VF Corp. said the second quarter is the slowest sales period for The North Face, so the Outdoor Coalition had to rely on acquisition strength for most of its sales growth in the period. The Imagewear group also relied on acquisitions for revenue gains in that division. Acquisitions added $156 million to the top line for the second quarter and nine cents to earnings per share for the period. Sales would have increased just 0.8% on an organic basis, thanks to a decline in the Intimate Apparel business and the “other” category. VF Corp. will look for acquisitions to deliver roughly half of their 8% growth forecast for 2006.
Outdoor Coalition sales are now expected to increase “close to 40%” for the year, better than planned and certainly important to the company achieving its 7% revenue growth estimate for 2005. VFC did increase earnings guidance for the year as special items and more sales from the higher margin Outdoor and Sportswear divisions spark better operating margins.
Outdoor Coalition sales jumped 104% in the second quarter to $296.7 million from $145.7 million, with the acquisitions of the Vans, Kipling, Reef, and Napapijri brands contributing about $138 million of the increase for the period. Organic growth was pegged at roughly 8.9% for the quarter. The Reef deal, which was completed in April 2005, contributed $25 million to sales in the quarter. Integration of that business is said to be going “very well” and sales are coming in above plan.
Jansport sales were up 8% due to “healthy back-to-school bookings” for core pack product.
While Q2 is a slower period for TNF, it was a strong quarter for Vans, which posted a double-digit gain and delivered a big chunk of the acquisition contribution to the top line. The company is also excited about the new owned-retail format for Vans, which is delivering 20% comp store sales increases.
The third quarter will again be time for TNF to shine as VFC starts to anniversary the Vans numbers. TNF backlog for Fall 05 was up 27% in the U.S. and rose 19% in Europe. Napapijri backlogs for Fall were also said to be “very positive” as they remain focused on a European roll-out and prepare for the U.S. launch.
Operating income for the Outdoor Coalition jumped 97% to $42.4 million from $21.5 million in Q2 last year.
VFs Imagewear Coalition reported that Q2 sales increased 4.1% to $180.7 million from $173.4 million in the year-ago period, but would have declined 5.6% without the $17 million delivered by the acquired Holoubek business, which is a Harley-Davidson licensee. That infusion drove a double-digit increase in licensed apparel sales for the period as well. MLB sales were also said to be “strong.” Occupational apparel sales were said to be “about flat” in the quarter.
Operating income for the Imagewear group rose 15.9% to $24.6 million, compared to $21.2 million in Q2 2004.
The other key driver to the sales and profit gains for the corporation was Nautica, which saw a double-digit sales gain and a “big improvement” in profitability. Total Sportswear division operating income jumped more than 3700% to $19.3 million versus just $515,000 in the year-ago period. VFC also said they were “gratified” by the sales increase in the U.S. jeanswear business during the quarter.
VF Corporation reported that second quarter sales rose 13% to $1.44 billion from $1.27 billion in the prior year's second quarter. Net income increased 11% to $100.0 million, or 88 cents per share, from $90.1 million, or 80 cents per share in the year-ago period. Second quarter earnings include a net benefit of 7 cents per share from special items. Similarly, second quarter EPS in 2004 included a net benefit of 4 cents per share related to the exit of the former Playwear business.
