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Financial Roundup: VF Scores on Direct Sales, Columbia’s Brands All See Gains, Repreve Leads Unifi, E-Commerce Aids Carter’s

VF Corp. credits direct-to-consumer for gains, value-added fibers keep Unifi spinning and Carter’s cites online sales gains.

VF Corp.

In a Nutshell: Following a key industry trend, VF Corp. said direct-to-consumer revenue increased 13 percent in the second quarter ended July 1, with digital revenue up 34 percent, while wholesale revenue fell 3 percent. VF’s direct-to-consumer operations include own-brand stores and outlets, and e-commerce. Direct-to-consumer revenue is now expected to increase 10 percent to 11 percent in 2017 versus the previous expectation of a high single-digit percentage rate increase. Digital revenue is now expected to increase more than 25 percent, with overall revenue now expected to grow 2 percent to about $11.65 billion for the year

The apparel giant credited a “shift toward higher margin businesses,” such as e-commerce for improving its gross margin 80 basis points to 49.7%, that were also benefitted from better pricing and lower product costs, but were partially offset by changes in foreign currency.

Sales: Total revenue rose 1.7% to $2.36 billion from $2.32 billion in the year-ago period, with net sales also rising 1.7% to $2.33 billion from $2.29 billion. By coalition, Outdoor & Action Sports revenue increased 4 percent to $1.47 million, with Vans brand revenue and North Face brand revenue rising 8 percent and 5 percent, respectively. International revenue increased 4 percent, including 13 percent growth in China.

Earnings: Net income doubled to $109.9 million from $51 million a year earlier. Operating income was down 14 percent to $168 million compared to the same period of 2016. Changes in foreign currency negatively affected the operating profit decline by 8 percent during the quarter.

CEO’s Take: Steve Rendle, president and chief executive officer, said: “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. 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.”

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Columbia Sportswear

In a Nutshell: Columbia Sportswear Co, posted record second quarter net sales for the period ended June 30, with strength in the U.S., the Europe, Middle East and Africa region, and in Canada, while sales in China and South Korea fell. The company saw Net sales increase in Columbia, Sorel, prAna and Mountain Hardwear brands, as well as its apparel, accessories and equipment division.

Sales: Net sales increased 3 percent to a second-quarter record $398.9 million compared to net sales of $388.8 million a year earlier. This included 4 percent net sales growth in the U.S. to $238.2 million, consisting of mid-teen percentage growth in direct-to-consumer net sales, partially offset by a high-single-digit percentage decline in wholesale net sales, and a 14 percent net sales growth in the EMEA region to $67.3 million.

Earnings: The second quarter net loss totaled $11.5 million compared to a net loss of $8.2 million in the same period in 2016, including expenses of about $2.5 million net of tax related to its operating model assessment.

CEO’s Take: Tom Boyle, president and CEO, said, “We delivered solid first half financial results featuring growth from three of our four brands and all four geographic regions. First-half sales growth of 3 percent and earnings growth of 4 percent are on pace with our full-year expectations. The operating model assessment we launched earlier this year led to a realignment of our senior leadership team in June. This newly aligned team is now focused on the second phase of the initiative, which we have named ‘Project CONNECT,’ to build on our strengths as a brand-led, consumer-first organization and accelerate performance against our…strategic priorities.”

Unifi Inc.

In a Nutshell: Unifi Inc., a Greensboro, North Carolina-based manufacturer of synthetic and recycled yarns, saw premium value-added product sales reach 40 percent of its portfolio for fiscal 2017, led by its Repreve line of recycled polyester fibers. The company said it intends to leverage and invest in its supply chain capabilities, state-of-the-art recycling equipment and wide network of textile assets to remain a leading supplier. Unifi expects to see improved contributions from its strategic investments, such as the Repreve Bottle Processing Center and Recycling Center, leading to growth in revenue and earnings during fiscal 2018.

[Read more about Unifi’s Repreve Business: The New Polyester: Eco-Friendly and Beyond Basic]

Sales: Net sales increased 4.5% to $171.3 million for the fourth quarter ended June 25, compared to $163.9 million in year-ago period. Sales growth was led by operations in Asia and Brazil, partially offset by challenging domestic market conditions. Operating income fell 6.5% to $13 million in the quarter.

Earnings: Net income declined 10 percent to $9.7 million in the quarter compared to net income of $10.2 million in the year-ago period. Adjusted earnings before interest, taxes, depreciation and amortization fell 8.7% to $18.8 million for the quarter from $20.6 million last year.

CEO’s Take: Kevin Hall, named CEO in May, said, “The fourth quarter of fiscal 2017 continued to demonstrate the global opportunity of our growing portfolio of PVA products. We are pleased that the strength of our international operations allowed us to overcome ongoing headwinds in the domestic retail and apparel markets. In my first two months at Unifi, I’ve had the opportunity to better understand the breadth and talent of our organization. As a result, I’ve grown even more confident in Unifi’s long-term potential and the growth opportunities for Repreve and our other PVA products, which will be driven by our strong technological and operational expertise, as well as by our exciting partnerships with many of the world’s leading brands and retailers.

Carter’s Inc.

In a Nutshell: Carter’s Inc., one of the largest branded marketers of apparel and related products for infants and children with its Carter’s and OshKosh B’gosh brands, saw net sales and income rise in the second quarter ended July 1. The company, which added the Skip Hop brand to its roster in the first quarter, was aided by an 11 percent gain in its retail segment, including comparable e-commerce sales growth of 27.6%. For fiscal 2017, Carter’s projects net sales to increase 4 percent to 6 percent compared to fiscal 2016.

Sales: Net sales increased 8.2% to $692.1 million from $639.5 million in the year-ago period, principally driven by growth in the company’s U.S. retail segment and the benefit of Skip Hop, a global lifestyle brand for families with young children acquired in February that contributed $25 million to consolidated net sales.

Earnings: Net income in the second quarter increased 4.8% to $37.9 million from $36.2 million a year earlier. Operating income rose 2 percent to $64.5 million compared to $63.2 million in the second quarter of fiscal 2016.

CEO’s Take: Michael D. Casey, chairman and CEO, said, “We achieved good growth in sales and earnings in our second quarter. Our growth was driven by our retail and international businesses, and the contribution from our Skip Hop brand…Given the strength of our fall and holiday product offerings, we’re forecasting good growth in the second half and expect to achieve our growth objectives this year.”