- Revenues up 6.5 percent to $2.8
billion
- Outdoor & Action Sports revenues
up 14 percent; double-digit growth in every region
- Direct-to-consumer revenues up 16
percent; double-digit growth in every region
- International revenues up 11
percent; double-digit growth in Europe and Asia Pacific
- Gross margin up 130 basis points to
49.4 percent
- Earnings per share up 12 percent to
$0.67
- 2014 revenues now expected to
increase to high end of 7 to 8 percent range
- 2014 earnings per share now expected
to grow 13 percent to $3.06
VF Corporation (NYSE: VFC) today reported financial results for
its first quarter ended March 29, 2014. All per share amounts are
presented on a diluted basis. Driven by continued momentum in its
Outdoor & Action Sports coalition, earnings per share in the
quarter were up 12 percent primarily due to strong demand for The
North Face®, Vans® and Timberland® brands and gross margin
expansion in every coalition.
“VF’s first quarter results reflect the continued strength of
our brands and our global business platforms,” said Eric Wiseman,
VF Chairman, President and Chief Executive Officer. “Led by
outstanding performance from the Outdoor & Action Sports
coalition, which had balanced growth across all channels and
geographies, we delivered strong growth in revenue and
profitability. Looking towards the balance of 2014 – we are
confident in our business plan and look forward to delivering
another record year for our shareholders.”
First Quarter 2014 Review
- Revenues rose 6.5 percent to
$2.8 billion, compared with the same period of 2013, driven by
double-digit growth in our Outdoor & Action Sports,
international and direct-to-consumer businesses.
- Gross margin improved 130 basis
points to 49.4 percent, an all-time high for any quarter in VF’s
history, with improvements in every coalition. The higher gross
margin is primarily driven by the continuing shift of our revenue
mix toward higher margin businesses and includes 30 basis points
related to the previously disclosed change in classification of
retail concession fees.
- SG&A as a percent of
revenues rose 50 basis points to 34.9 percent in the first quarter.
This increase includes 30 basis points related to the inclusion of
retail concession fees.
- Operating income increased 13
percent to $403 million in the first quarter, compared with $358
million in the same period of 2013. Operating margin was
14.5 percent compared with 13.7 percent in the first quarter of
2013.
- Earnings per share increased 12
percent to $0.67 per share compared with $0.60 per share during the
same period last year.
Coalition Review
Revenues for the Outdoor & Action Sports coalition
increased 14 percent in the quarter to $1.6 billion with
double-digit growth across the U.S. and international markets as
well as in wholesale and direct-to-consumer channels.
First quarter revenues for The North Face® brand rose 14 percent
globally driven by nearly 30 percent growth in direct-to-consumer
sales and a high single-digit increase in the brand’s wholesale
business. By region, The North Face® brand’s revenues were up at a
high-teen percentage rate in the Americas region, up at a mid-teen
percentage rate in the Asia Pacific region and up at a low
single-digit percentage in Europe.
Vans® brand revenues, which represented the highest of any VF
brand in the first quarter, were up 20 percent with strong,
double-digit growth across all geographies, as well as in the
brand’s wholesale and direct-to-consumer channels. Revenues in the
Americas region were up at a low-teen percentage rate in the
quarter, up more than 20 percent in Europe and more than 40 percent
in the Asia Pacific region. Global direct-to-consumer revenues for
the Vans® brand were up 19 percent in the quarter.
Revenues for the Timberland® brand were up 12 percent in the
first quarter. In the Americas region, revenues increased at a
high-teen percentage rate including greater than 20 percent growth
in its wholesale business and solid direct-to-consumer results
driven by double-digit comparable store growth rates. In Europe,
the Timberland® brand grew at a high single-digit percentage rate
and in the Asia Pacific region, first quarter revenues were up at a
low double-digit percentage rate. Globally, the Timberland® brand’s
growth was balanced between its direct-to-consumer and wholesale
businesses in the quarter.
Jeanswear first quarter revenues were down 4 percent to
$690 million. Coalition revenues in the Americas region were down
at a high single-digit percentage rate due primarily to ongoing
challenges in the U.S. mid-tier/department store channel and to a
lesser extent, consumer trends in women’s denim. In Europe,
revenues were up at a high single-digit percentage rate and sales
in the Asia Pacific region were up 10 percent.
Revenues for the Wrangler® brand in the first quarter were down
2 percent driven by a low single-digit decline in the Americas
region, partially offset by a high single-digit increase in
European revenues. First quarter revenues for the Lee® brand were
down 1 percent driven by a high single-digit percentage decline in
the Americas region, partially offset by 10 percent growth in
Europe and a mid-teen increase in Asia Pacific sales.
Imagewear revenues were up 4 percent in the quarter to
$263 million driven by particular strength in its Licensed Sports
Group business.
First quarter Sportswear revenues were up 3 percent to
$132 million. Nautica® brand revenues were flat, impacted by a
shift in timing of shipments; second quarter revenues should grow
at a low double-digit rate. The Kipling® brand’s U.S. business
achieved a high-teen percentage rate increase in revenues compared
with the same period last year. Globally, the Kipling® brand grew
23 percent.
In line with expectations amid a challenging premium denim
market, first quarter revenues for the Contemporary Brands
coalition were down 5 percent to $98 million.
International Review
International revenues in the first quarter grew 11 percent (up
10 percent in constant currency). Revenues in Europe rose 12
percent (up 8 percent in constant currency) with positive results
from nearly every brand in VF’s portfolio. In the Asia Pacific
region, revenues were up 16 percent (up 17 percent in constant
currency) driven by 27 percent growth in China (up 25 percent in
constant currency), which included strong results from every brand.
Reported revenues were flat in the Americas (non-U.S.) region (up 8
percent in constant currency). International revenues were 43
percent of total VF first quarter sales in 2014 compared with 42
percent in the same period of 2013.
Direct-to-Consumer Review
Direct-to-consumer revenues grew 16 percent in the first quarter
with double-digit increases in all regions of the world and growth
in nearly every VF brand. Twenty-three stores were opened across
our brands during the quarter bringing the total number of VF owned
retail stores to 1,263. Direct-to-consumer revenues reached 23
percent of total revenues in the first quarter compared with 20
percent in the 2013 period. VF now includes revenues from its
concession locations in its direct-to-consumer business; on a
comparable basis, direct-to-consumer revenues in the first quarter
of 2013 would have been 22 percent of total VF revenue. References
to direct-to-consumer and wholesale revenue growth rates reflect
the change in reporting of concessions in all periods.
Share Repurchase Program
During the first quarter, VF purchased a total of 9.1 million
common shares for approximately $553 million under its Board of
Directors’ share repurchase authorization, which was approved in
December 2013. During the second quarter, the company purchased an
additional 2.9 million shares for $173 million. No additional share
repurchases in 2014 are anticipated at this time.
2014 Revenue and Earnings Outlook Raised
Revenues for 2014 are now expected to increase at the high end
of the previously provided 7 to 8 percent range. Second quarter
revenues are expected to increase at a similar level to that of the
first quarter, and again be driven primarily by strength from our
Outdoor & Action Sports coalition. For the full year, Outdoor
& Action Sports coalition revenues are now expected to be up 12
to 13 percent. Full year gross margin and operating margin
expectations of 49 percent and 15 percent, respectively, remain
unchanged. Based on slightly stronger than expected first quarter
results, earnings per share in 2014 are now expected to increase to
approximately $3.06 per share, representing 13 percent growth over
2013, as compared with the $3.00 to $3.05 per share outlook
provided on February 14.
Dividend Declared
On April 22, 2014, VF’s Board of Directors declared a quarterly
dividend of $0.2625 per share, payable on June 20, 2014 to
shareholders of record on June 10, 2014.
Webcast Information
VF will hold its first quarter conference call and webcast today
at 8:30 a.m. Eastern Time. Interested parties should call
888-318-7470 (domestic) or 719-457-1529 (international) to access
the call. The conference call will be broadcast live and accessible
at www.vfc.com. A replay of the conference call will be available
from April 25 through May 2, 2014, via telephone at 877-870-5176
(access code: 2650165) or at www.vfc.com.
About VF
VF Corporation is a global leader in branded lifestyle apparel
and footwear with more than 30 brands. The company’s five largest
brands are The North Face®, Vans®, Wrangler®, Timberland®, and
Lee®. Other brands include 7 For All Mankind®, Bulwark®, Eagle
Creek®, Eastpak®, Ella Moss®, JanSport®, Kipling®, lucy®,
Majestic®, Napapijri®, Nautica®, Red Kap®, Reef®, Riders®,
Splendid® and SmartWool®. For more information, please visit
www.vfc.com.
Forward Looking Statements
Certain statements included in this release and the attachments
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. You can
identify these statements by the fact that they use words such as
“will,” “anticipate,” “estimate,” “expect,” “should,” and “may” and
other words and terms of similar meaning or use of future dates. 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,
but are not limited to, the level of consumer demand for apparel;
disruption to VF’s distribution system; VF's reliance on a small
number of large customers; the financial strength of VF's
customers; VF's ability to implement its growth strategy; VF's
ability to grow its international and direct-to-consumer
businesses; VF and its customers’ 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
protect trademarks and other intellectual property rights; foreign
currency fluctuations; changes in tax liabilities, 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.
VF CORPORATION
Condensed Consolidated Statements of
Income
(Unaudited)
(In thousands, except per share
amounts)
Three Months Ended March
% 2014 2013
Change Net sales $ 2,750,115 $ 2,582,230 7%
Royalty income 30,663 29,639 3%
Total revenues 2,780,778
2,611,869 6%
Costs and operating expenses Cost
of goods sold 1,406,566 1,355,277 4% Selling, general and
administrative expenses 971,022 898,864
8% 2,377,588 2,254,141 5%
Operating income 403,190 357,728 13% Interest, net
(19,306 ) (20,518 ) 6% Other income (expense), net (2,092 )
1,039 (301%)
Income before income taxes
381,792 338,249 13%
Income taxes 84,599
67,832 25%
Net income $ 297,193
$ 270,417 10%
Earnings per common share Basic
$ 0.68 $ 0.61 11% Diluted $ 0.67 $ 0.60 12%
Weighted
average shares outstanding Basic 438,290 440,272 Diluted
446,266 447,896
Cash dividends per common share $
0.2625 $ 0.2175 21%
Basis of presentation: 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 2014, December 2013 and March
2013 relate to the 13 week and 52 week fiscal periods ended March
29, 2014, December 28, 2013 and March 30, 2013, respectively.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
March December
March 2014 2013 2013
ASSETS Current assets Cash and equivalents $ 321,672
$ 776,403 $ 300,437 Accounts receivable, net 1,310,468 1,360,443
1,208,682 Inventories 1,512,459 1,399,062 1,409,443 Other current
assets 389,922 347,074 341,065 Total current
assets 3,534,521 3,882,982 3,259,627
Property, plant and
equipment 921,970 932,792 866,251
Intangible assets
2,946,959 2,960,201 2,897,701
Goodwill 2,022,086 2,021,750
2,000,703
Other assets 559,616 517,718
466,992 Total assets $ 9,985,152 $ 10,315,443 $ 9,491,274
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Short-term borrowings $ 261,105 $ 18,810 $ 182,206
Current portion of long-term debt 5,142 5,167 402,910 Accounts
payable 467,578 638,732 432,918 Accrued liabilities 807,708
905,292 687,366 Total current liabilities 1,541,533
1,568,001 1,705,400
Long-term debt 1,425,833
1,426,829 1,428,496
Other liabilities 1,262,957 1,243,575
1,268,384
Stockholders' equity 5,754,829
6,077,038 5,088,994 Total liabilities and
stockholders' equity $ 9,985,152 $ 10,315,443 $ 9,491,274
VF CORPORATION
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
(In thousands)
Three Months Ended March 2014
2013 Operating activities Net income $ 297,193
$ 270,417 Depreciation and amortization 64,017 57,948 Other noncash
adjustments to net income 62,796 (4,916 ) Changes in operating
assets and liabilities (410,352 ) (311,775 ) Cash
provided by operating activities 13,654 11,674
Investing
activities Capital expenditures (49,309 ) (102,227 ) Software
purchases (44,654 ) (10,547 ) Other, net (5,170 )
(2,225 ) Cash used by investing activities (99,133 ) (114,999 )
Financing activities Net increase in short-term
borrowings 242,586 169,754 Payments on long-term debt (1,099 ) (707
) Purchases of treasury stock (513,778 ) (281,370 ) Cash dividends
paid (114,776 ) (96,263 ) Net impact of stock issuance
20,807 16,624 Cash used by financing
activities (366,260 ) (191,962 )
Effect of foreign
currency rate changes on cash and equivalents (2,992 )
(1,737 )
Net change in cash and equivalents
(454,731 ) (297,024 )
Cash and equivalents - beginning of
year 776,403 597,461
Cash
and equivalents - end of period $ 321,672 $ 300,437
VF CORPORATION
Supplemental Financial
Information
Business Segment Information
(Unaudited)
(In thousands)
Three Months Ended March %
2014 2013 Change Coalition
revenues Outdoor & Action Sports $ 1,574,647 $ 1,384,274
14% Jeanswear 690,330 717,929 (4%) Imagewear 263,239 252,757 4%
Sportswear 131,505 128,233 3% Contemporary Brands 98,169 103,727
(5%) Other 22,888 24,949 (8%)
Total coalition revenues $ 2,780,778 $ 2,611,869 6%
Coalition profit Outdoor & Action Sports $
274,490 $ 226,502 21% Jeanswear 129,266 143,343 (10%) Imagewear
37,772 31,586 20% Sportswear 12,555 12,216 3% Contemporary Brands
7,902 12,576 (37%) Other (3,116 ) (2,657 ) (17%)
Total coalition profit 458,869 423,566 8%
Corporate and other expenses (57,771 ) (64,799 ) 11%
Interest, net (19,306 ) (20,518 ) 6%
Income before income taxes $ 381,792 $ 338,249
13%
VF CORPORATION
Supplemental Financial
Information
Business Segment Information – Constant
Currency Basis
(Unaudited)
(In thousands)
Three Months Ended March 2014
Exclude As Reported Impact of Foreign under
GAAP Currency Exchange Constant Currency
Coalition revenues Outdoor & Action Sports $
1,574,647 $ 15,343 $ 1,559,304 Jeanswear 690,330 (7,289 ) 697,619
Imagewear 263,239 (1,250 ) 264,489 Sportswear 131,505 - 131,505
Contemporary Brands 98,169 839 97,330 Other 22,888
- 22,888 Total coalition
revenues $ 2,780,778 $ 7,643 $ 2,773,135
Coalition profit Outdoor & Action Sports $
274,490 $ 3,879 $ 270,611 Jeanswear 129,266 916 128,350 Imagewear
37,772 (154 ) 37,926 Sportswear 12,555 - 12,555 Contemporary Brands
7,902 93 7,809 Other (3,116 ) - (3,116
) Total coalition profit 458,869 4,734 454,135
Corporate and other expenses (57,771 ) - (57,771 )
Interest, net (19,306 ) -
(19,306 )
Income before income taxes $ 381,792
$ 4,734 $ 377,058
Constant Currency Financial InformationVF 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
business performed excluding the effects of changes in foreign
currency translation rates. Management believes this information is
useful to investors to facilitate comparison 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.
VF CorporationLance AllegaVice President, Investor
Relations336-424-6082orCarole CrosslinDirector, Corporate
Communications336-424-7836
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