Lifted by international and direct-to-consumer platforms, as well as Active and Work segments, VF Corp. reported significant increases in revenue and income in the first quarter.
In a Nutshell: An evolving VF Corp., which has added some niche brands to its portfolio and shed some underperforming units, is reaping the benefits in sales and profits.
In light of recently completed acquisitions of Williamson-Dickie, Icebreaker and Altra, as well as divestitures including the sale of its Nautica business, and organizational realignments, the company has changed its reporting structure to better support and assess the operations of the business. The company’s new reportable segments are Outdoor, Active, Work and Jeans.
Its outdoor primary brands include The North Face, Timberland, Smartwool, Icebreaker and Altra. Active brands include Vans, Kipling, Napapijri, JanSport, Reef, Eastpak and Eagle Creek. Work primary brands are Dickies, Bulwark, Red Kap, Timberland PRO, Wrangler RIGGS, Walls, Terra, Kodiak and Horace Small, while Jeans brands include Wrangler, Lee and Rock & Republic.
On the strength of the first quarter and the new lineup that helped boost major gains in first quarter net revenue, VF raised its full-year forecast for revenue to between $13.6 billion and $13.7 billion, reflecting an increase of 10 percent to 11 percent. The forecast includes a more than $150 million negative impact from unfavorable foreign currency exchange rates relative to the prior outlook. This compares to the previous expectation of revenue of $13.45 billion to $13.55 billion, which reflected a 9 percent to 10 percent increase.
By segment, revenue for Outdoor is expected to increase 6 percent to 8 percent, Active is forecast to increase 13 percent to 14 percent, revenue for Work is seen growing more than 35 percent, and revenue for Jeans is expected to be flat compared to the prior year.
Direct-to-consumer revenue is now predicted to rise between 11 percent and 13 percent versus the previous expectation of an 8 percent to 10 percent increase. Digital revenue is expected to increase more than 30 percent versus the previous expectation of a more than 25 percent gain.
Sales: Revenue increased 23 percent to $2.77 billion in the first quarter ended June 30 from $2.25 billion a year earlier, including a $249 million revenue contribution from the Williamson-Dickie, Icebreaker and Altra acquisitions. Excluding acquisitions, revenue increased 12 percent, driven by strength across VF’s international and direct-to-consumer platforms and Active and Work segments.
Active segment revenue increased 25 percent, including a 35 percent increase in Vans brand revenue. Outdoor segment revenue rose 6 percent, including an 8 percent gain in The North Face brand and a 6 percent contribution from acquisitions. International revenue increased 27 percent, with a 13 percent contribution from acquisitions.
Direct-to-consumer revenue was up 22 percent, including a 6 percent growth contribution from acquisitions, and digital revenue increased 54 percent, including a 21 percent contribution from acquisitions.
Earnings: Net income for the period jumped 46 percent to $160.36 million from $109.89 million in the comparable prior-year period. Operating income on an adjusted basis rose 57 percent to $250 million, including an $20 million contribution from acquisitions. Gross margin improved 70 basis points to 50.3%, as benefits from a mix-shift toward higher margin businesses and continued focus on fundamentals were partially offset by the impact of acquisitions.
CEO’s Take: Steve Rendle, chairman, president and CEO, said: “VF’s first quarter results were strong, driven by continued broad based acceleration across our core brands and platforms. We are executing well against our 2021 growth plan and continuing on our journey to reshape the portfolio and transform VF into a purpose-led, performance driven, consumer-centric organization focused on and committed to delivering superior returns to shareholders.”