VF Corp.’s shares were in the red in early morning trading Friday — down 2 percent as of 10:45 a.m. EST — after the Greensboro, N.C.-based firm reported a mixed second quarter and downward adjusted its outlook for the remainder of the year.
The company, which announced the sale of it Contemporary Brands division on June 30 — posted total net income of $51 million, a 70 percent decline from the comparable period when net income was $170.8 million.
Adjusted earnings per diluted share from continuing operations were 35 cents, a 10 percent decline from the year-ago same period when diluted EPS were 39 cents. The results were a beat on analysts’ expectations for EPS of 34 cents. Reported diluted EPS were 12 cents, a 70 percent year-over-year decline from reported diluted EPS of 40 cents last year. (Reported results include a $97 million loss from discontinued operations due to the sale of the Contemporary Brands Group.)
“I’m pleased to report that our second quarter results were little better than our expectations and that our first half of 2016 came in as promised [which] gives us great confidence in our ability to deliver on our outlook for the full year,” VF chairman and CEO Eric Wiseman said during the firm’s conference call.
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Total revenues for the period advanced 1 percent to $2.4 billion, missing Wall Street’s forecast for revenues of $2.5 billion. Revenues for Vans gained 4 percent, or 6 percent on a currency-neutral basis, driven by a high single-digit percentage rate increase in the Americas; a high single-digit percentage rate increase in Asia-Pacific; and a high single-digit percentage rate decrease in Europe, where the brand is still working through elevated inventories.
Timberland brand revenue was down 7 percent, with a low-single-digit increase in direct-to-consumer offset by a low-double-digit decline in wholesale sale. The brand saw a high-teen percentage rate decrease in the Americas region; a low double-digit percentage rate increase in Europe; and a high single-digit decline in Asia-Pacific.
Management attributed the dip in sales at Timberland (and Vans’ Europe) to “short-term inventory imbalance versus a brand issue” as the company “[tempers] sell-in for a quarter or two to allow inventory to normalize.”
Q2 direct to consumer business was up 7 percent including mid-teen-level international growth and a low single-digit increase in the U.S. International sales were up 7 percent overall, with Europe up 3 percent, Asia up 6 percent and non-U.S. Americas region gaining 20 percent.
VF Corp. downward adjusted its outlook for FY16 and now expects revenues to increase 3 to 4 percent versus the previous outlook of a mid-single-digit percentage rate increase.
Wiseman said the company continues to prioritize effective portfolio management and was still exploring strategic alternatives for its Licensed Sport Group within the Imagewear coalition. The company announced in March that it was seeking strategic alternatives for the division, which analysts have interpreted as an eminent divestiture, likely within the year.
“This process is ongoing and we’ll update you when we have something more to report,” Wiseman said. “… You can expect to see VF continue to drive brand energy through product innovation and closer connections with our consumers. We will continue to leverage the power of our portfolio to deliver long-term improvement, SG&A productivity and improve overall profitability to maximize shareholders for returns.”