Overheard on Wall Street: Reactions to VF, Wolverine, Iconix & Columbia’s Q1

Another big week in earnings has wrapped with VF Corp., Iconix Brand Group Inc., Wolverine World Wide Inc., Columbia Sportswear Co., all filing their financials with the SEC.

Now that the big numbers are in, FN brings you a closer look at the emerging business trends and performance highlights you need to know.

VF Corp. 

In Q1, VF Corp.—whose brands Vans, Timberland and The North Face have substantial international exposure—was not spared from ongoing FX pressures.

“The euro to dollar relationship, which is VF’s most significant foreign currency exposure, was as high as $1.21 and as low as $1.05 during first four months of the year. That volatility, along with our new assumptions, has produced a negative impact [of 6 cents] to our earnings for the full year,” said VF’s CEO during the company’s Q1 conference call on May 1.

On the Q1 call on May 1, Wiseman said that even with larger-than-expected headwinds, there would be no changes to the company’s expectations for 3 percent revenue growth, a 49 percent gross margin rate, and 4 percent EPS growth.

The company also raised its currency neutral earnings growth expectations to 14 percent (versus 12 percent) due to “underlying brand and operational strength and greater visibility to how the full year should play out,” Wiseman said.

So far, analysts seem upbeat about the company and its footwear brands.

“We highlight momentum in Timberland, which delivered its sixth straight quarter of [double-digit] increases in the Americas,” said Nomura Securities International Inc. analyst Robert Drbul. “We think Timberland is on its way to becoming VF’s next $2 billion brand.”

Vans also reported its 22nd straight quarter of double-digit growth.

“Even with currency still acting as an albatross, we continue to like VFC’s medium-term total return profile against strengthened currency-neutral earnings growth and a favorable dividend yield,” said Susquehanna Financial analyst Christopher Svezia.

Meanwhile chatter on the M&A front continues.

“The stock pushback we hear is that no deal seems imminent … With the dollar re-weakening, investor sentiment could shift to names like PVH Corp. with more FX leverage,” said Binetti, UBS Investment Bank analyst.

 Wolverine World Wide, Inc.

Analyst ratings for Sperry, Keds and Stride Rite’s parent company are predominantly “Neutral” or “Sell” following the firm’s announcement of a mixed close to Q1 this week.

“Revenue growth continues to be elusive,” said Sterne Agee analyst Sam Poser. “The Sperry and Merrell brands are properly positioned and it’s unclear if true progress is being made.”

Wolverine’s share price fell more than 6 percent Tuesday after the company posted profits that rose slightly year-over-year to $40.1 million (from $37.2 million) but revenues missed Wall Street’s estimates by $12 million.

“We remain sell rated given [that] valuation for Wolverine remains expensive on negative EPS growth; we believe numbers could still come down based on ongoing challenges in 30 percent of Merrell’s business; Q2 could be a negative catalyst as it is a smaller quarter with more volatility; and Wolverine is putting more pressure on the back half performance,” noted Citi Research analyst Kate McShane.

Iconix Brand Group Inc.

Market Watchers are continuing to keep their eyes on Iconix following the seemingly abrupt departures of its CFO and COO over the last month—the news took a toll on the firm’s share price over the past few weeks. During its Q1 earnings call, CEO Neil Cole briefly addressed the resignations only to confirm that they were unrelated.

“We believe that leadership uncertainty has largely influenced the recent stock price decline, down 25 percent since March 30,” said Drbul in a note.

Drbul added that while licensing revenue in Q1 fell short of expectations, decreasing 15 percent to $95.4 million, he remains “encouraged by Iconix’s international growth prospects and continues to admire the company’s strong free cash flow generation.”

Taking into account the Q1 miss and management commentary, McShane adjusted down her EPS estimate for FY15 to $3.01 from $3.09 and significantly reduced our EPS estimate for FY16 to $3.02 from $3.33.

CL King & Associates analyst Steven Marotta, however, maintained a ‘Buy’ rating on the stock and pointed to multiple one-time items in last year’s first quarter that made for a difficult comparison in this year’s Q1.

Columbia Sportswear Co.

Portland, Oregon-based Columbia Sportswear Co. offered up a soft beat on Street this week reporting Q1 net income that rose 19 percent compared to the same year-ago quarter. Analysts say they are generally upbeat about the brand—although market watchers are accustomed to stronger beats—and expect footwear to be a strong driver in the year ahead.

“We were pleased to hear that the Columbia brand continues to gain share across numerous channels while displaying signs of brand strength through increased segmentation and some pricing power …” said Susquehanna Financial analyst Christopher Svezia in a note. “PFG and footwear continued to be positive brand callouts.”

McShane was equally optimistic based on the firm’s performance and initiatives for the remainder of the year.

“We remain encouraged on spring sell-through trends, European growth, strong expectations for North American sales, gross margin expansion and market segmentation initiatives at department stores,” wrote McShane in a note. “We are also optimistic that operating margin improvement is likely to [grow] 10.2 percent in 2015 and 15 percent long term.”

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