NEW YORK — Cost controls and gross margin gains allowed VF Corp. to wrangle greater profits out of essentially flat sales in the third quarter.
For the three months ended Sept. 28, the Greensboro, N.C.-based apparel megamanufacturer reported a 23.8 percent boost in net earnings to $128.2 million, or $1.15 a diluted share, 23.8 percent higher than the prior-year mark of $103.6 million, or 90 cents, and 6 cents above analysts’ estimates. Restructuring charges shaved 2 cents off the bottom line, but a reversal of a prior-year charge added 1 cent to it.
Net sales for the period hardly moved, ticking down 0.4 percent to $1.4 billion from $1.41 billion a year ago.
“This performance is a result of aggressive action that we have taken to reduce costs and rebalance our manufacturing mix, as well as our traditional, conservative approach to how we plan our business,” said chief executive officer Mackey McDonald on a conference call with analysts. “Despite the challenging economic environment, we are gaining market share in our jeans and intimate brands, and our operating and net margins are at the highest levels they’ve been in more than a decade.”
Gross margins in the quarter improved nearly 3 percent to 37.8 percent, and operating and net margins reached 15.4 percent and 9.2 percent, respectively. Over the past year, VF has repositioned itself to reduce costs and extract itself from businesses deemed to be outside its strategic core.
Investors apparently liked the firm’s new look and sent its shares up $3.23, or 9.1 percent, to close at $38.92.
Adding to the bottom line was also better performance from the company’s outerwear segment, said McDonald, with a 20 percent jump in sales of VF’s North Face brand in Europe.
“The North Face is considered to be the fastest-growing outerwear brand in Europe,” McDonald noted.
McDonald said that through August, the Wrangler brand increased its jeans market share to 9.7 percent from 9.3 percent, while the Lee brand grew to 4.8 percent from 4.3 percent.
Overall, for the first nine months of the fiscal year, VF posted a net loss of $231.1 million, or $2.20 a diluted share, versus net income of $250.4 million, or $2.17, in last year’s comparable period. This year’s loss includes a $527.3 million aftertax charge for an accounting change regarding the amortization of goodwill, restructuring charges of $13.7 million and a $2 million gain for discontinued operations. Excluding those items, the firm would have recorded an 18 percent increase in profit to $296.1 million, or $2.60. Sales for the period slipped 5.4 percent to $3.77 billion from $3.99 billion a year ago.
This story first appeared in the October 18, 2002 issue of WWD. Subscribe Today.
In guidance, VF said it expects fourth-quarter sales to remain flat with last year, and reaffirmed its expectation of full-year earnings per share of $3.35, excluding charges for goodwill and restructuring.