VF Corporation (NYSE: VFC) today reported financial results for its second quarter ended June 29, 2013. All per share amounts are presented on a diluted basis. “Adjusted” amounts refer to non-GAAP measures as described in the “Adjusted Amounts” paragraph at the end of this release.
“Our strong second quarter results demonstrate that VF’s diverse portfolio of brands supported by powerful platforms is a potent engine for growth,” said Eric Wiseman, VF Chairman and Chief Executive Officer. “By staying sharply focused on our strategies – leading in innovation, expanding geographically and connecting more deeply with our consumers – we are winning in the global marketplace and are on track to deliver another record year for VF.”
Second Quarter 2013 Review
Revenues rose 4 percent to $2.2 billion compared with the same period of 2012, driven by strength in Outdoor & Action Sports, international and direct-to-consumer businesses.Gross margin improved 240 basis points to 48.5 percent, an all-time high for any quarter in VF’s history. This performance, which includes improvements in nearly every coalition, compares with 46.1 percent in the same period of 2012. The higher gross margin reflects lower year-over-year product costs and the continued shift in our revenue mix toward higher margin businesses. Operating income on an adjusted basis grew 22 percent to $206 million in the second quarter, compared with $169 million in the same period of 2012. On a GAAP basis, second quarter operating income increased 23 percent to $201 million, compared with $164 million in last year’s same period. Adjusted operating margin was 9.3 percent, compared with 7.9 percent in the second quarter of 2012. On a GAAP basis, operating margin rose to 9.1 percent from 7.7 percent in last year’s period. Net income on an adjusted basis grew by 16 percent to $142 million from $123 million in the second quarter of 2012. Adjusted earnings per share – which excludes Timberland acquisition-related items of $0.03 per share in the second quarter – increased 14 percent to $1.27 per share from $1.11 per share during the same period last year. Last year’s second quarter adjusted earnings per share of $1.11 excluded a $0.32 per share gain from the sale of John Varvatos and $0.03 per share in acquisition-related expenses. Additionally, last year’s second quarter earnings per share included a non-recurring $0.10 per share discrete tax benefit primarily related to the settlement of prior years’ tax audits. On a GAAP basis, second quarter net income was down 11 percent to $138 million or $1.24 per share. Second Quarter Coalition Review Outdoor & Action Sports revenues rose 6 percent in the quarter to $1.1 billion with balanced growth across both the U.S. and international markets, and its wholesale and direct-to-consumer channels. The North Face ® brand revenues rose 5 percent globally driven by a mid-teen percentage rate increase in its direct-to-consumer sales and more than 20 percent growth in its international business. Revenues for The North Face ® brand’s Americas region were down slightly, with a modest decline in its wholesale business that was not fully offset by its strong direct-to-consumer business, which grew at a mid-teen percentage growth rate. Second quarter revenues for the brand grew by 10 percent in Europe and by more than 40 percent in Asia Pacific demonstrating that The North Face ® brand’s international strategy continues to deliver outstanding results. Vans ® , one of VF’s fastest growing and most profitable brands, continues to perform well on all fronts: wholesale, direct-to-consumer and in all regions of the world. In the second quarter, Vans ® brand global revenues were up 15 percent including low-teen percentage growth in the Americas, 20 percent growth in its European business and more than 20 percent growth in the Asia Pacific region. The Vans ® brand posted strong mid-teen percentage revenue increases in both its wholesale and direct-to-consumer channels globally. Second quarter revenues for the Timberland ® brand were down 3 percent. In the Americas region, revenues increased at a low single-digit percentage rate driven by a high single-digit increase in direct-to-consumer sales, offset by a modest decline in its wholesale business. In Asia Pacific, where Japan remains the brand’s largest market, second quarter revenues increased at a low single-digit percentage rate (low double-digit rate on a constant-dollar basis). With continued challenging conditions in Europe, the Timberland ® brand’s revenues declined at a low double-digit percentage. Globally, on a constant-dollar basis, the Timberland ® brand’s direct-to-consumer business was up by a mid single-digit percentage rate in the quarter. Second quarter Outdoor & Action Sports operating income rose 22 percent to $100 million and operating margin increased 120 basis points to 9.1 percent, compared with 7.9 percent in the 2012 period.