VF Corp. isn’t sitting still.
Following the $120 million sale of its contemporary brands business to Delta Galil Industries — the deal is expected to close in the third quarter of 2016 — the company continues to consider strategic alternatives for its licensed sports group business. At the same time, VF is keeping tabs on what brands might be available for acquisition.
Eric Wiseman, chairman and chief executive officer, said in a telephone interview, “Over the last decade, we regularly look into the future and try to shape our company to be successful over the next five to 10 years.”
He explained that the executive team eyeballs all components of the business, from technology to geographies its businesses should be in. “We make our choices based on what we think should be the shape of VF [down the road],” he said, adding that from that vantage point comes additional decisions on what countries VF should invest in, analyzing whether brands still fit into the core portfolio, and “what we might want to acquire to be a robust company.”
Following the $2 billion Timberland acquisition in 2011, one might think VF needs another big transaction to move the proverbial needle. Wiseman said, “While we would prefer to do something that is large and material that is positive for our shareholders, sometimes brands have huge potential, but don’t have the capability of achieving that potential. We can help them with our platforms, such as supply chain.” He added that on the international front, there are many brands that don’t have efficient access to new countries, but through VF are likely to get to where they need to be sooner rather than later.
Wiseman also said the company’s direct-to-consumer business is up 7 percent overall on a currency-neutral basis. Following divestiture of the contemporary brands business, the wholesale channel at department stores would account for 3 percent of the overall revenue total. In contrast, the direct-to-consumer business is three times that at 27 percent.
The company on Friday posted second-quarter results that beat earnings per share expectations, but missed revenue forecasts.
For the second quarter ended July 2, net income was $51 million, or 12 cents a diluted share, down from $170.8 million, or 40 cents a year ago. The contemporary brands business — which includes Seven For All Mankind, Splendid and Ella Moss — was characterized as discontinued operations in the current quarter’s results. Adjusting for that change, net income from continuing operations declined 11.6 percent to $148.3 million, or 35 cents a diluted share, from $167.8 million, or 39 cents, a year ago. Total revenues inched up 0.8 percent to $2.45 billion from $2.43 billion.
Wall Street was expecting EPS of 34 cents on revenues of $2.53 billion.
The company said in the outdoor and action sports category, revenue was up 2 percent to $1.4 billion. Brands include The North Face, Vans and Timberland. The Jeanswear business, which includes the Wrangler and Lee brands, was up 3 percent to $629 million. In the Imagewear business, revenue was up 3 percent to $255 million. Sportswear, which was impacted by a 20 percent decrease in the Nautica brand revenues and a midteen decrease in the Kipling brand’s North America business, fell 19 percent to $115 million.
Shares of VF on Friday closed down 1.3 percent to $62.37 on the Big Board. The company still expects to deliver on its current 2016 outlook.
The company continues to work on developing innovative technologies and products. During the quarter just ended, VF made available its Water Adventure Series in Asia, which included sustainable products such as waterproof jackets and bags. And in April, the company introduced its outdoor training category, which features durable breathable materials for running and training outdoors.
In the same telephone interview, chief operating officer Steve Rendle said the company is working on waterproof and water treatment developments, some of which the company is considering providing access to other businesses.
In April, it was disclosed that VF would partner with more than 80 companies and nonprofit organizations to spearhead a $320 million manufacturing innovation institute, of which $75 million in funding would be provided by the U.S. government. The consortium will bring together firms to integrate fibers and yarns with integrated circuits and other technologies to create “smart garments” and connected fabrics.