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VF on Acquisitions Hunt, and Tommy Could Be in Its Sights

As it posted first-quarter results, VF Corp. said it expects acquisitions to supply most of its top-line annual growth of 6 percent in coming years.

For the three months ended April 5, the company posted net income of $92.1 million, or 83 cents a diluted share, against a $448.3 million loss, or $3.96, a year ago. Last year’s results included a $527.3 million charge for a change in accounting for goodwill. Last year, the company exited the Jantzen and private label knitwear businesses. Excluding the discontinued businesses, income from operations rose 19.5 percent to $92.1 million, or 83 cents, from $77 million, or 67 cents, last year.

Buoyed by improved cost management and double-digit sales increases by most of its branded product categories, the company bested Wall Street’s mean consensus of 74 cents in earnings per share. Analysts had been expecting between 72 cents and 77 cents per share, according to a poll by Thomson First Call.

McDonald said in a statement, "This was a great quarter. Our focus on managing costs is serving us well in this environment. As important, our brands and financial position remain strong, providing us with excellent leverage when conditions improve."

Wall Street apparently agreed, sending shares of the company up $1.43, or 3.7 percent, to close at $39.98 in trading Tuesday on the Big Board.

Sales in the quarter gained 3.1 percent to $1.25 billion from $1.21 billion. International jeans sales were up 15 percent, reflecting the positive effects of foreign currency translation. Domestic jeans sales, however, fell by 7 percent due to customers’ efforts to control stocks and in some cases close stores.

McDonald expressed concern that retailers had driven inventories too low in some cases: "We think there are some stock-outs in some [of our] major accounts," he told analysts. "Some inventory is at an all-time low in denim."

Global intimate apparel sales increased by 9 percent, with increases across the company’s department store, mass market and international businesses. Sales in VF’s outdoor coalition — The North Face, JanSport and Eastpak brands — gained 15 percent in the quarter, driven by double-digit sales increases of the The North Face brand products in the U.S. and internationally.

Imagewear sales — including Chase Authentics, CSA, NFL White, NFL Red and Harley Davidson — increased by 10 percent, while the licensed sports apparel brands in the category posted a double-digit increase. Playwear sales, however, declined by 15 percent. The company said previously it was exploring strategic options for the business.
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