--Second-quarter profit up 20%
--Company raises guidance
--Cautious about Europe
(Adds comments from company's CFO about what was behind the
results in sixth graph. Adds comment from analyst ninth graph.
Updates stock price.)
By Victoria Stilwell and Karen Talley
VF Corp.'s (VFC) second-quarter profit climbed 20% as the
branded-apparel maker reported higher revenue from its outdoor and
action sports units and a gain from the sale of one of its
brands.
The company raised its full-year adjusted earnings forecast to
about $9.50 a share, up from the $9.45 a share predicted in April.
The revised guidance covers an additional 7-cent negative impact
from foreign currency exchange. The company continues to see
revenue growth of 15%.
The results sent shares up 6.4% to $150.91, closing in on their
record high of $156.15.
VF "is delivering," said CEO Eric Wiseman on a conference call.
The company, already a standard for outdoor and active weather
gear, is seeing success as it expands globally.
But VF is also "keenly aware of the many challenges posed by
continuing slowdown and global economic conditions," Wiseman
said.
In Europe "there is no doubt conditions have weakened since last
year," but the company plans for lower growth in the region this
year and is benefiting from having a diverse portfolio of brands,
Wiseman said. European sales were up 16% after rising a similar
amount a year ago, as VF in the latest period upped its marketing
spending, added new products and expanded geographically in the
region, Chief Financial Officer Bob Shearer said in an interview
with Dow Jones.
VF, which makes clothes with brands including the North Face,
Wrangler and Nautica, has seen its recent results helped by last
year's $2.3 billion acquisition of footwear company Timberland Co.
The company reported strong profits despite 2011's high cotton
prices as VF aimed to pass through costs to consumers. Moody's
Investors Services in March said it expects a continuing decline in
cotton prices to help ease pressure on the apparel industry's
margins starting in the second half of the year.
VF's gross margins benefited in the second quarter from
earlier-than-expected cotton cost relief.
The company also saw "broad-based growth across not just brands,
but geographies," said Matt Arnold, retail analyst at Edward Jones.
"And in this economic environment that is quite an
accomplishment."
For the second quarter, the company reported a profit of $155.3
million, or $1.40 a share, up from $129.4 million, or $1.17 a
share, a year earlier. Excluding Timberland acquisition-related
expenses and a gain on the sale of John Varvatos Enterprises Inc.,
adjusted earnings were $1.11 a share. The company in March agreed
to sell the majority ownership interest on the brand to Lion
Capital LLP.
Revenue improved 16% to $2.14 billion, while revenue growth
excluding the Timberland and Smartwool brands rose 3%.
Analysts surveyed by Thomson Reuters recently expected earnings
of 94 cents a share on revenue of $2.18 billion.
Gross margin widened to 46.1% from 45.9% as high costs
associated with the jeanswear segment eased.
Sales at the outdoor and action-sports segment, the largest
top-line contributor, rose 45% to $1.04 billion, with organic
revenue growth of 12%. Timberland and Smartwool added $239 million
to revenues.
In its jeanswear business--its second-largest segment--sales
decreased 3.2%, reflecting a shift of spring seasonal products that
helped first-quarter results.
Write to Victoria Stilwell at victoria.stilwell@dowjones.com
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