) reported fourth-quarter 2011 adjusted earnings of $2.32 per
share, striding ahead of the Zacks Consensus Estimate of $2.30. The
result also surpassed earnings of $1.78 per share in the prior-year
quarter. The robust increase in earnings per share was primarily
driven by strong top-line growth and a contribution of 34 cents per
share from the Timberland acquisition.
On a reported basis, the company's earnings came in at $2.28 per
share compared with 49 cents registered in the prior-year quarter.
The reported figure includes the costs associated with Timberland
acquisition and impairment charges in fourth quarter 2010.
For full fiscal 2011, adjusted earnings surged 27% to $8.20 per
share, beating the Zacks Consensus Estimate of $8.18. On a reported
basis, earnings were $7.98 per share compared with $5.18 per share
registered in fiscal 2010.
Fiscal 2011 was a great year for V.F. Corp. as the company
achieved record revenues, record earnings per share and record cash
flow. Moreover, Timberland's contribution toward earnings was
more-than-expectation. The acquisition was expected to increase
V.F. Corp.'s profit by 25 cents a share, but it surpassed the
V.F. Corp.'s revenue of $2,879.4 million in the fourth quarter
exceeded the Zacks Consensus Estimate of $2,821 million. Revenues
eclipsed the year-ago figure by 36.8%. Besides, double-digit
revenue growth at all V.F. Corp.'s coalitions led to the overall
The company's full fiscal 2011 revenue also exceeded the Zacks
Consensus Estimate of $9,337 million and climbed 22.8% year over
year to $9,365.5 million.
Costs and operating expenses on a year-over-year basis increased
23.5% in the fourth quarter. Gross margin in the reported quarter
declined 140 basis points to 45.2% from its previous high of 46.6%
in the year-ago quarter, resulting from higher product costs.
Adjusted operating margin for the reported quarter contracted 60
basis points to 12.3%, primarily due to a year over year 34.6%
increase in operating expenses.
Outdoor & Action Sports
jumped 81% from the year-ago quarter to $1,619 million, of which
Timberland and Smartwool brands contributed $549 million. Business
from both the Americas and beyond contributed to the revenue
increase. America's revenue grew robustly by 19% while
International revenue spiked 20%. Moreover, a growth of 20% was
registered in the segment's direct-to-consumer business.
Fourth-quarter operating income (including Timberland) increased
52% from the year-ago quarter to $274 million while operating
margin contracted 320 basis points year over year to 16.9%.
However, excluding Timberland, operating margin expanded 390 basis
points to 24%.
revenue increased 3% to $711.6 million driven by a domestic growth
of 1% and international growth of 9%. The company is registering
market share gain in all of the three businesses under this segment
driven by new product innovations in all categories. However, the
segment's operating margin in the quarter declined due to higher
revenue increased 10% in the quarter to $256.8 million, driven by a
14% revenue growth in Image and 5% revenue growth in Licensed
Sports. However, higher product costs dragged down the segment's
inched up 1% in the quarter to $159.5 million primarily driven by a
49% revenue growth in Kipling brand, fully offset by decline in the
U.S. Nautica brand. However, operating margin declined year
over year due to higher product cost.
experienced a revenue increase of 12% to $128.9 million, as
benefited from new store openings and e-commerce coalition.
Operating margin was 6% compared with a loss in the year-ago
During the quarter under review, international revenues
increased 68%, largely driven by solid growth in the Outdoor &
Action Sports and Jeanswear businesses, along with strength across
the biggest brands in Asia and Europe. Timberland contributed 51%
to this growth.
Direct-to-consumer revenue increased 53% in the quarter, driven
by new store openings and Timberland acquisition. The company
opened 46 stores across diverse brands in the quarter, bringing the
total number of owned retail stores to 1,068 at the end of
fourth-quarter 2011. Timberland contributed 37% to this growth.
V.F. Corp. ended fiscal 2011 with cash and cash equivalents of
$341.2 million and long-term debt of $1,831.9 million. The
company's shareholder's equity was $4,525.2 million at the end of
fiscal 2011. During fiscal 2011, the company recorded all-time-high
operating cash flow of $1,081.4 million.
The board of directors of V.F. Corp. declared a quarterly cash
dividend of 72 cents per share. The dividend will be paid on March
19, 2012 to shareholders of record as of March 9, 2012.
Looking Into 2012
Bolstered by better-than-expected quarterly results, the company
expects total revenue in fiscal 2012 to grow approximately 15% year
over year. Moreover, the company is expecting earnings of
approximately $9.30 per share in fiscal 2012 with an expansion of
70 and 20 basis points in gross and operating margins,
respectively. V.F. Corp. now anticipates gross margin to reach
45.8% and operating margin to touch 11% in fiscal 2012.
The company also expects operating cash flow to exceed $1.1
billion. Apart from this, it plans to make a capital expenditure of
approximately $375 million in fiscal 2012 toward new store opening,
new distribution centers in U.S, Europe and Asia and new
headquarters for the company's Outdoor & Action Sports
businesses in the U.S and Europe.
We expect V.F. Corp. to continue delivering on its potential,
given the proven performance across its segments, its focus to
build brand image via incremental marketing spending and its
committed returns to shareholders by virtue of share buybacks and
Moreover, we believe that V.F. Corp.'s policy to acquire
businesses providing strategic opportunities and exiting businesses
having lower potential have helped the company to drive growth and
improve profitability. The recent merger of Timberland in the V.F.
Corporation portfolio of brands of outdoor and action sports
business comprising Vans, Jansport, Eastpak and other brands, will
make 50% of the company's total revenue in fiscal 2012, which is
expected to rise to 60% by 2015.
Based in Greensboro, North Carolina, V.F. Corp. is one of the
world's largest apparel companies. The company, together with its
subsidiaries, engages in the design, manufacture, and marketing of
branded apparel and related products in the United States and
internationally. Major competitors of the company are
Sears Holdings Corporation
V.F. Corp. currently retains a Zacks #3 Rank, which translates
to a short-term Hold rating. However, we maintain a long-term
Neutral recommendation on the stock.
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