VF’s Q1 In Line With Street Forecasts; FX Pressures Persist

VF Corp. posted earnings for the first quarter, ended April 4, 2015, that hit Wall Street’s forecasts but remained relatively flat year-over-year. The Greensboro, N.C.-based firm behind Vans and Timberland experienced a larger-than-expected FX drag in the quarter, which contributed to the flat EPS growth and a decline in profits.

Net Income: The company posted profits that were down 3 percent year-over-year. Profits in Q1, ended April 4, 2015, were $288.7 million, compared with last year’s Q1 profit of $297.2 million.

EPS: Earnings per diluted share remained flat year-over-year at 67 cents.

Net Revenue: Net revenues for the first quarter totaled $2.83 billion, compared with the year-ago quarter’s $2.78 billion, a 2 percent gain.

Hit, Miss or Beat: VF Corp.’s performance hit market watchers’ forecasts for the quarter. Analysts polled by Yahoo Finance had predicted EPS of 67 cents and revenues of $2.84 billion for Q1.

Executive Insights: “The proven strength of VF’s growth strategy, driven by consistent execution and solid operational discipline, has led us to increase our expectations for full-year currency-neutral earnings-per-share growth, putting us on track to deliver another record year to shareholders.”
— VF CEO Eric Wiseman in a release.

“Vans’ international business was up at a mid-teen rate, driven by balanced wholesale and [direct-to-consumer] results. In Europe, revenue grew at the mid-single-digit rate, driven by more than 20 percent growth in [direct-to-consumer] and solid results in our wholesale business. Key footwear product highlights include the great performance from our enhanced comfort ISO collection, as well as strong response to our printed styles.”
– Karl Heinz Salzburger, VF Corp. VP & group president, international, in a Q1 earnings call

“Timberland revenues were up 10 percent, driven by a mid-teen increase in global wholesale sales…. In footwear, it’s been particularly exciting to see continued momentum in our women’s collection, as new products hit the mark in terms of style, relevance and trend. In our industrial PRO line, the PRO Boondock and Power Train collections had especially strong results as work consumers continue to respond favorably to these innovative platforms.”
— Steve Rendle, VF Corp.’s SVP, Americas (Q1 earnings call)

Looking Ahead: Earnings per share on a currency-neutral basis are now expected to increase by 14 percent compared with adjusted earnings per share of $3.08 in 2014. This is an increase from the previous expectation of 12 percent per-share growth provided on Feb. 13, 2015. Earnings per share, on a reported basis, are still anticipated to increase by 4 percent, to $3.20, compared with adjusted earnings per share of $3.08 in 2014.

Analyst Insights: “We viewed the guidance raise as a positive, reflecting increased visibility on backlogs and SG&A discipline through the remainder of the year. However, while most of its peers have not raised guidance so far this year, given the valuation, we think the stock might be neutral to down today on essentially an in-line quarter.”
— Kate McShane, Citi Research analyst

“The positive news, in our view, is that VF Corp. left [its 2015] reported EPS guidance unchanged at $3.20 — which implicitly raises the organic EPS growth rate for the year.”
— Michael Binetti, UBS Investment Bank analyst

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