By  on October 19, 2007

Booming sales in its outdoor division and a revenue bump from the newly formed contemporary brands segment lifted earnings for VF Corp. in the third quarter and pushed revenues beyond $2 billion.

"These results, in this environment, prove that VF has the right brands and strategies to win," Mackey McDonald, chairman and chief executive officer, said in a statement.

However, during a conference call with analysts, McDonald indicated that warm weather and a cloudy retail picture would continue to impact results.

"We expect a fairly choppy retail environment," said McDonald. "Good months will continue to alternate with weaker ones....We believe that the consumer will be fairly resilient, but certainly more selective with the apparel choices they make."

For the three months ended Sept. 29, the Greensboro, N.C.-based apparel giant saw earnings improve 4.8 percent to $207.2 million, or $1.84 a diluted share, compared with earnings of $197.7 million, or $1.75 a share. Revenues for the quarter vaulted 14.5 percent to $2.07 billion from $1.81 billion in the year-ago period. Sales rose 14.6 percent to $2.05 billion from $1.79 billion, while royalty income increased 8.5 percent to $20 million from $18.5 million.

The company's outdoor segment again proved itself to be the key revenue driver. The segment saw sales rise 22 percent to $806 million during the quarter, led by double-digit gains at The North Face, Vans, JanSport, Kipling and Napapijri brands. Eagle Creek, acquired early this year, contributed $10 million in revenues for the quarter.

Jeanswear, VF's largest and oldest segment, posted a 3 percent revenue gain. However, the entirety of that growth was due to gains in international markets. International jeanswear revenues improved 13 percent during the quarter. While the Lee and Wrangler brands saw improvements in Europe, the company saw explosive growth in China. The firm's Chinese denim business grew 40 percent during the quarter. Weakness in the retail market led to a decline in domestic revenues.

Nautica dragged down results for the sportswear segment, where overall revenues slid 6 percent. Nautica saw sales fall 10 percent on sluggish performance at department stores.

VF's newest business segment, the contemporary brands coalition, was formed in August with the acquisitions of Seven For All Mankind and Lucy. The new segment contributed $33 million to revenues. Seven For All Mankind will open its first signature store in Los Angeles next month and recently signed a deal to open its second location in the NorthPark Center in Dallas. Lucy will open an additional six stores next month, as well.A 24 percent revenue increase in the imagewear coalition was driven by the acquisition of Majestic Athletic, which contributed an additional $44 million to revenues during the quarter.

For the nine months, earnings were essentially flat, inching up 0.54 percent to $427.2 million, or $3.76 a share, compared with earnings of $424.9 million, or $3.77 a share. Revenues shot up 14 percent to $5.26 billion from $4.62 billion. Sales rose 14.2 percent to $5.21 billion from $4.56 billion and royalty income increased 2.2 percent to $57 million from $55.8 million.

Despite concerns about the department store and mass channel retail sectors, VF upped its guidance for the year. Management now expects revenues for the year to rise 15 percent and earnings per share to increase just over 13 percent. This compares with earlier guidance for revenue gains of 14 percent and EPS gains of 12 percent. VF's board also voted to increase the firm's quarterly cash dividend by 3 cents to 58 cents a share. The dividend will be payable on Dec. 20 to shareholders of record as of Dec. 10.

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