By Ben Fox Rubin
VF Corp. (VFC) reported a 14% increase in earnings as the
apparel maker continues to benefit from its heavy investment in the
marketing of its main outdoor and sports business, which includes
Vans and The North Face brands.
The Greensboro, N.C., company also unveiled two
shareholder-friendly moves, saying it will institute a four-for-one
stock split--its first split since 1997--and boost its quarterly
dividend by 21%.
VF, whose clothing brands also include Wrangler and Nautica, has
been able to improve its results thanks to its continued expansion
of its outdoors segment, which was boosted by a 2011 acquisition of
the Timberland brand. Its third-quarter results reinforced the
strength of the segment, its largest contributor to sales, as
revenue in the business jumped 6.5% to $1.97 billion. Within the
segment, the Vans brand, which sells surfing and skateboarding
apparel, was particularly strong, with a 16% rise in revenue.
In addition, VF vowed to remain aggressive in a retail sector
that is dealing with patchy demand amid a shaky economy. Chief
Executive Eric Wiseman said the challenging environment "is the
ideal time to up shift and hit the gas pedal a bit harder on
marketing and product initiatives."
With that in mind, VF said it will commit an additional $40
million in marketing investments in the second half of the year,
with $10 million spent in the third quarter and $30 million planned
for the fourth quarter to help drive business in its top
brands.
The company noted that the marketing effort wasn't a new
strategy for VF, because it made similar marketing pushes in North
Face, Vans and its business in China in previous years.
"Based on our strong results particularly in those three areas
during the past three years, we know this is a strategy that works
and works quite well at VF," Mr. Wiseman said.
Investors seemed pleased by the news. Shares, which have surged
from around $50 in late 2008, continued to hit fresh all-time
highs, reaching a new top of $214.40 on Monday, up 4.9% on the day.
The stock has gained 41% so far this year.
VF reported a profit of $433.8 million, or $3.89 a share, up
from $381.3 million, or $3.42 a share, a year earlier. Excluding
Timberland acquisition-related costs, per-share earnings rose to
$3.91 from $3.52.
Revenue increased 4.7% to $3.3 billion.
In addition to Vans, the outdoor and action-sports segment was
helped by North Face revenue growing 3% and Timberland revenue
adding 2%. VF's jeanswear business saw sales rise 4% to $747
million, driven by growth in the Americas. Wrangler revenue jumped
8%, and Lee revenue was up 3%.
John Kernan, an analyst for Cowen and Company, said that while
others in the retail sector have had to resort to markdowns to work
through inventory, VF has managed its inventory well all year,
allowing the company to protect its profits.
VF's gross margin widened to 47.6% from 46.7%, aided by the
company's shift to higher-margin businesses, including the outdoor
and action-sports business, as well as lower production costs.
Mr. Kernan added that the company's increased focus on Vans,
North Face and Timberland should continue to benefit results.
"There's still a lot of growth in those brands internationally
and domestically, so they can continue to drive improvement in
their returns and operating margins," he said.
Write to Ben Fox Rubin at ben.rubin@wsj.com
Order free Annual Report for VF Corp.
Visit http://djnweurope.ar.wilink.com/?ticker=US9182041080 or
call +44 (0)208 391 6028
Subscribe to WSJ: http://online.wsj.com?mod=djnwires