VF Corp. Beats Zacks Consensus

VF Corp. (VFC), a leading manufacturer of branded lifestyle apparel, reported fourth quarter results on Thursday. The company posted earnings of $66.9 million on revenues of $1.92 billion in the quarter, compared to earnings of $115.9 million on revenues of $1.91 billion in the year-earlier quarter.

Excluding special items, earnings per share came in at $1.73, easily topping the Zacks Consensus Estimate of $1.46 per share derived from 14 covering analysts. The better-than-expected performance was primarily driven by strong gross margins, which reached record levels during the quarter.

In terms of segments, the Outdoor and Action Sports division grew by 8% year-over-year, while Contemporary Brands recorded growth of 18%. However, overall top-line growth was partially offset by 3%, 8% and 18% decline in Jeanswear, Imagewear and Sportswear segments, respectively.

The International and Direct-to-Customer segments were the key long-term drivers of organic growth and healthy margin. Although overall International revenues increased slightly during the quarter, revenues were up by 40% in Asia. VF’s Direct-to-Customer segment posted a 6% increase in revenues year over year.

Quarterly gross margins reached a record of 46.3%, while operating margin (excluding the impairment charge) increased to 13.6% from 9.4% in the year-ago quarter. At quarter end, VF had a healthy balance sheet with cash and cash equivalents of $732 million.

The company generated $973 million of cash from operations, which was significantly higher than the target of $800 million. Inventories during the quarter reduced 17% year-over-year, primarily due to prudent inventory management policies.

Moving forward, VF expects earnings to range between $5.60 and $5.70 per share in 2010, assuming a 2% to 3% growth in revenues. The guidance is lower than the Zacks Consensus Estimate of $5.71 per share, which moved up a penny in just the past week as 1 of 16 covering analysts raised expectation.

Read the full analyst report on VFC