VF has released its second quarter earnings, reporting revenues of $2.1 billion—a 16% increase from 2011’s $1.8 billion. Gross margins grew 20 basis points, up to 46.1% as compared to the same time period last year, while net income ranked in at $123 million, a drop from the $129 million posted in 2011. This, in turn, led to a decline in adjusted earnings per share, which fell 5% to $1.11.
The company’s Outdoor & Action sports revenues enjoyed an increase of 45% for Q2, with organic revenue hiking up 12%. International revenues increased 42% for the quarter, with organic revenues in Europe up 16%. This growth was due in part to solid performance in the Vans, The North Face, 7 For All Mankind, and Napapijri brands. On the Asian front, organic revenues increased 20 %, with continued growth in the Lee, The North Face, Vans, and Kipling brands.
"We've reached the halfway mark of the year, and are right on track to deliver another year of strong and very profitable growth to our shareholders," said Eric Wiseman, VF Corporation Chairman and Chief Executive Officer. "The strength of VF's business model – a diverse portfolio strategy supported by an intense focus on financial and operational disciplines – provides us with a clear competitive advantage as we successfully navigate through an increasingly uncertain economic environment."
Speaking on the subject of The North Face, Steve Rendle, Vice President, VF Corporation and Group President of Outdoor & Action Sports Americas revealed that global revenue has seen a 14% increase, with the Americas alone reporting growth in the mid-teens. Global fall order books are up as compared to 2011, which VF attributes to new product introductions, and product support at key accounts. The company is focusing on connecting consumers to three product initiatives; flash dry apparel, its new footwear line, and the Mairu Kit of outerwear and apparel. VF hopes to engage consumers with its 'story telling'— athletes relaying experiences as they test out the brand's product. This May, with live online updates, three North Face athletes summitted Everest as part of a National Geographic sponsored expedition. The brand hopes to use data gathered from the trip in creating innovative new products. Heading into the second half of the year, VF expressed confidence in reaching its goal of mid-teen constant dollar growth, approaching $2 billion in global sales.
VF's International VP, Karl Heinz Salzburger, provided insight as to The North Face's performance overseas. Salzburger revealed that following a strong first quarter, The North Face international business kept pace for Q2, reporting mid-teen constant dollar growth in Europe. The brand is continuing tp expand its direct-to-consumer business by launching new websites in Italy and Spain, bringing the brand's e-commerce presence to a total of 8 countries, and driving online revenue up 75%. New sites in places like Ireland, Germany, and The Netherlands are expected to go live in the second half of 2012. Overall, The North Face saw a strong 9% growth in its direct-to-consumer business. In Asia, the brand has seen high-teen dollar growth, and is focusing its energy on brand building and promoting consumer awareness. In keeping with this effort, the brand has launched the Go Outdoors video series, which has already garnered over 12 million views online.
Vans, another of VF’s top Outdoor and Action Sports brands, also enjoyed a promising quarter. At an 'investor's day' held in June 2012, Vans executives spoke of four key growth drivers: product innovation, consumer connectivity, direct-to-consumer business growth, and geographic expansion. Steve Rendle expressed his belief that Q2 provided a great example of each of these strategies in action, with global revenues hiking 25%. As far as product is concerned, June 28, 2012 marked the global launch of Vans newest footwear collection LXVI ('66'). In the Americas, Q2 revenues grew at a low double-digit rate, while the brand's direct-to-consumer business experienced an increase of 15%. Seven new stores opened their doors this past quarter, including a first in Atlanta, Georgia. The 18th Vans Warped Tour is currently in progress, and the brand is looking for ways to expand the event into Latin America and Europe in the future.
Karl Heinz Salzburger elaborated on Vans' International business, which saw revenues double as compared to Q2 of 2011. Asia alone fielded a revenue increase of 20%. In Europe, two new doors were opened in Rome, Italy, and Warsaw, Germany. The brand has seen growth in a number of key distributor markets in Asia, and is focused on strengthening its regional presence with new store formats, the first of which is located in Shanghai.
Looking forward, VF firmly states its confidence that it will meet all of its year-end goals. Already this year, 58 new stores have opened, with 130 new stores expected to be up and running by the end of 2012.