VF BEATS ESTIMATES WITH SOLID 3RD QUARTER

Byline: Scott Malone

NEW YORK — VF Corp. late Wednesday reported third-quarter results that squeaked past Wall Street’s expectations, but warned that the slowdown in retail traffic since the Sept. 11 attacks could take a bite out of fourth-quarter sales and profits.
For the three months ended Sept. 29, the Greensboro, N.C.-based company recorded net income of $103.6 million, or 90 cents a diluted share, up slightly from earnings of $103.4 million, 88 cents a share, reported for the prior-year quarter.
According to First Call/Thomson Financial, analysts had expected the company to earn 89 cents a share for the quarter.
The earnings growth came despite a 7.7 percent slide in sales, to $1.48 billion.
“Clearly, business conditions were difficult before the Sept. 11 tragedy and they have continued to be extremely challenging,” chairman and chief executive Mackey McDonald said in a statement. “People are adjusting to the aftermath of the events of Sept. 11 and the prospect of lengthy military action by the U.S. and its allies.”
The company warned that if post-Sept. 11 sales trends continue, its fourth-quarter revenues could be down 10 percent, leading to a drop of 35 percent or more in fourth-quarter earnings. That would leave the company’s overall earnings, which were essentially flat for the first nine months, down for the year.
Last year, VF posted fourth-quarter earnings of $97.2 million, or 81 cents a share, on sales of $1.36 billion. Analysts had expected the company to post fourth-quarter 2001 earnings of around 75 cents a share prior to Wednesday’s announcement.
McDonald said the company, which over the past 12 months has reduced its inventory levels by $100 million, would continue to reduce stock levels in light of the expected sales decline. That is a large part of the reason for the anticipated fourth-quarter margin deterioration.
Salomon Smith Barney analyst Carol Murray described VF’s estimate of its potential fourth-quarter sales decline as “higher than we had initially thought.”
However, she noted that VF is not the first apparel company to lower earnings forecasts since the Sept. 11 attacks.
“We adjusted our numbers to reflect some type of earnings impairment back on Sept. 26,” she said. “So far all of the revisions announced have been greater than our initial assessment, which is not surprising.”
J.P. Morgan Securities analyst Noelle Grainger suggested that retailers’ current skittishness about consumer spending might hit VF harder than other apparel vendors in the short term because much of the company’s volume is done on an at-once, replenishment basis.
“That is business that people are pulling back from more quickly, so they could see more fourth-quarter impact,” she said. “But on the other hand, they could rebound more quickly,” if consumer demand proves to be stronger than anticipated.

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