VF Corporation would have seen sales increase just 2.8% in the first quarter ended March 31 excluding the impact of acquired businesses and the sale of its Playwear business. Instead, the $156 million in sales generated by the addition of Vans, Napapijiri, Kipling, and Holoubek to the portfolio more than offset the $34 million lost from the Playwear business as VFC posted a 9.1% increase in sales for the period to $1.56 billion, compared to $1.43 billion in the year-ago quarter. Net income increased 18% to $122.9 million from $103.9 million, with earnings per share rising 15% to $1.07 from 93 cents per share. The acquired businesses added a dime to earnings for the quarter.
Only the Sportswear and Outdoor businesses showed organic sales increases in the period.
Outdoor division sales jumped 127% in the quarter to $282.3 million. Roughly $141 million of the business was from the Vans, Napapijiri, and Kipling additions last year. Excluding those acquisitions, the Outdoor business posted organic sales growth just north of 13% for the period. Total sales for The North Face increased 18% in the quarter and Packs sales, which includes JanSport and Eastpak, also rose in the quarter.
Vans, Napapijiri, and Kipling were said to be “performing well above plan in both sales and profits” as the division saw double-digit owned-retail comp store sales increases for both TNF and Vans in Q1.
Fall bookings for The North Face are up 27% in the U.S. and 19% in Europe. Vans posted a 40% increase in bookings and Napapijiri is up 23%. JanSport bookings were up 33% at quarter-end.
Outdoor Coalition operating profit surged 133% to $32.4 million, compared to $13.9 million in Q1 2004.
Mike Egeck, president of VF Outdoor Inc., told Sports Executive Weekly that The North Face didnt see any effect from the later winter weather last year. He said that the kids business performed very well in Q1 and they had a “great quarter” in snow sports.
He also sees the A5 line benefiting from the strength of the more technical product, a position we have heard from more than one retailer already this year.
SEW asked Egeck if the TNF footwear product would be able to keep up with the 20%+ growth of the last year. He responded with the revelation that footwear is currently running about 40% ahead of last year.
Footwear is booking in very well for fall as well, especially insulated product, multi-sport, and Gore styles. He said the gains are clearly being driven by the higher price-points.
In apparel, Egeck said that outerwear was still very strong and snow sports is way up. He pointed to the decision made a couple of years ago to split the two categories as one reason for stronger growth.
The snow sports category is up 35% for fall bookings and youth, which is primarily take-downs from adult, is up 48% in forward bookings. Egeck sees even more upside in youth next year when it rolls out to the International markets.
SEW asked Egeck if the move to “Luxe” at retail was a key driver for their success at TNF while other mid-price brands start to slow. He responded by stating that they see technology as the new luxury. He told SEW that Bloomingdales was one of the fastest growing retailers for the brand, but they are buying the same technical goods as everyone else. He said there was little to no cannibalization because the consumers are quite different from specialty.
Turning to Vans, Egeck said it was the “biggest surprise” so far this year. He said the ramp up in demand for their classic product is really fueling sales growth. While they arent sharing numbers, he did say the timing of the acquisition is making them look very smart. When we asked about Vans apparel, he said that they are testing in their retail stores now with a concerted launch at ASR this fall for spring delivery. Fall 06 will bring an increased denim program and the launch of a snowboard apparel line that was developed in cooperation with the TNF technical team.
Looking at Reef, Egeck said the deal there would look quite different if the market saw the numbers since their last fiscal year-end last September. While the rumored $185 million price tag sounded like a steep price to many, he hinted that this is another deal that will make them look very smart.
Apparel is another obvious upside opportunity here. Mike said that Reef was doing about $7 million with three people running the business. They have already put nine more people on the project and “exposed them to 900 more in Asia.”
Management said that Imagewear continues to benefit from leveraging its highly efficient operating platform against higher sales. Imagewear operating profits increased 38.7% to $30.3 million, compared to $21.8 million in Q1 last year. Sales for the quarter rose 8.2% to $187.2 million from $173.0 million in the prior year period. Occupational apparel sales were flat in the quarter, but licensed sports apparel had a strong increase and the division benefited from the acquisition of Holoubek, which contributed about $15 million in sales to the group.
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