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VF Reports Record 2012 Fourth Quarter And Full Year Results, And Sets Guidance For Fiscal 2013

Fourth quarter Outdoor & Action Sports operating income rose 18 percent and operating margin increased 190 basis points to 18.8 percent compared with 16.9 percent in the 2011 period.

Jeanswear revenues increased 3 percent (4 percent in constant dollars) to $735 million in the quarter. The Americas business grew by 5 percent in constant dollars during the quarter, while Europe posted a modest decline in revenues. Jeanswear revenues in Asia were up modestly reflecting the impact of a buildup in retailers’ inventories.

Global revenues for the Wrangler ® brand on a constant dollar basis increased 5 percent driven by solid growth in its Western and Mass businesses in the U.S., and moderate growth in Latin America offset by a slight decline in Europe.

The Lee ® brand’s global revenues were about flat on a constant dollar basis in the fourth quarter as the brand continues to navigate challenging dynamics in the mid-tier channel in the U.S. and weak macroeconomic conditions in Europe.

Jeanswear operating margin continued to improve, moving closer to historic levels. Both the Wrangler ® and Lee ® brands improved profitability in every region of the world, driven by lower year over year product costs and continued improvements in operating efficiencies.

Imagewear revenues grew 2 percent in the fourth quarter to $262 million, with a difficult comparison against strong growth achieved in the prior year period. As anticipated, the higher product costs that negatively impacted profitability in the first nine months of the year subsided, contributing to a 19 percent increase in operating income and 13.1 percent operating margin in the fourth quarter of 2012 versus 11.2 percent in the fourth quarter of 2011.

Sportswear had an outstanding quarter with revenues increasing 15 percent to $183 million and both the Nautica ® and Kipling ® (U.S.) brands achieving strong double-digit revenue growth. Nautica ® brand growth reflected double-digit revenue increases in both its wholesale and direct-to-consumer businesses. Sportswear operating income was up 70 percent in the quarter, with operating margin up 580 basis points over the prior year. An overall higher mix of direct-to-consumer business for the coalition and improved operating performance in Nautica ® retail stores drove this significant improvement.

Contemporary Brands revenues were down 17 percent in the quarter to $107 million, with the decline due entirely to the sale of John Varvatos. Excluding John Varvatos in both the 2011 and 2012 periods, revenues increased 4 percent. Revenues for the 7 For All Mankind ® brand rose modestly while the Splendid ® and Ella Moss ® brands, on a combined basis, achieved high single-digit revenue growth in the quarter.

Contemporary Brands’ operating income and profitability in the fourth quarter both improved, with operating income increasing 20 percent and operating margin expanding by 260 basis points (320 basis points excluding John Varvatos). This improvement was driven by improved direct-to-consumer performance and lower closeout sales.

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