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V.F. Corporation (VFC - Free Report) released first-quarter 2017 results, wherein the company’s quarterly adjusted earnings came in at 55 cents a share, in line with the Zacks Consensus Estimate and down 9.8% year over year. Including one-time items, earnings declined 18% to 50 cents per share. On a currency neutral basis, the adjusted earnings per share declined 3%.
Total revenue, including royalty income came in at $2,581.7 million, down 2% year over year. Net sales of $2,555.7 million were down 2% from the prior-year quarter. The Zacks Consensus Estimate was pegged at $2,749.3 million. Revenues in the quarter gained from strength in international and direct-to-customer platforms, and the Outdoor & Action Sports coalition. However, a challenging retail environment and currency headwinds led to the decline. On a currency neutral basis, revenues declined 1%.
Consequently, shares of this branded apparel retailer fell by a marginal 0.6% in the pre-market trading session. However, V.F. Corp’s shares have surged 8.4% year to date, outperforming the Zacks categorized Textile–Apparel industry’s decline of 5.5%.
The company’s reported gross margin improved 150 basis points (bps) to 50.2%, as gains from better pricing, reduced product costs and mix shift toward high margin businesses were somewhat offset by foreign currency headwinds. Foreign currency hurt gross margin by 40 bps.
Reported operating income declined 7% to $291 million, while operating margin contracted 50 bps to 11.3%. Currency headwinds affected operating margin by 40 bps.
Segment Details
Revenues at Outdoor & Action Sports grew 2% to $1,678.8 million (up 4% on a currency neutral basis).
Jeanswear revenues of $647.4 million declined 9% year over year (down 8% on a currency neutral basis).
Imagewear revenues fell 5% on both reported and currency neutral basis, to $135 million.
Revenues at Sportswear plunged 17% on both reported and currency neutral basis to $98.3 million.
Financial Details
V.F. Corp. ended the first quarter with cash and equivalents of $604.4 million, long-term debt of $2,051.5 million and shareholders’ equity of $4,381.2 million. In the first quarter, the company used $210.2 million cash in operating activities.
During the quarter, the company bought back 8.2 million shares for nearly $438 million, at an average price of $53 per share under the share repurchase program authorized in 2013. Additionally, in Mar 2017, the company authorized a new share repurchase program to buyback up to $5 billion shares.
The company also declared a quarterly dividend of 42 cents per share, payable on Jun 19, 2017 to shareholders with record as on Jun 9.
Divestitures
On Apr 4, V.F. Corp. signed a deal to divest Licensed Sports Group (LSG) business to Fanatics Inc., which is a leading name for officially licensed sports merchandise. This divestment will include sale of the Majestic brand, which offers apparel and fanware through licensing deals with domestic and global professional sports leagues and teams.
Previously, in Aug 2016, the company completed the sale of its Contemporary Brands businesses, including the 7 For All Mankind, Splendid and Ella Moss brands. These segments are classified as discontinued operations in the company’s financial statements.
Outlook
For 2017, management anticipates revenues to grow at a low-single digit percentage rate. Foreign currency headwinds are likely to hurt revenues for 2017 by about two percentage points.
V.F. Corp. anticipates gross margin to increase 20 bps from 2016 levels at 49.6%, including negative currency impact of roughly 70 bps. Operating margin is expected at about 14%, including 60 bps impacts from currency headwinds.
Further, the company envisions earnings per share to decline at a low-single digit percentage rate compared with 2016 adjusted earnings per share of $2.98. On a currency neutral basis, earnings per share is likely to rise in the mid-single digit percentage range. The company expects cash flow from operations of approximately $1.45 billion for 2017.
V.F. Corporation Price, Consensus and EPS Surprise
Children’s Place, with a long-term earnings growth rate of 8%, has surged 13.6% year to date.
Gildan Activewear, with a long-term earnings growth rate of 12.3%, has jumped nearly 10.7% year to date.
Carter's has grown nearly 9.5% year to date. The stock has a long-term EPS growth rate of 12.2%.
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V.F. Corp. (VFC) Posts In-Line Q1 Earnings, Guides 2017
V.F. Corporation (VFC - Free Report) released first-quarter 2017 results, wherein the company’s quarterly adjusted earnings came in at 55 cents a share, in line with the Zacks Consensus Estimate and down 9.8% year over year. Including one-time items, earnings declined 18% to 50 cents per share. On a currency neutral basis, the adjusted earnings per share declined 3%.
Total revenue, including royalty income came in at $2,581.7 million, down 2% year over year. Net sales of $2,555.7 million were down 2% from the prior-year quarter. The Zacks Consensus Estimate was pegged at $2,749.3 million. Revenues in the quarter gained from strength in international and direct-to-customer platforms, and the Outdoor & Action Sports coalition. However, a challenging retail environment and currency headwinds led to the decline. On a currency neutral basis, revenues declined 1%.
Consequently, shares of this branded apparel retailer fell by a marginal 0.6% in the pre-market trading session. However, V.F. Corp’s shares have surged 8.4% year to date, outperforming the Zacks categorized Textile–Apparel industry’s decline of 5.5%.
The company’s reported gross margin improved 150 basis points (bps) to 50.2%, as gains from better pricing, reduced product costs and mix shift toward high margin businesses were somewhat offset by foreign currency headwinds. Foreign currency hurt gross margin by 40 bps.
Reported operating income declined 7% to $291 million, while operating margin contracted 50 bps to 11.3%. Currency headwinds affected operating margin by 40 bps.
Segment Details
Revenues at Outdoor & Action Sports grew 2% to $1,678.8 million (up 4% on a currency neutral basis).
Jeanswear revenues of $647.4 million declined 9% year over year (down 8% on a currency neutral basis).
Imagewear revenues fell 5% on both reported and currency neutral basis, to $135 million.
Revenues at Sportswear plunged 17% on both reported and currency neutral basis to $98.3 million.
Financial Details
V.F. Corp. ended the first quarter with cash and equivalents of $604.4 million, long-term debt of $2,051.5 million and shareholders’ equity of $4,381.2 million. In the first quarter, the company used $210.2 million cash in operating activities.
During the quarter, the company bought back 8.2 million shares for nearly $438 million, at an average price of $53 per share under the share repurchase program authorized in 2013. Additionally, in Mar 2017, the company authorized a new share repurchase program to buyback up to $5 billion shares.
The company also declared a quarterly dividend of 42 cents per share, payable on Jun 19, 2017 to shareholders with record as on Jun 9.
Divestitures
On Apr 4, V.F. Corp. signed a deal to divest Licensed Sports Group (LSG) business to Fanatics Inc., which is a leading name for officially licensed sports merchandise. This divestment will include sale of the Majestic brand, which offers apparel and fanware through licensing deals with domestic and global professional sports leagues and teams.
Previously, in Aug 2016, the company completed the sale of its Contemporary Brands businesses, including the 7 For All Mankind, Splendid and Ella Moss brands. These segments are classified as discontinued operations in the company’s financial statements.
Outlook
For 2017, management anticipates revenues to grow at a low-single digit percentage rate. Foreign currency headwinds are likely to hurt revenues for 2017 by about two percentage points.
V.F. Corp. anticipates gross margin to increase 20 bps from 2016 levels at 49.6%, including negative currency impact of roughly 70 bps. Operating margin is expected at about 14%, including 60 bps impacts from currency headwinds.
Further, the company envisions earnings per share to decline at a low-single digit percentage rate compared with 2016 adjusted earnings per share of $2.98. On a currency neutral basis, earnings per share is likely to rise in the mid-single digit percentage range. The company expects cash flow from operations of approximately $1.45 billion for 2017.
V.F. Corporation Price, Consensus and EPS Surprise
V.F. Corporation Price, Consensus and EPS Surprise | V.F. Corporation Quote
Zacks Rank
V.F. Corp. currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks include The Children’s Place Inc. (PLCE - Free Report) , sporting a Zacks Rank #1 (Strong Buy), Gildan Activewear Inc. (GIL - Free Report) and Carter's, Inc. (CRI - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Children’s Place, with a long-term earnings growth rate of 8%, has surged 13.6% year to date.
Gildan Activewear, with a long-term earnings growth rate of 12.3%, has jumped nearly 10.7% year to date.
Carter's has grown nearly 9.5% year to date. The stock has a long-term EPS growth rate of 12.2%.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>