By and  on February 11, 2010

Branded apparel giant VF Corp. will ramp up investment in international markets and its fastest growing, most profitable businesses this year as it looks to move beyond what year-end results showed was a challenging 2009.

A charge to write down the value of Nautica and other brands pushed VF to a 42.3 percent drop in fourth-quarter profits, but chairman and chief executive officer Eric Wiseman said the company was increasing investment in its sports, contemporary and international businesses.

During a conference call with analysts, Wiseman said 2009 “was a year unlike any other we have experienced.”

“Looking back, I believe we struck the right balance between cautiousness related to managing costs and inventories, and assertiveness related to investing behind our brands to keep them strong and healthy, and investing in growth markets,” he said.

The Greensboro, N.C.-based firm reported earnings for the three months ended Dec. 31 of $66.9 million, or 60 cents a diluted share, compared with earnings of $115.9 million, or $1.05, during the same period a year ago. Excluding a $114.4 million after-tax charge for the impairment of goodwill related to the Nautica, Reef and Lucy acquisitions, profits rose to $181.3 million, or $1.62 a share. Analysts were looking for earnings of $1.47 a share.

Revenues for the quarter inched up 0.2 percent to $1.92 billion from $1.91 billion. Sales were essentially flat at $1.89 billion, while royalty income rose 10 percent to $21.9 million from $20 million.

VF’s outdoor and action sports segment — home to brands such as The North Face, Vans and Kipling — led the company with revenues rising 8.2 percent to $730.9 million from $675.7 million. Revenues for North Face grew 7 percent during the quarter, while Vans posted a 14 percent revenue gain.

Poor economic conditions across Europe weighed on the jeanswear segment, where revenues fell 2.8 percent to $644.9 million from $663.2 million. International revenues in the group fell 11 percent, but Asia returned 15 percent growth during the quarter.

“Conditions deteriorated sharply in key [European] markets early last year, but have stabilized since and we expect better performance in 2010,” said Karl Heinz Salzburger, president of VF International, of the jeanswear business.

The Imagewear segment saw revenues fall 8.4 percent to $222.3 million from $242.7 million, while sportswear segment revenues slid 18 percent to $141.4 million from $172.4 million.

The acquisitions of Splendid and Ella Moss helped lift the contemporary brands segment. Revenues rose 18.3 percent to $143.3 million from $121.2 million. Premium denim leader Seven For All Mankind posted a 5 percent boost in global revenues.

For the full year, earnings fell 23.5 percent to $461.3 million, or $4.13 a share, from $602.7 million, or $5.42 a share. Revenues declined 5.5 percent to $7.22 billion compared with revenues of $7.64 billion in 2008. Sales also fell 5.5 percent to $7.14 billion from $7.56 billion.

Outdoor and action sports revenues inched up 0.4 percent to $2.75 billion from $2.74 billion. Jeanswear revenues fell 8.8 percent to $2.52 billion from $2.76 billion. The Imagewear and Sportswear groups both posted declines of 12.7 percent, with imagewear revenues falling to $865.5 million from $991.1 million and sportswear hitting $498.3 million from $570.7 million. Revenues for the contemporary brands segment increased 4.6 percent to $471.9 million from $451.2 million.

Management unveiled plans to increase spending by about $50 million this year. Wiseman singled out Vans, The North Face and Lee as brands likely to get additional support for social media programs and advertising.

Much of the investment will center on spurring growth in Asia, particularly China. VF’s revenues for Asia ballooned 40 percent during the fourth quarter and 28 percent for the year. Wiseman said the company is targeting a 40 percent increase in distribution in China and will participate in other events, such as having The North Face sponsor a 100 kilometer race in Beijing.

“These are the right investments to make and this is the right time to make them,” said Wiseman. “And the good news is we fund these investments and we expect to deliver earnings per share growth of 9 to 11 percent this year.”

Excluding the impact of last year’s impairment charges, VF expects earnings per share to rise to $5.60 to $5.70 this year. Revenues are slated to increase 2 to 3 percent. Management also said it had been granted approval to repurchase 10 million shares of the company stock.

To Read the Full Article
SUBSCRIBE NOW

Tap into our Global Network

Of Industry Leaders and Designers

load comments
blog comments powered by Disqus