VF Corp. Remains Bullish On Timberland

VF Corp. Remains Bullish On Timberland
Eric Wiseman

After weathering the unseasonably warm winter relatively well, VF Corp. raised its estimate of Timberland’s contribution to earnings per share for 2012.

“We expect $1.10 in adjusted earnings from Timberland, which is higher than our original estimate of 90 cents that we committed to when we first announced this great acquisition,” said Robert Shearer, SVP and CFO, to analysts in a call on Thursday. “Our experience has obviously been quite positive to date.”

VF said Timberland contributed 26 percentage points to group revenue growth in the fourth quarter of 37 percent. For the full year, total revenue grew 23 percent with 9 percentage points of the growth coming from Timberland.

Timberland’s top line contribution for 2011 totaled $713 million, exceeding the $700 million target VF previously set, and the brand is expected to contribute about $1 billion to revenue growth in 2012.

Steve Rendle, president of the Outdoor & Actions Sports Americas division at VF, added, “[For] 2012 we’re targeting low single-digit global revenue growth for the combined Timberland and SmartWool business. I see many parallels to our early days with The North Face. Purchased in 2000, for the first two years The North Face revenues remained relatively stable as we worked through distribution and operational issues. And as we all know, the rest is history.”

Michael Binetti, analyst at UBS Investment Research, said the outlook on Timberland will continue to rise and be favorable to guidance through the year. He noted that the outdoor brand avoided the “fourth quarter worst case scenario … surprising considering unusually warm and snowless conditions.”

While The North Face brand was the clear winner in the fourth quarter, achieving a 22 percent increase in global revenues despite the warm weather, footwear did well elsewhere in the VF portfolio. Vans’ global revenues grew 25 percent in the fourth quarter, with a double-digit increase in the Americas business.

“For the full year, Vans Americas … helped push global revenues well past the $1 billion mark for the first time in the brand’s 46-year history. 2012 promises to be another very strong year for Vans with global revenues targeted to grow at a mid-teen rate,” said Rendle.

Eric Wiseman, CEO of VF, said the firm will keep its eye on Europe and the euro in 2012, as European revenues, which make up a fifth of the total, did slow slightly in the fourth quarter.

Addressing industry murmur that VF may be on the market for some of Collective Brands’ assets, Wiseman said, “Obviously we have the capacity to be engaged right now in additional acquisition activities, [but to acquire] something the size of Timberland [is] probably unlikely in the next 12 months.”

VF’s fourth-quarter profits increased more than fourfold to $257.3 million, or $2.28 a diluted share, from $54.2 million, or 49 cents, a year earlier. Revenues for the three months ended Dec. 31 increased 36.9 percent to $2.91 billion from $2.13 billion.

The Greensboro, N.C.-based company expects fiscal 2012 revenues to increase 15 percent, and EPS to come in at $9.30.

VF ended the year with $341.2 million in cash and $1.83 billion in long-term debt.

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