The sportswear and denim giant believes that after several years of struggles and a weak first quarter, its jeans business will return to growth in the second half of the year. The uptick will be “driven by great new product innovations and channel expansion. And for the full year, we continue to expect low-single-digit growth for this highly profitable coalition,” said Bob Shearer, VF’s chief financial officer.
“We look forward to 2014 being one of the strongest years for our jeanswear business in quite a few years,” added Karl Heinz Salzburger, group president of international, referring to VF’s jeans business outside the Americas.
Eric Wiseman, chairman, president and chief executive officer of VF, told WWD that efforts to elevate the company’s two billion-dollar jeans brands, Wrangler and Lee, to the midtier and department store channels, respectively, were proceeding well.
“VF jeanswear was down 4 percent while Wrangler was down 2 percent and Lee was down 1 percent,” he pointed out. “What’s missing? About half of the high-single-digit decline [in the U.S.] came from our exit from a big private-label business that we didn’t make money on.” He didn’t identify the U.S. retailer involved.
Rock & Republic, acquired out of bankruptcy in 2010 and now distributed exclusively at Kohl’s, “has done really well in total, but we got a bit far ahead in fashion and we’ve had to adjust the product line. That showed up in the quarter, too,” the ceo noted. “There’s no concern long-term, but an inventory adjustment needed to be made.”
Reflecting on Rock & Republic as well as ongoing efforts to place Lee in department stores and Wrangler in midtier retailers, Wiseman said, “When you take a brand to a new channel for the first time, you have to learn how far you can push that business. One of the ways you find out how far you can go is by sometimes going a bit too far.”
Lee has strength in the midtier while Wrangler derives its U.S. business from mass merchants and Western stores.
VF still faces an uphill battle in denim in the second quarter of the year after the group’s coalitions of jeanswear and contemporary, which includes the premium denim brand Seven For All Mankind, weathered declines in their top and bottom lines in the first quarter. Compensating for weakness in jeanswear and contemporary, its other three coalitions, led by its dominant outdoor and action sports group, posted improved sales and profits that contributed to better-than-expected first-quarter results and led VF to boost full-year guidance.
With global jeanswear sales in the first quarter off 3.8 percent to $690.3 million, and a similar performance expected in the current second quarter, there will be enormous pressure on the third and fourth quarters if projections are to be met.
In the first quarter, jeanswear sales in the Americas were off in the high-single-digits while they came in with high-single-digit increases outside the Americas.
While contemporary coalition revenues were down 5.4 percent, to $98.2 million, and operating income contracted 37.2 percent, to $7.9 million, Wiseman voiced confidence in Seven For All Mankind, the coalition’s premium denim brand.
“We strongly believe that Seven For All Mankind is holding or gaining share in the contemporary market in women’s denim, where Seven does the majority of its business,” he said.
Premium jeans have faced severe challenges in the department-store channel and haven’t been able to overcome them with their own stores. Shearer told analysts that the contemporary group’s direct-to-consumer business “was up at a low-teen rate but this was offset by a similar rate decline in the wholesale business, which continues to experience challenging demand for premium denim.”
Speaking with WWD, Wiseman noted that the shift to the ath-leisure trend, as typified by the popularity of yoga pants for both everyday and active use, has taken some business from Seven For All Mankind in the U.S. and Canada but the impact overall has been minor.
“It’s not a global trend, and it’s not a male trend, and you have to recognize that about two-thirds of our business is in men’s,” he said. “It hasn’t had no effect, but where it has had an effect is with the U.S. business of Seven For All Mankind, which is predominantly a women’s business.”
The Seven For All Mankind business was down at a high-single rate in the U.S. but up at a similar rate in Europe.
While not heavily invested in ath-leisure, Wiseman said both The North Face, in outdoor & action sports, and Lucy, in contemporary, are looking into bottoms that address the trend. Additionally, the move toward yoga pants is part of a continuing embrace of comfort and flexibility that is being actively addressed by the jeanswear coalition, such as with the Heavenly Touch and Easy Fit models from Lee, which combine “the comfort of leggings with the structural benefits of denim,” according to Scott Baxter, group president of jeanswear, imagewear and South America.
VF saw the three billion-dollar brands in the outdoor group — Vans, The North Face and Timberland — register revenue increases of 20, 14 and 12 percent, respectively, and Vans emerge as the highest-volume brand for the period. All told, the coalition generated revenues of $1.57 billion, a 13.8 percent increase over the prior year, as operating income jumped 21.2 percent to $274.5 million. The increases were the highest among the five coalitions as the outdoor group expanded its share of company revenues to 56.6 percent from 53 percent a year ago.
Overall in the quarter ended March 20, net income was up 9.9 percent to $297.2 million, or 67 cents a diluted share, from $270.4 million, or 60 cents, in the comparable period last year. Analysts on average had expected earnings per share of 63 cents. Revenues rose 6.5 percent to $2.78 billion from $2.61 billion. Analysts expected $2.75 billion in revenues.
Gross margin rose to 49.4 percent of sales, up 130 basis points from a year ago and the highest measure for any quarter in VF’s history. VF said margins increased in all of its coalitions.
Direct-to-consumer revenues were up 16 percent, with double-digit increases in all regions, and growth, according to the firm, in “nearly every brand.” Wiseman said, as he has in previous quarters, that VF is just beginning to put e-commerce platforms in place in many markets and that, even in the U.K., where it’s already established, “it’s far from mature. When I look at the digital landscape, I see plenty of white space for us.”
In updated guidance, VF expects full-year EPS of about $3.06, 1 cent higher than the top of its previous range of between $3 and $3.05, and revenue expansion at the higher end of its previous guidance for an increase of between 7 and 8 percent.
The earnings beat and elevated guidance helped VF’s stocks gain ground Friday, a day when increases were scarce. Shares rose 2.2 percent to $61.44 as the overwhelming majority of fashion, retail and beauty stocks suffered declines.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast