Cost cuts and a modest upswing in sales helped VF Corp. boost profits 62 percent in the first quarter.
This story first appeared in the May 3, 2010 issue of WWD. Subscribe Today.
Net income for the Greensboro, N.C.-based apparel giant increased to $163.5 million, or $1.46 a diluted share, compared with earnings of $100.9 million, or 91 cents, in the same period a year ago. Earnings per share came in 32 cents ahead of Wall Street’s expectations.
“This is a very good day for VF,” Eric Wiseman, chairman and chief executive officer, said during a conference call with analysts on Friday. “It’s a day that we announce record first-quarter earnings that surpassed both ours and industry expectations, and a day that we increase our full-year guidance for revenues, gross margins, brand investment and earnings per share.”
Revenues for the three months ended April 3 rose 1.4 percent to $1.75 billion from $1.73 billion. Sales improved 1.3 percent to $1.73 billion from $1.71 billion and royalties rose 8.9 percent to $19.8 million from $18.2 million.
The company’s outdoor and action sports segment, home to The North Face, Vans, Kipling and Napapijri labels, led results. Revenues for the segment were up 9.8 percent to $678.6 million from $618.3 million. The North Face reported a revenue gain of 9 percent, while Vans saw a 20 percent increase.
The company’s second-largest segment, jeanswear, felt the impact of the discontinuation of “non-core programs” in the U.S. mass business. Jeanswear revenues dropped 6.8 percent to $622.1 million from $667.4 million. However, the company did see revenues in Asia spike 40 percent and management said the European market has shown signs of stabilizing. Double-digit growth was also seen in key international markets such as Mexico, South America and Canada.
The imagewear segment posted a 2.4 percent decline in revenues to $221.3 million from $226.7 million. Revenues for the sportswear business unit slid 1.3 percent to $102.2 million from $103.6 million. The contemporary brands division, which includes Seven For All Mankind and John Varvatos, jumped 16.2 percent to $104.1 million from $89.6 million. The acquisition of the Splendid and Ella Moss brands contributed $14 million in revenues.
VF inched up its top-line guidance for the year and is now looking for revenues to rise 3 to 4 percent instead of the 2 to 3 percent previously projected.
“As all of us are aware, economic conditions are stabilizing, with consumer spending showing signs of recovery in the first three months of the year,” said Wiseman. “But given the volatility and uncertainty of the past year, it’s important to keep in mind that we still have three quarters to go and the economic recovery remains fragile.”