The lifestyle apparel company VF Corporation
posted record first quarter revenues and earnings. This was driven by strong organic growth and Timberland acquisition. Revenues rose 31% to $2,556 million from $1,959 million in 2011, with Timberland adding $356 million to revenues. The international business posted 15% organic revenue growth and direct-to-consumer business achieved 16% organic revenue growth. Adjusted EPS increased to a record $1.94 ($1.91 on a GAAP basis).
Organic revenue growth in the quarter was 12%, slightly stronger than anticipated, due in part to earlier shipments and stronger sales of seasonal products. All VF Corp. coalitions achieved solid revenue growth in the quarter, with the strongest increase in outdoor and action sports, where total revenues rose 60% and organic growth was 15%. First quarter operating income grew 16%, with operating margin expanding to 15.5% from 15% in the prior year’s quarter. Sportswear operating income increased 44% in the quarter, with operating margin rising to 8.7% from 6.6% in the first quarter of 2011. Contemporary brands’ operating income increased 53% in the quarter, with a substantial improvement in operating margin to 11.7% from 8.7% in the prior year’s quarter. Companies’ international revenues reached 40% of total revenues in the quarter compared with 36% in the first quarter of 2011. Direct-to-consumer revenues increased 49% in the first quarter, with 32 percentage points of the growth attributable to the Timberland acquisition.
Overall VF Corp’s gross margin declined as anticipated, primarily due to the continued negative impact of higher jeanswear product costs, which was 45.7% compared with 47.2% in the 2011 period. Operating income was $319 million on an adjusted basis in the first quarter. This included earnings from Timberland of $22 million and excluded acquisition-related expenses of $5 million. On a GAAP basis, first quarter operating income was $314 million. Operating margin on an adjusted basis was 12.5% in the first quarter of 2012 and 12.3% on a GAAP basis. Excluding Timberland, first quarter operating margin was 13.5% compared to 14% in last year’s first quarter. In the first quarter of 2011, gross and operating margins both reflected a 40 basis point benefit from a change in inventory accounting.
The companies’ net income on an adjusted basis rose 9% to $219 million from $201 million in the same period last year. Adjusted earnings per share increased 7% to $1.94 per share, including $0.12 per share accretion from Timberland. Earnings in the quarter were negatively impacted by $0.09 per share from foreign currency translation and higher pension expense ($0.04 and $0.05 per share, respectively).
VF Corporation is a global leader in branded lifestyle apparel with more than 30 brands. The company’s top six brands are The North Face, Wrangler, Timberland, Vans, Lee and Nautica. Its brands are sold in more than 150 countries through 47,000 retailers in all channels of distribution. In addition, the company owns and operates more than 1,000 retail stores and also directly to consumers over the Internet.