) fourth quarter 2013 adjusted earnings came in at 82 cents a
share, up 6% year-over-year. However, it missed the Zacks
Consensus Estimate of 84 cents. GAAP earnings came in at 82 cents
per share, up 12% year-over-year.
Results were driven mainly by The North Face and Vans brands,
which performed exceptionally well. Also robust performances by
the international and direct-to-consumer operations contributed
to the company's growth.
Quarter in Detail
VF Corp.'s total revenue of $3,258.7 million grew nearly 8% year
over year on the back of strong growth in Outdoor & Action
Sports, international as well as direct-to-consumer revenues. The
company's Imagewear segment also delivered high single-digit
growth. However, reported sales fell short of the Zacks Consensus
Estimate of $3358.0 million.
Gross margin in the quarter expanded 80 basis points (bps) to
48.2% from 47.4% in the comparable year-ago quarter. This could
be attributed to an improvement in higher margin businesses and
lower product costs, coupled with an enhancement in almost every
Adjusted operating income rose 11% to $509.0 million, on a
year-over-year basis. Moreover, adjusted operating margin
expanded 40 bps to 15.5% during the quarter.
Full Year 2013
Excluding the effects of restructuring expenses related to the
company's Timberland acquisition, earnings per share for the full
year surged 13% to $2.73, falling short of the Zacks Consensus
Estimate of $2.75. GAAP earnings came in at $2.71 per share, up
Revenues for 2013 witnessed a rise of 5% to $11.4 billion and
came in line with the Zacks Consensus Estimate.
Revenue at Outdoor & Action Sports rose 12% from the year-ago
quarter to $1919.3 million, driven by stable growth in
international and U.S. markets and direct-to-consumer and
The increased revenues could be attributed to a respective 12%,
14% and 13% increase in sales in North Face, Vans and Timberland
brands. Segment operating income increased 11% year over year to
$358.0 million, while operating margin dropped 10 bps to 18.7%.
VF Corp. expects revenues of this segment to grow at a low
double-digit rate in 2014.
Jeanswear revenues remained flat year over year at $734.1
million. Though sales at Wrangler brand grew 5%, the Lee brand
saw a decline of 6% during the quarter. Segment operating income
increased 2% to $134.0 million while operating margin expanded 40
bps to 18.3% in the quarter. VF Corp. expects revenues of this
segment to grow at a low single-digit rate in 2014.
Imagewear revenues increased 9% year over year to $286.9 million
on the back of a late contract renewal. However, operating income
increased 31% to $45.0 million and operating margin at the
segment enhanced 250 bps to 15.6%, impacted by a significant
gross margin improvement. VF Corp. expects revenues of this
segment to grow at a low single-digit rate in 2014.
Revenues at Sportswear increased considerably by 14% to $207.8
million owing to robust performances by the Nautica and Kipling
brands, whose sales grew 11% and 33%, respectively. Segment
operating income increased 11% year over year to $36.0 million.
Operating margin came in at 17.2%, contracting 50 bps year over
year. VF Corp. expects revenues of this segment to grow at a high
single-digit rate in 2014.
Contemporary Brands' revenues rose marginally by 1.0% to $107.7
million, depicting the challenges faced by the premium denim
business environment. Operating income and margin during the
quarter remained flat at $9.0 million and 8.3%, respectively. VF
Corp. expects revenues of this segment to grow at a mid-single
digit rate in 2014.
The company's International revenues escalated 11% year over
year. The growth was largely driven by strong performances of the
biggest brands in Americas, Asia, China and Europe. International
revenues now represent 38% of V.F.Corp.'s full year total
revenue. VF Corp. expects revenues of this segment to grow nearly
10% in 2014 and continue to account for 38% of the company's
Direct-to-Consumer revenues advanced 14% year over year, driven
by the addition of 53 new stores bringing the store count to
1,246. Performance by The North Face, Vans, Nautica and Kipling
brands also contributed towards this surge. Direct-to-consumer
revenues constitute 22% of VF Corp.'s full-year revenues, higher
than 21% previously. VF Corp expects revenues of this segment to
grow at a high-teen rate in 2014 and represent 26% of the
company's total revenue.
VF Corp. ended the year with cash and cash equivalents of $776.4
million and long-term debt of $1,426.9 million. The company's
shareholders equity came in at $6,077.0 million at the end of
full year 2013.
Moreover, during the year, the company generated cash flow from
operations worth $1,506.4 million and returned $700 million to
its stockholders in the form of share buybacks and dividends, in
spite of repaying its debt worth $400 million and spending $100
million on its pension plan. Inventories improved 3%, indicating
the company's emphasis on its operational efficacy.
Going forward in 2014, VF Corp expects to generate cash flow from
operations of over $1.7 billion. Also, it plans on returning $1
billion to its shareholders, including share buybacks worth $700
million. The company anticipates capital expenditure of $270
million in 2014.
During the quarter, management announced a quarterly dividend of
26.25 cents, to be paid to stockholders of record as of Mar 10,
2014, on Mar 20, 2014.
During the quarter the company's board authorized 50 million more
shares, under its buyback program. Together with the remaining
shares from its previous authorization, the company presently has
53 million shares under its share repurchase program.
The company seems confident about 2014, mainly on the back of its
strong brand portfolio. For 2014, it envisions a 7-8% improvement
in revenues, considering favorable growth in all its coalitions.
Further, the company expects gross margin to expand 90 bps to 49%
and operating margin to improve 60 bps to 15%.
VF Corp. projects adjusted earnings for 2014 to rise 11-13% year
over year and lie in a band of $3.00-$3.05 per share. The Zacks
Consensus Estimate stands at $3.10.
Other Stocks to Consider
This North Carolina-based retailer currently holds a Zacks Rank
#3 (Hold). However, other better-ranked stocks in the
textile-apparel space include
Michael Kors Holdings Ltd.
Columbia Sportswear Co.
). While Hanesbrands and Michael Kors carry a Zacks Rank #1
(Strong Buy), Columbia Sportswear holds a Zacks Rank #2
COLUMBIA SPORTS (COLM): Free Stock Analysis
HANESBRANDS INC (HBI): Free Stock Analysis
MICHAEL KORS (KORS): Free Stock Analysis
V F CORP (VFC): Free Stock Analysis Report
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