By Eric Smith
Vans delivered another record quarter for VF Corp., which rode the footwear brand and the rest of the company’s portfolio to an outstanding first quarter.
VF reported earnings of $252.8 million, or 65 cents per share, for the quarter ended March 31, up 20.9 percent from the same quarter a year ago. On an adjusted basis, earnings per share increased 30 percent (22 percent currency neutral) to 67 cents per share, including a 3-cent contribution from the Williamson-Dickie acquisition.
Revenue jumped 22 percent to $3 billion. Excluding the Williamson-Dickie acquisition, revenue increased 12 percent (up 8 percent currency neutral).
The company, which beat analyst estimates on both earnings and revenue, reported broad-based strength across VF’s international and direct-to-consumer platforms and the entire Outdoor & Action Sports segment, where sales grew 19 percent to $2 billion (13 percent on a currency-neutral basis).
But Vans was the standout in Q1. The brand’s revenue grew 39 percent in Q1, with balanced growth across regions and channels. Vans revenue grew 45 percent in the U.S., 53 percent in EMEA (Europe, Middle East & Africa), 32 percent in Asia Pacific and 45 percent in the global segment.
“The performance of the brand globally is nothing short of outstanding,” VF President and CEO Steve Rendle told analysts on Friday morning’s earnings call.
Rendle credited “Vans’ commitment to deep consumer connectivity” as a chief driver for the brand of late. In the first quarter, Vans debuted the Vans Family Loyalty program in the U.S. The program “allows members to access exclusive designs, experiences and earn and redeem points from purchases,” Rendle said. The program garnered 1 million enrollees, easily surpassing VF’s expectations.
But one analyst raised an important question about Vans’ skyrocketing sales: Does the standout performance raise concern for next year’s comps?
“We’re seeing growth broad-based across the company; it’s just even more accelerated in Vans,” Rendle said. “So, as we look forward and the comps get harder, we have assumed some moderation. It’s implied in our guidance in the back half. Frankly, so far, we haven’t seen that moderation occur.”
VF expects revenue for Q2 to be in the range of $13. 5 billion to $13.6 billion, reflecting growth of approximately 9 percent to 10 percent. The company expects revenue for Outdoor & Action Sports to increase 8 percent to 10 percent, revenue for Jeanswear to be about flat compared to prior year and revenue for Imagewear to increase more than 35 percent.
Here’s a look at the rest of VF’s portfolio in Q1.
The North Face global revenue increased 7 percent, driven by 19 percent growth in VF’s direct-to-consumer business, including more than 30 percent growth in digital. By region, revenue increased 3 percent in the Americas, increased 19 percent in Europe and declined 5 percent in Asia.
“Globally, we continue to expect 6 percent to 8 percent growth for The North Face brand in fiscal 2019, including mid-single-digit growth in the Americas,” Rendle said. “And in terms of shaping, growth will be slightly tilted to the second half as we expect mid-single-digit growth in the first half of the fiscal year.”
VF’s third big brand, Timberland, saw global revenue decline 1 percent. Direct-to-consumer sales increased 12 percent, including 45 percent growth in digital, offset by a high single-digit decline in wholesale. Timberland brand revenue decreased 7 percent in the Americas, increased 4 percent in Europe and increased 2 percent in Asia.
Rendle noted the recent acquisitions of Altra and Icebreaker, and he also mentioned the company’s recent hiring of Velia Carboni as chief digital officer, an appointment made with increasing e-commerce capabilities across VF’s portfolio.
“As she starts to get her feet on the ground, she will help us really tease out that end-to-end digital strategy, just not the e-commerce site but all aspects of how we think about using digital to elevate our skills and get closer to our consumer,” Rendle said. “We’re a year into this commitment and we’re really starting to see it take hold and pay dividend.”
Rendle closed the earnings call with a comment about the balanced growth across VF’s portfolio.
“The momentum returning to The North Face gives us confidence against the commitments we’ve made there,” he said. “And the work that we’re doing to reenergize Timberland, you can see the sequential set of actions bringing the portfolio up to the high single-digit growth commitments that we made to you all [at a recent investors meeting] in Boston.
“We are very committed to continue our transformation to become a more consumer-centric enterprise and we’re excited to unlock the power of both being purpose-led and performance-driven as we create value for our shareholders, our employees, partners and ultimately our consumers.”
Photo courtesy Vans