NEW YORK — Shares of VF Corp. fell 9 percent in trading Friday following the manufacturer’s downward revision of second-quarter earnings expectations amid inventory concerns up and down the supply chain.

The stock closed at $35.23, down $3.48, in trading Friday on the Big Board. Nearly 2.3 million shares changed hands, compared with a daily average trading volume of just 450,000.

VF said second-quarter earnings per share could decline by 20 percent to 25 percent from year-ago figures. The company originally expected EPS to be flat to down 5 percent from the prior year, excluding last year’s restructuring initiatives. Sales could be down 5 percent to 7 percent, instead of flat as originally projected. Last year, second-quarter earnings per share from continuing operations were 79 cents, which included a 3-cent per share benefit from restructuring actions.

The company emphasized that it was not revising its expectations for the second half of 2003 at this time, but would provide an update on the outlook for the full year when it releases second-quarter earnings results next month.

Mackey J. McDonald, chairman and chief executive officer, said in a statement, “Our second quarter basically reflects external factors that are affecting most retailers and suppliers across most product categories and channels of distribution. Fortunately our brands remain very healthy, and they are continuing to outperform our competitors at retail. Inventory control remains a priority for us, and we have taken the appropriate actions to keep our inventories in line.”

Second-quarter inventory by the end of June could be up by as much as 20 percent, although some of that increase was planned because year-ago levels were deemed too low, Robert Shearer, chief financial officer, said on a conference call with Wall Street analysts.

The cfo emphasized to the Street: “The issue here is the tough retailing environment and the inventory reductions taken by our customers. We don’t have specific brand or production issues. What we see is a very difficult environment,with apparel sales particularly slow, and that’s especially in seasonal items.”

He pointed to the Iraqi war, unseasonably cool weather and the weak men’s jeans business in the mass channel as factors affecting the firm during April and May.“Our brand sell-throughs at retail are as strong as if not stronger than our competitors. Generally we believe that we’re holding or gaining share in our key categories, jeanswear and intimates, as well as other areas of our business such as outdoors. So while in some cases our shipments to retailers are down, our sell-throughs at retail are positive. Again this is the result of the aggressive inventory reduction actions taking place at retail,” he added.

About 50 percent of VF’s business is based on replenishment orders, which have declined in part because of the inventory reductions in progress at retail.

VF also noted that it was “still pursuing options” about its Playwear business and could decide to sell or otherwise dispose of it by the end of the second quarter. Projections for the current quarter do not include any possible effect from a change in the Playwear unit’s status.

Standard & Poor’s Ratings Services said Friday its ratings and outlook on VF would not be affected by the company’s announcement. VF’s long-term corporate credit is rated “A-” and its short-term corporate credit and commercial paper is rated “A-2.” VF’s outlook is “stable.” Jayne Ross, the S&P analyst, said in her report that “Standard & Poor’s expects the company will continue to generate significant free cash flow and that credit measures will remain appropriate for the rating despite the current retail environment.”

The second-quarter revision prompted Dennis Rosenberg at Credit Suisse First Boston to downgrade VF to “neutral” from “outperform.” The 12-month price target was also lowered to $37 from $46, while 2003 estimates were reduced to $3.20 from $3.65 per share and 2004 estimates lowered to $3.55 from $3.90.

Robert Drbul of Lehman Brothers kept his firm’s rating of VF shares at “neutral.” In his research note, he wrote that VF’s outdoor business “remains strong, driven by The North Face brand, which experienced a 23 percent increase in spring preseason bookings and a 35 percent increase in fall 2003 preseason bookings” at the end of first quarter 2003. In addition, he noted that despite pressures on the VF business, “planned investments in several new jeans programs under its Lee, Wrangler and Riders brands remain intact.”

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