Branded lifestyle apparel maker VF Corp. (VFC) on Monday reported a 27 percent increase in profit for the third quarter on higher revenues and margins. Adjusted earnings beat analysts' expectations, while revenues missed their estimates.
Looking ahead, VF Corp. raised its earnings outlook for fiscal year 2012 and also boosted its quarterly dividend by 21 percent. However, the company's shares are down almost 5 percent in pre-market trading.
Quarterly revenues from Timberland tripled from last year to $499 million. Organic revenue growth in the quarter was 2 percent or 6 percent in constant dollars, driven by continued strength in the Outdoor & Action Sports, international and direct-to-consumer businesses.
Gross margin rose by 140 basis points from last year to 46.7 percent, with improvements in nearly every business. The higher gross margin also reflects the continued shift in the company's revenue mix towards higher margin businesses. VF Corp.'s brands include Lee, The North Face, Vans, Timberland, and Kipling.
Outdoor & Action Sports revenue for the quarter grew 29 percent, with the addition of Timberland and Smartwool brands contributing $499 million to revenues.
However, Contemporary Brands revenues declined 17 percent, or 15 percent in constant dollars, with the decline primarily due to the sale of John Varvatos in April 2012.
International revenues rose 28 percent in the quarter, with 20 percentage points of the growth attributable to Timberland. Direct-to-consumer revenues also increased 28 percent, with 19 percentage points of the growth attributable to Timberland.
North Carolina-based VF Corp.'s third-quarter net income rose to $381.32 million or $3.42 per share from $300.70 million or $2.69 per share in the year-ago period. Adjusted earnings for the quarter were $392.64 million or $3.52 per share, compared to $321 million or $2.87 per share in the prior-year period.
On average, 21 analysts polled by Thomson Reuters expected earnings per share of $3.49 for the quarter. Analysts' estimates typically exclude one-time items.
Total revenues for the quarter grew 14 percent to $3.15 billion from $2.75 billion in the prior-year period, but missed analysts' consensus estimate of $3.17 billion.
Looking ahead to fiscal year 2012, VF Corp. now forecasts adjusted earnings of around $9.60 per share, up from the prior guidance of $9.50 per share.
However, the company maintained its forecast for full-year revenue of $10.9 billion, up about 15 percent, or 17 percent in constant dollars, with Timberland accounting for just under $1 billion of the growth. Excluding Timberland, the company projects full-year revenues to rise by nearly 6 percent, or 8 percent in constant dollars.
Analysts expect the company to earn $9.54 per share for the year on revenues of $10.96 billion.
Additionally, VF Corp.'s board declared a quarterly dividend of $0.87 per share, reflecting a $0.15 or 21 percent increase over the prior quarter's dividend. The dividend is payable December 20 to shareholders of record on December 10.
VFC closed Friday's trading at $166.77. In Monday's pre-market, the stock is down $7.78 or 4.67 percent to $158.99.
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