By  on April 26, 2006

NEW YORK — Brands such as The North Face, Vans and Napapijri continue to boost VF Corp., with substantial sales in the company's outdoor segment spurring the $6.5 billion apparel giant to another record-setting quarter.

"I hope it's clear that VF is becoming a very different company than it was just a few years ago," Mackey McDonald, chairman and chief executive officer, said during the company conference call. "We've shown that we are disciplined acquirers with the skills and capabilities to identify, integrate and grow new brands, and we've leveraged the economies of scale, technology and operational expertise through our businesses to fuel a steady expansion in our margins."

For the three months ended March 31, Greensboro, N.C.-based VF's earnings vaulted 24.6 percent to $128.2 million, or $1.14 a share, compared with $102.9 million, or 89 cents a share, in the same period a year ago. However, during the fourth quarter of 2005, the company opted for the early adoption of new accounting practices that require including the impact of stock-option expenses on the balance sheet. Results for 2005 were adjusted under the new method, negatively impacting first-quarter results, but subsequently making for an easier comparison in the current quarter. Without the adjustments, earnings still would have gained 12 percent to $128.2 million from $114.7 million, or $1 a share.

Revenues for the quarter rose 5.3 percent to $1.67 billion from $1.58 billion. The outdoor segment led the charge, with revenues rising 35.1 percent to $385.6 million from $285.4 million. The bulk of this growth was attributable to a 40 percent increase in revenues from The North Face. In a nod to the company's new commitment to expand its direct retail operations, Eric Wiseman, president and chief operating officer, pointed out that the company's North Face stores posted same-store sales gains of 19 percent for the quarter. Fall bookings for the brand are already up more than 30 percent Wiseman said.

Vans and Napapijri also posted growth in the midteens, the company said. "Vans enjoyed a robust 42 percent increase in domestic full-price comp-store sales in the quarter," said Wiseman, who added that fall bookings are up 23 percent.

Revenues in the jeanswear division, VF's largest business segment, fell 1.4 percent to $703.8 million from $713.5 million. Domestic jeanswear sales rose "slightly," the company said, driven by the mass market and western specialty business. Reenergizing the Lee business has been a priority, and despite continued declines during the quarter, management said it is seeing signs of a rebound earlier than anticipated."We still have a long way to go to get Lee sales and profitability back to where they should be, but we are certainly encouraged by this progress," McDonald said.

The company is also nearing the conclusion of a yearlong "strategic review" of its jeanswear division, McDonald said. Specifics of any new jeanswear strategies will be shared later this year, although McDonald has acknowledged previously that VF has failed to fully exploit the potential of long-established brands such as Lee and Wrangler by expanding their product offerings.

Another potential threat to the company's denim segment may come from Wal-Mart, which has been stepping up efforts to attract customers to its private label brands. The impact already has been felt by competitors such as Levi Strauss. On April 12, Levi Strauss announced that sales of the company's mass channel Levi Strauss Signature brand fell 20.2 percent to $70.2 million during the first quarter, largely as a result of Wal-Mart taking back space for its own brands.

McDonald said Wal-Mart's efforts have centered not on getting more people into the stores, but getting more people into the apparel section. "They have been successful," he said, which has ultimately benefited VF. "We feel as the consumer gets more interested in apparel and as they compare pricing and compare products, they are choosing our brands, which has been beneficial to us."

The company's intimate apparel segment continued to struggle. Revenues fell 7.7 percent to $210.1 million from $227.7 million.

Sportswear revenues rose 2.1 percent to $163 million from $159.6 million, with the Nautica, John Varvatos and Kipling brands all showing growth. Wiseman said the company is on track for a "limited introduction" of the Nautica women's sportswear line this fall. "The launch should begin to hit the stores in the beginning of August with our national ad campaign kicking off in September.

Imagewear grew 3.4 percent to $194 million from $187.3 million, the segment's eighth consecutive quarter of increasing revenues.

The strong results prompted management to revise its guidance for the year regarding earnings and revenues. The company now anticipates revenues growing between 6 and 7 percent.

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