- Revenues up 7 percent to $3.5
billion; earnings per share up 11 percent to $1.08.
- Outdoor & Action Sports revenues
up 11 percent including a 9 percent increase in The North Face®
brand revenues, a 12 percent increase in Vans®, and a 15
percent increase in Timberland®.
- Direct-to-consumer revenues up 16
percent with growth from every brand and double-digit growth in
every region.
- International revenues up 9 percent
(up 10 percent in constant currency) with continued strong growth
in Europe and Asia Pacific.
- Quarterly dividend increased by 22
percent to $0.32 per share.
- Full-year earnings per share outlook
increased to $3.08, representing 14 percent growth over 2013
results.
VF Corporation (NYSE: VFC) today reported financial results for
its third quarter ended Sept. 27, 2014. All per share amounts are
presented on a diluted basis. The Timberland®, Vans®, The North
Face®, Kipling® and Wrangler® brands drove a 7 percent increase in
revenues and an 11 percent increase in earnings per share in the
third quarter.
“Our third quarter results validate our growth strategy and
demonstrate our ability to manage our powerful portfolio in ways
that ensure we deliver solid results,” said Eric Wiseman, VF
Chairman, President and Chief Executive Officer. “Led by another
outstanding performance from our Outdoor & Action Sports
coalition, we delivered strong growth in revenue and earnings. We
are squarely on track to deliver another record year for VF and our
shareholders.”
Third Quarter 2014 Review
- Revenues rose 7 percent to $3.5
billion driven by strong growth in our Outdoor & Action Sports
coalition and our international and direct-to-consumer
businesses.
- Gross margin improved 70 basis
points to 48.3 percent driven primarily by the continuing shift of
our revenue mix toward higher margin businesses.
- SG&A as a percent of
revenues was up 40 basis points to 30.4 percent.
- Operating income increased 9
percent to $633 million in the third quarter, compared with $580
million in the same period of 2013. Operating margin was 18
percent compared with 17.6 percent in the third quarter of
2013.
- Earnings per share increased 11
percent to $1.08 per share compared with $0.97 per share during the
same period last year.
Coalition Review
Revenues for the Outdoor & Action Sports coalition
increased 11 percent in the quarter to $2.2 billion with
double-digit growth in the Americas, European and Asia Pacific
regions.
Third quarter revenues for The North Face® brand rose 9 percent
globally. The North Face® brand’s revenues were up at a low
double-digit percentage rate in the Americas region, up by a mid
single-digit percentage rate in Asia Pacific and up at a low
single-digit rate in Europe. Global direct-to-consumer revenues for
The North Face® brand were up 32 percent.
Vans® brand revenues were up 12 percent with continued, strong
growth across all regions as well as in the brand’s wholesale and
direct-to-consumer businesses. Revenues in the Americas region were
up at a high single-digit rate, impacted by a shift in timing of
shipments; fourth quarter revenues are expected to grow at a
high-teen percentage rate. In Europe, Vans® brand revenues were up
at a mid-teen percentage rate in the quarter, and by nearly 40
percent in the Asia Pacific region. Global direct-to-consumer
revenues for the Vans® brand were up 18 percent in the quarter.
Revenues for the Timberland® brand were up 15 percent in the
third quarter. In the Americas region, revenues were up 22 percent
including more than 30 percent growth in its wholesale business. In
Europe, Timberland® brand revenues were up at a mid-teen percentage
rate and in Asia Pacific, revenues increased at a low single-digit
rate. Globally, the Timberland® brand achieved 18 percent growth in
wholesale revenues and a 6 percent increase in its
direct-to-consumer business in the quarter.
In line with our expectations for sequential quarterly
improvement, Jeanswear third quarter revenues were up
slightly to $750 million. In constant currency, Jeanswear revenues
increased 2 percent in the quarter. 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 unfavorable consumer trends in women’s denim, which, similar to
the second quarter, primarily impacted the Lee® brand. Jeanswear
revenues were down slightly in Europe and up more than 30 percent
in the Asia Pacific region.
Third quarter revenues for the Wrangler® brand were up 3 percent
driven by a low single-digit increase in the Americas region, a mid
single-digit percentage rate decline in European revenues and more
than 30 percent growth in the Asia Pacific region. Third quarter
revenues for the Lee® brand were down 1 percent driven by a low
double-digit percentage revenue decline in the Americas region,
partially offset by 30 percent growth in Asia Pacific and a low
single-digit increase in European sales.
We continue to expect fourth quarter revenue comparisons for the
Jeanswear coalition to be the strongest of the year with a
mid-to-high single-digit percentage increase.
Imagewear revenues were up 3 percent in the quarter to
$293 million driven by a 10 percent increase in its Image business
and a mid single-digit percentage decrease in its Licensed Sports
Group business.
Third quarter Sportswear revenues were up 5 percent to
$163 million. Nautica® brand revenues grew 2 percent and the
Kipling® brand’s U.S. business was up more than 22 percent.
Globally, the Kipling® brand grew 20 percent.
Contemporary Brands coalition revenues were down 5
percent, to $99 million, reflecting continuing challenging consumer
trends in women’s contemporary apparel and premium denim.
International Review
International revenues in the third quarter grew 9 percent, or
10 percent excluding the impact of foreign currency. Revenues in
Europe increased 8 percent and in the Asia Pacific region were up
18 percent, including 19 percent growth in China. Reported revenues
in the Americas (non-U.S.) region were up 4 percent (up 10 percent
in constant currency). International revenues were 41 percent of
total VF third quarter sales in 2014 compared with 40 percent in
the same period of 2013.
Direct-to-Consumer Review
Direct-to-consumer revenues grew 16 percent in the third quarter
with double-digit increases in all regions of the world and growth
in every VF brand with a retail format. Forty-nine stores were
opened during the quarter bringing the total number of VF owned
retail stores to 1,333. Direct-to-consumer revenues reached 22
percent of total revenues in the third quarter compared with 19
percent in the 2013 period. As previously discussed, effective in
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 third quarter of 2013 would have
been 20 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
Quarter end inventories were up 4 percent compared to the same
period in 2013 reflecting VF’s rigorous operational discipline. For
the full year, VF continues to anticipate cash generation from
operations to exceed $1.65 billion.
2014 Outlook
Key points related to VF’s full year 2014 outlook include:
- Revenues are expected to reach
$12.3 billion, growing 8 percent over 2013. Outdoor & Action
Sports revenues are expected to increase by 13 percent. The
Timberland® brand’s annual growth outlook has been strengthened to
13 percent versus the previously anticipated 12 percent
expectation.
- Gross margin is expected to
expand to approximately 49 percent, and operating margin
should reach 15 percent.
- Earnings per share are now
expected to reach $3.08 per share, an increase of $0.02 over the
previous outlook, representing a 14 percent increase over 2013 and
slightly ahead of the company’s long-term financial target. This
new $3.08 outlook includes an estimated $0.02 negative impact due
to currency fluctuations since our prior outlook.
Dividend Declared
On Oct. 16, 2014, VF’s Board of Directors declared a quarterly
dividend of $0.32 per share, reflecting a 22 percent increase over
the previous quarter’s dividend. This dividend will be payable on
Dec. 19, 2014 to shareholders of record at the close of business on
Dec. 9, 2014.
Webcast Information
VF will hold its third quarter conference call and webcast today
at 8:30 a.m. Eastern Time. Interested parties should call
888-542-0999 (domestic) or 719-325-2108 (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 Oct. 20 through Oct. 27, 2014, via telephone at 877-870-5176
(access code: 2986770) or at www.vfc.com.
About VF
VF Corporation (NYSE: VFC) is a global leader in the design,
manufacture, marketing and distribution of branded lifestyle
apparel, footwear and accessories. The company’s highly diversified
portfolio of 30 powerful brands spans numerous geographies, product
categories, consumer demographics and sales channels, giving VF a
unique industry position and the ability to create sustainable,
long-term growth for our customers and shareholders. The company’s
largest brands are The North Face®, Vans®, Timberland®,
Wrangler®, Lee® and Nautica®. For more information,
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,
footwear and accessories; 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 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
September % Nine Months Ended
September % 2014 2013
Change 2014 2013 Change
Net sales $ 3,486,998 $ 3,266,681 7 % $ 8,610,521 $
8,043,638 7 %
Royalty income 33,449
30,588 9 % 92,780 85,911 8 %
Total revenues 3,520,447
3,297,269 7 % 8,703,301 8,129,549
7 %
Costs and operating expenses
Cost of goods sold 1,818,655 1,728,144 5 % 4,464,565 4,226,779 6 %
Selling, general and administrative expenses 1,068,710
989,422 8 % 2,982,656
2,764,005 8 % 2,887,365 2,717,566
6 % 7,447,221 6,990,784 7 %
Operating income 633,082 579,703 9 % 1,256,080
1,138,765 10 % Interest, net (20,703 ) (19,987 ) (4 %)
(59,828 ) (61,224 ) 2 % Other income (expense), net (1,609 )
(1,250 ) (29 %) (4,209 ) (1,723 ) (144 %)
Income before income taxes 610,770 558,466 9 %
1,192,043 1,075,818 11 %
Income taxes 140,241
124,705 12 % 266,639
233,366 14 %
Net income $ 470,529 $
433,761 8 % $ 925,404 $ 842,452 10 %
Earnings per common share Basic $ 1.09 $ 0.99 10 % $ 2.14 $
1.92 11 % Diluted $ 1.08 $ 0.97 11 % $ 2.10 $ 1.89 11 %
Weighted average shares outstanding Basic 430,638 438,180
432,956 438,516 Diluted 437,587 445,620 440,328 446,480
Cash dividends per common share $ 0.2625 $ 0.2175 21 % $
0.7875 $ 0.6525 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 third quarter ends on the
Saturday closest to September 30. For presentation purposes herein,
all references to periods ended September 2014, December 2013 and
September 2013 relate to the 13 week, 52 week and 13 week fiscal
periods ended September 27, 2014, December 28, 2013 and September
28, 2013, respectively.
VF CORPORATION
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
September
December September 2014
2013 2013 ASSETS Current assets
Cash and equivalents $ 496,500 $ 776,403 $ 315,661 Accounts
receivable, net 1,764,636 1,360,443 1,663,118 Inventories 1,822,162
1,399,062 1,752,284 Other current assets 440,915
347,074 362,841 Total current assets 4,524,213 3,882,982
4,093,904
Property, plant and equipment 940,193
932,792 904,809
Intangible assets 2,785,651 2,960,201
2,939,371
Goodwill 1,989,871 2,021,750 2,014,717
Other
assets 575,948 517,718 499,260 Total
assets $ 10,815,876 $ 10,315,443 $ 10,452,061
LIABILITIES
AND STOCKHOLDERS' EQUITY Current liabilities Short-term
borrowings $ 654,839 $ 18,810 $ 468,310 Current portion of
long-term debt 4,374 5,167 2,987 Accounts payable 674,950 638,732
659,135 Accrued liabilities 932,315 905,292
924,228 Total current liabilities 2,266,478 1,568,001 2,054,660
Long-term debt 1,424,311 1,426,829 1,427,138
Other
liabilities 1,262,727 1,243,575 1,341,386
Stockholders' equity 5,862,360 6,077,038
5,628,877 Total liabilities and stockholders' equity $
10,815,876 $ 10,315,443 $ 10,452,061
VF CORPORATION
Condensed Consolidated Statements of
Cash Flows
(Unaudited)
(In thousands)
Nine Months Ended
September 2014 2013
Operating activities Net income $ 925,404 $ 842,452
Depreciation and amortization 200,519 181,109 Other noncash
adjustments to net income 198,667 105,076 Changes in operating
assets and liabilities (957,744 ) (710,561 ) Cash
provided by operating activities 366,846 418,076
Investing activities Capital expenditures (171,606 )
(203,469 ) Software purchases (66,815 ) (41,923 ) Other, net
(16,612 ) (9,896 ) Cash used by investing activities
(255,033 ) (255,288 )
Financing activities Net
increase in short-term borrowings 637,786 457,856 Payments on
long-term debt (3,549 ) (402,141 ) Purchases of treasury stock
(727,536 ) (283,433 ) Cash dividends paid (340,690 ) (286,790 ) Net
impact of stock issuance 57,219 72,848
Cash used by financing activities (376,770 ) (441,660 )
Effect of foreign currency rate changes on cash and
equivalents (14,946 ) (2,928 )
Net
change in cash and equivalents (279,903 ) (281,800 )
Cash and equivalents - beginning of year 776,403
597,461
Cash and equivalents - end
of period $ 496,500 $ 315,661
VF CORPORATION
Supplemental Financial Information
Business Segment Information
(Unaudited)
(In thousands)
Three Months Ended
September % Nine Months
Ended September % 2014
2013 Change 2014
2013 Change Coalition revenues Outdoor
& Action Sports $ 2,180,879 $ 1,971,963 11 % $ 5,034,670 $
4,459,845 13 % Jeanswear 750,446 747,241 0 % 2,046,614 2,076,919 (1
%) Imagewear 292,531 284,480 3 % 805,733 779,064 3 % Sportswear
163,442 155,208 5 % 435,049 416,919 4 % Contemporary Brands 99,382
104,998 (5 %) 293,737 307,339 (4 %) Other 33,767
33,379 1 % 87,498 89,463
(2 %) Total coalition revenues $ 3,520,447 $
3,297,269 7 % $ 8,703,301 $ 8,129,549 7 %
Coalition profit Outdoor & Action Sports $
475,444 $ 421,177 13 % $ 880,618 $ 748,137 18 % Jeanswear 156,998
158,334 (1 %) 386,401 410,551 (6 %) Imagewear 42,855 40,698 5 %
115,944 107,343 8 % Sportswear 22,979 23,987 (4 %) 45,801 52,481
(13 %) Contemporary Brands 4,869 9,456 (49 %) 21,611 29,910 (28 %)
Other 1,193 (47 ) - (1,997 )
(2,195 ) 9 % Total coalition profit 704,338 653,605 8 %
1,448,378 1,346,227 8 %
Corporate and other expenses
(72,865 ) (75,152 ) 3 % (196,507 ) (209,185 ) 6 %
Interest,
net (20,703 ) (19,987 ) (4 %) (59,828 )
(61,224 ) 2 %
Income before income taxes $
610,770 $ 558,466 9 % $ 1,192,043 $ 1,075,818
11 %
VF CORPORATION Supplemental
Financial Information Business Segment Information –
Constant Currency Basis
(Unaudited)
(In thousands)
Three Months Ended September
2014 Exclude As
Reported Impact of Foreign under GAAP Currency
Exchange Constant Currency Coalition
revenues Outdoor & Action Sports $ 2,180,879 $ (4,765 ) $
2,185,644 Jeanswear 750,446 (8,063 ) 758,509 Imagewear 292,531 (402
) 292,933 Sportswear 163,442 - 163,442 Contemporary Brands 99,382
153 99,229 Other 33,767 - 33,767
Total coalition revenues $ 3,520,447 $ (13,077
) $ 3,533,524
Coalition profit Outdoor &
Action Sports $ 475,444 $ (2,911 ) $ 478,355 Jeanswear 156,998 (439
) 157,437 Imagewear 42,855 (136 ) 42,991 Sportswear 22,979 - 22,979
Contemporary Brands 4,869 (44 ) 4,913 Other 1,193
- 1,193 Total coalition profit
704,338 (3,530 ) 707,868
Corporate and other expenses
(72,865 ) - (72,865 )
Interest, net (20,703 )
- (20,703 )
Income before income taxes
$ 610,770 $ (3,530 ) $ 614,300
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 CORPORATION Supplemental Financial
Information Business Segment Information – Constant Currency
Basis
(Unaudited)
(In thousands)
Nine Months Ended September
2014 Exclude As
Reported Impact of Foreign under GAAP Currency
Exchange Constant Currency Coalition
revenues Outdoor & Action Sports $ 5,034,670
$
22,296 $ 5,012,374 Jeanswear 2,046,614 (25,057 ) 2,071,671
Imagewear 805,733 (2,656 ) 808,389 Sportswear 435,049 - 435,049
Contemporary Brands 293,737 2,035 291,702 Other 87,498
- 87,498 Total coalition
revenues $ 8,703,301 $ (3,382 ) $ 8,706,683
Coalition profit Outdoor & Action Sports $ 880,618 $ 532
$ 880,086 Jeanswear 386,401 4 386,397 Imagewear 115,944 (592 )
116,536 Sportswear 45,801 - 45,801 Contemporary Brands 21,611 114
21,497 Other (1,997 ) - (1,997 )
Total coalition profit 1,448,378 58 1,448,320
Corporate
and other expenses (196,507 ) - (196,507 )
Interest, net
(59,828 ) - (59,828 )
Income
before income taxes $ 1,192,043 $ 58 $ 1,191,985
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 Allega, 336-424-6082Vice President, Investor
RelationsorCraig Hodges, 336-424-5636Director, Public Relations
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