V.F. Corp's 1Q Earnings Surge, Rev Lags - Analyst Blog
April 26 2013 - 10:50AM
Zacks
V.F. Corporation (VFC) reported first-quarter
2013 adjusted earnings of $2.43 per share, speeding ahead of the
year-ago earnings of $1.94 and Zacks Consensus Estimate of $2.17.
The year-over-year increase was primarily driven by strong top-line
growth and improved margins.
Quarter in Detail
V.F. Corp.'s first-quarter revenue of $2,611.9 million fell short
of the Zacks Consensus Estimate of $2,652 million. However, it grew
2.2% compared with the year-ago period, on the back of robust
growth in Outdoor & Action Sports, international and
direct-to-consumer revenues. However, the sale of John Varvatos in
Apr 2012 had a negative impact of 1 percentage point on
revenue.
Gross margin in the quarter increased 240 basis points to 48.1%
from 45.7% in the comparable year-ago quarter, resulting from an
improvement in higher margin businesses and lower product costs.
Moreover, adjusted operating margin expanded 130 basis points to
13.8%, reflecting higher gross margin.
Segment Details
Revenue at Outdoor & Action Sports surged 10%
from the year-ago quarter to $1.384 billion. Continued growth
momentum at the company’s The North Face, Vans brands and at
Timberland brand contributed to the revenue growth. Segment
operating income increased 12% year over year, while operating
margin expanded 40 basis points to 16.4%.
Jeanswear revenue declined 3% to $718 million. The
decline was attributed to lower sales in the Americas region,
difficult conditions in the mid-tier channel as well as weak
performance in Europe and Asia. However, the company witnessed
significant growth in the segment’s operating income and margin,
mainly on lower product costs and improved operating efficiencies.
Segment operating income rose 29% year over year to $143
million.
Imagewear revenue dipped 9% in the quarter to $253
million. Moreover, operating income and margin at the segment
declined 12.5% due to lower volumes.
Revenue at Sportswear increased 4% to $128 million
driven by increased Nautica and Kipling brands revenue. Segment
operating income increased 13.9% primarily due to robust revenue
growth and operational efficiencies.
Contemporary Brands’ revenue slumped 18% to $104
million due to the sale of John Varvatos. Operating income
decreased 15% during the quarter, while adjusted operating margin
expanded 40 basis points on the back of increased
direct-to-consumer business.
The company’s International revenues increased 6%.
The growth was largely driven by strength across the biggest brands
in America, Asia and Europe.
Direct-to-Consumer revenue increased 12%, driven
by the addition of 20 new stores and improved contributions from
The North Face, Vans and Timberland brands. The company’s total
owned retail stores were 1,132 at the end of first quarter.
Direct-to-consumer revenues reached 20% of VF’s first quarter total
revenues.
Balance Sheet
V.F. Corp. ended the quarter with cash and cash equivalents of
$300.4 million and long-term debt of $1.428.5 million. The
company’s shareholders’ equity came in at $5.089 billion at the end
of first-quarter 2013.
Dividend
The board of directors at this Zacks Rank #3 (Hold) company
declared a quarterly cash dividend of 87 cents per share. Dividend
will be paid on Jun 20, 2013 to shareholders of record as of Jun
10, 2013.
Looking into 2013
The company expects fiscal 2013 revenue to increase 6% to $11.5
billion. Gross and operating margins are anticipated to expand by
100 basis points.
Based on the better-than-expected first quarter results, V.F. Corp.
projects its adjusted earnings for fiscal 2013 to rise by 5 cents
to $10.75 per share, compared to the previous forecast of $10.70
per share.
Other Stocks to Consider
Other stocks in the apparel industry that are worth considering
include G-III Apparel Group Ltd. (GIII),
Ralph Lauren Corporation (RL) and Under
Armour Inc. (UA), all of which carry a Zacks Rank #2
(Buy).
G-III APPAREL (GIII): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis Report
UNDER ARMOUR-A (UA): Free Stock Analysis Report
V F CORP (VFC): Free Stock Analysis Report
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