses. International jeans revenues increased 17%;
Asia revenues rose 60%, revenues in Mexico, Latin America and
Canada each increased by more than 20%, and European revenues were
flat with those of last year’s quarter.
Operating income increased 15%, with
operating margin rising to 18.1% from 17.2% in the prior year’s
quarter. As anticipated, the domestic jeanswear operating margin
declined 130 basis points in the quarter due to higher product
costs, which were offset by profitability improvements in our
international jeanswear business, primarily resulting from
restructuring actions taken in the 2010 period that did not
recur.
Imagewear: Imagewear had a tremendous
quarter, achieving double-digit growth in both revenues and
operating income. Revenues rose 12% in the first quarter, with
strong gains in both our Image (uniform) and Licensed Sports
businesses.
Operating income rose 62% and operating
margin increased to 15.0% from 10.3%, with healthy improvements in
both the Image and Licensed Sports businesses during the
quarter.
Sportswear: Sportswear achieved a
second consecutive quarter of double-digit top line growth, with
revenues up 10% over prior year levels. Nautica® brand revenues
rose 6%, while Kipling® brand revenues in the U.S. rose 46%.
Sportswear operating income rose 4% in the
quarter, with operating margin down slightly from that in the prior
year period.
Contemporary Brands: Revenues of our
Contemporary Brands coalition, which consists of the 7 For All
Mankind®, John Varvatos®, Splendid® and Ella Moss® brands, grew 8%
in the quarter. Global revenues of the 7 For All Mankind® brand
rose 2% in the quarter, with 19% growth in Europe and a
near-doubling of revenues in Asia. These gains drove a 26% increase
in international revenues for the coalition. Domestic revenues for
the coalition rose 3% driven by double-digit revenue growth in our
Splendid®, Ella Moss® and John Varvatos® brands. New stores, comp
store growth and higher e-commerce revenue drove a 41% increase in
global Contemporary Brands’ direct-to-consumer revenues.
First quarter operating income for the
Contemporary Brands coalition increased 15% while operating margin
improved to 8.7% from 8.1%.
Expansion in International Revenues
International revenues increased 20%, with double-digit growth
across our Outdoor & Action Sports, Jeanswear and Contemporary
Brands’ international businesses. Revenues in Asia were up 52% in
the quarter, with our The North Face®, Vans®, 7 For All Mankind and
Kipling® and jeanswear businesses all growing in excess of 30%. Our
business in India continued to show great momentum, with revenues
rising by over 80% in the quarter.
Growth in Direct-to-Consumer Revenues
Direct-to-consumer revenues grew 10% in the quarter, driven by
new store openings, a 31% increase in e-commerce revenues, and comp
store growth. The direct-to-consumer businesses of The North Face®,
Vans®, 7 For All Mankind® and Kipling® brands each achieved solid
revenue gains in the period. A total of 15 stores were opened
across our brands in the quarter, bringing the total number of
owned stores to 788.
2011 Guidance Increased
“VF’s formula for success continues to produce outstanding
results,” said Mr. Wiseman. “That formula includes the combination
of powerful brands supported by targeted investments to drive
profitable growth, rapidly expanding international and direct to
consumer platforms, and new tools and processes designed to spur
even greater innovation across VF.”
Revenues are now expected to rise approximately 10% in 2011, up
from previous guidance for an increase of 8 to 9%, due largely to
the impact of a weaker dollar in translating foreign currencies, as
well as broad-based strength across our businesses.
Earnings per share are now anticipated to increase to $7.25, up
from our previous guidance of $7.00 to $7.10 per share. The new
guidance includes the $.11 in special items reported in the first
quarter, as well as an increase of $.10 per share from foreign
currency translation.
We continue to look forward to another strong year of cash flow
from operations, which should again reach $1 billion in 2011.
Dividend Declared
The Board of Directors declared a quarterly cash dividend of
$.63 per share, payable on June 20, 2011 to shareholders of record
as of the close of business on June 10, 2011.
Statement on 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 VF and therefore involve
a number of risks and uncertainties. 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. Potential risks and uncertainties
that could cause the actual results of operations or financial
condition of VF to differ materially from those expressed or
implied by forward-looking statements in this release include the
overall level of consumer spending on apparel; the level of
consumer confidence; fluctuations in the price, availability and
quality of raw materials and contracted products; disruption and
volatility in the global capital and credit markets; VF's reliance
on a small number of large customers; the financial strength of
VF's customers; changing fashion trends and consumer demand;
increasing pressure on margins; VF's ability to implement its
growth strategy; VF's ability to grow its international and
direct-to-consumer businesses; VF's ability to successfully
integrate and grow acquisitions; VF's ability to maintain the
strength and security of its information technology systems;
stability of VF's manufacturing facilities and foreign suppliers;
continued use by VF's suppliers of ethical business practices; VF's
ability to accurately forecast demand for products; continuity of
members of VF's management; VF's ability to protect trademarks and
other intellectual property rights; maintenance by VF's licensees
and distributors of the value of VF's brands; foreign currency
fluctuations; and legal, regulatory, political and economic risks
in international markets. More information on potential factors
that could affect VF's financial results is included from time to
time in VF's public reports filed with the Securities and Exchange
Commission, including VF's Annual Report on Form 10-K and Quarterly
Reports on Form 10-Q.
About VF
VF Corporation is a global leader in branded lifestyle apparel
with more than 30 brands, including Wrangler®, The North Face®,
Lee®, Vans®, Nautica®, 7 For All Mankind®, Eagle Creek®, Eastpak®,
Ella Moss®, JanSport®, John Varvatos®, Kipling®, lucy®, Majestic®,
Napapijri®, Red Kap®, Reef®, Riders® and Splendid®.
Webcast Information
VF will hold its first quarter conference call and webcast today
at 8:30 a.m. ET. Interested parties should call 1-888-634-7543
domestic, or 1-719-457-2655 international, to access the call. You
may also access this call via the Internet at www.vfc.com. A replay
will be available through May 6, 2011 and can be accessed by
dialing 1-877-870-5176 domestic, and 1-858-384-5517 international.
The pass code is 3018793. A replay also can be accessed at the
Company’s web site at www.vfc.com.
VF CORPORATION Consolidated Statements of Income
(In thousands, except per share amounts)
Three Months Ended March
2011 2010 Net
Sales $ 1,937,124 $ 1,730,086
Royalty Income
21,675 19,793
Total Revenues
1,958,799 1,749,879
Costs and
Operating Expenses Cost of goods sold 1,033,856 932,203
Marketing, administrative and general expenses 650,300
594,416 1,684,156
1,526,619
Operating Income 274,643 223,260
Other Income (Expense) Interest income 966 494
Interest expense (15,940 ) (20,499 ) Miscellaneous, net
(1,931 ) 6,423 (16,905 ) (13,582 )
Income Before Income Taxes 257,738 209,678
Income Taxes 56,318 46,219
Net Income 201,420 163,459
Net (Income)
Loss Attributable to Noncontrolling Interests (717 )
57
Net Income Attributable to VF
Corporation $ 200,703 $ 163,516
Earnings Per Share Attributable to VF Corporation Common
Stockholders Basic $ 1.85 $ 1.48 Diluted 1.82 1.46
Weighted Average Common Shares Outstanding Basic
108,222 110,259 Diluted 110,040 111,629
Cash
Dividends Per Common Share $ 0.63 $ 0.60
Fiscal Periods: VF operates and reports using a 52/53
week fiscal year ending on the Saturday closest to December 31 of
each year. Similarly, the fiscal first quarter ends on the Saturday
closest to March 31. For presentation purposes herein, all
references to periods ended March 2011, December 2010 and March
2010 relate to the fiscal periods ended as of April 2, 2011,
January 1, 2011 and April 3, 2010, respectively.
VF
CORPORATION Consolidated Balance Sheets (In
thousands)
March December March 2011
2010 2010
ASSETS Current Assets Cash and equivalents $
672,963 $ 792,239 $ 718,634 Accounts receivable, net 892,294
773,083 787,682 Inventories 1,183,314 1,070,694 952,182 Other
current assets 201,457 190,044
192,275 Total current assets 2,950,028 2,826,060 2,650,773
Property, Plant and Equipment 615,372 602,908 601,859
Intangible Assets 1,556,791 1,490,925 1,529,538
Goodwill 1,187,107 1,166,638 1,363,059
Other Assets 383,840 371,025
326,979 $ 6,693,138 $ 6,457,556
$ 6,472,208
LIABILITIES AND STOCKHOLDERS'
EQUITY Current Liabilities Short-term borrowings
$ 40,052 $ 36,576 $ 48,525 Current portion of long-term debt 2,722
2,737 202,690 Accounts payable 429,541 510,998 296,437 Accrued
liabilities 564,531 559,164
512,415 Total current liabilities 1,036,846 1,109,475
1,060,067
Long-term Debt 935,244 935,882 937,826
Other Liabilities 594,601 550,880 649,449
Commitments and Contingencies Stockholders'
Equity Common Stock 109,014 107,938 109,981 Additional paid-in
capital 2,159,204 2,081,367 1,938,184 Accumulated other
comprehensive income (loss) (202,203 ) (268,594 ) (246,241 )
Retained earnings 2,059,492 1,940,508
2,024,856 Total equity attributable to VF
Corporation 4,125,507 3,861,219 3,826,780 Noncontrolling
interests 940 100 (1,914 )
Total stockholders' equity 4,126,447
3,861,319 3,824,866 $ 6,693,138
$ 6,457,556 $ 6,472,208
VF CORPORATION
Consolidated Statements of Cash Flows (In thousands)
Three Months Ended
March 2011 2010
Operating Activities Net income $
201,420
$ 163,459 Adjustments to reconcile net income to cash provided
(used) by operating activities: Depreciation 30,096 27,396
Amortization of intangible assets 9,776 9,978 Other amortization
5,069
3,695 Stock-based compensation 13,702 14,774 Pension funding under
expense 10,817 10,324 Other, net
2,615
27,410 Changes in operating assets and liabilities, net of
acquisitions: Accounts receivable (101,628 ) (25,230 ) Inventories
(101,511 ) 3,867 Other current assets 726 (4,373 ) Accounts payable
(94,167 ) (74,409 ) Accrued compensation (64,313 ) (31,548 )
Accrued income taxes 14,651 26,213 Accrued liabilities 8,922 58,312
Other assets and liabilities
30,960
(25,714 ) Cash provided (used) by operating
activities (32,865 ) 184,154
Investing Activities
Capital expenditures (33,607 ) (17,339 ) Business acquisitions, net
of cash acquired - (29,111 ) Trademark acquisition (55,500 ) -
Software purchases (7,256 ) (701 ) Other, net 53
(2,486 ) Cash used by investing activities (96,310 ) (49,637
)
Financing Activities Net increase in short-term
borrowings 3,427 2,837 Payments on long-term debt (550 ) (1,061 )
Purchase of Common Stock (2,453 ) (118,001 ) Cash dividends paid
(68,475 ) (66,224 ) Proceeds from issuance of Common Stock, net
46,036 52,394 Tax benefits of stock option exercises 8,384
1,669 Cash used by financing activities
(13,631 ) (128,386 )
Effect of Foreign Currency Rate
Changes on Cash 23,530 (19,046 )
Net Change in Cash and Equivalents (119,276 ) (12,915 )
Cash and Equivalents - Beginning of Year
792,239 731,549
Cash and Equivalents
- End of Period $ 672,963 $ 718,634
VF
CORPORATION Supplemental Financial Information
Business Segment Information (In thousands)
Three
Months Ended March 2011
2010 Coalition Revenues: Outdoor &
Action Sports $ 788,215 $ 678,562 Jeanswear 679,243 622,065
Imagewear 246,808 221,298 Sportswear 111,894 102,177 Contemporary
Brands 111,916 104,089 Other 20,723 21,688
Total coalition revenues $ 1,958,799 $
1,749,879
Coalition Profit: Outdoor
& Action Sports $ 143,905 $ 127,027 Jeanswear 123,126 106,808
Imagewear 36,898 22,812 Sportswear 7,430 7,168 Contemporary Brands
9,684 8,452 Other (2,074 ) (1,225 ) Total
coalition profit 318,969 271,042
Corporate and Other
Expenses (46,257 ) (41,359 )
Interest, net
(14,974 ) (20,005 )
Income Before Income Taxes
$ 257,738 $ 209,678
VF CORPORATION
Supplemental Financial Information Business Segment
Information – Constant Currency Basis (In thousands)
Three Months Ended March 2011
Impact of Foreign As Currency
Constant Reported Exchange Currency
Coalition Revenues: Outdoor & Action Sports $
788,215 $ 2,870 $ 785,345 Jeanswear 679,243 3,557 675,686 Imagewear
246,808 688 246,120 Sportswear 111,894 - 111,894 Contemporary
Brands 111,916 193 111,723 Other 20,723 -
20,723 Total coalition revenues $
1,958,799 $ 7,308 $ 1,951,491
Coalition Profit: Outdoor & Action Sports $ 143,905 $
928
$
142,977
Jeanswear 123,126 1,203 121,923 Imagewear 36,898 175 36,723
Sportswear 7,430 - 7,430 Contemporary Brands 9,684 (9 ) 9,693 Other
(2,074 ) - (2,074 ) Total
coalition profit 318,969 2,297 316,672
Corporate and
Other Expenses (46,257 ) - (46,257 )
Interest, net
(14,974 ) - (14,974 )
Income
Before Income Taxes $ 257,738 $ 2,297 $ 255,441
Constant Currency Financial Information
VF is a global company that reports
financial information in U.S. dollars in accordance with generally
accepted accounting principles. Foreign currency exchange rate
fluctuations affect the amounts reported by VF 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. We use constant currency information to
provide a framework to assess how our businesses performed
excluding the effects of changes in foreign currency translation
rates. Management believes this information is useful to investors
to facilitate comparisons of operating results and better identify
trends in our businesses.
To calculate coalition revenues and profits 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.
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