- Prachi Singh |
For its second quarter, VF Corporation (VFC) reported revenue increase of 2 percent or 3 percent currency neutral to 2.4 billion dollars. The company said that the sales rise was driven by broad-based strength across its international and direct-to-consumer platforms, outdoor & action sports coalition, and our workwear businesses. Earnings per share on a reported basis were however down 11 percent to 0.29 dollar compared to 0.32 dollar during the same period last year but were in line with last year’s second quarter, excluding the impact of changes in foreign currency.
“VF’s second quarter results were solid and consistent with our expectations, driven by strong results from our largest global brands, the company’s international and direct-to-consumer platforms, and our growing workwear businesses,” said the company’s Steve Rendle, President and Chief Executive Officer in a statement.
Second quarter financial update
Gross margin for the quarter improved 80 basis points to 49.7 percent on a reported basis, as the company said, benefits from pricing, lower product costs and a mix shift toward higher margin businesses were partially offset by changes in foreign currency. Changes in foreign currency negatively affected reported gross margin by 80 basis points during the quarter.
Operating income on a reported basis was down 14 percent to 168 million dollars compared to the same period of 2016. Changes in foreign currency, VFC said, negatively affected the operating profit decline by 8 percentage points during the quarter. Operating margin on a reported basis decreased 130 basis points to 7.1 percent. Changes in foreign currency negatively affected reported operating margin by about 70 basis points in the quarter.
VFC updates FY17 outlook
For the fiscal year 2017, the company now expects revenue to approximate 11.65 billion dollars, up 2 percent on a reported basis or 3 percent currency neutral. By coalition, revenue for outdoor & action sports is now expected to increase approximately 5 percent or 6 to 7 percent currency neutral versus the previous expectation of a mid-single-digit percentage rate increase; revenue for jeanswear is still expected to approximate 2016 revenue; imagewear revenue is now expected to increase at a mid-single-digit percentage rate versus the prior expectation of a low single-digit percentage rate increase; and sportswear is still expected to decline at a high single-digit percentage rate.
Direct-to-consumer revenue is now expected to increase between 10 percent and 11 percent versus the previous expectation of a high single-digit percentage rate increase. Digital revenue is now expected to increase more than 25 percent.
The company’s gross margin is now expected to reach 49.8 percent, versus the previous expectation of 49.6 percent, a 40 basis point increase over 2016 gross margin, and includes about a 70 basis point negative impact from changes in foreign currency. Operating margin is still expected to approximate 14 percent, consistent with the 2016 adjusted operating margin, including about a 60 basis point negative impact from changes in foreign currency.
Earnings per share is now expected to be 2.94 dollars, down approximately 1 percent on a reported basis (up at a mid-single-digit percentage rate currency neutral) compared to 2016 adjusted EPS of 2.98 dollars. This compares to the company’s prior outlook range of 2.89 to 2.94 dollars. Relative to our prior outlook, the company’s updated 2017 earnings per share outlook includes about a 0.08dollar per share (40 million dollars pre-tax) impact from additional investments to drive accelerated growth into 2018 and beyond.
VF’s board of directors declared a quarterly dividend of 0.42 dollar per share, payable on September 18, 2017 to shareholders of record on September 8, 2017.