VF revenues up 15% in the second quarter
VF Corporation continued to beat expectations in its second quarter and raised its full-year guidance on Friday.
The apparel maker reported that its revenue increased 15 percent in the second quarter of 2019, or 16 percent in constant currencies, with growth driven by the group’s international and direct-to-consumer platforms, and Active and Work segments.
In particular, its three big brands – Vans, The North Face and Timberland - boosted results due to thriving demand. They grew at a combined rate of 11 percent, with the Vans brand leading the way with another exceptional quarter.
Net sales for the quarter ended September 29, 2018 totalled $3.9 billion. The firm's newly acquired brands Williamson-Dickie, Icebreaker and Altra continued to prove to be solid contenders, contributing $324 million revenue during the quarter.
The group’s active segment, which includes the Vans, Eastpak and Kipling brands, among others, increased 19 percent during the period (up 20 percent in constant dollars). Vans, of course, led the segment with a 26 percent revenue jump.
VF’s work segment, which is comprised of brands like Timberland Pro, was also a strong performer, posting a revenue jump of 125 percent.
By region, international revenue increased 13 percent (up 15 percent in constant dollars) where a 9-percentage point contribution was recorded from new acquisitions. Meanwhile, by channel, VF’s direct-to-consumer business saw revenue growth of 19 percent, again pushed by growth from new acquisitions, as well as digital revenue, which increased an impressive 48 percent (up 49 percent in constant dollars).
Operating income during the quarter reached $659 million, up 19 percent on an adjusted basis, while net income totaled $507 million.
“VF’s second quarter results were strong driven by our core brands, the company’s international and direct-to-consumer platforms, and our work businesses,” said Steve Rendle, Chairman, President and Chief Executive Officer, in a news statement.
“As we move into the second half of our fiscal year, we are confident in our growth engines as evidenced by the increase in both our dividend and full year outlook. We continue to invest behind our strategic growth priorities, and the actions we are taking continue to advance our journey toward transforming VF into a purpose-led, performance-driven, consumer centric organization focused on and committed to delivering superior returns to shareholders.”
Following the acquisitions of Williamson-Dickie, Icebreaker and Altra in the first quarter, and the sale of Nautica to Authentic Brands Group, VF entered into a definitive agreement to sell the Reef brand, a shoes and clothing brand rooted in surf culture, to The Rockport Group of Newton, Massachusetts, in the second quarter.
VF Corp also recently decided to spin-off its denim business, which includes brands like Wrangler and Lee into a publicly traded company.
Since 2017, VF has been following its “2021 growth plan”, which includes an increased focus on its international and direct-to-consumer businesses.
Part of the growth plan is to prioritize digital and direct-to-consumer, increase focus on the Asian market, particularly China, and reshape the company’s brand portfolio, which the company is continuing to do.
Due to its strong results in the second quarter, VF has revised up its full-year outlook for fiscal 2019. Revenue is now expected to be at least $13.7 billion, compared to a previous guidance of between $13.6 billion to $13.7 billion.
International revenue is still expected to increase between 12 percent and 13 percent, while direct-to-consumer revenue is now expected to increase between 12 percent and 14 percent versus the previous expectation of an 11 percent to 13 percent increase.
The company raised its full-year adjusted earnings forecast to $3.65 per share, compared to the previous expected range of $3.52 to $3.57.
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