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V.F. Corporation (VFC - Analyst Report) reported first-quarter 2013 adjusted earnings of $2.43 per share, speeding ahead of the year-ago earnings of $1.94 and Zacks Consensus Estimate of $2.17. The year-over-year increase was primarily driven by strong top-line growth and improved margins.

Quarter in Detail

V.F. Corp.'s first-quarter revenue of $2,611.9 million fell short of the Zacks Consensus Estimate of $2,652 million. However, it grew 2.2% compared with the year-ago period, on the back of robust growth in Outdoor & Action Sports, international and direct-to-consumer revenues. However, the sale of John Varvatos in Apr 2012 had a negative impact of 1 percentage point on revenue.

Gross margin in the quarter increased 240 basis points to 48.1% from 45.7% in the comparable year-ago quarter, resulting from an improvement in higher margin businesses and lower product costs. Moreover, adjusted operating margin expanded 130 basis points to 13.8%, reflecting higher gross margin.

Segment Details

Revenue at Outdoor & Action Sports surged 10% from the year-ago quarter to $1.384 billion. Continued growth momentum at the company’s The North Face, Vans brands and at Timberland brand contributed to the revenue growth. Segment operating income increased 12% year over year, while operating margin expanded 40 basis points to 16.4%.

Jeanswear revenue declined 3% to $718 million. The decline was attributed to lower sales in the Americas region, difficult conditions in the mid-tier channel as well as weak performance in Europe and Asia. However, the company witnessed significant growth in the segment’s operating income and margin, mainly on lower product costs and improved operating efficiencies. Segment operating income rose 29% year over year to $143 million.

Imagewear revenue dipped 9% in the quarter to $253 million. Moreover, operating income and margin at the segment declined 12.5% due to lower volumes.

Revenue at Sportswear increased 4% to $128 million driven by increased Nautica and Kipling brands revenue. Segment operating income increased 13.9% primarily due to robust revenue growth and operational efficiencies.

Contemporary Brands’ revenue slumped 18% to $104 million due to the sale of John Varvatos. Operating income decreased 15% during the quarter, while adjusted operating margin expanded 40 basis points on the back of increased direct-to-consumer business.

The company’s International revenues increased 6%. The growth was largely driven by strength across the biggest brands in America, Asia and Europe.

Direct-to-Consumer revenue increased 12%, driven by the addition of 20 new stores and improved contributions from The North Face, Vans and Timberland brands. The company’s total owned retail stores were 1,132 at the end of first quarter. Direct-to-consumer revenues reached 20% of VF’s first quarter total revenues.

Balance Sheet

V.F. Corp. ended the quarter with cash and cash equivalents of $300.4 million and long-term debt of $1.428.5 million. The company’s shareholders’ equity came in at $5.089 billion at the end of first-quarter 2013.

Dividend

The board of directors at this Zacks Rank #3 (Hold) company declared a quarterly cash dividend of 87 cents per share. Dividend will be paid on Jun 20, 2013 to shareholders of record as of Jun 10, 2013.

Looking into 2013

The company expects fiscal 2013 revenue to increase 6% to $11.5 billion. Gross and operating margins are anticipated to expand by 100 basis points.

Based on the better-than-expected first quarter results, V.F. Corp. projects its adjusted earnings for fiscal 2013 to rise by 5 cents to $10.75 per share, compared to the previous forecast of $10.70 per share.

Other Stocks to Consider

Other stocks in the apparel industry that are worth considering include G-III Apparel Group Ltd. (GIII - Snapshot Report), Ralph Lauren Corporation (RL - Analyst Report) and Under Armour Inc. (UA - Snapshot Report), all of which carry a Zacks Rank #2 (Buy).

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