Before the market open on Monday, VF Corp. reported third-quarter sales that missed forecasts, though profits were better than expected. The results, along with management’s decision to downward-adjust forecasts for the remainder of the year, have put pressure on the firm for much of the morning. As of 11:15 a.m., shares remained down 0.76 percent, to $54.26.
The Greensboro, N.C.-based owner of Vans, Timberland, The North Face and other brands, said its Q3 net income advanced 8 percent year-over-year, to $498.5 million, or $1.19 per diluted share, topping forecasts for diluted earnings per share of $1.15.
Revenues, however, fell 1 percent year-over-year, to $3.5 billion, missing market watcher’s estimates for revenues of $3.6 billion.
VF Chairman and CEO Eric Wiseman — who will pass the leadership torch to VF President and COO Steve Rendle on Jan. 1, 2017 — said four consecutive quarters of sluggish consumer spending, an unseasonably warm winter (2015), retail bankruptcies and excess inventory in the off-price channel have had “an outsized impact” on the company and its U.S. business in particular.
“Consistently positive results from our International business, which is about 40 percent of our revenues, have been somewhat offset by a slight decline in our U.S. business,” Wiseman noted during the firm’s conference call. “Simply put, we’ve seen mixed results.”
Revenue at Vans was up 7 percent, or 8 percent on a currency neutral basis, driven by a high-single-digit percentage-rate increase in the Americas business, a low-single-digit rate decline in Europe, and over 20 percent growth in Asia-Pacific.
VF said Timberland’s revenue was in line with last year’s third quarter, down 1 percent on a currency-neutral basis, including a mid-single-digit percentage-rate decrease in the Americas region, a mid-single-digit percentage-rate increase in Europe, and a low-single-digit rate decline in Asia-Pacific.
Rendle said Timberland’s global revenues would have been up by a low-single-digit rate during the quarter were it not for a slew of bankruptcies among sporting-goods retailers. (Sports Authority, City Sports, Sport Chalet and others have gone out of business over the past 18 months.)
“Timberland had the toughest comparison at VF in the third quarter, as it was up against 21 percent growth last year, which was driven by a 40 percent increase in the Americas business,” Rendle explained during VF’s conference call.
Overall, direct-to-consumer revenues gained 6 percent, to $800 million, and international revenues advanced 5 percent, to $1.4 billion.
Although Wiseman said he “wasn’t satisfied” with the company’s third-quarter results, he continues to expect an “uneven, global economic environment,” as well as ongoing challenges in VF’s largest market, the Americas.
The firm downward-adjusted its full-year expectations and now forecasts revenue to increase 2 percent on a currency-neutral basis, to about $12.2 billion, instead of the previous estimate of 3 to 4 percent growth. Revenue for Outdoor & Action Sports is now expected to increase at a low-single-digit percentage rate compared with the earlier estimate of mid-single-digit growth due to “proactive” inventory reductions by both The North Face and Timberland brands related to fourth-quarter wholesale orders, the company said.
Reported EPS is expected to rise 3 percent, to $3.13 (up 7 percent currency neutral), compared with the previous forecast of a 5 percent jump, to $3.20 (up 11 percent currency neutral).