) posted second-quarter 2014 earnings of 36 cents a share, up over
16% year over year and a penny ahead of the Zacks Consensus
Estimate. The bottom line benefited from consistently good
performance at the company's Outdoor & Action Sports,
international and Direct-to-Consumer businesses.
V F Corporation - Quarterly EPS (BNRI) |
Quarter in Detail
V.F. Corp.'s total revenue of $2,402.1 million grew 8% year over
year on the back of double-digit revenue growth at its Outdoor
& Action Sports, international as well as direct-to-consumer
businesses. With this, reported sales surpassed the Zacks Consensus
Estimate of $2,365 million.
The company's gross margin in the quarter contracted 10 basis
points (bps) to 48.4% as the benefit from a mix shift to
higher-margin businesses were more than offset by the negative
impact of foreign currency translations.
Operating income rose 9% to $219.8 million, on a year-over-year
basis. Moreover, adjusted operating margin expanded 10 bps to 9.2%
during the quarter as the effect of lower gross margin was more
than offset by improved selling, general & administrative
expenses as a percentage of revenues.
Outdoor & Action Sports
rose 16% from the year-ago quarter to $1,279.1 million, driven by
double-digit growth witnessed in international and U.S. markets as
well as direct-to-consumer and wholesale networks.
The increased revenues could be attributed to a respective 11%,
21% and 19% increase in sales in North Face, Vans and Timberland
brands. Segment operating income increased 30% year over year to
$130.7 million, while operating margin expanded 110 bps to
revenues inched down 1% year over year to $605.8 million. The
dismal performance at the segment was due to a low single-digit
percentage decline in the Americas region, partly offset by a
mid-teen percentage increase in Europe and a low-single-digit
percentage rise in Asia Pacific.
Moreover, segment revenue suffered due to a 7% decline at the
Lee brand. Segment operating income dipped 8% to $100.1 million
while operating margin contracted 130 bps to 16.5% in the
revenues increased 3% year over year to $250.0 million on the back
of strong Image and Licensed Sports Group revenues. Operating
income increased 1% to $35.3 million. However, operating margin at
the segment contracted 40 bps to 14.1%.
increased 5% to $140.1 million owing to strong performance at the
Kipling brand that delivered high-teens percentage increase in the
U.S. and 27% growth worldwide. On the other hand, the Nautica brand
improved 2% in the quarter. However, segment operating income
decreased 37% year over year to $10.3 million. Operating margin
came in at 7.3%, contracting 490 bps year over year.
revenues slipped 2% to $96.2 million, depicting the challenges
faced by the women's premium denim business. However, operating
income in the quarter increased 12% to $8.8 million, while
operating margin expanded 120 bps to 9.2%.
The company's International revenues escalated 14% year over
year. The growth was largely driven by strong performances at
almost all brands in Europe (up 16%), Asia Pacific (up 17%) and
Americas (up 6%). Notably, within the Asia Pacific region the
company witnessed strong growth in China, where revenues were up
15%. International revenues represented 36% of V.F. Corp.'s total
revenue in the second quarter compared with 34% for the comparable
Direct-to-Consumer revenues advanced 18% year over year,
primarily driven by double-digit revenue growth in every region
across the globe and upside in almost every brand. During the
quarter, the company added 41 new stores to its portfolio,
including various brands, bringing the store count to 1,299.
Overall, direct-to-consumer revenues contributed 26% of V.F.
Corp.'s second quarter revenues, higher than 22% in the year-ago
V.F. Corp. ended the quarter with cash and cash equivalents of
$475.9 million and long-term debt of $1,425.1 million. The
company's shareholders' equity came in at $5,653.4 million as of
Jun 28, 2014.
Moreover, during the first two quarters of 2014, the company
generated cash flow from operations of $219.6 million and spent
about $95.8 million towards capital expenditure. Inventories
improved 6% year over year, indicating the company's emphasis on
operational efficacy. Further, the company expects to generate over
$1.65 billion from operational activities.
On Jul 15, 2014, management announced a quarterly dividend of
26.25 cents per share to be paid on Sep 19, 2014 to stockholders of
record as of Sep 9, 2014.
During the quarter, V.F. Corp. bought back nearly 2.9 million
shares for an aggregate value of $173 million, under the share
repurchase authorization approved in Dec 2013. Going forward, the
company expects no further share repurchases throughout 2014.
The company seems confident about 2014, mainly on the back of
its strong brand portfolio. For 2014, it continues to expect an 8%
increase in revenues, considering favorable growth in all its
coalitions. For the third quarter, the company expects revenue
growth similar to the second-quarter level, driven by continued
strength at the Outdoor & Action Sports, international and
Further, the company retained its gross margin and operating
margin forecasts for 2014 at 49% and 15%, respectively.
The company still projects adjusted earnings for 2014 to rise
13% year over year to $3.06 per share. Currently, the Zacks
Consensus Estimate for the year stands at $3.09 per share, above
the company's guidance.
Other Stocks to Consider
This North Carolina-based retailer currently holds a Zacks Rank
#2 (Hold). Some better-ranked stocks in the textile-apparel
Michael Kors Holdings Ltd.
Vince Holding Corp.
), all of which carry a Zacks Rank #1 (Strong Buy).
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