VF Corp. Profits Rise Despite Challenges in U.S. Retail

VF Corp. Profits Rise Despite Challenges
Vans’ collaboration style with Della for spring ’14

Market watchers lauded VF Corp. for its second-quarter performance amid the difficult retail environment in the U.S. and after its sales for the period beat expectations.

Total revenues for the quarter rose 8 percent to $2.40 billion, from $2.22 billion in the same quarter last year, which topped analysts’ consensus estimate of $2.36 billion.

The Greensboro, N.C.-based company reported second-quarter earnings of $157.7 million, or 36 cents a diluted share, up from $138.3 million, or 31 cents, a year earlier. The result beat the Street’s forecast of 35 cents.

VF Corp. maintained its outlook for the full year for an earnings increase of 13 percent to $3.06 a share and for revenue to rise 8 percent. Driving this growth is the continued strength in the company’s outdoor and action-sports business, international operations and direct-to-consumer businesses, VF Corp. said.

Analysts expect the company to report full-year earnings of $3.09 a share on revenue of $12.3 billion.

Michael Binetti, analyst at UBS, said VF Corp.’s performance was robust given the quarter’s challenging macro conditions and that the company’s results were strong relative to its peers.

“With the company reiterating confidence in the seasonally important outdoor and action-sports coalition for the second half and boosted by a shift of North Face Asia revenues into the third quarter — which was a drag in the second quarter — we still see a strong case for [VF Corp.’s earnings being surprisingly to the] upside to consensus estimates in 2014,” Binetti said.

“We were impressed that VF Corp. was able to hit Street estimates even with gross margins clearly coming in worse than expected in the second quarter,” he added, noting that the company’s gross margins declined 10 basis points in the period to 48.4 percent, year-on-year.

VF Corp. attributed the dip in margins to the shift of the company’s revenue mix toward higher margin businesses, which was offset by foreign currency impact and efforts to aggressively manage inventories, especially in its jeans business.

A standout in the quarter was sales by the company’s Vans brand, which rose 19 percent in the quarter, with strong, double-digit growth across all regions as well as in the brand’s wholesale and direct-to-consumer channels.

Global direct-to-consumer revenues for the Vans brand were up 27 percent in the quarter.

VF Corp. shares were 1.5 percent, or 92 cents lower, at