VF Corp Action Sports Coalition Reaches Record Q1 Revenues

According to a report from SportsoneSource.com, VF's Outdoor & Action Sports businesses achieved record revenues and operating income in the first quarter, due largely to the segment’s two dominant brands, Vans and The North Face, which hit 17% and 20% global revenue growth respectively. Total global revenues in Outdoor & Action Sports rose 16% in the quarter, with revenues in the Americas business rising 12% and international revenues up 21%.


Total direct-to-consumer revenues for Outdoor & Action Sports rose 12% in the quarter, with solid increases in The North Face, Vans and Kipling direct-to-consumer businesses.

Operating income for the coalition rose by 13%. Reflecting a higher percentage of advertising to revenues versus the 2010 period, operating margin in the quarter was 18.3% compared with last year's 18.7%. The full year coalition operating margin is still expected to approximate 20%.
VF Corp.'s consolidated revenues rose 12% to $1.96 billion from $1.75 billion in 2010. All VF coalitions achieved higher revenues in the quarter, with the strongest growth in Outdoor & Action Sports, where revenues increased 16%. Jeanswear revenues grew 9%, Imagewear revenues rose 12%, Sportswear revenues increased 10% and Contemporary Brands revenues were up 8%.
Gross margin reached a record 47.2%, up 50 basis points from the same period in 2010. Operating margin reached 14%. Gross and operating margins in the current quarter both include a 40 basis point benefit from a change in inventory accounting.
Net income rose 23% to $200.7 million from $163.5 million, while earnings per share increased 25% to $1.82 per share from $1.46 per share. Earnings per share in the quarter benefited by 7 cents per share from a favorable tax settlement and by 4 cents per share from the aforementioned change in inventory accounting.
"Our decision last year to increase investments in our brands to drive organic growth is paying dividends in the form of continued top and bottom line momentum that we expect to sustain during 2011," said Eric Wiseman, chairman and CEO. "During the quarter we achieved higher revenues and operating income across all businesses, with exceptionally strong international growth as we continue to extend the reach of our brands to consumers around the world."
VF Corp.s international revenues increased 20% on a consolidated basis, with double-digit growth across the Outdoor & Action Sports, Jeanswear and Contemporary Brands' international businesses. Revenues in Asia were up 52% in the quarter, with The North Face, Vans, 7 For All Mankind and Kipling and jeanswear businesses all growing in excess of 30%. Business in India continued to show great momentum, with revenues rising by over 80% in the quarter.
Direct-to-consumer revenues grew 10% in the quarter, driven by new store openings, a 31% increase in e-commerce revenues, and comp store growth. The direct-to-consumer businesses of The North Face, Vans, 7 For All Mankind and Kipling brands each achieved solid revenue gains in the period. A total of 15 stores were opened across all the brands in the quarter, bringing the total number of owned stores to 788.
"VF's formula for success continues to produce outstanding results," said Wiseman. "That formula includes the combination of powerful brands supported by targeted investments to drive profitable growth, rapidly expanding international and direct to consumer platforms, and new tools and processes designed to spur even greater innovation across VF."
Revenues are now expected to rise approximately 10% in 2011, up from previous guidance for an increase of 8 to 9%, due largely to the impact of a weaker dollar in translating foreign currencies, as well as broad-based strength across the businesses.
Earnings per share are now anticipated to increase to $7.25, up from previous guidance of $7.00 to $7.10 per share. The new guidance includes the $.11 in special items reported in the first quarter, as well as an increase of $.10 per share from foreign currency translation.



Supplemental Financial Information

Business Segment Information

(In thousands)

Three Months Ended March


Coalition Revenues:

Outdoor & Action Sports
$ 788,215

$ 678,562









Contemporary Brands




Total coalition revenues
$ 1,958,799
$ 1,749,879

Coalition Profit:

Outdoor & Action Sports
$ 143,905

$ 127,027










Contemporary Brands



(2,074 )
(1,225 )

Total coalition profit



Corporate and Other Expenses

(46,257 )

(41,359 )
Interest, net
(14,974 )
(20,005 )

Income Before Income Taxes
$ 257,738
$ 209,678