VF Corp EPS up 13% in unsatisfactory third quarter
VF Corporation on Monday released its third quarter 2016 results, which marks as its first quarter without its contemporary brands business including 7 For All Mankind, Splendid and Ella Moss. The company sold its contemporary brands business to Delta Galil on August 26, 2016 and incurred a net loss of $5 million.
Total revenue from continued operations fell 1% to $3.5 billion. Outdoor and Action Sports revenue, Direct-to-Consumer revenue, and International revenue all increased by 2%, 6% and 5%, respectively. The North Face brand revenue fell 1% though European business increased more than 20%, Vans revenue increased 7% and Timberland was down 1% currency neutral.
Revenue for Jeanswear, Imagewear, and Sportswear fell 6%, 3% and 13%, respectively with Wrangler and Lee revenue dropping 6% and Nautica decreasing 15%.
Gross margin was up 70 basis points to 48.4% for the quarter and earnings per share were up 13% to $1.20 compared to $1.06 in the previous third quarter. In addition, operating income was down 1% to $635 million and operating margin increased 10 basis points on a reported basis. Changes in foreign currency negatively impacted reported operating margin by 40 basis points.
“We continue to operate in an uneven, global economic environment including especially sluggish retail conditions in the Americas, our largest market,” said Eric Wiseman, VF Chairman and Chief Executive Officer. “With a strong balance sheet, powerful brands, and a growing global presence, we have great confidence in our ability to maintain near-term profitability, yet we’re not satisfied with our third quarter results. We remain sharply focused on operational improvements and taking advantage of this environment to accelerate strategies to create sustainable, long-term growth opportunities for our brands.”
VF Corp also released its adjusted 2016 outlook and now expects total revenue to increase 2% to $12.2 billion compared to the previous estimate of 3% to 4%. Outdoor & Action Sports and Jeanswear revenues are expected to increase at a low single-digit percentage rate and Direct-to-Consumer revenue is now expected to increase at a high single-digit percentage rate. Lastly, the earnings per share are expected to increase 3% to $3.13 compared to the previous expectation of a 5% increase to $3.20.
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