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VF Corporation reports flat revenue growth in FY16

VF Corporation said, revenue for the fourth quarter and full year was in line with last year. Fourth quarter of 3.3 billion dollars was up 1 percent currency neutral and full year revenue of 12 billion dollars, also up 1 percent currency neutral driven by continued momentum in our international and direct-to-consumer platforms, and Vans business.

“VF’s global business model, diverse brand portfolio and focused operational discipline helped the company deliver solid results in 2016 despite an inconsistent US marketplace,” said Eric Wiseman, Executive Chairman of the Board in a statement, adding, “We’re pleased with the improved quality of our revenue, which reflects continued growth in our international and direct-to-consumer platforms, and our strong gross margin and cash generation performance that enabled us to return a record 1.6 billion dollars to our shareholders.”

Financial highlights of the fourth quarter and FY16

Gross margin improved 90 basis points to a 49.1 percent on a reported basis, as the company said, benefits from pricing, lower product costs and a mix-shift toward higher margin businesses were partially offset by changes in foreign currency and the impact of restructuring charges. On an adjusted basis, gross margin increased 160 basis points to 49.8 percent. Changes in foreign currency negatively affected both reported and adjusted gross margin by 90 basis points during the quarter.

Earnings per share on a reported basis was down 33 percent to 0.63 dollar compared to 0.94 dollar during the same period last year. Adjusted earnings per share increased 3 percent to 0.97 dollar and excluding the impact of changes in foreign currency, adjusted earnings per share was up 8 percent.

Gross margin for the year, improved 20 basis points to 48.4 percent on a reported basis as benefits from pricing, lower product costs, and a mix-shift toward higher margin businesses were partially offset by changes in foreign currency and the impact of restructuring charges. On an adjusted basis, gross margin increased 40 basis points to 48.6 percent. The company said, changes in foreign currency negatively affected both reported and adjusted gross margin by almost 80 basis points in 2016.

Earnings per share on a reported basis was down 9 percent to 2.78 dollars compared to 3.04 dollars in 2015. Adjusted earnings per share for 2016 increased 2 percent to 3.11 dollars and excluding the impact of changes in foreign currency, adjusted 2016 earnings per share was up 7 percent.

Segment-wise financial highlights

Fourth quarter revenue for outdoor & action sports was up 2 percent to 2.1 billion dollars, while the segment’s revenue also increased 2 percent in 2016 to 7.5 billion dollars. Vans brand revenue for the fourth quarter was up 14 percent (up 15 percent currency neutral) driven by a mid-teen increase in the Americas business (up high-teens currency neutral); and in Europe a return to growth with a mid-single-digit rate increase (up low single-digits currency neutral); and more than 20 percent (up more than 25 percent currency neutral) growth in Asia Pacific. Revenue for the Vans brand for the full year was up 6 percent (up 7 percent currency neutral) and reached 2.3 billion dollars.

Fourth quarter revenue for The North Face brand was down 8 percent (down 7 percent currency neutral), which the company said were driven by the strategic decision to reduce sales to the off-price channel and the impact of bankruptcies in North America. Excluding these factors, The North Face brand would have increased at a low single-digit rate. On a regional basis, the Americas declined at a low double-digit rate; Europe increased at a mid-teen rate (up high-teens currency neutral); and, Asia Pacific declined at a low double-digit percentage rate (down mid-single-digit currency neutral). For the full year, revenue for The North Face brand declined 2 percent (down 1 percent currency neutral) to 2.3 billion dollars.

Timberland brand revenue was up 4 percent in the fourth quarter (up 5 percent currency neutral) including a low single-digit rate increase in the Americas region; a high single-digit rate increase in Europe (up low double-digits currency neutral); and, a mid-single-digit rate increase in Asia Pacific. Full year Timberland brand revenue was up 1 percent to 1.8 billion dollars.

Jeanswear fourth quarter revenue declined 5 percent (down 4 percent currency neutral) to 697 million dollars, while full year, global jeanswear revenue was down 2 percent to 2.7 billion dollars (flat currency neutral). Wrangler brand revenue was down 1 percent (up 1 percent currency neutral) in the fourth quarter with revenue in line with last year in the Americas business (up low single-digit currency neutral); a high single-digit rate decrease in Europe (down mid-single digits currency neutral); and, a 20 percent decline in the Asia Pacific region (down high-teens currency neutral). Full year revenue for the Wrangler brand was down 1 percent (up 1 percent currency neutral) to 1.7 billion dollars.

Fourth quarter revenue for the Lee brand was down 13 percent (down 11 percent currency neutral) including a high-teens rate decline in the Americas region; a high single-digit rate increase in Europe (up low double-digits currency neutral); and, a mid-single digit rate decline in the Asia Pacific region (down low single-digit currency neutral). For the full year, revenue for the Lee brand was down 3 percent (down 1 percent currency neutral) to 1 billion dollars.

Imagewear fourth quarter revenue increased 15 percent to 298 million dollars with a more than 20 percent increase in the Licensed Sports Group (LSG) business and a mid-single-digit increase in the workwear business. For the full year, revenue for imagewear was up 2 percent to 1.1 billion dollars.

Sportswear fourth quarter revenue declined 17 percent to 162 million dollars including a 20 percent decrease in Nautica brand revenue and a 2 percent decline in the Kipling brand’s North American business compared to the same period last year. For the full year, Sportswear coalition revenue was down 16 percent to 536 million dollars.

International segment sales up 5 percent in Q4 and 4 percent in FY

International revenue in the fourth quarter was up 5 percent (up 7 percent currency neutral). Revenue was up 6 percent (up 7 percent currency neutral) in Europe and up 6 percent (up 8 percent currency neutral) in the Asia Pacific region, including a 6 percent increase (up 14 percent currency neutral) in China. Revenue in the Americas (non-U.S.) region was down 1 percent (up 6 percent currency neutral). The international business represented 34 percent of total VF fourth quarter sales, compared to 33 percent in last year’s same period.

For the full year, international revenue was up 4 percent (up 6 percent currency neutral). Revenue was up 5 percent (up 4 percent currency neutral) in Europe and up 3 percent (up 6 percent currency neutral) in the Asia Pacific region, including a 4 percent increase (up 10 percent currency neutral) in China. Revenue in the Americas (non-US) region was up 2 percent (up 11 percent currency neutral). The international business represented 38 percent of total VF sales in 2016, compared to 37 percent in 2015.

Direct-to-consumer revenue was up 11 percent (up 12 percent currency neutral) in the fourth quarter driven by a mid-teen increase in the outdoor & action sports business and a mid-teen increase in the international business. The company’s e-commerce business continued its strong momentum with 21 percent revenue growth during the quarter. There were 1,507 VF-owned retail stores at the end of the quarter compared with 1,405 at the end of the fourth quarter of 2015.

For the year, direct-to-consumer revenue was up 8 percent (up 9 percent currency neutral) driven by a low-teen increase in the outdoor & action sports business and a low double-digit (mid-teen currency neutral) increase in the international business. Direct-to-consumer revenue was 28 percent of total VF revenue in 2016 compared to 26 percent in 2015.

Revenues in 2017 expected to rise low-single-digit

For the fiscal year 2017, revenue is expected to increase at a low single-digit percentage rate including about a two percentage point negative impact from changes in foreign currency. By coalition, revenue for outdoor & action sports is expected to increase at a low single-digit percentage rate (up at a mid-single-digit rate currency neutral); revenue for Jeanswear is expected to approximate 2016 levels; imagewear revenue is expected to increase at a low single-digit percentage rate; and sportswear is expected to decline at a high single-digit percentage rate.

International revenue is expected to grow at a low single-digit percentage rate (accelerating to a high single-digit percentage rate on a currency neutral basis). By geographic region, European revenue is expected to increase at a low single-digit percentage rate (up at a high single-digit rate on a currency neutral basis). In the Asia Pacific region, revenue is expected to increase at a mid-single-digit percentage rate (up at a high single-digit rate on a currency neutral basis). And, in the Americas (non-US) region, revenue is expected to increase at a high single-digit percentage rate (up at a low-teen rate currency neutral).

Direct-to-consumer revenue is expected to grow at a high single-digit percentage rate. Direct-to-consumer growth in 2017 includes the addition of about 50 stores and mid-single-digit comparable sales growth, including an expected increase of approximately 25 percent in e-commerce revenue. Earnings per share are expected to be down at a low single-digit percentage rate compared to 2016 adjusted EPS of 3.11 dollars (up at a mid-single-digit percentage rate on a currency neutral basis).

In the first half of 2017, the company expects revenue on a reported basis to decline at a low single-digit percentage rate (about flat on a currency neutral basis). VF expects earnings per share to decline at a mid-single-digit percentage rate on a reported basis (up at a low single-digit rate on a currency neutral basis). Revenue on a reported basis is expected to increase at a low single-digit percentage rate (up at a mid-single-digit rate on a currency neutral basis). Earnings per share are expected to increase at a low single-digit percentage rate on a reported basis (up at a high single-digit rate on a currency neutral basis).

VF’s Board of Directors declared a quarterly dividend of 0.42 dollar per share, payable on March 20, 2017 to shareholders of record on March 10, 2017.

Picture:Vans