Women’s Wear Daily
04.16.2014
business
business

Vans, North Face Stand Out for VF

Analysts saw signs of life in several of the company’s businesses.

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While much of VF Corp.’s portfolio struggled during the second quarter, analysts saw signs of life in several of the company’s businesses and welcomed the higher-than-expected earnings per share of 68 cents during the period.

Strength in VF’s Outdoor and Action Sports coalition, improved gross margins and growth in the company’s vertical retail revenues were encouraging signs that a better second half could be in store for VF — and the industry as a whole.

“Though the quarter was by no means stellar, the solid margin performance, coupled with management’s confident tone, should help investors feel more comfortable with the outlook for both VF and the industry in general,” said Omar Saad, an analyst at Credit Suisse.

Saad called VF an “industry bellwether,” noting that the company’s second quarter results should help “alleviate concerns about another leg down in vendor industry earnings.”

Although revenues in VF’s outdoor segment fell by 3 percent to $510.5 million, Vans and North Face both posted sales increases of 14 percent and 4 percent, respectively. Eric Wiseman, president, chairman and CEO of the Greensboro, N.C.-based company, emphasized that Vans grew on both the wholesale and retail side, domestically and internationally. “The performance of the Vans brand has been balanced,” he said during a conference call with analysts. “We have been opening a fair number of new Vans stores, and our wholesale business has been growing. So it has been a brand that’s working for us.”

Less impressive were the results in VF’s largest Jeanswear segment, which posted a 16 percent drop in revenues, to $545.4 million, for the second quarter.

Kate McShane, an analyst with Citigroup, said VF’s lower sourcing costs, easier comparisons and ongoing expense management should lift the firm in the second half. She called the company’s reiterated full-year guidance of $4.70 to $5 “conservative,” but added that “the biggest risk to the company’s second-half results could be on the top line, with second-quarter sales weaker than expected and continued challenges to U.S. and European retail.”

Jeff Mintz, a research analyst with Wedbush Morgan Securities, added that although VF is managing its business to the best of its ability, without sales growth an economic turnaround is still far off. “We really need revenue to start turning around,” he said, “and not just for them but for the whole industry.”

VF last week reported earnings of $75.5 million, or 68 cents a diluted share, a 28 percent decrease from the year-ago quarter. Analysts polled by Yahoo Finance had expected EPS to come in at 59 cents.

The company’s revenues fell 11 percent to $1.49 billion, versus $1.68 billion in the second quarter of last year.

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