VF Corp. posted another quarter of record revenue growth despite completing the sale of its intimate apparel business, which deflated second-quarter earnings.
For the three months ended June 30, the Greensboro, N.C.-based company reported that earnings slid 17.5 percent to $81.7 million, or 74 cents a diluted share, compared with $99 million, or 90 cents, in the same period a year ago.
The decline stemmed from the sale of the intimates division, which had a negative impact on results of more than $24 million during the quarter. VF announced in January that it had reached a deal to sell the intimates segment, which includes the Vanity Fair, Lily of France, Vassarette and Bestform brands, to Fruit of the Loom for $350 million. The company said the labels were no longer in keeping with the strategy of developing a portfolio of lifestyle brands.
Earnings from continuing operations rose 18 percent to $105.8 million compared with $89.6 million in the year-ago period.
Revenues reached record levels for the quarter, expanding 12.3 percent to $1.52 billion, driven by gains across all the company's business segments. Sales rose 12.6 percent to $1.5 billion from $1.33 billion, while royalty income fell 7.9 percent to $17 million from $18.4 million.
"Within our industry, there does appear to be a fair amount of restructuring and positioning under way," Mackey McDonald, chairman and chief executive officer, said during a conference call with analysts. "Fortunately, the strategy that we initially launched in 2004 has proven to be exactly the right one for those changing times."
Strong growth in domestic and international markets resulted in the company's outdoor segment posting a 20.4 percent revenue increase to reach $446.7 million from $371 million. The Reef and North Face brands each posted double-digit domestic sales gains during the quarter, but it was the growth in international markets that drove home the strength of VF's growing portfolio of lifestyle brands. The North Face, Vans, Kipling, Napapijri, Eastpak and Reef all achieved growth of more than 35 percent during the quarter. International revenues ultimately increased 48 percent, while domestic revenues rose 10 percent.
Jeanswear, the company's largest and oldest segment, saw revenues increase 2.7 percent to $655.4 million from $638.2 million. International revenues spiked 14 percent, led by the Lee brand and developing markets such as China, Russia and India. Revenues in the domestic market were flat year-to-year.Eric Wiseman, president and chief operating officer, said India and China represented some of the greatest near-term opportunities for jeanswear. Wiseman said the company will finish the year with about 140 stores in India, double the unit count from the beginning of the year.
In addition, Wiseman said: "While still a relatively small business for us, our jeanswear business [in China] continues to grow at an annual rate of more than 40 percent."
VF's sportswear segment saw revenues increase 8.8 percent to $153.7 million from $141.2 million, spurred by gains of more than 25 percent in the Kipling and John Varvatos brands. During the conference call, Wiseman added that Varvatos sales were up 50 percent during the quarter. Nautica also experienced an increase of 6 percent, although the company expects that building the women's business will be a "slow and steady" process.
The March acquisition of Majestic Athletic resulted in a 22 percent rise in revenues for the company's imagewear segment, reaching $229.9 million from $188.5 million. Majestic is a global provider of authentic sports licensed apparel and branded team uniforms for Major League Baseball, and added an additional $45 million to second-quarter results.
For the first six months, earnings slid 3.2 percent to $220 million, or $1.93 a share, from $227.2 million, or $2.02 a share. Earnings from continuing operations rose 15 percent to $239.9 million compared with $207.7 million a year ago. Revenues rose 13.7 percent to $3.19 billion from $2.81 billion. Sales increased 13.9 percent to $3.15 billion from $2.77 billion. Royalty revenues fell 1 percent to $37 million.
The outdoor segment led gains, jumping 30.2 percent to $985.5 million from $756.7 million a year ago. Jeanswear revenues rose 5.5 percent to $1.41 billion from $1.34 billion, and imagewear revenues were up 16 percent to $443.6 million from $382.5 million. Sportswear sales fell 0.7 percent to $302.1 million.
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