VF CORP. ACQUISITIONS SEEN PROFITABLE IN 2001
Byline: Evan Clark
NEW YORK — VF Corp.’s acquisitions in 2000 shaved 4 cents off its earnings for the quarter and 6 cents off its year but are expected to add to the bottom line in 2001.
After reporting fourth-quarter profits slightly below Wall Street’s expectations, but ahead for the year, VF Corp.’s chairman and chief executive, Mackey McDonald, told analysts on a conference call Wednesday that acquisitions including North Face and Eastpak, a series of management shifts and the elimination of non-strategic workwear businesses constituted “a lot of initiatives to prepare ourselves for the future.”
As reported, the company’s earnings for the period ended Dec. 30 were $82 million, or 71 cents a basic share, down about 15.6 percent from year-ago levels after the exclusion of extraordinary items. The Street was looking for earnings of 73 cents. Excluding the special items net income for 2000 was $343.8 million, or $2.98 a basic share, ahead of Wall Street’s anticipations of $2.96. Sales for the year were $5.75 billion, a 3.5 percent improvement over year-ago sales of $5.55 billion.
Shares of the Greensboro, N.C.-based company ended the day Wednesday down 6 cents, to $35.71, in New York Stock Exchange trading.
The respective 4 and 6 cent reductions in earnings attributable to acquisitions were stated on a diluted basis.
Exiting the non-apparel segment of workwear and its Japanese jeans business, which together produced about $100 million in revenues, should produce annualized benefits of approximately $45 million.
McDonald described VF at the start of 2001 as “more focused on our core businesses. We’ve got the building blocks in place to continue to build our brands.”
VF’s U.S. market share in jeans rose to 27.7 percent in 2000 compared to 25 percent in the preceding year, according to the company. Its Wrangler brand jeans gained the leading share, surpassing Levi Strauss & Co., capturing 11.7 percent of the domestic market during the year compared to 10.5 percent a year ago. Lee brand jeans picked up a fraction of a percent, growing to 6.7 percent from 6.5 percent.
The firm expects its jeanswear operations to grow only slightly in 2001. Increases are expected due to the launch of a casual pants line from Lee called City Elements, initiatives in the underserved special size market and the expansion of the company’s customer base with its Brittania label and recently acquired Chic brand.
Despite recent softness in the western specialty store business, John Schamberger, chairman of the firm’s North and South American jeanswear coalition, said VF expects to maintain or gain retail space during 2001 in both the middle and mass merchant markets. The company’s intimates business was affected by private label program reductions, due partially to the loss of a program with Victoria’s Secret, but VF expects sales to rebound this year from the continued rollout of Tommy Hilfiger intimates and the introduction of seamless products.
Eric Wiseman, vice president and chairman of intimate apparel, said on the call he planned for 11 percent growth in private label in 2001 driven by new programs. The Vanity Fair brand grew 5 percent on strength of the Illuminations program in 2000 and is expected to duplicate that performance in 2001.
As reported, domestic intimate apparel sales fell 7 percent during the fourth quarter and 9 percent for the year with stronger results in the department store brands offset by declines in private label sales. On the call, the company said it expects private label to turn around during the second quarter.