VF Corp. reported profits for the fourth quarter on an adjusted basis jumped 34 percent, benefiting from the acquisition of Timberland Co. as well more than 20 percent growth for The North Face and Vans brands.

And despite the warm weather this season that has sidetracked the 2012 outlooks for several competitors. VF remained aggressive with its growth outlook for the current year, expecting revenues for its Outdoor & Action Sports coalition to rise in a low-teen percentage rate in constant dollars in 2012.

On a conference call with analysts, Eric Wiseman VF's chairman, president and CEO, started off his comments by sweeping aside the question “on everyone's mind” – the impact of the unseasonably warm weather on VF and The North Face in particular. He noted that The North Face achieved global revenue growth of 21 percent in the 2011 fourth quarter and that came on top of a 25 percent gain seen in the fourth quarter of 2010.

He further added that North Face's revenues in the quarter climbed 24 percent in the Americas, 12 percent in constant dollars in Europe and 41 percent in constant dollars in Asia. Said Wiseman, “I hope that this helps put to rest concerns about the ability of this powerful brand to grow even in less than ideal conditions. We are confident that The North Face's momentum will continue in the years to come and we look forward to achieving our 2015 revenue goal of $3 billion.”

Other strong performances in the fourth quarter among its sports/outdoor brands came from Vans, Lucy and Reef. Wiseman also said he was “thrilled about the opportunities” from the acquisition of the Timberland and SmartWool brand with 2011 revenues exceeding VF's initial expectations.

Revenues in the fourth quarter jumped 36.7 percent to $2.91 billion, with the Timberland acquisition adding $549 million to revenues. Organic revenue growth in the quarter was 11 percent. All VF coalitions achieved higher revenues in the quarter, with the strongest growth in Outdoor & Action Sports, where total revenues rose 80.6 percent to $1.62 billion and organic growth was 19 percent.

In the Outdoor & Action Sports coalition, TNF's 22 percent global quarterly gain was the brand's strongest rate seen all year with revenue for the year finishing ahead of its global five-year compounded growth goal of 16 percent. Said Steve Rendle, group president, Outdoor & Action Sports Americas coalition, on the call, “Spring 2012 bookings for The North Face are up 15 percent globally and, although early, we're encouraged by what we see for fall.”

TNF’s direct-to-consumer revenues grew over 20 percent in the quarter. The brand saw double-digit growth in both retail and e-commerce channels as well as mid-teen increases in its wholesale business.

For 2012, two technologies – Flash Dry moisture-control for apparel and Cradle cushioning for footwear– are expected to spark growth for TNF. Overall, TNF is targetig mid-teen revenue growth in 2012.

Vans' global revenues increased 24 percent in the quarter with double-digit growth across its Americas, European and Asia businesses. Vans direct-to-consumer revenues advanced 21 percent. Gains were witnessed in all channels including U.S. retail, wholesale and e-commerce.

Rendle said Vans is benefitting from further retail expansion and grassroots marketing efforts targeted at influential consumers and athletes and a heightened social media presence. Vans.com broke records with 28 million unique visitors in 2011 while the brand’s Facebook fan base is now exceeding 4 million. With double-digit growth in the year, Vans’ global revenues increased well past the $1 billion mark for the first time in the brand's 46-year history. For 2012, Vans is projected to see growth in the mid-teen rate, building on the success of new stores opened in the Northeast in 2011 and its “rapidly growing” e-commerce business.

Globally, the Timberland brand achieved revenue growth of more than 10 percent in the fourth quarter, which Rendle referred to as “less than the very strong rate we saw in the third quarter, which is not surprising considering the unfavorable weather conditions.” SmartWool revenues grew 20 percent in the fourth quarter. Also driving the gains were continued success of the Timberland Earthkeepers collection and the Timberland PRO Series.

For 2012, VF will be “supercharging Timberland's product engine for maximum innovation” aligning Timberland's financial and planning processes with those of VF, integrating backend technologies, and assessing and adjusting Timberland’s wholesale distribution. For 2012, VF is targeting low-single-digit global revenue growth for the combined Timberland and SmartWool business with growth in the mid-single digits in constant dollars. Excluding exits from certain distribution channels for the Timberland brand, high-single digit growth is expected for the Timberland/SmartWool combination.
 
Rendle noted that while that’s below its projected five-year compounded growth rate of 10 percent, “it will take time to fully activate all of the growth opportunities and synergies envisioned in our five-year plan.” For example, the U.S. apparel launch for Timberland won’t come until fall 2013.

“To add some additional context, I see many parallels to our early days with The North Face,” Rendle said. “Purchased in 2000, for the first two years The North Face revenues remained relatively stable as we worked through distribution and operational issues. As we all know the rest is history.”

Double-digit gains in the quarter were also delivered by Lucy and Reef. Lucy had a record year with healthy double-digit profitable growth “and we anticipate even stronger results in 2012,” said Rendle. Reef likewise saw “strong double-digit growth, profitable revenue growth, with another great year planned for 2012.”

Overall, organic revenue growth in the coalition’s Americas and international businesses continued at double-digit rates of 19 percent and 20 percent, respectively. Organic growth in direct-to-consumer revenues for Outdoor & Action Sports was 20 percent in the quarter, with double-digit increases in The North Face, Vans and Kipling direct-to-consumer businesses.

Operating income for the Outdoor & Action Sports coalition rose by 51.9 percent in the quarter to $274.0 million. The latest year included earnings from Timberland of $43 million, including acquisition-related expenses of $6.7 million. Operating margin was 16.9 percent compared with 20.1 percent in the 2010 period, with a negative impact of 40 basis points from acquisition-related expenses. Excluding Timberland, operating income increased 24 percent and the coalition operating margin was 20.9 percent.

For the full year, operating earnings in the Outdoor & Action Sports coalition rose 30.1 percent to $828.2 million as revenues zoomed up 42.4 percent to $4.56 billion. Excluding the acquired Timberland business, Outdoor and Action Sports Americas revenues grew nearly 15 percent with solid growth achieved at The North Face, Vans, JanSport, Lucy and Reef.

In its Imagewear coalition, which includes its Majestic Athletic and the Lee fan businesses, fourth quarter revenues rose 9.8 percent to $256.8 million. Image (workwear) revenues rose 14 percent in the quarter. Licensed Sports revenues grew 5 percent, driven by new women’s products and differentiated graphics. Operating income dipped 2.9 percent to $28.9 million.

Scott Baxter, VP, group president of Jeanswear Americas & Imagewear, said the sports licensing area “saw great results from our NFL business,” which rose nearly 30 percent in the quarter, contributing to a 6 percent increase in the overall Licensed Sports Group revenue for the full year.

In its other segments, Jeanswear revenues increased 3.4 percent to $711.6 million in the quarter, helped by healthy growth in the Lee and Western businesses. Operating profits were down 23.1 percent to $86.0 million.

Sportswear coalition revenues rose 1.3 percent in the fourth quarter to $159.5 million, driven by a 49 percent increase in Kipling brand revenues in the U.S. Operating income declined 12.6 percent to $18.9 million. In the Contemporary Brands coalition, revenues grew 11.9 percent to $128.9 million while the segment showed a profit of $$7.4 million against a $7.8 million loss a year ago.

International revenues jumped 68 percent in the quarter, with 50 percentage points of the growth attributable to the Timberland acquisition. Organic revenue growth in Europe was 14 percent. In Asia, organic revenue growth was 22 percent with The North Face and Vans businesses each growing in excess of 30 percent in the quarter, and Jeanswear revenues rising 13 percent. Solid growth also continued in India, where revenues increased 14 percent during the quarter.

Direct-to-consumer revenues increased 53 percent in the quarter, with 37 percentage points of the growth attributable to the Timberland acquisition. Direct-to-consumer revenues of The North Face, Vans, and 7 For All Mankind brands each achieved growth in excess of 20 percent in the period. A total of 122 stores were opened during the year, bringing the total number of owned retail stores to 1,068 at the end of 2011 (including 215 Timberland stores). At year-end 2011, direct-to-consumer revenues accounted for 19 percent of VF’s total revenues compared with 18 percent in 2010.

Gross margins in the quarter eroded to 45.2 percent of sales from 46.6 percent due to the impact of higher product costs. Operating margin on an adjusted basis was 12.3 percent in the fourth quarter of 2011 versus 12.9 percent in the 2010 period. Excluding Timberland, the fourth quarter operating margin increased 10 basis points to 13.0 percent.

For 2012, VF expects revenue to increase by approximately 15 percent (17 percent currency neutral (CN)). Excluding Timberland, revenues should rise by approximately 6 percent (8 percent CN).

The Outdoor & Action Sports coalition is projected to see 25-to-30 percent growth with the coalition expected to exceed 50 percent of total revenues for the first time. On an organic basis, Outdoor & Action Sports revenues are expected to rise at a low-teen percentage rate in constant dollars. Jeanswear, Imagewear, Sportswear and Contemporary Brands are each planning for mid-single-digit revenue growth in 2012.

Gross margins are expected to improve about 70 basis points from the 45.8 percent reported in 2011, with much of the pickup expected to come in the second half. Adjusted EPS, including Timberland-related expenses, is expected to reach $9.30, representing growth of 13 percent. It expects $1.10 in adjusted earnings from Timberland, up from its original estimate of 90 cents a share. Excluding 60 cents per share in costs tied to foreign currency translation and higher pension expense, adjusted EPS is expected to  climb 21 percent in 2012.