V.F. Corporation (VFC)

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V.F. (VFC)

Q4 2011 Earnings Call

February 16, 2012 8:30 am ET


Jean Fontana - Senior Vice President

Eric C. Wiseman - Chairman, Chief Executive Officer, President, Ex-Officio Member of Finance Committee

Robert K. Shearer - Chief Financial Officer and Senior Vice President

Karl Heinz Salzburger - Vice President, Group President of International and Member of Operating Committee

Scott Baxter - Vice President, Group President of Jeanswear Americas & Imagewear and Member of Operating Committee

Karen Murray - President of Sportswear Coalition

Susan Kellogg - President of Contemporary Brands Coalition

Unknown Executive -


Michael Binetti - UBS Investment Bank, Research Division

Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division

Joseph Parkhill - Morgan Stanley, Research Division

Robert F. Ohmes - BofA Merrill Lynch, Research Division

Kate McShane - Citigroup Inc, Research Division

John D. Kernan - Cowen and Company, LLC, Research Division

Omar Saad - ISI Group Inc., Research Division

Kenneth M. Stumphauzer - Sterne Agee & Leach Inc., Research Division

Michelle Tan - Goldman Sachs Group Inc., Research Division



Good day, everyone, and welcome to the VF Corporation Fourth Quarter Fiscal 2011 Earnings Conference Call. Please be aware that today's conference is being recorded. And now, your host for today's call, Ms. Jean Fontana. Ms. Fontana, please go ahead, ma'am.

Jean Fontana

Thank you. Good morning, everyone. Thank you for participating in VF Corporation's fourth quarter and full year 2011 conference call. By now, you should have received today's earnings press release. If not, please call (203) 682-8200, and we'll send you a copy immediately following the call. Hosting the call today is Eric Wiseman, Chairman and CEO of VF Corp.

Before we begin, I would like to remind participants that certain statements included in today's remarks and the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include management's current expectations, estimates and projections about business and results of operations and the industries in which VF operates. Actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those projected in the forward-looking statements are discussed in the documents filed by the company in the SEC.

I would now like to turn the call over to Eric Wiseman.

Eric C. Wiseman

Thanks, Jean. Good morning, everyone and thanks for joining us. With me today are Bob Shearer, our Chief Financial Officer; our 3 group presidents, Steve Rendle, Karl Heinz Salzburger and Scott Baxter; as well as Karen Murray, President of VF Sportswear; and Susan Kellogg, President of VF Contemporary Brands. I'd like to start off today's call by answering a question I know has been on everyone's mind lately. That question relates to the impact of unseasonably warm weather on VF in general and on The North Face, in particular. I'm delighted to report that in the fourth quarter of 2011, The North Face achieved a 22% increase in global revenues, and this was no easy comp. In the fourth quarter of 2010, The North Face achieved global revenue growth of 25% during an exceptionally cold and snowy winter season globally. Here are some additional numbers. The North Face Americas business grew by 24%. European revenues rose 12% in constant dollars, and Asia revenues increased 41% in constant dollars. I hope that this helps put to rest concerns about the ability of this powerful brand to grow, even in less-than-ideal conditions. We are confident that The North Face's momentum will continue in the years to come, and we look forward to achieving our 2015 revenue goal of $3 billion.

Now with that piece of the picture behind us, let's talk some about the year and the quarter just ended.

2011 was a year of records: record revenues, record earnings, record cash flow from operations both on an organic basis and, of course, including Timberland, which represents another VF record, the largest acquisition in VF's history.

We continue to be thrilled about the opportunities that Timberland and SmartWool offer VF and our shareholders. We delivered revenues and earnings accretion in 2011 above our initial expectation. We have outstanding teams in place at both Timberland and SmartWool, who are working incredibly hard to realize all the synergies and growth we laid out for you at the time of the acquisition, and we're confident that both the Timberland and SmartWool brands will be important drivers of VF's success for years to come.

The VF team delivered an impressive array of accomplishments in 2011. First, solid organic revenue growth in each and every VF coalition and higher operating income in every coalition except Jeanswear, for reasons we have discussed throughout the year, continued momentum at both The North Face and Vans brands, both of which grew over 20%.

Internationally, organic revenue growth was about 20% in constant dollars. Including Timberland, international revenues were 34% of VF's total revenues. And speaking of international growth, despite the well documented financial challenges in Europe, our organic revenue growth in Europe was 16% in constant dollars. In Asia, an area of continued investment for us, organic revenue growth was greater than 30% in constant dollars, and in our direct-to-consumer businesses, we achieved organic revenue growth of 15%.

In terms of the fourth quarter, we're delighted to wrap up the year on such a strong note, with total revenues rising 37%, and organic growth of 11%. I noted earlier the strength of The North Face in the quarter, but that doesn't tell the whole story. All the VF coalitions achieved solid organic revenue growth in the quarter, and both our international and direct-to-consumer businesses posted double-digit organic growth in the period.

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