- Revenues up 8 percent to $2.4
billion; earnings per share up 16 percent to $0.36.
- Outdoor & Action Sports revenues
up 16 percent including an 11 percent increase in The North
Face® brand revenues, a 21 percent increase in Vans®
brand revenues, and a 19 percent increase in Timberland®
brand revenues.
- Direct-to-consumer revenues up 18
percent with strong results from nearly every brand and
double-digit growth in every region.
- International revenues up 14 percent
with double-digit growth in Europe and Asia Pacific.
- Full year earnings per share
expected to increase 13 percent to $3.06.
VF Corporation (NYSE: VFC) today reported financial results for
its second quarter ended June 28, 2014. All per share amounts are
presented on a diluted basis. Strong contribution from our Vans®,
Timberland®, The North Face®, Kipling® and Wrangler® brands drove
an 8 percent increase in revenues and a 16 percent increase in
earnings per share in the second quarter.
“Our strong second quarter results, led by our Outdoor &
Action Sports coalition, put us right in line with our full-year
outlook and long-term growth commitments,” said Eric Wiseman, VF
Chairman, President and Chief Executive Officer. “Looking toward
the second half of 2014, our powerful brands and platforms have us
well-positioned to continue our momentum and deliver another record
year for VF and its shareholders.”
Second Quarter 2014 Review
- Revenues rose 8 percent to $2.4
billion driven by double-digit growth in our Outdoor & Action
Sports, international and direct-to-consumer businesses.
- Gross margin was 48.4 percent,
down 10 basis points against last year’s same period. Continued
benefit from the shift of our revenue mix toward higher margin
businesses was offset by foreign currency impact, as anticipated,
and efforts to aggressively manage inventories especially in our
Jeanswear business. The company’s expectation for a 90 basis point
improvement for the full year remains unchanged.
- SG&A as a percent of
revenues was down 10 basis points to 39.3 percent.
- Operating income increased 9
percent to $220 million in the second quarter, compared with $201
million in the same period of 2013. Operating margin was 9.2
percent compared with 9.1 percent in the second quarter of
2013.
- Earnings per share increased 16
percent to $0.36 per share compared with $0.31 per share during the
same period last year.
Coalition Review
Revenues for the Outdoor & Action Sports coalition
increased 16 percent in the quarter to $1.3 billion with
double-digit growth in the Americas, European and Asia Pacific
regions.
Second quarter revenues for The North Face® brand rose 11
percent globally driven by 37 percent growth in direct-to-consumer
sales and a low single-digit increase in the brand’s wholesale
business. The North Face® brand’s revenues were up at a mid-teen
percentage rate in the Americas region, up by a high single-digit
percentage rate in Europe and down at a mid single-digit rate in
the Asia Pacific region, where we expect the brand to return to
double-digit growth in the second half of the year.
Vans® brand revenues were up 21 percent with strong,
double-digit growth across all regions as well as in the brand’s
wholesale and direct-to-consumer channels. Revenues in the Americas
and European regions were up at a high-teen percentage rate in the
quarter, and by more than 40 percent in the Asia Pacific region.
Global direct-to-consumer revenues for the Vans® brand were up 27
percent in the quarter.
Revenues for the Timberland® brand were up 19 percent in the
second quarter. In the Americas region, revenues were up nearly 25
percent including more than 35 percent growth in its wholesale
business and flat results in direct-to-consumer sales. In Europe
and the Asia Pacific region, Timberland® brand revenues were up at
a mid-teen percentage rate. Globally, the Timberland® brand
achieved 10 percent growth in its direct-to-consumer business and
more than 25 percent growth in wholesale revenues in the
quarter.
In line with expectations, Jeanswear second quarter
revenues were down 1 percent to $606 million. Coalition revenues in
the Americas region were down at a low single-digit percentage rate
due to ongoing challenges in the U.S. mid-tier/department store
channel and consumer trends in women’s denim, which primarily
impacted the Lee® brand. In Europe, revenues were up at a mid-teen
percentage rate and sales in the Asia Pacific region were up at a
low single-digit rate.
Second quarter revenues for the Wrangler® brand were up 4
percent driven by a mid single-digit increase in the Americas
region and a high single-digit percentage rate increase in European
revenues. Second quarter revenues for the Lee® brand were down 7
percent driven by a mid-teen percentage revenue decline in the
Americas region, offset by 25 percent growth in Europe and a mid
single-digit increase in Asia Pacific sales.
Imagewear revenues were up 3 percent in the quarter to
$250 million driven by a mid single-digit increase in its Image
business and a low single-digit increase in its Licensed Sports
Group business.
Second quarter Sportswear revenues were up 5 percent to
$140 million. Nautica® brand revenues grew 2 percent as the brand
faces challenging market dynamics in the U.S. department store
channel. The Kipling® brand’s U.S. business was up at a high-teen
percentage rate compared with the same period last year. Globally,
the Kipling® brand grew 27 percent.
As expected, Contemporary Brands coalition revenues were
down 2 percent, to $96 million, reflecting challenging consumer
trends in women’s premium denim.
International Review
International revenues in the second quarter grew 14 percent.
Revenues in Europe rose 16 percent (up 11 percent in constant
currency) with positive results from nearly every brand in VF’s
portfolio. In the Asia Pacific region, revenues were up 17 percent
(up 18 percent in constant currency) including 15 percent growth in
China (up 13 percent in constant currency). Reported revenues in
the Americas (non-U.S.) region were up 6 percent (16 percent in
constant currency). International revenues were 36 percent of total
VF second quarter sales in 2014 compared with 34 percent in the
same period of 2013.
Direct-to-Consumer Review
Direct-to-consumer revenues grew 18 percent in the second
quarter with double-digit increases in all regions of the world and
growth in nearly every VF brand with a retail format. Forty-one
stores were opened during the quarter bringing the total number of
VF owned retail stores to 1,299. Direct-to-consumer revenues
reached 26 percent of total revenues in the second quarter compared
with 22 percent in the 2013 period. As previously discussed,
effective fiscal 2014, VF now includes revenues from its concession
locations in its direct-to-consumer business; on a comparable
basis, direct-to-consumer revenues in the second quarter of 2013
would have been 23 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.
Balance Sheet Review
Inventories were up 6 percent from June 2013 reflecting VF’s
rigorous operational discipline. For the full year, VF continues to
anticipate cash generation from operations to exceed $1.65
billion.
Share Repurchase Program
During the second quarter, the company purchased an additional
2.9 million shares for $173 million under its Board of Directors’
authorization, which was approved in December 2013. No additional
share repurchases in 2014 are anticipated at this time.
2014 Outlook
The outlook for the full year remains unchanged with revenues
projected to increase 8 percent, and gross margin and operating
margin expected to reach 49 percent and 15 percent, respectively.
Earnings per share in 2014 are expected to reach $3.06 per share.
Third quarter revenues are expected to increase at a rate similar
to that of the second quarter driven primarily by strength within
the Outdoor & Action Sports coalition, our international
operations and continued strength in our direct-to-consumer
businesses. The strongest growth and profit comparisons of the year
are expected in the fourth quarter, when direct-to-consumer
represents the most significant contribution of the year.
Dividend Declared
On July 15, 2014, VF’s Board of Directors declared a quarterly
dividend of $0.2625 per share, payable on September 19, 2014 to
shareholders of record on September 9, 2014.
Webcast Information
VF will hold its second quarter conference call and webcast
today at 8:30 a.m. Eastern Time. Interested parties should call
888-397-5350 (domestic) or 719-325-2272 (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 July 18 through July 25, 2014, via telephone at 877-870-5176
(access code: 6759503) 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 June % Six Months Ended
June % 2014 2013
Change 2014 2013
Change Net sales $ 2,373,408 $
2,194,727 8 % $ 5,123,523 $ 4,776,957 7 %
Royalty income
28,668 25,684 12 % 59,331
55,323 7 %
Total revenues
2,402,076 2,220,411 8 % 5,182,854
4,832,280 7 %
Costs and operating
expenses Cost of goods sold 1,239,344 1,143,358 8 % 2,645,910
2,498,635 6 % Selling, general and administrative expenses
942,924 875,719 8 % 1,913,946
1,774,583 8 % 2,182,268
2,019,077 8 % 4,559,856 4,273,218
7 %
Operating income 219,808 201,334 9 %
622,998 559,062 11 % Interest, net (19,819 ) (20,719 ) 4 %
(39,125 ) (41,237 ) 5 % Other income (expense), net (508 )
(1,512 ) 66 % (2,600 ) (473 ) (450 %)
Income before income taxes 199,481 179,103 11 % 581,273
517,352 12 %
Income taxes 41,799
40,829 2 % 126,398 108,661 16 %
Net income $ 157,682 $ 138,274 14 % $
454,875 $ 408,691 11 %
Earnings per common
share Basic $ 0.37 $ 0.32 16 % $ 1.05 $ 0.93 12 % Diluted $
0.36 $ 0.31 16 % $ 1.03 $ 0.91 13 %
Weighted average
shares outstanding Basic 429,940 437,096 434,115 438,684
Diluted 437,131 445,916 441,699 446,904
Cash dividends
per common share $ 0.2625 $ 0.2175 21 % $ 0.5250 $ 0.4350 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 second quarter ends on the
Saturday closest to June 30. For presentation purposes herein, all
references to periods ended June 2014, December 2013 and June 2013
relate to the 13 week, 52 week and 13 week fiscal periods ended
June 28, 2014, December 28, 2013 and June 29, 2013, respectively.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
June December June
2014 2013 2013 ASSETS Current
assets Cash and equivalents $ 475,891 $ 776,403 $ 320,112
Accounts receivable, net 1,178,874 1,360,443 1,060,778 Inventories
1,615,245 1,399,062 1,522,809 Other current assets 509,902
347,074 394,008 Total current assets 3,779,912
3,882,982 3,297,707
Property, plant and equipment
921,970 932,792 883,197
Intangible assets 2,921,335
2,960,201 2,889,106
Goodwill 2,018,997 2,021,750 2,001,375
Other assets 573,113 517,718 478,182
Total assets $ 10,215,327 $ 10,315,443 $ 9,549,567
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Short-term borrowings $ 581,120 $ 18,810 $ 46,350
Current portion of long-term debt 4,334 5,167 402,949 Accounts
payable 537,192 638,732 555,719 Accrued liabilities 747,678
905,292 639,280 Total current liabilities 1,870,324
1,568,001 1,644,298
Long-term debt 1,425,123
1,426,829 1,427,823
Other liabilities 1,266,512 1,243,575
1,293,389
Stockholders' equity 5,653,368
6,077,038 5,184,057 Total liabilities and
stockholders' equity $ 10,215,327 $ 10,315,443 $ 9,549,567
VF CORPORATION
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
(In thousands)
Six Months Ended June 2014
2013 Operating activities
Net income $ 454,875 $ 408,691 Depreciation and amortization
131,201 116,715 Other noncash adjustments to net income 80,152
48,167 Changes in operating assets and liabilities (446,641
) (282,160 ) Cash provided by operating activities 219,587
291,413
Investing activities Capital expenditures
(95,844 ) (155,454 ) Software purchases (56,042 ) (28,715 ) Other,
net (11,701 ) (4,307 ) Cash used by investing
activities (163,587 ) (188,476 )
Financing activities
Net increase in short-term borrowings 562,315 34,783 Payments on
long-term debt (2,697 ) (1,417 ) Purchases of treasury stock
(727,536 ) (281,586 ) Cash dividends paid (227,625 ) (191,460 ) Net
impact of stock issuance 43,528 64,002
Cash used by financing activities (352,015 ) (375,678 )
Effect of foreign currency rate changes on cash and
equivalents (4,497 ) (4,608 )
Net
change in cash and equivalents (300,512 ) (277,349 )
Cash and equivalents - beginning of year 776,403
597,461
Cash and equivalents - end
of period $ 475,891 $ 320,112
VF CORPORATION
Supplemental Financial
Information
Business Segment Information
(Unaudited)
(In thousands)
Three Months Ended
June % Six Months Ended June %
2014 2013 Change
2014 2013 Change
Coalition revenues Outdoor & Action Sports $ 1,279,144 $
1,103,608 16 % $ 2,853,791 $ 2,487,882 15 % Jeanswear 605,838
611,749 (1 %) 1,296,168 1,329,678 (3 %) Imagewear 249,963 241,827 3
% 513,202 494,584 4 % Sportswear 140,102 133,478 5 % 271,607
261,711 4 % Contemporary Brands 96,186 98,614 (2 %) 194,355 202,341
(4 %) Other 30,843 31,135 (1 %)
53,731 56,084 (4 %) Total coalition
revenues $ 2,402,076 $ 2,220,411 8 % $ 5,182,854
$ 4,832,280 7 %
Coalition profit
Outdoor & Action Sports $ 130,684 $ 100,458 30 % $ 405,174 $
326,960 24 % Jeanswear 100,137 108,874 (8 %) 229,403 252,217 (9 %)
Imagewear 35,317 35,059 1 % 73,089 66,645 10 % Sportswear 10,267
16,278 (37 %) 22,822 28,494 (20 %) Contemporary Brands 8,840 7,878
12 % 16,742 20,454 (18 %) Other (74 ) 509 (115
%) (3,190 ) (2,148 ) (49 %) Total coalition
profit 285,171 269,056 6 % 744,040 692,622 7 %
Corporate
and other expenses (65,871 ) (69,234 ) 5 % (123,642 ) (134,033
) 8 %
Interest, net (19,819 ) (20,719 ) 4 %
(39,125 ) (41,237 ) 5 %
Income before
income taxes $ 199,481 $ 179,103 11 % $ 581,273
$ 517,352 12 %
VF CORPORATION
Supplemental Financial
Information
Business Segment Information – Constant
Currency Basis
(Unaudited)
(In thousands)
Three Months Ended June 2014
Exclude As Reported Impact of Foreign under
GAAP Currency Exchange Constant Currency
Coalition revenues Outdoor & Action Sports $ 1,279,144 $
13,509 $ 1,265,635 Jeanswear 605,838 (9,705 ) 615,543 Imagewear
249,963 (1,004 ) 250,967 Sportswear 140,102 - 140,102 Contemporary
Brands 96,186 1,043 95,143 Other 30,843 -
30,843 Total coalition revenues $
2,402,076 $ 3,843 $ 2,398,233
Coalition profit Outdoor & Action Sports $ 130,684 $ (60
) $ 130,744 Jeanswear 100,137 (473 ) 100,610 Imagewear 35,317 (302
) 35,619 Sportswear 10,267 - 10,267 Contemporary Brands 8,840 65
8,775 Other (74 ) - (74 ) Total
coalition profit 285,171 (770 ) 285,941
Corporate and
other expenses (65,871 ) - (65,871 )
Interest, net
(19,819 ) - (19,819 )
Income
before income taxes $ 199,481 $ (770 ) $ 200,251
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 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 CORPORATION
Supplemental Financial
Information
Business Segment Information – Constant
Currency Basis
(Unaudited)
(In thousands)
Six Months Ended June 2014 Exclude
As Reported Impact of Foreign under
GAAP Currency Exchange Constant Currency
Coalition revenues Outdoor & Action Sports $ 2,853,791 $
27,061 $ 2,826,730 Jeanswear 1,296,168 (16,994 ) 1,313,162
Imagewear 513,202 (2,254 ) 515,456 Sportswear 271,607 - 271,607
Contemporary Brands 194,355 1,882 192,473 Other 53,731
- 53,731 Total coalition
revenues $ 5,182,854 $ 9,695 $ 5,173,159
Coalition profit Outdoor & Action Sports $
405,174 $ 3,443 $ 401,731 Jeanswear 229,403 443 228,960 Imagewear
73,089 (456 ) 73,545 Sportswear 22,822 - 22,822 Contemporary Brands
16,742 158 16,584 Other (3,190 ) -
(3,190 ) Total coalition profit 744,040 3,588 740,452
Corporate and other expenses (123,642 ) - (123,642 )
Interest, net (39,125 ) -
(39,125 )
Income before income taxes $ 581,273
$ 3,588 $ 577,685
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 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 Allega, 336-424-6082, Vice President,
Investor RelationsorCraig Hodges, 336-424-5636, Director, Public
Relations
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