- Prachi Singh |
Revenues at VF Corporation for its second quarter ended July 2, 2016, increased 1 percent to 2.4 billion dollars driven by positive results from outdoor & action sports, jeanswear and imagewear coalitions and direct-to-consumer and international businesses. Operating income on a reported basis was down 3 percent to 211 million dollars and earnings per share were 0.35 dollar compared with 0.39 dollar during the same period last year. Excluding the negative impact of foreign currency, earnings per share were down 6 percent.
“Our second quarter results were in line with our expectations, despite a challenging environment with mixed economic and currency conditions around the world,” said Eric Wiseman, VF Chairman and CEO, adding, “Earlier this year, we said we would actively manage our portfolio of brands and we’re doing just that. We expect to deliver on our current 2016 outlook.”
Highlights of the second quarter trading
On June 30, 2016, the company finalised a deal to sell its Contemporary Brands businesses, which include the 7 For All Mankind, Splendid and Ella Moss brands, to Delta Galil Industries for 120 million dollars. The company’s net loss from discontinued operations was 97 million dollars in the second quarter.
Second quarter revenue for outdoor & action sports was up 2 percent to 1.4 billion dollars. Revenue for The North Face brand was up 2 percent including low single-digit growth in the Americas; a high-teen percentage rate increase in Europe up low-teen currency neutral and a high-teen percentage rate decline in Asia-Pacific. Vans brand revenue was up 4 percent or 6 percent currency neutral driven by a high single-digit percentage rate increase in the Americas business; a high single-digit percentage rate increase in Asia-Pacific or up mid-teen currency neutral) and a high single-digit percentage rate decrease in Europe. Timberland brand revenue was down 7 percent including a high-teen percentage rate decrease in the Americas region; a low double-digit percentage rate increase in Europe and up high single-digit currency neutral and, a high single-digit decline in Asia-Pacific.
Jeanswear revenue was up 3 percent or 6 percent currency neutral to 629 million dollars. Wrangler brand revenue was up 2 percent and 4 percent currency neutral with a low single-digit percentage rate increase in the Americas business or up mid-single-digit currency neutral; a low single-digit percentage rate increase in Europe and up mid-single-digit currency neutral; and, a low double-digit decline in the Asia-Pacific region and down high single-digit currency neutral. Revenue for the Lee brand was up 8 percent or up 10 percent currency neutral including a high single-digit percentage rate increase in the Americas region or up low double-digit currency neutral; a mid-teen percentage rate increase in Europe; and, a low single-digit percentage rate increase in the Asia-Pacific region or up mid-single-digit currency neutral.
Imagewear revenue was up 3 percent to 255 million dollars with a mid-teen percentage rate increase in the licensed sports group business partially offset by a high single-digit decline in the workwear business or down mid-single-digit currency neutral, which continues to be impacted by oil and gas exploration declines. Sportswear revenue declined 19 percent to 115 million dollars including a 20 percent decrease in Nautica brand revenue and a mid-teen decrease in the Kipling brand’s North American business compared with the same period last year.
International and direct to consumer financial review
International revenue in the second quarter was up 5 percent or 7 percent currency neutral. Revenue in Europe was up 5 percent or 3 percent currency neutral and in the Asia-Pacific region was up 4 percent or 6 percent currency neutral. Revenue in the Americas region was up 7 percent or 20 percent currency neutral.
Direct-to-consumer revenue was up 6 percent or 7 percent currency neutral in the second quarter driven by a low double-digit percentage rate increase in the outdoor & action sports business, which was partially offset by a mid-teen decline in sportswear. The company’s ecommerce business continued its strong momentum with a nearly 30 percent increase in revenue. Excluding the Contemporary Brands coalition, there were 1,461 VF-owned retail stores at the end of the quarter compared with 1,319 for last year’s same period.
2016 Outlook Highlights
For the fiscal year 2016, revenue is expected to increase 3 to 4 percent versus the previous outlook of a mid-single-digit percentage rate increase. Revenue for the outdoor & action sports coalition is now expected to increase at a mid-single-digit percentage rate compared with previous expectations of a high single-digit percentage rate increase.
Jeanswear revenue is still expected to grow at a mid-single-digit currency neutral percentage rate and expectations for Imagewear growth remains the same at a low single-digit percentage rate increase. Sportswear coalition revenue is now expected to decline at a low double-digit percentage rate versus the previous expectation of a slight decline.
The company said that the exclusion of Contemporary Brands in continuing operations results in a reduction of earnings per share by 0.03 dollar from its previous outlook for 2016. Accordingly, reported earnings per share is expected to increase 5 percent to 3.20 dollars (up 11 percent currency neutral) compared to EPS from continuing operations of 3.04 dollars in 2015.
VF’s Board of Directors declared a quarterly dividend of 0.37 dollars per share.