- Prachi Singh |
VF Corporation’s third quarter revenue increased 5 percent or 4 percent currency neutral to 3.5 billion dollars, which the company said was driven by broad-based strength across VF’s international and direct-to-consumer platforms, outdoor & action sports coalition, most notably Vans brand and workwear businesses. Earnings per share on a reported basis decreased 16 percent to 0.97 dollar compared to 1.16 dollars during the same period last year. On an adjusted basis, earnings per share increased 6 percent to 1.23 dollars. Excluding the impact of changes in foreign currency, third quarter reported and adjusted earnings per share decreased 12 percent and increased 10 percent, respectively.
“VF’s third quarter results were strong, fuelled by accelerated momentum across the company’s international and direct-to-consumer platforms and our outdoor and action sports and workwear businesses,” said Steve Rendle, VF’s President and Chief Executive Officer in a statement, adding, “Based on the strength of our third quarter performance and the stronger growth trajectory we see for the remainder of 2017, we are again increasing our full year outlook.”
Q3 gross margin improves 100 basis points
The company said, gross margin for the quarter improved 100 basis points to 50.1 percent, as benefits from pricing and a mix shift toward higher margin businesses were partially offset by changes in foreign currency and an increase in product costs. Changes in foreign currency negatively affected reported gross margin by 80 basis points during the quarter.
Operating income on a reported basis was down 20 percent to 484 million dollars compared to the same period of 2016. On an adjusted basis, operating income was down 2 percent to 593 million dollars. Changes in foreign currency negatively affected the reported and adjusted operating profit decline by 3 percentage points during the quarter. Operating margin on a reported basis decreased 450 basis points to 13.8 percent. On an adjusted basis, operating margin declined 140 basis points to 16.9 percent. Changes in foreign currency negatively affected reported and adjusted operating margin by 80 basis points during the quarter.
VF raises 2017 outlook
For the full year, revenue is now expected to increase about 6 percent on a reported or 5.5 percent currency neutral basis to approximately 12.1 billion dollars compared to the previous expectation of 11.85 billion dollars, a 3.5 percent increase on a reported and 4.5 percent on currency neutral basis. Both estimates include about a 200 million dollars contribution from the previously announced Williamson-Dickie acquisition.
By coalition, revenue for outdoor & action sports is now expected to increase approximately 7 percent versus the previous expectation of an approximate 5 percent increase (up 6 percent to 7 percent currency neutral); revenue for jeanswear is now expected to decline slightly versus the previous expectation of revenue that approximated that of 2016; imagewear revenue is still expected to increase at a mid-single-digit percentage rate; and, sportswear is still expected to decline at a high single-digit percentage rate.
International revenue is now expected to increase approximately 10 percent versus the previous expectation of a low single-digit increase or up high single-digit currency neutral. Direct-to-consumer revenue is now expected to increase approximately 13 percent versus the previous expectation of a 10 percent to 11 percent increase. Digital revenue is now expected to increase approximately 30 percent versus the previous estimate of a more than 25 percent increase.
Gross margin is now expected to approximate 50 percent, versus the previous expectation of 49.5 percent, and includes about a 50 basis point negative impact from changes in foreign currency. The Williamson-Dickie acquisition is expected to negatively impact gross margin by about 20 basis points. Earnings per share on a reported basis are expected to be 2.73 dollars; adjusted earnings per share are now expected to be 3.01 dollars compared to the previous expectation of 2.96 dollars. Accordingly, adjusted earnings per share are expected to increase 1 percent or 6 percent currency neutral, compared to 2016 adjusted earnings per share of 2.98 dollars.
On October 19, 2017, VF’s board of directors declared a quarterly dividend of 0.46 dollar per share, reflecting a 10 percent increase over the previous quarter’s dividend.