VF Corp.’s profits climb, raises outlook
Strong performance across its largest global brands, digital and international divisions lifted VF Corp.'s profits in the second quarter.
For the quarter ended July 1, VF Corp.’s revenue increased 2% to $2.4 billion, surpassing the Zacks Consensus Estimate of $2.289 million. While earnings per share dropped 11% to 29 cents, this still beat analyst expectations of 28 cents.
The company’s direct-to-consumer division’s revenue increased 13%. Digital revenue jumped by 34%.
The company’s gross margin improved 80 basis points to 49.7% on a reported basis, even as benefits from pricing, lower product costs and a mix shift toward higher margin businesses were partially offset by changes in foreign currency. These foreign currency changes negatively affected reported gross margin by 80 basis points during the quarter.
“VF’s second quarter results were solid and consistent with our expectations, driven by strong results from our largest global brands, the company’s international and direct-to-consumer platforms, and our growing workwear businesses,” said Steve Rendle, president and CEO.
Results pushed VF Corp. to raise its 2017 outlook. Revenue is now expected to be approximately $11.65 billion, up 2% on a reported basis. The company’s direct-to-consumer revenue is now expected to increase between 10% and 11% versus the previous expectation of a high single-digit percentage rate increase. Digital revenue is expected to increase more than 25%.
Gross margin is now expected to reach 49.8%, versus the previous expectation of 49.6%, a 40 basis point increase over 2016 gross margin. This includes about a 70 basis point negative impact from changes in foreign currency.
“We have really good momentum as we move into the second half of 2017 and are confident in our growth engines, as evidenced by an increase in our full year outlook and our plan to increase our cash returns to shareholders,” Rendle said. “Based on the strength of the first half of 2017 and our expectations for the second half of the year, we are making growth-focused investments in our largest brands and platforms to generate additional value for our shareholders both in the near and long term.”
The company also announced that Eric C. Wiseman will retire as executive chairman of the Board and Directors, effective Oct 28. Rendle will succeed Wiseman as the chairman after his retirement.
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