VF Corp. couldn’t do much about the fourth quarter’s warm weather and the slow holiday selling period, but it is already at work looking ahead to the changing dynamics in consumer shopping preferences.
Eric Wiseman, VF’s chairman and chief executive officer, said Friday that the company has been analyzing consumer shopping patterns in the different operating regions to gauge where their behavior is headed over the next five to 10 years.
“We are looking at where they are going to live and why they are living there, the importance of omnichannel and how important is [the expectation of same or] next-day delivery,” Wiseman said. Information gleaned from the global review will help VF shape its five-year strategy.
“We know that to win five years from now, one needs to provide a consistent brand message for consumers however they engage with you, whether online, in-store or on mobile — it all has to be identical. Everybody needs to get there in a hurry because consumers expect the same functionality and same service regardless of how they engage [with a brand],” Wiseman explained.
As consumers seem to be spending more on experiences, Wiseman was confident that shift would be beneficial to VF. He noted that the firm’s “activity-based brands are going to work in our favor. The North Face, Timberland, Vans and JanSport can help you have a good experience with whatever [activity] you want to spend your money on to have a rewarding time.”
Outdoor and action sports-based activities also remain the first priority – although not exclusive focus – when the firm considers what might make interesting opportunities on the acquisitions front, according to the ceo. One shift has been a more concerted effort at broadening its base of acquisition targets. “We are actively shopping overseas for interesting brands that meet that description [and] Kipling is [one example]. We haven’t done a lot of that and the question is why not?” Wiseman said.
He explained that the strength of the U.S. dollar, and correspondingly weaker euro, helps to make such purchases “more affordable for us.”
During the conference call to analysts, Wiseman said the company is “actively exploring segments of the business we want to expand our portfolio in and we are exploring where we might want less exposure.” He declined to elaborate further, but left open the door to a possible divestiture. Cowen & Co.’s John Kernan suggested that a “brand divestiture could occur this year in some of VF Corp.’s smaller or more challenged segments, such as contemporary and sportswear.”
For the three months ended Jan. 2, the company said net income nearly tripled to $312.2 million, or 72 cents a diluted share, from $122.1 million, or 28 cents, a year ago. The fourth quarter in 2014 consisted of 53 weeks. On an adjusted basis, earnings per share were 95 cents in the quarter, versus 98 cents a year ago. Analysts’ consensus expectations had pegged EPS at $1.01. Total revenues were down 4.6 percent to $3.41 billion from $3.58 billion, which also included a 4.6 percent decline in net sales to $3.38 billion from $3.54 billion. Wall Street was expecting revenues of $3.64 billion.
For the year, net income was up 17.6 percent to $1.23 billion, or $2.85 a diluted share, on a 0.8 percent gain in revenues to $12.38 billion.
The company guided full year 2016 EPS, on a currency neutral basis, to an increase of 11 percent, or 5 percent on a reported basis, versus the adjusted EPS of $3.08 in 2015. Revenues are projected to grow at a mid single-digit percentage rate. For the first quarter, EPS is expected to be down at a low double-digit percentage rate, with currency neutral revenues estimated to be flat. The company expects second half EPS to rise at a mid to high-teen percentage rate, with the strongest performance in the fourth quarter.
Wiseman, who said the company has really good visibility for the first half, normally doesn’t provide quarterly projections. Even though caution is the operating word, “we want people to see what we’re seeing. We have partial visibility in the second half,” he said.
VF Corp. shares fell 4.4 percent to close at $58.55 in trading Friday on the Big Board.
The company on Friday also said it expected to return $1.5 billion to shareholders in 2016 through share repurchases and dividends. In addition, it appointed Nina Flood president, Kipling North America, effective April 4. Flood, who most recently was vice president, marketing and strategy for VF’s Nautica brand, will report to Karen Murray, president, VF Sportswear.