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GREENSBORO, N.C.--(BUSINESS WIRE)-- VF Corporation (NYSE:VFC - News), a global leader in branded lifestyle apparel, today announced results for the fourth quarter and full year 2010. All per share amounts are presented on a diluted basis.
The discussions in this release refer to adjusted amounts that exclude noncash impairment charges taken in the fourth quarters of both 2009 and 2010, which are described under the heading "Adjusted Amounts – Excluding Noncash Impairment Charges.” Reconciliations of GAAP measures to adjusted amounts are presented in the supplemental financial information included with this release and identify and quantify all excluded items.
Fourth Quarter Results Summary
Revenues rose a stronger-than-expected 11% to $2,126.2 million from $1,915.4 million in 2009. On a constant currency basis, revenues increased 12%. Revenue growth in the quarter was driven primarily by strong growth in Outdoor & Action Sports, where revenues rose 20%. Reflecting solid organic growth in other coalitions, Jeanswear revenues grew 7%, Imagewear revenues rose 5% and Sportswear revenues increased 11%. Contemporary Brands revenues declined 9%.
Gross margins reached a record 46.6%, up from a previous high of 46.3% in the 2009 period. Operating margins on an adjusted basis declined to 12.9% from 13.6% in 2009, reflecting a disproportionately high level of incremental marketing investments made during the quarter. ($45 million Q4; $100 million full year.)
Net income on an adjusted basis rose 8% to $196.1 million from $181.3 million, while adjusted earnings per share increased 10% to $1.78 per share from $1.62 per share. On a GAAP basis, net income was $54.2 million compared with $66.9 million in 2009, and earnings per share were $.49 compared with $.60 in the 2009 period.
“These results – in an economic environment that remains fragile – prove that VF has the right brands and strategies to win,” said Eric Wiseman, Chairman and Chief Executive Officer. “We’re uniquely positioned for long-term success, driven by our exceptionally powerful and diverse brand portfolio, substantial growth opportunities both domestically and internationally, and the balance sheet and cash to fuel our expansion.”
Full Year Results Summary
Revenues increased 7% to $7,702.6 million from $7,220.3 million in 2009, with Outdoor & Action Sports revenues rising 14% during the year; Jeanswear revenues rose 1%, Imagewear and Contemporary Brands revenues each grew by 5%, and Sportswear revenues were flat.
Gross margins reached a record 46.7%, up 240 basis points from 44.3% in 2009. Exceptional growth in our high margin direct-to-consumer and lifestyle businesses, improved profitability in our retail operations, and lower product costs were the key factors contributing to the increase. Operating margins on an adjusted basis were 13.3% in 2010, expanding by 140 basis points including the aforementioned $100 million in additional marketing investments.
Net income on an adjusted basis rose 24% to $713.2 million from $575.7 million, while adjusted earnings per share increased 25% to $6.46 from $5.16. On a GAAP basis, net income also rose 24%, to $571.4 million in 2010 from $461.3 million in 2009 and earnings per share rose 25% to $5.18 in 2010 from $4.13 in 2009.
Adjusted Amounts - Excluding Noncash Impairment Charges
As a result of our review of goodwill and intangible assets that we conduct during the fourth quarter of each year in connection with our strategic planning process and preparation of our annual financial statements, we recorded a $201.7 million pre-tax noncash impairment charge in the fourth quarter of 2010 to reduce the carrying value of the goodwill and intangible assets related to our 7 For All Mankind® brand. On an after-tax basis, the charge totaled $141.8 million, which decreased full year 2010 earnings per share by $1.29. Similarly, we recorded impairment charges of $122.0 million in 2009 related to other businesses. On an after-tax basis, these charges totaled $114.4 million, which decreased full year earnings per share in 2009 by $1.03.
Fourth Quarter Business Review
Outdoor & Action Sports: The momentum continues in our Outdoor & Action Sports businesses, which again achieved record revenues, operating income and operating margins in the current quarter. Total global revenues in Outdoor & Action Sports rose 20% in the quarter, with revenues of our Americas business rising 17% and international revenues up 32% on a constant currency basis. The strength of The North Face® and Vans® businesses led to growth in global revenues for these brands of 25% and 18%, respectively. Our international Kipling® and Napapijri® businesses also achieved outstanding results in the quarter, with revenues up 23% and 38%, respectively, in constant dollars. Total direct-to-consumer revenues for Outdoor & Action Sports rose 21% in the quarter, with double-digit increases in The North Face®, Vans®, Kipling® and Napapijri® direct-to-consumer businesses.
Operating income rose by 27%, with operating margins increasing by one full percentage point to 20.1% in the quarter. The strong top and bottom line growth was fueled in part by a nearly 60% increase in brand-building investments and initiatives during the quarter, particularly in The North Face® and Vans® brands.
Jeanswear: Our Global Jeanswear business experienced healthy top line growth and higher operating margins during the quarter. Global Jeanswear revenues grew 7% in the quarter. The exit of our European mass market business in 2009 negatively impacted the revenue comparisons by 1%. Domestic revenues rose 6% with growth in all three major businesses: Mass Market revenues grew 5% in the quarter, and revenues in our Lee® and Western businesses rose 8% and 7%, respectively. International jeans revenues rose 9%, despite a 5% negative impact from the exit of our European mass market business. Jeanswear revenues in Asia increased 42%; strong growth was also achieved in Mexico, Latin America and Canada.
Operating income increased 10%, with operating margins rising to 16.4% from 15.9% in the quarter reflecting improved profitability in our international jeans businesses.
Imagewear: Our Imagewear business achieved another quarter of solid performance, with a 5% increase in revenues and a 14% increase in operating income. Fueling coalition revenue and profit growth in the quarter was a 14% increase in Image (uniform) revenues. Growth in our flame-resistant apparel business under our highly profitable Bulwark® brand contributed to the quarter’s results and should be a source of growth in future periods as well.
See Page 2 for more on VF results