Vans & Timberland Owner Kept Revenues Steady in 2016 But Outlook Remains Cautionary

VF Corp. today reported fourth-quarter earnings that were in line with expectations, while its revenue missed forecasts. The sales miss combined with the firm’s worse-than-expected outlook for the year ahead sent VF’s shares slipping briefly in early morning trading.

As of 11:15 a.m. ET, the shares had recovered and were up 3.3 percent, to$52.01.

The owner of Vans, Timberland, The North Face and other footwear and apparel brands said its net income during the period fell 15 percent year-over-year, to $264 million, or 63 cents per share on a reported basis. Adjusted earnings per diluted share, at 97 cents, were in line with market watchers’ predictions. (Net income for the full-year also slid 13 percent, to $1.1 billion.)

Revenues remained flat year-over-year at $3.3 billion and missed estimates calling for revenues of $3.4 billion. Full-year sales were also in line with last year, at $12 billion.

VF’s global business model, diverse brand portfolio and focused operational discipline helped the company deliver solid results in 2016 despite an inconsistent U.S. marketplace,” said Eric Wiseman, executive chairman of VF’s board, who retired from his CEO post last month. “We’re pleased with the improved quality of our revenue, which reflects continued growth in our international and direct-to-consumer platforms, and our strong gross margin and cash generation performance that enabled us to return a record $1.6 billion to our shareholders.” (Steve Rendle, former VF president and COO, became the company’s new CEO on Jan. 1. He also kept his president title.)

By brand, revenue at Vans was up 14 percent in Q4, driven by a mid-teen increase in the Americas, a 20 percent gain in Asia Pacific, and in Europe a return to growth with a mid-single-digit rate increase. Full-year sales at the brand advanced 6 percent, to $2.3 billion.

During the firm’s conference call, Wiseman addressed reports that Vans has lost its appeal in recent months.

In paraphrasing Mark Twain, the reports of Vans’ decline have been greatly exaggerated,” Wiseman said. “Unless you’ve been following along all year, Vans’ [currency-neutral] 8 percent growth on top of last year’s 10 percent growth doesn’t tell the whole story. As we’ve detailed on previous calls, Vans’ EMEA business, which is about 25 percent of global revenue, have been working through an inventory imbalance in 2016. This work-through saw Vans’ EMEA revenue down slightly this quarter, which is exactly what we expected, and we still expect the brand to return to growth in the last quarter of this year.

Timberland’s revenue was up 4 percent, including a low single-digit rate increase in the Americas region; a high single-digit rate increase in Europe; and, a mid-single-digit rate increase in Asia Pacific. Full-year Timberland revenues rose 1 percent, to $1.8 billion.

The North Face didn’t fare as well during the period, driven by management’s decision to reduce sales to the off-price channel as well as the impact of bankruptcies in North America, its fourth-quarter revenues slid 8 percent. For the full year, revenue for brand declined 2 percent, to $2.3 billion.

Looking ahead, management predicted that revenue will increase at a low single-digit percentage rate including about a two percentage point negative impact from changes in foreign currency. Meanwhile, earnings per share are expected to be down at a low single-digit percentage rate compared to 2016 adjusted EPS of $3.11.

The pace of change in both our industry and the broader consumer landscape is happening at an accelerated rate,” Rendle said in a release. “The proliferation of technology and innovation across all aspects of our lives has shifted consumers’ shopping behaviors and elevated their expectations when engaging with our brands. We are pivoting to become more agile and consumer centric to compete and win in this changing global marketplace.”

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