Updated from 8:09 a.m. EDT to include CEO comments
Sometimes it's brutally tough to sell clothing and footwear on other people's racks, as VF Corp.'s (VFC) third-quarter results and outlook attest.
The maker of well-known brands such as The North Face, Timberland and Vans reported Monday that third-quarter sales fell 1% from the prior year to $3.5 billion, falling short of analyst estimates for $3.63 billion. Earnings rose 13% from a year ago to $1.20 a share, ahead of Wall Street estimates for $1.15 a share.
But excluding 6 cents a share of discrete tax items that VF Corp. logged during the quarter, earnings would have come in at $1.14 a share. It's unclear if analysts included the 6-cents-a-share benefit -- which is likely one-time in nature -- in their forecasts.
Shares fell close to 1% on Monday.
A combination of a warm start to fall that has major U.S. retailers buying apparel inventory cautiously and ongoing department store closures appeared to take its toll on VF Corp. Sales in the Americas at the North Face and Timberland brands each fell by mid-single-digit percentages. At jeans brands Wrangler and Lee, sales in the Americas each declined by high-single-digit percentages. Vans was the lone bright spot in the Americas, with sales up by a high-single-digit percentage.
"Retailers are buying more cautiously. Almost all of them are trying to run their business models with less inventory in the stores. We also know among sporting goods retailers, there is a hangover of cold weather inventory from last year, meaning they are going into the season already holding inventory," explained Eric Wiseman, VF Corp. chairman and CEO in an interview with TheStreet.
Wiseman added, "Clearly, the department store sector in the U.S. has challenges right now."
Fortunately for VF, it saw much better demand for its outdoor clothing and boots at major retailers in Europe, Asia and within its own stores globally. The North Face sales spiked 20% in Europe, and Timberland gained by a mid-single-digit percentage. Vans sales rose by a low-single-digit percentage in Europe. Wrangler and Lee sales each increased by a high-single-digit percentage in Asia, with Vans up 20%. Direct to consumer sales, which includes VF's over 1,475 company-owned stores and e-commerce operations, rose 6% from the prior year. Online sales rose by about 18%.
Despite the momentum abroad and at its own stores, VF opted to take a more cautious stance with its outlook headed into the holiday season due to the turbulent U.S. wholesale market. Revenue is now seen rising 2% to $12.2 billion, down from a prior forecast for an increase of 3% to 4%. Earnings are pegged at $3.13 a share, up 3% from a year ago. VF Corp. previously saw earnings up 5% to $3.20 a share.