Propelled by a 25% increase in the first quarter at Vans and stronger gross margins, VF net income rose 26% to $270,417,000 from $215,216,000 for the three months ended Mar. 31 on a 2% revenue increase to $2,582,230,000 compared to $2,527,417,000. Gross margin was up 240 b.p. to a record 48.1%, about 70 b.p. of that attributed to higher margin mix and the balance to lower input costs, principally cotton in the jeans business.
The Outdoor & Action Sports group generated operating profit of $226,502,000 this year against $201,700,000 on a 10% revenue increase to $1,384,274,000 compared to $1,263,937,000 that was largely driven by currency. The North Face was up 6% globally with a slight increase in wholesale and DTC growth of 25%. In the Americas region, the brand grew 3% despite low-double-digit growth in DTC where cold weather boosted comps in Q1. Fall orders remain cautious, VF said, though it also believes the season for booking is playing out a bit longer than in the past. Meanwhile international revenues for TNF were up 11%, with European DTC up but wholesale down. Sales in Asia were up nearly 40% for the brand.
Vans grew double digits in all regions both at wholesale and DTC, and is on track to become VF’s second largest brand after TNF and ahead of Timberland by the end of the year. Strength in men’s apparel was a standout, up more than 50% year to date. International sales were up 30% at wholesale and more than 40% in DTC. The Timberland brand had a 2% increase in revenues and is said to be tracking well against expectations. Besides the re-launch of the apparel business this fall, it is seeing a revival of its classic boot business at full price as well as good acceptance of new styles. The new “Best Then, Better Now” marketing campaign to celebrate the brand’s 40th anniversary will debut this year. In Imagewear, operating profit fell 26% in the period on a 9% decline on the top line to $252,757,000 from $277,521,000, despite flat sales in the licensed segment of the group.
With the strong Q1 results, VF raised guidance by $0.05 per share to $10.75 on a 6% increase for the top line to $11.5 billion. Much of the growth will be in its DTC channel, which plans to add 160 stores to the 1,100 open at the end of 2012. DTC is targeted to be 23% of sales by the end of the year, up from 21% at the end of 2012, and VF hinted that it would lay out even more aggressive expansion plans for DTC at a newly scheduled investor conference to raise its five-year targets set for June. DTC growth will be concentrated in TNF, Vans and Timberland.
Written by Nicolas Yang
