LEE JEANS, INNERWEAR HELP VF SCORE 25.5% NET GAIN IN 1ST PERIOD

Byline: Diane Picard

NEW YORK — The seasonal parade of first-quarter reports from major apparel companies started with a flourish Tuesday, as VF Corp. reported a 25.5 percent gain in net earnings on a sales hike of 9 percent.
Particularly strong sales increases were cited in its Lee jeanswear and various brands of intimate apparel, as the biggest of the publicly traded apparel companies posted profits of $70.2 million, or $1.08 a share, in the three months ended April 5, against $55.9 million, or 86 cents, a year earlier.
Total sales in the quarter rose to $1.3 billion from $1.2 billion.
The results easily beat Wall Street estimates of 95 cents a share, and on a buoyant New York Stock Exchange, shares of VF rose 2 5/8 to close at 67 7/8. (See stock market story on page 2.)
VF’s strong performance should be followed by a string of other plus figures for the year’s initial quarter, according to First Call, a survey of Wall Street analysts. Among the major players, Fruit of the Loom is expected to earn 27 cents a share, against 16 cents last year. Jones Apparel Group is forecast at 46 cents a share, compared to 30 cents. The estimate for Liz Claiborne is 56 cents, versus 49 cents, and Warnaco Group is expected to turn in 33 cents a share against 29 cents.
While the results may not reflect an overall booming consumer market, they do again support what analysts have long been saying — the big branded marketers are only destined to get bigger, as they are the companies that can efficiently serve the increasingly larger retailers.
Meanwhile, in a conference call with analysts, chief executive officer Mackey J. McDonald said that for the full year, VF is taking a relatively conservative outlook but expects an 8 to 10 percent earnings increase.
In 1996, VF reported net earnings of $299.5 million, or $4.64, on sales of $5.13 billion.
In the conference call and a statement accompanying the figures, McDonald remarked upon a number of points regarding the performance of key categories, although the company this quarter did not break out specific results by merchandise groups, as it has in the past.
Sales growth, he said, was broad-based across all product areas. Jeanswear, he noted, accounted for about half of the 9 percent sales increase in quarter.
“The Lee brand enjoyed its largest quarterly sales gain in over two years, with continued good response to its Lee Riveted casuals program and high visibility marketing initiatives,” he said.
Intimate apparel sales “rebounded” in the quarter, McDonald said, rising more than 35 percent, with profits up at an “even higher” rate. Expanded distribution of the Vassarette brand and new product introductions in Vanity Fair and private label programs contributed to the increase.
Vanity FaIr brand sales were up about 10 percent in the quarter, while Vassarette sales surged 70 percent due to the brand’s rollout at Kmart. Private label sales gained 50 percent.
In addition, the company’s Red Kap workwear business reported a double-digit sales gain in the quarter, due partly to the 1996 acquisition of Bulwark Protective Apparel, McDonald said.
“Our Nike licensed and Healthtex playwear businesses also remain on the upswing, with solid gains in knitwear as well,” he added.
First-quarter inventories were lower than plan, McDonald said, and the company is doing “better at matching production to retail demand.”
Also helping the bottom line, gross margins improved to 33.1 percent of sales from 32.9 percent, primarily from lower raw material costs and improved sourcing strategies. Operating margins also rose in the quarter despite a $17 million increase in incremental marketing costs to support growth in the jeanswear, intimate apparel and day pack brands.
Leslie McCall, apparel analyst with Oppenheimer & Co. Inc. summarized the quarter by noting that the company has been booking “terrific jeanswear performances,” and that the intimate apparel business is “finally starting to achieve a turnaround.”
Looking ahead, she said that VF will face easy second-quarter comparisons but spending will increase on marketing efforts. “The first half is a seasonally good time for them.”
On a final note, McDonald said, “Given our low 21 percent debt-to-capital ratio and strong cash flow, we have accelerated our share repurchase program.”
He pointed out that the company has 4.7 million shares remaining under its authorized 5 million share repurchase program.

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