By and  on October 24, 2011

VF Corp. didn’t have to wait long for Timberland to make its presence felt.

Acquired for $2.3 billion on Sept. 13, just 17 days before the close of its new parent’s third quarter, the rugged footwear specialist lifted VF’s profit and revenue gains above the 20 percent level, helping it beat analysts’ estimates and contributing to an upward revision in guidance and a new 52-week high for the company’s stock.

Eric Wiseman, VF’s chairman, president and chief executive officer, said the deal hasn’t closed the door on future acquisitions, which would remain focused on the Outdoor and Action Sports Coalition in which Timberland is now housed.

“Our overall acquisition strategy remains unchanged, other than that we wouldn’t go out and buy a business that looks like Timberland,” he told WWD. “This time last year the calls were outgoing to see if there were brands interested in being acquired. We’re very focused on Timberland right now, but we’re still accepting incoming calls. If one of the brands on our short shopping list called and said they want to engage, we’d want to take that phone call.”

VF returned money to shareholders Monday with an increase in the quarterly dividend, to 72 cents a share from the previous rate of 63 cents, but has stuck with its plan to stay away from share buybacks in 2011. Although the Greensboro, N.C.-based apparel giant will resume the practice next year, it will be for the purpose of covering option exercises.

“Going into 2011, it looked like we could get the Timberland deal done and our attitude was, ‘Let’s keep our powder dry,’” the ceo said. “What kind of company would we be if we hadn’t used our money to buy North Face, to buy Vans, to buy Napapijri, John Varvatos or Seven [For All Mankind]? We wouldn’t be this big if we’d bought shares of the old VF rather than building the new one.”

VF shares closed Monday at $136.99, up $4.30, or 3.2 percent, after establishing a 52-week high of $139.64 in morning trading.

Wiseman noted that VF’s debt-to-equity ratio, below 20 percent prior to the Timberland purchase, rose to about 40 percent subsequent to it but “will be below 20 percent again by the end of next year.” VF’s cash and cash equivalents fell to $337.4 million at the end of the third quarter from $792.2 million at the end of last year.

With September Timberland’s top month for revenue and profits, VF pushed for a close as early in the month as possible and the fiscal rewards were considerable.

With Timberland contributing $163.6 million in sales and 25 cents in earnings per share exclusive of acquisition-related costs, net income attributable to VF rose 23.9 percent to $300.7 million, or $2.69, from $242.8 million, or $2.22, in the prior-year quarter. Adjusted EPS of $2.87 beat analysts’ consensus estimates by 30 cents. Revenues rallied 23.2 percent, to $2.75 billion from $2.23 billion, and would have risen 15.9 percent without the acquisition.

Gross margin declined, to 45.3 percent of sales from 46.4 percent, as cost of goods sold, principally attributable to increases in the cost of cotton, rose faster — 25.9 percent — than revenues. That was in line with company projections and didn’t stop its Jeanswear Coalition from mounting an 8.4 percent increase in sales, to $727.6 million, with U.S. jeanswear sales rising 2 percent despite a unit decline that fell within the company’s expectations for a mid- to high-single-digit drop in jeans units, with the sharpest effects felt within the mass channel.

Wiseman said by the second quarter of next year, the company will be making jeans from denim that’s less expensive than the fabric used for the comparable period this year. “We didn’t try to recover all of the cost increases when prices went up and, while we’d like to regain some of the gross margin we left on the table, we haven’t fully worked out how pricing will reflect lower prices next year,” he said. “It’s better to have smaller swings in terms of your position in the market.”

He also pointed out that VF’s newest and fastest-growing businesses — Timberland, international and direct-to-consumer — all enjoy higher gross margins than its legacy businesses.

VF added $100 million to its marketing spend last year and hasn’t scaled back. In fact, Wiseman said marketing investments as a percentage of sales had been maintained, with this year’s increase commensurate with the revised guidance for a 13.5 percent gain in revenues for the year, excluding Timberland. That would put the top-line result for the year at more than $8.74 billion without Timberland and from $9.4 billion to $9.5 billion with it.

Adjusted EPS guidance was raised to $8.15 a diluted share from $7.50. The 65-cent addition includes 55 cents from Timberland, 10 cents more than first estimated, and 10 cents from organic growth.

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