Market watchers lifted their earnings forecasts for VF Corp. for the full year after the company posted a stronger-than-expected financial result for the first quarter, driven by robust sales of outdoor and action-sports footwear and apparel.
The Greensboro, N.C.-based firm raised its earnings per share guidance for the full year to 13 percent, or $3.06, slightly ahead of its prior estimate of between $3 and $3.05.
UBS analyst Michael Binetti increased his EPS forecast for fiscal 2014 to $3.13, from $3.10, and said the company’s positive commentary on southern Europe reads positive for other global footwear and apparel brands.
More specifically, Binetti said, the recovery in Italy bodes well for VF’s Timberland brand, in addition to Nike and Foot Locker.
“[VF’s] solid first-quarter results boosted our conviction that VF can deliver its guided organic revenue acceleration in 2014, with our contacts pointing to excitement around new product innovation and strong reorders of VF’s core cold-weather categories in the second half,” Binetti said.
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He added that the gross margin expansion booked in the first quarter confirms VF’s shift toward its most profitable businesses in 2014.
On a conference call with analysts and investors, VF Chairman, President and CEO Eric Wiseman said, “The three largest brands — the North Face, Vans and Timberland — all posted outstanding results with strong double-digit growth in each.”
Steve Rendle, VP and group president of VF’s Outdoor & Action Sports Americas division, said global revenue for Vans was up 20 percent in the first quarter, with similar growth in both the wholesale and direct-to-consumer businesses.
“On the product front in the Americas, there are several exciting things happening in footwear, including a great response in our women’s business, particularly in slip-ons, in both sell-in and sell-through,” Rendle said.
“Additionally in classics,” he added, “we have seen great success with our collaboration product, including our Beatles collection, which coincided with the 50th anniversary of their appearance on Ed Sullivan.”
The brand’s presence in Asia continues to grow, with sales rising by more than 40 percent in the first quarter, VF management said on the call.
Meanwhile, Rendle said the Timberland brand also saw great momentum over the period, with 12 percent global revenue growth and balanced strength across distribution channels and geographies.
“Based on our strong first-quarter results, we now expect Timberland to grow 12 percent in 2014, versus the 10 percent we discussed in February,” he said on the call.
“Sales of core Timberland men’s and kids’ boot styles, as well as our hiking boots, almost doubled versus last year,” Rendle added.
Mitch Kummetz, an analyst at Baird Equity Research, wrote in a note to clients, “We’re encouraged that VF is off to a better-than-expected start to the year, especially since this allows us to more conservatively model the back half [of 2014], suggesting more room for upside to guidance.”
Kummetz raised his EPS estimate for the full year to $3.06, from $3.05, following the guidance upgrade and commentary from management around second-half orders, the strength of the wholesale channels and robust inventory control.
Moving forward, Binetti said the potential for a “significant brand acquisition [in 2014] is high, which could drive a step change in VF’s positive stock trajectory.”