VF Corp. Q2 Earnings: Beats Street, Ups Guidance

VF Corp.’s second-quarter earnings show across-the-board improvement following a relatively flat first quarter. The Greenboro, N.C.-based company behind Vans, Timberland, Wrangler, Lee and other popular brands beat Wall Street forecasts for Q2 and saw accelerated revenues across many of its key divisions.

Although the firm is still shouldering FX pressures, analysts are generally upbeat after a solid Q2, with sales gains in the Outdoor & Action Sports division (up 9 percent; 16 percent currency neutral) and direct-to-consumer (up 7 percent; 13 percent currency neutral).

International sales declined 1 percent but would’ve improved by 13 percent were it not for FX woes.

Net Income: Earnings for the second quarter, ended July 4, 2015, were up 8 percent year-over-year, to $170.8 million compared with the year-ago quarter’s earnings of $157.7 million.

EPS: Earnings per diluted share rose 3 cents year-on-year, to 40 cents per share, against the year-ago quarter’s EPS of 36 cents.

Net Revenue: Net sales for the quarter were up 5 percent — 10 percent currency neutral — to $2.48 billion compared with the year-ago quarter’s $2.37 billion.

Hit, Miss or Beat: The firm beat Wall Street’s estimates for both revenues and EPS. Analysts polled by Yahoo Finance had predicted revenues of $2.46 billion and EPS of 36 cents.

Executive Insights: “I’m extremely proud of the progress we continue to 
make against our near and long-term objectives. We’re delivering 
meaningful innovation across our portfolio, connecting even more 
deeply with our consumers and are tirelessly working to serve them 
wherever and whenever they shop and engage our brands around the 

 Operationally, strategically and financially, we are stronger than 
we’ve ever been. Powerful brands, powerful platforms, one VF with a single-minded focus on delivering consistent, sustainable and 
profitable growth to our shareholders.” – CEO Eric Wiseman on the Q2 conference call

Management on Vans: “Vans has posted 23 consecutive quarters of double-digit growth. …
 There was strength across all products and channels, including greater than 20 percent growth in both wholesale and retail, which featured an impressive double-digit comp. In the Americas, revenue was also up on more than 20 percent with similar growth rates in the retail and wholesale channels.”

Management on Timberland: “Timberland continues to build its relevance as a year-round outdoor lifestyle brand with its adaptive style that’s made for the modern trail. With a revenue increase of 10 percent in the second quarter driven by a high-teen increase in global wholesale sales, we continue to be really happy with the progress the brand is making against its long-term growth targets. In the Americas, in the quarter that typically represents less than 15 percent of Timberland’s annual revenue, the brand was up at a mid-single-digit rate.”

Looking Ahead: The firm maintained its full-year revenue guidance of an 8 percent increase on a currency-neutral basis but raised guidance for EPS. VF Corp. now expects EPS to jump 15 percent on a currency-neutral basis compared with the expectation of an rise of 14 percent provided on May 1, 2015. Reported EPS is now expected to increase by 5 percent year-over-year, to $3.22, compared with previous guidance, provided on May 1, 2015, indicating an expected increase of 4 percent, to $3.20.

Analyst Insights: “VF Corp. continues to execute, with continued outperformance in Outdoor and steady improvement in jeans wear. Management’s incremental increases in guidance despite FX headwinds indicate confidence in the underlying business.”
— Citi Research analyst Kate McShane

“The positive news is that VF Corp. raised ’15 EPS guidance despite expectations of greater-than-expected FX headwinds in [the second half]. Importantly, 3Q revenues are expected to grow similarly to 2Q, implying 3Q rev growth guided to be in-line with our 3Q estimates. … This also sets a very beatable bar for 4Q, in our view.”
— UBS Investment Bank analyst Michael Binetti

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