Analysts Upbeat on VF Long-Term

Even after VF Corp. missed first-quarter revenue estimates, analysts were bullish on the firm’s potential for growth.

“While disappointed by [first-quarter] revenue growth below expectations, we were encouraged by the strength of the outdoor coalition, which saw revenue $31 million above our estimate, and strong overall operating margins,” said Jim Duffy, analyst at Stifel Nicolaus.

While investors seemed disappointed with the full-year guidance, sending the firm’s shares down 3.7 percent Friday morning, analysts suggested there could be upside to expectations.

“[Guidance] could either be conservative or indicate just how cautious retailers continue to be with open-to-buy for winter ’13,” said Citigroup analyst Kate McShane.

Baird analyst Mitch Kummetz agreed, noting that full-year earnings per share could come in higher than expected. “[Management’s] gross margin assumption is very conservative,” he said.

The outdoor and action sports segment of VF’s business, which now comprises more than 55 percent of the group’s total revenue, will clearly drive the business going forward.

Steve Rendle, president of VF’s Outdoor & Action Sports Americas division, told Footwear News on Friday there is room to add assets to that portfolio in the action-sports space.

“We have been active in that area and we continue to look for brands that have the right amount of scale. [We’ve] been very vocal that we continue to look in this activity-based environment,” he said.

Rendle also expressed optimism at how the Timberland acquisition has benefited the footwear offering at The North Face, noting that The North Face’s trail running shoes have received rave reviews of late.

“We’ve quickly seen the benefits of being able to leverage the best of Timberland. I’m excited because we’ve started to see those efforts pay off. We’ll continue to see over the next two seasons that we’re really putting our stake in the ground,” said Rendle.

For the three months ended March 30, VF’s net income rose 25.6 percent to $270.4 million, or $2.41 a share, from $215.2 million, or $1.91, a year ago. Total revenues for the quarter rose 2.2 percent to $2.61 billion, from $2.56 billion. Wall Street was expecting EPS of $2.18 on revenue of $2.64 billion.

Outdoor & Action Sports revenues were up 10 percent in the quarter to $1.4 billion, with balanced growth across both domestic and international markets. The North Face brand rose 6 percent, buoyed by colder, more seasonable weather. Vans surged 25 percent, including more than 20 percent growth in the Americas and Asia regions, and more than a 30 percent increase in Europe.

Timberland inched up 2 percent, showing growth in Asia and the Americas, but saw a mid-single-digit decline in Europe due to challenging macroeconomic conditions.

Looking ahead, Rendle said, “We’re impacted by the European economic situation from a brand standpoint, not a portfolio standpoint. As for weather, we’re not ready to call waiting-for-snow as a strategy.”

Of the other segments, denim wear revenues decreased 3 percent to $718 million; imagewear declined 9 percent to $253 million; and contemporary brands slipped 18 percent to $104 million. Sportswear grew of 4 percent to $128 million.

Revenue guidance for 2013 remains unchanged: It should rise by 6 percent to $11.5 billion. EPS is expected to grow 5 cents, to come in at $10.75.

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