The specter of rapid inventory growth haunted VF Corp. Friday as its shares fell 7.5 percent despite double-digit gains in first-quarter income and revenues and elevated guidance for the year.
The stock closed at $100.56 in trading on the New York Stock Exchange over concerns that its inventory levels grew faster than its sales projections. According to its quarterly statement, inventories at the end of the quarter on April 2 stood at $1.18 billion, 24.3 percent above the year-ago level of $952.2 million. The company’s revised guidance calls for revenue growth of 10 percent this year, versus an earlier forecast of between 8 and 9 percent.
Addressing the inventory issue on the company conference call, Robert Shearer, senior vice president and chief financial officer, said the increase “includes an impact from higher product costs, buying some goods earlier to secure lower costs, currency translation rates, as well as higher unit volumes to support revenue growth. Inventory days computed on a forward-looking basis only are up slightly year over year. In addition, as previously outlined, we expect cash generation to approximate $1 billion for the year.”
For the three months, income attributable to the Greensboro, N.C.-based apparel giant rose 22.7 percent to $200.7 million, or $1.82 a diluted share, from $163.5 million, or $1.46, in the year-ago quarter. Led by a 16.2 percent increase in sales of its outdoor and action sports coalition, to $788.2 million, revenues rose 11.9 percent to $1.96 billion from $1.75 billion, which included an 11.9 percent rise in sales to $1.94 billion from $1.73 billion. Gross margin expanded to 47.2 percent of sales from 46.7 percent a year ago.
Excluding onetime benefits totaling 11 cents a share, EPS was $1.71, 10 cents better than the $1.61 expected, on average, by analysts polled by Yahoo Finance.
Eric Wiseman, chairman and chief executive officer, told analysts that VF’s formula for continuing and expanded growth “includes the powerful brands supported by targeted investments to drive profitable growth, rapidly expanding international and direct-to-consumer platforms and new tools and processes designed to spur greater innovation across VF.”
He noted that price increases are just beginning to take effect at retail and that it’s still unknown how consumers will respond to the additional increases later in the year. Initial price increases in the jeanswear businesses “have gone smoothly and had less impact on unit volumes than we anticipated,” he said.
In raising its guidance, VF now expects earnings for the year of $7.25 a share, up from earlier forecasts of between $7 and $7.10.
Shearer said on the call that the company continues “to aggressively pursue acquisition opportunities.”
In response to a question from an analyst regarding share buybacks versus building cash for its war chest, the cfo said that the “priority remains on the acquisition front,” but that the company could adjust and buy back some shares later in the year if it doesn’t make an acquisition.
VF’s brand portfolio includes Wrangler, Lee, The North Face, Seven For All Mankind, JanSport, Nautica, Vans and John Varvatos.
“My personal philosophy to beauty is paying attention to oneself. I love to be outdoors, lots of fresh air, trying to take care of yourself as best you can. I always notice that comes through,” says Felicity Jones, the global face of @shiseido-owned @cledepeaubeauteus, which launches today. Head to WWD.com to read more about the actress’ love for beauty and how she prepared for her new role in “The Basis of Sex,” playing the young Ruth Bader Ginsburg. #wwdbeauty (📷: @dandoperalski)
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews