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GREENSBORO, N.C.--(BUSINESS WIRE)-- Information regarding VF’s third quarter conference call webcast today at 8:30 a.m. ET can be found at the end of this release.
VF Corporation (NYSE:VFC - News), a global leader in branded lifestyle apparel, today announced record results for the third quarter of 2011. All per share amounts are presented on a diluted basis.
The discussions in this release refer to adjusted amounts that exclude costs incurred in connection with the acquisition of The Timberland Company which are described under the heading “Adjusted Amounts – Excluding Timberland acquisition-related expenses.” 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.
Third Quarter Results Summary
Revenues rose 23% to $2,750.1 million from $2,232.4 million in 2010. The acquisition of The Timberland Company (“Timberland”), which was completed on September 13, added $163.6 million to revenues. Excluding Timberland, organic revenue growth in the quarter was 16%. All VF coalitions achieved strong revenue gains: Outdoor & Action Sports revenues, which now include the Timberland® and Smartwool® brands, grew 37%; Jeanswear revenues rose 8%; Imagewear revenues increased 14%; Sportswear revenues grew 18%; and Contemporary Brands revenues were up 11%.
Gross margin declined, as anticipated, to 45.3% from 46.5% in the 2010 period, reflecting the impact of higher product costs. Operating income of $430.1 million included a net benefit from the Timberland acquisition of $13.5 million, which included acquisition-related expenses of $26.6 million. Operating margin was 15.6% compared with 15.9% in the 2010 period, with acquisition-related expenses negatively impacting operating margin by approximately 100 basis points. On an organic basis, the third quarter operating margin increased to 16.1% from 15.9%.
Net income grew 24% to $300.7 million from $242.8 million, while earnings per share increased 21% to $2.69 from $2.22. Adjusted earnings per share were $2.87, an increase of 29% over 2010 levels. The Timberland acquisition was accretive to adjusted earnings by $.25 per share in the quarter. On an organic basis, earnings per share grew 18% to $2.62. Foreign currency translation benefitted earnings by $.10 per share in the quarter.
Nine Months Results Summary
Revenues increased 17% to $6,549.0 million from $5,576.4 million in 2010, with strong growth in every coalition. The Timberland acquisition accounted for three percentage points, or $163.6 million, of the revenue growth in the period.
Net income and earnings per share each increased by 22%, to $630.8 million and $5.69. Adjusted earnings per share were $5.89, an increase of 26% over 2010 levels. Earnings per share in the period also benefitted by $.11 in special items reported in the first quarter, $.07 from a gain on a facility closure reflected in second quarter earnings, and $.14 due to foreign currency translation.
“The strength of VF’s diversified brand portfolio has never been more evident,” said Eric Wiseman, Chairman and Chief Executive Officer. “These results – in this environment – clearly demonstrate that VF has the right brands and strategies for strong and sustainable long-term growth. Our businesses continue to post healthy and very profitable organic growth, and the acquisition of Timberland further strengthens our portfolio with the addition of two outstanding outdoor brands.”
Third Quarter Business Review
Outdoor & Action Sports: Outdoor & Action Sports continued its momentum, achieving record revenues and operating income in the quarter. Total global revenues rose 37%, reflecting strong organic growth of 22% and the addition of the Timberland® and Smartwool® brands, which contributed $163.6 million to revenues. Organic growth in the coalition’s Americas and international businesses continued at double-digit rates, rising 13% and 38% respectively. On a constant currency basis, organic revenue growth internationally was 28%.
Most Outdoor & Action Sports brands achieved double-digit growth in the quarter, with the two largest brands –The North Face® and Vans® – achieving global revenue growth of 22% and 25%, respectively. Growth for both brands was well-balanced, with strong gains achieved across their wholesale, direct-to-consumer, domestic and international platforms. Our Kipling® and Napapijri® businesses continue to deliver exceptionally strong performance, with revenues up 30% and 23%, respectively, in the quarter. The Timberland® brand also continued to show solid growth during the full quarter, with growth in both the direct-to-consumer and wholesale channels and continued expansion in the Earthkeepers® collection across all regions.
Operating income for the coalition rose 29%. Operating margin was 22.3% compared with 23.7% in the 2010 quarter, reflecting a negative impact of 120 basis points from acquisition-related expenses. Third quarter operating income of $321 million included a net benefit from the Timberland acquisition of $22 million, including acquisition-related expenses of $18 million. Excluding Timberland and related acquisition costs, operating income was up 21% and the coalition operating margin was 23.5%.
Jeanswear: Jeanswear revenues rose 8% in the quarter, with increases in both domestic and international revenues. The domestic jeans business continues to perform as anticipated, given the challenges posed by higher product costs and the impact of higher prices on unit volumes. Domestic revenues rose 2% in the quarter, reflecting accelerating growth in the Wrangler® Western specialty business and higher Lee® brand revenues, with mass market revenues declining slightly in the quarter. Domestically, the Wrangler® and Lee® brands continue to gain share within their respective channels, with strong performance from new products. International jeans revenues increased 22% (16% on a constant currency basis), with more than 50% growth in Asia and double-digit gains in Europe, Latin America and Canada.
Reflecting the continued impact of higher product costs, jeanswear operating margin and income both declined in the quarter. Jeanswear operating margin remained strong at 15.1%.
Imagewear: Sustaining the strong growth of the past several quarters, Imagewear grew revenues by 14% in the quarter. Image revenues increased 18%, fueled by continued strength in its Protective Apparel and Industrial uniform businesses. Licensed Sports Group revenues rose 11%, reflecting a pickup in its National Football League (NFL) licensed apparel business and positive response to an expanded women’s NFL apparel offering.
Operating income rose 21% and operating margin reached 14.3% in the quarter, up from 13.5% in last year’s quarter.
Sportswear: Sportswear revenues rose 18% in the third quarter, with double-digit growth in both the Nautica® and Kipling® (U.S.) businesses. Nautica® brand revenues rose 13%, with healthy growth in the men’s wholesale sportswear and direct-to-consumer businesses. Kipling® handbag and accessory revenues in the U.S. grew by 63%, as the brand continued to expand its distribution and extend into new products and styles.
Sportswear achieved a 33% increase in operating income during the quarter, with operating margin expanding to 12.0% from 10.7% in the prior year period.
Contemporary Brands: Contemporary Brands revenues grew 11% in the quarter, with growth across the 7 For All Mankind®, Splendid®, Ella Moss® and John Varvatos® brands. Global revenues of the largest brand, 7 For All Mankind®, rose 8%, with growth both domestically and internationally. New stores, comp store growth and higher e-commerce revenue drove 30%-plus growth in Contemporary Brands’ direct-to-consumer revenues during the quarter.
The profitability of the Contemporary Brands business showed significant improvement in the quarter. Operating income increased 55% while operating margin improved to 6.4% from 4.6%.
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