VF MAPS BIG RESTRUCTURING PLANS

Byline: Diane E. Picard

NEW YORK — VF Corp. will begin a major corporate repositioning this year designed to yield about $150 million in annual savings and about $2 billion in new sales by the year 2000.
The strategy also will result in continued cash-flow growth, Mackey J. McDonald, chief executive officer, said Tuesday, and VF will use the additional cash for possible acquisitions, continued share repurchase and dividend payments.
With the repositioning, the company does not plan to take any special charges, a company spokeswoman said, noting that the money will come out of general expenses. Neither will it entail any significant layoffs, she said.
In a meeting here with analysts, McDonald said that the repositioning will move all similar brands into five coalitions that will share management, manufacturing and other corporate functions. Marketing for each brand will remain separate.
According to the new plan, VF will be divided into North and South American jeanswear, intimate apparel, knitwear, playwear and international.
Also on Tuesday, VF reported earnings of $82.6 million, or $1.28 a share, in the fourth quarter ended Jan. 4, ahead of Wall Street estimates of $1.24 a share. In 1995’s fourth quarter, VF lost $35.6 million, which included charges of $155.9 million, or $1.61 a share, to reduce administrative and manufacturing costs and align inventories. Sales in the latest period gained 8.4 percent to $1.37 billion from $1.27 billion a year ago.
Reacting to the news, investors pushed VF stock up 1 5/8 to close at 69 5/8 on the New York Stock Exchange.
Going forward, McDonald said that the firm “remains committed to meeting earnings-per-share estimates despite these investments and is looking forward to a record year next year.”
In 1998, VF Corp. expects to track the 8 percent growth expected by Wall Street, he said.
McDonald explained that the company will be driven by several key concepts that will focus more directly on the needs of the consumer, with stepped up consumer research and product development.
“We will be able to ‘micro-market’ our product on a store-by-store level,” he said. “For example, a store selling VF Corp. product located near a college campus will not have the same merchandise available as one near a retirement community.”
VF has built a new service center in Greensboro, N.C., to centralize information systems and transaction processing for its domestic operations.
It will also make an “unprecedented push” behind its strongest product categories, including jeanswear, intimate apparel, workwear and day packs, to spur renewed sales growth, McDonald said.
“Over the next four years, we intend to invest a total of $1.25 billion behind our brands, including $250 million incrementally in a multitiered strategy of consumer research, product development, in-store marketing and advertising,” he said.
The company, he noted, will also launch a custom-fit jeans line by late 1997. The line is currently in its experimental stage and should be in test markets by June or July, he added.
Overall, fourth-quarter operating earnings were $150.4 million, against an operating loss of $28.3 million in 1995.
By operating division in the quarter, jeanswear operating profit nearly tripled to $102.9 million, as sales climbed 8.6 percent to $724.5 million.
Decorated knitwear reported operating earnings of $19.7 million, against an operating loss of $2.1 million. Sales inched ahead 0.7 percent to $188.4 million.
Intimate apparel reported operating earnings of $7.9 million against an operating loss of $46.9 million, but sales dipped 4.5 percent to $168.9 million.
Playwear reported operating earnings of $2.1 million, against an operating loss of $16.6 million, as sales rebounded 26.8 percent to $107.9 million.
Specialty apparel operating earnings more than doubled to $29.3 million, as sales gained 21.2 percent to $187.4 million.
Leslie McCall, analyst at Oppenheimer & Co. Inc., noted that VF’s jeans business has been “steaming along,” commenting that this repositioning shouldn’t affect the firm’s performance significantly. “It’s really more of a redeployment of their resources,” she said, “which will lead to a gradual, strong improvement for them over the year.”
“The actions that we took last year to increase brand investment, reduce costs and to better balance our manufacturing base have paid off strongly,” McDonald said. “Record levels of cash flow and the lowest debt-to-capital ratio in 13 years give us an unparalleled flexibility to round out our portfolio via acquisitions, repurchase shares and to continue our track record of steady increases in dividends.”
He noted that during the quarter, VF saw top-line growth in Wrangler, the international jeans brands, Red Cap workwear and licensed Disney and Nike children’s wear products.
“In addition, each of our specialty apparel businesses, Red Kap, Jantzen swimwear and Jansport day packs, achieved improved margins,” McDonald added.
For the year, VF reported net earnings jumped 90.4 percent to $299.5 million, or $4.64 a share, from $157.3 million, or $2.41, which included the charge.
Sales inched ahead 1.3 percent to $5.13 billion from $5.06 billion.
Operating profit in the jeanswear division rose 26.9 percent to $395.6 million, as sales were ahead 3.3 percent to $2.75 billion.
Decorated knitwear operating profit surged to 452.4 million from $8 million. Sales were up 2.9 percent to $638 million.
Intimate apparel reported operating earnings of $39.9 million against an operating loss of $788,000 a year ago. Sales dropped 10.8 percent to $650.2 million.
Playwear operating earnings swelled to $12.3 million from $2.7 million, as sales inched ahead 2.8 percent to $382.4 million.
Specialty apparel operating earnings increased 27.2 percent to $92.2 million, as sales were ahead 5.3 percent to $712.6 million.

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