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Tiffany Montgomery
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Vans star of VF earnings

By Tiffany Montgomery
July 21, 2009 3:38 PM

Vans was the star of VF Corp.'s earnings conference call this afternoon, with executives citing the brand's 14 percent increase in revenue in constant currency for the quarter ended June 30.

All facets of Vans' business showed revenue increases including domestic, international and wholesale sales. Comparable sales increased at Vans stores as well.

The North Face also reported a solid quarter, with revenue rising 4 percent in constant currency.

Gross margins in the Outdoor and Action Sports coalition rose 10 basis points to 43.9 percent, a big accomplishment in this environment, VF executives said.

In Asia, Outdoor and Action Sports coalition revenue grew 32 percent, while the coalition's direct-to-consumer sales rose 19 percent.

Vans results have been "excellent" in China and have improved in Europe.

Overall, revenue from Outdoor and Action Sports coalition fell 2 percent in reported currency or rose 2 percent in constant currency. Operating margins grew 1 percent in the quarter.

The performance of Reef, also in the Outdoor and Action Sports coalition, was not mentioned.

The strong results for the Outdoor and Action Sports coalition, along with a better than expected performance in the Jeanswear coalition, helped VF beat its earnings per share guidance.

Other highlights from the call

Total company revenue: down 11 percent to $1.5 billion.

Net income: Down 27.4 percent to $75.5 million

7 For all Mankind revenues declined 12 percent in the quarter, or 8 percent in constant currency. The upper tier department store and specialty markets were particularly weak. Shoppers are buying more denim in the $150 to $189 price range this year vs. denim in the $200 to $300 range. VF plans to open 20 7 For All Mankind stores this year, and is adding its other contemporary brands, Ella Moss and Splendid, to those stores.

Executives said the second quarter was the toughest of the year and expect easier comparison's in the second half. Conditions remain very challenging, however, and the company does not expect an improvement in economic conditions this year. The company will continue to reduce inventories and expects inventories to be down by 10 percent, or $100 million by year-end.

VF has $385 million in cash and cash equivalents on its balance sheet and access to $1.1 billion in credit.

The company also maintained its revenue and earnings guidance for the year. For fiscal 2009, VF expects a revenue decline of 5 percent to 7 percent and earnings per share of $4.70 to $5 vs. $5.42 in 2008.

 


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