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VF Corporation's Q1 earnings decline 8 percent

By Prachi Singh

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First quarter revenue at VF Corporation declined 2 percent or 1 percent currency neutral to 2.6 billion dollars. However, the company said, key growth drivers, including its international and direct-to-consumer platforms, and outdoor & action sports coalition delivered stronger results during the quarter. Earnings per share on a reported basis were down 8 percent to 0.52 dollar compared to 0.56 dollar during the same period last year.

“VF’s first quarter results were right in line with our expectations. The company’s largest brands and international and direct-to-consumer platforms performed well, delivering solid results against a retail backdrop that continues to experience significant dislocation,” said Steve Rendle, President and Chief Executive Officer in a press release.

Financial highlights of the quarter

Gross margin improved 150 basis points to 50.2 percent on a reported basis. Changes in foreign currency, the company said, negatively affected reported gross margin by 40 basis points during the quarter.

Operating income on a reported basis was down 7 percent to 291 million dollars compared to the same period of 2016. Changes in foreign currency negatively affected operating profit growth by 5 percentage points during the quarter. Operating margin on a reported basis decreased 50 basis points to 11.3 percent. Changes in foreign currency negatively affected reported operating margin by about 40 basis points in the quarter.

Excluding the impact of changes in foreign currency, first quarter earnings per share were down 3 percent. The company added that changes in discrete tax benefits negatively affected earnings per share growth by 8 percentage points during the first quarter.

Loss from discontinued businesses was 5.5 mn dollars

On April 4, 2017, the company reached an agreement to sell its Licensed Sports Group (LSG) business, including the Majestic brand, to Fanatics, which is expected to be completed in the second quarter of 2017. In conjunction with the LSG divestiture, VF executed its plan to entirely exit the licensing business, which comprises the LSG and JanSport brand collegiate businesses.

On August 26, 2016, the company completed the sale of its Contemporary Brands businesses, which included the 7 For All Mankind, Splendid and Ella Moss brands.

The company’s net loss from discontinued operations was 5.5 million dollars in the first quarter of 2017.

FY17 revenue expected to be up low single-digit

For the fiscal year 2017, revenue is expected to increase at a low single-digit percentage rate including about a 2 percentage point negative impact from changes in foreign currency. Gross margin is expected to reach 49.6 percent, a 20 basis point increase over 2016 gross margin, and includes about a 70 basis point negative impact from changes in foreign currency.

Operating margin is expected to approximate 14 percent, consistent with the 2016 adjusted operating margin, including about a 60 basis point negative impact from changes in foreign currency. Earnings per share are expected to be down at a low single-digit percentage rate compared to 2016 adjusted EPS of 2.98 dollars (up at a mid-single-digit percentage rate on a currency neutral basis).

VF’s Board of Directors declared a quarterly dividend of 0.42 dollar per share, payable on June 19, 2017 to shareholders of record on June 9, 2017.

Picture:Facebook/Wrangler Jeans

VF Corporation