VF Corp Q2 revenues up 10 percent, updates outlook

Reporting its financial results for the second quarter, VF Corporation said that revenues rose 10 percent on a currency neutral basis driven by growth in Outdoor & Action Sports and Jeanswear coalitions, and international and direct-to-consumer businesses. On a reported basis, revenue increased 5 percent over the 2014 quarter.

Gross margin was 48.3 percent on a reported basis, down 10 basis points compared with the same quarter last year. Operating income on a reported basis was up 1 percent to 223 million dollars compared with the same period in 2014. Operating margin on a reported basis declined 30 basis points to 8.9 percent due to the negative impact from changes in foreign currency rates. Earnings per share were up 22 percent on a currency neutral basis and up 11 percent on a reported basis compared with last year’s same period.

Second quarter revenue for the Outdoor & Action Sports coalition was up 16 percent on a currency neutral basis and up 9 percent on reported basis to 1.4 billion dollars driven by a similar growth rate in both its wholesale and direct-to-consumer businesses. Revenue for The North Face brand rose 10 percent or up 6 percent reported, including a 20 percent increase or up 15 percent reported in its direct-to-consumer business. By region, The North Face brand’s revenue was up at a low double-digit percentage rate in the Americas, up at a mid-single-digit rate or down low-teen percentage reported in Europe and up at a low-teen percentage rate in the Asia Pacific region.

Currency neutral revenue for the Vans brand was up 23 percent or up 17 percent reported including a 25 percent increase or up 21 percent reported in direct-to-consumer sales and 22 percent growth or up 15 percent reported in wholesale sales. Revenue in the Americas region was up greater than 20 percent or up more than 30 percent in the Asia Pacific region, and up at a mid-teen percentage rate or down mid-single-digit reported in Europe. In 2015, the company continues to expect a mid-teen currency neutral percentage rate increase in revenue for the Vans brand.

Second quarter revenue for the Timberland brand was up 10 percent on a currency neutral basis or up 2 percent reported including a 17 percent increase or 9 percent reported in its wholesale business. In the Americas region, revenue was up at a mid-single-digit percentage rate or low single-digit reported. In Asia Pacific, revenue was up at a high single-digit percentage rate or low single-digit reported and in Europe, up at a high-teen percentage rate or down slightly reported. There is no change to the company’s expectation for Timberland brand revenue to increase at a low-teen percentage rate on a currency neutral basis in 2015.

Second quarter operating income for Outdoor & Action Sports was up 3 percent to 135 million dollars as reported and operating margin declined 50 basis points to 9.7 percent, due to changes in foreign currency rates. Jeanswear second quarter currency neutral revenue was up 4 percent and flat reported, at 608 million dollars. Revenue for the Americas region improved at a mid-single-digit percentage rate or low-single-digit reported. In Europe, revenue was flat and down high-teen reported and in the Asia Pacific region, revenue increased at a low double-digit percentage rate.

Currency neutral revenue for the Wrangler brand in the second quarter was up 7 percent or 4 percent reported driven by strength in the Americas region, which realized high single-digit growth or mid-single-digit reported. Revenue in Europe was down at a mid-single-digit rate or more than 20 percent reported due to ongoing weakness in Eastern Europe and up more than 20 percent or high-teen reported in the Asia Pacific region.

Global revenue, on a currency neutral basis, for the Lee brand was up 1 percent or down 4 percent reported including a low double-digit percentage rate increase or up high single-digit reported in Asia Pacific and a mid-single-digit increase or down mid-teen reported in Europe. Revenue in the Americas region was down at a low single-digit rate or mid-single-digit reported.

Imagewear revenue was flat at 249 million dollars in the second quarter, driven by a mid-single-digit increase in the Licensed Sports Group business offset by a low single-digit percentage rate decline or down mid-single reported in the workwear business due to slower oil production demand. Sportswear second quarter revenue increased 1 percent to 142 million dollars. Nautica brand revenue was down at a low single-digit percentage rate and the Kipling brand’s revenue in the U.S. was up 20 percent compared with the same period last year. Contemporary Brands coalition currency neutral revenue was down 5 percent or 10 percent reported to 87 million dollars as demand in the category remains challenged.

International revenue, on a currency neutral basis, was up 13 percent or down 1 percent reported. Revenue in Europe was up 11 percent and down 8 percent reported) and up 17 percent or 14 percent reported in the Asia Pacific region. Revenue in the Americas (non-U.S.) region was up 11 percent and down 1 percent reported. On a reported basis, the international business was 34 percent of total VF second quarter revenue compared with 36 percent in the same period of 2014. Direct-to-consumer revenue, on a currency neutral basis, grew 13 percent or up 7 percent reported in the second quarter with positive comparable sales growth in all regions and particular strength in Asia Pacific. Forty-nine stores were opened during the second quarter bringing the total number of VF-owned retail stores around the world to 1,438. On a reported basis, direct-to-consumer revenue reached 26 percent of total revenue in the second quarter, the same percentage as last year’s second quarter.

Full year revenue expectations are unchanged, with an 8 percent increase on a currency neutral basis and 3 percent reported. Revenue for the Outdoor & Action Sports coalition is expected to increase at a low double-digit currency neutral percentage rate or mid-single-digit reported). Jeanswear is now expected to grow at a mid-single-digit currency neutral rate and low single-digit reported compared with the previous expectation of a low single-digit increase. Imagewear and Sportswear coalition revenue is expected to grow at a mid-single-digit currency neutral percentage rate. Contemporary Brands revenue is now expected to be down at a mid-single-digit currency neutral rate or down at a high single-digit reported rate. Earnings per share, on a currency neutral basis, is now expected to increase 15 percent compared to an adjusted EPS of 3.08 dollars in 2014. Earnings per share, on a reported basis, is now anticipated to increase by 5 percent to 3.22 dollars compared to adjusted earnings per share of 3.08 dollars in 2014.

Third quarter currency neutral and reported revenues are expected to increase at nearly the same rates as those of the second quarter driven by strength from the Outdoor & Action Sports and Jeanswear coalitions, our international operations and continued strength in our direct-to-consumer businesses. Fourth quarter currency neutral revenue should increase at a rate slightly lower than third quarter results. VF’s Board of Directors declared a quarterly dividend of 0.32 dollars per share.