Results for the quarter compare with year-ago earnings of $10.2 million, or 8 cents. Excluding restructuring charges in both periods, earnings slumped 33.9 percent, to $57.4 million, or 50 cents a diluted share, from $86.8 million, or 74 cents. The pro forma performance was 2 cents ahead of Wall Street’s estimates of 48 cents a share.
VF’s restructuring cost it $236.8 million, or $1.53 a share, during the quarter. In the year-ago period restructuring costs mounted to $119.9 million, or 67 cents a share. The company also said that it expects the full costs of realignment to be smaller than originally anticipated. Annualized cost reductions of $130 million are expected from the charges taken during the quarter.
Sales for the period ended Dec. 29 dropped 11.4 percent, to $1.3 billion from $1.46 billion a year ago. U.S. sales from the company’s jeanswear business retreated 11 percent, while intimate apparel sales slid 5 percent during the period.
Shares of the firm slid 59 cents, or 1.4 percent, to close at $40.45 on the New York Stock Exchange on Tuesday, before results were reported.
As reported, VF in November unveiled a restructuring plan that would effect the elimination of 13,000 jobs worldwide, the sale of underperforming businesses and a hunt for new brands to bolster its portfolio. VF also said it would outsource more of its manufacturing operations and exit its swimwear and private label knits businesses.
Although charges related to the plan were expected to mount to $280 million to $320 million, VF now expects the one-time item cost to be $265 million, most of which was taken during the most-recent quarter.
In a statement, chairman and chief executive officer Mackey McDonald said 2001 had been “a year unlike any other in our history, primarily due to the events that transpired during the fourth quarter.” In addition to integrating VF’s past acquisitions, he noted that the firm also “cut costs, strengthened our sourcing capabilities and realigned capacity with current demand.”
“Clearly, our financial position is very solid,” he noted. For the year, he added that VF reduced its inventories by $211 million, more than twice the expected $100 million. This helped boost cash flow from operations for the year to $685 million.
By midyear 2002, VF is set to have reduced its workforce by about 18 percent, including 3,800 jobs through the discontinuation of its swimwear and private label knits. The rest of the cuts will come in administrative and manufacturing areas. Between 30 and 35 of the firm’s 150 worldwide plants will be closed.
Meanwhile, the firm’s jeanswear, intimates and outdoor businesses are looking to acquire brands that would fit into its current portfolios easily and rack up about $100 million in revenues annually.
On a conference call at the time the reorganization was announced in November, McDonald noted: “From a corporate standpoint, we’re looking at acquisitions that would fall into the lifestyle-brand category or a major move into a broad category that would fall into the $250 million and up to $500 million range,” adding that the price could extend even further.
For the full year, unadjusted earnings dropped 47.1 percent, to $137.8 million, or $1.19 a diluted share, from $260.3 million, or $2.21, a year ago. Sales for the 12 months dipped 4 percent, to $5.52 billion from $5.75 billion last year.
McDonald said sales in 2002 would “remain under pressure” as “consumer spending on apparel will remain relatively soft, but the actions we’ve taken should result in improved profitability in our core businesses.”
VF now expects costs related to exiting certain businesses to total $15 million in 2002, as opposed to the $25 million originally projected. These costs and restructuring will drag down earnings for the year by 25 cents a share.
The Greensboro, N.C.-based firm markets and manufactures apparel under brands names including Lee, Wrangler, Bestform, Lily of France and The North Face.