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V.F. Corporation (VFC - Analyst Report) reported third-quarter 2013 adjusted earnings per share of $3.91, which came above $3.52 earned in the year-ago quarter as well as the Zacks Consensus Estimate of $3.77. On a reported basis, earnings per share for the quarter came at $3.89 compared with the year-ago comparable quarter earnings of $3.42.

Quarter in Detail

V.F. Corp.'s total revenue of $3,266.7 million grew 4.7% from $3,119.6 million in the year-ago period, on the back of robust growth in Outdoor & Action Sports, Jeanswear and International as well as Direct-to-Consumer revenues. However, it fell short of the Zacks Consensus Estimate of $3,348.0 million by 2.4%.

Gross margin in the quarter increased 90 basis points (bps) to 47.6% from 46.7% in the comparable year-ago quarter, due to improvement in higher margin businesses and lower product costs. Moreover, adjusted operating margin expanded 20 bps year over year to 17.7% as the benefit of higher gross margin was partially offset by increased selling, general & administrative (SG&A) expenses as a percentage of sales.

Segment Details

Revenues at Outdoor & Action Sports rose 6.5% from the year-ago quarter to $1,972.0 million. Consistent growth momentum at the company’s The North Face, Timberland and Vans brands contributed to increased revenues. Segment operating income rose nearly 2% year over year to $421.2 million. However, operating margin contracted 90 bps year over year to 21.4%.

Jeanswear revenues rose about 4.0% to $747.2 million, driven by improved sales in the Americas region and Europe, partly offset by weaker sales in the Asia-Pacific region. Also, the company witnessed significant growth in the segment’s operating income and margin, mainly due to strong international performance and lower product costs. Segment operating income rose 20.5% to $158.3 million while operating margin increased 290 bps 21.2% in the quarter.

Imagewear revenues were almost flat at $284.5 million in the quarter. Moreover, operating income increased 8.6% to $40.7 million and operating margin at the segment increased 110 bps to 14.3% due to lower year-over-year product costs. The company anticipates revenues in the segment to grow at a low double-digit percentage rate in the fourth quarter.

Revenues at Sportswear inched up 0.7% to $155.2 million, driven by over 25% growth registered in direct-to-consumer sales, partially offset by mid-teen rate decline in the wholesale business. Segment operating income increased 29.7% to $24.0 million, primarily due to higher gross profit. Operating margin came in at 15.5%, expanding 350 bps.

Contemporary Brands’ revenues inched up 0.8% year over year to $105.0 million. Operating income decreased 29.6% to $9.5 million during the quarter, while operating margin came in at 9.0%, contracting 390 bps. The company expects the segment’s revenues to improve in the fourth quarter.

The company’s International revenues increased 7%. The growth was largely driven by strong performance of V.F. Corp.’s renowned brands in the Americas, Asia and Europe. International revenues constituted 40% of V.F. Corp.’s total revenue in the reported quarter.

Direct-to-Consumer revenues increased 14%, driven by the addition of 55 new stores and improved contributions from The North Face, Vans, Nautica and Kipling brands. The company’s total owned retail stores were 1,202 at the end of the reported quarter. Direct-to-consumer revenues accounted for 19% of V.F. Corp.’s total revenue in the said quarter.

Balance Sheet

V.F. Corp. ended the quarter with cash and cash equivalents of $315.7 million and long-term debt of $1,427.1 million. The company’s shareholders equity came in at $5,628.9 million at the end of third-quarter 2013.

Stock Split and Dividend

The board of directors of this Zacks Rank #2 (Buy) company has approved a four-for-one stock split to be payable on Dec 20, 2013 to shareholders of record date as of Dec 10, 2013. Apart from this, the company announced a 21% hike in quarterly cash dividend. V. F. Corp. will pay a dividend of $1.05 per share on a pre-split basis on Dec 20 this year to shareholders of record date as of Dec 10.

Looking Ahead

The company continues to expect its fiscal 2013 revenues to increase 6% to $11.5 billion. Gross margins are anticipated to expand by 150 bps to 48%, given the company’s strong performance in the first three quarters of 2013.

Despite expecting gross margin expansion, the company has retained its adjusted earnings guidance for fiscal 2013 of $10.85 per share due to anticipation of an impact of 25 cents per share owing to incremental investments toward long-term growth strategies.

Other Stocks to Consider

Other stocks in the apparel industry that are worth a look include Hanesbrands Inc. (HBI - Analyst Report), Michael Kors Holdings Ltd. (KORS - Analyst Report) and Ralph Lauren Corp. (RL - Analyst Report). Hanesbrands carries a Zacks Rank #1 (Strong Buy), while Michael Kors and Ralph Lauren both have a Zacks Rank #2 (Buy).

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