Greensboro, NC—VF Corp. reported today that its second quarter profit jumped 20% helped by strong sales growth, including double-digit gains in Europe and Asia.
As a result, the footwear and apparel giant increased its full year earnings outlook.
For the quarter ended June 30, VF posted a net profit of $155.3 million, or $1.40 a share, up from $129.4 million, or $1.17 a share, a year earlier. Excluding Timberland acquisition-related expenses and a gain on the sale of John Varvatos Enterprises Inc., adjusted earnings were $1.11 a share. In March, VF agreed to sell the majority ownership interest in the brand to Lion Capital LLP.
Total revenue increased 16% to $2.14 billion. That total included $239 million from Timberland, the footwear brand VF bought last year. Organic revenue growth in the quarter 6% in constant dollars, driven by strong growth in the Outdoor & Action Sports (Vans, The North Face, etc) and international businesses.
The earnings handily beat analysts’ average estimate for 94 cents a share, but just missed their sales estimate for $2.18 billion.
Gross margin widened to 46.1% from 45.9% as high costs associated with the jeanswear segment eased.
“The strength of VF’s business model–a diverse portfolio strategy supported by an intense focus on financial and operational disciplines–provides us with a clear competitive advantage as we successfully navigate through an increasingly uncertain economic environment,” said Eric Wiseman, chairman/ceo.
International Accounts for 33% of Total Revenue
By brand, The North Face posted a 16% increase in constant dollars with the Americas, Europe and Asia regions each growing in excess of 15%. The North Face brand’s direct-to-consumer business continued to post healthy growth, up 9% in the quarter.
Vans saw a 29% increase in constant dollars, thanks double-digit sales increases in the Americas, Europe and Asia. The Vans direct-to-consumer business also demonstrated solid results, with revenues rising by 18%.
As anticipated, Timberland’s revenues were flat in the quarter (up 2% in constant dollars).
VF’s international revenues increased 42% with 26 percentage points of the growth attributable to Timberland. Despite economic headwinds, organic revenues in Europe increased 16% driven by solid performance in the Vans, The North Face, 7 For All Mankind and Napapijri brands.
In Asia, organic revenues increased 20% with continued growth in the Lee, The North Face, Vans and Kipling. Sales growth in China remains robust, rising more than 30%. International sales reached 33% of total revenues compared with 29% a year ago.
Direct-to-consumer sales, which now account for 21% of total revenues, increased 37% with Timberland contributing 29 percentage points. The company said The North Face, Vans, Nautica and 7 For All Mankind brands “each achieved healthy growth in the period.”
A total of 34 stores opened during the quarter brining the total number of owned retail stores to 1,071.
VF increased its full year earnings forecast as a result of its first half report. The company now expects earnings per sale of $9.50, up 5 cents from its April guidance of $9.45. Timberland is expected to account for about $1.10 a share.
The company also reiterated that it expects full year revenue to rise by about 15% to $10.9 billion, with Timberland accounting for approximately $1 billion of the growth. Excluding Timberland, revenues should rise by approximately 6%.
Analysts’ average estimate expects VF to earn $9.48 a share on revenues of $11.05 billion.
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